Bush v Congress

Round 1: Iraq
Round 2: Stem cell study
Round 3: China

US senators to introduce Bill requiring stronger action on yuan.

ANOTHER battle looms between US President George W. Bush and a hostile Congress – over China.

This will be the latest in a string of legislative confrontations between the Democrat-controlled Congress and the White House.

Mr Bush has already used his veto once over Iraq and has threatened another over federal funding for stem cell research.

A third now beckons after a group of senators said they would introduce legislation today to put pressure on the administration to act against alleged unfair Chinese trade practices.

The White House is in no mood to be pushed into a corner by feisty lawmakers, despite growing trade tensions between the United States and China.

Washington has urged Beijing to accelerate exchange rate reforms on previous occasions, including at a high-level economic dialogue last month.

The Treasury Department said in its semi-annual currency report released yesterday that it was obvious the Chinese government was controlling the value of its currency against the dollar.

But it said that it could not determine that this was being done to “ unfair competitive advantage in international trade”.

That is the standard set in the law.

But many legislators, both Democrats and Republicans, believe that China deliberately undervalues the yuan by as much as 40 per cent to give Chinese companies an “unfair” advantage in international trade.

They say this has fuelled the ballooning US-China trade deficit, which hit US$232.5 billion (S$359 billion) last year.

Treasury Secretary Henry Paulson has launched a series of twice-a-year, high-level meetings with top Chinese officials.

The hope is that this new Strategic Economic Dialogue will bring pressure on China to allow the yuan to rise more quickly in value and also deal with a host of other trade tensions, including rampant piracy of American copyrighted material in China.

But Congress, under pressure from voters upset with the soaring US trade deficit and the loss of more than 3 million manufacturing jobs since 2000, is pushing for the administration to take a tougher line on China.

The Senate Finance Committee is expected to announce details of a bipartisan Bill today that could put pressure on the Bush administration to bring a World Trade Organisation case against China over the currency issue.

The senators “will discuss the new US responses their Bill requires when other nations, including China, unfairly undervalue their currency”, a statement said, without providing any further details.

Mr Kevin Nealer of the Scowcroft Group, a Washington-based business advisory, believed that it was likely to include provisions calling for greater action on the yuan in the International Monetary Fund.

The Bill may also aim to change American law to require the United States to accept anti-subsidy cases against non-market economies such as China.

Democratic Senator Charles Schumer, who helped draft the legislation, has maintained that any currency Bill against China would be “WTO-compliant and strong and effective”, and “likely to pass with a veto-proof margin”.

It was Mr Schumer who led moves in the last Republican-dominated Congress to introduce a Bill to slap punitive tariffs on Chinese imports if it did not revalue its currency.

That Bill won two-thirds support in the Senate in a procedural vote, but was held back to give Beijing more time to carry out currency reforms.

Yet another indication of the growing mood of hostility on Capitol Hill towards China was apparent when the top Democrat and the top Republican on the Senate Banking Committee – Mr Chris Dodd and Mr Richard Shelby respectively – said they would introduce legislation giving the Treasury Department stronger tools to confront China’s currency practices.

“A change in our currency manipulation policy is long overdue,” said Mr Dodd, who is chairman of the committee.

“America’s companies and workers deserve an opportunity to compete on fair terms with countries such as China.”

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