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US threatens trade protection or china revalues currency { April 7 2005 } Original Source Link: (May no longer be active)
http://news.ft.com/cms/s/fca01ee0-a78b-11d9-9744-00000e2511c8.htmlhttp://news.ft.com/cms/s/fca01ee0-a78b-11d9-9744-00000e2511c8.html
US set to get tough over renminbi
By Edward Alden and Christopher Swann in Washington
Published: April 7 2005 22:03 | Last updated: April 8 2005 00:27
The US Senate will vote no later than July on legislation that would slap across-the-board tariffs on imports of Chinese goods unless China agrees to revalue its currency.
The agreement, worked out by the Senate leadership on Thursday, is the strongest sign yet that Congress might pass overtly protectionist legislation if the US trade balance with China continues to deteriorate.
The Senate failed on Wednesday on a 67-33 vote to kill the legislation, offered by Charles Schumer, Democratic senator, which would give China six months to revalue the renminbi or face a 27.5 per cent tariff on all its imports. The Senate leadership agreed to a final vote on the measure later this year to avoid having it attached to a bill authorising State Department programmes.
In the House of Representatives, Duncan Hunter, the powerful Republican chairman of the armed services committee, on Thursday also introduced legislation that would define currency manipulation by a foreign government as an export subsidy. This could then allow the US to offset the subsidy by imposing duties on imports.
“Clearly the mood on China is getting more and more intense. There is a lot of surprise at the amount of Republican support,” said Frank Vargo of the National Association of Manufacturers, which wants tough action on China but opposes the Schumer bill as a violation of World Trade Organisation rules.
In a sharp exchange yesterday with John Snow, Treasury secretary, Mr Schumer charged that “this administration, on this issue, has had the strength of a wet noodle”.
The anger in Congress is being driven in part by the rapid increase in the US trade deficit with China. According to Chinese customs figures compiled by Global Trade Information Services, a US data company, US imports from China rose 37 per cent in January and February, while US exports to China fell by 10 per cent. Official US trade data for February will be released next week.
While most of the focus has been on growing Chinese textile and apparel sales since the lifting of quotas on January 1, exports have also grown sharply in basic materials like steel and chemicals as well as heavier machinery sectors where China was until recently a net importer.
The rumblings in Congress are increasing pressure on the administration to declare that China is manipulating its currency. The US Treasury is set later this month to release its semi-annual report to Congress on exchange rates. Mr Vargo said: “They just can't find again that China is not manipulating its currency.”
Mr Snow on Thursday would not say what the Treasury would conclude in the report. But Rob Nichols, Treasury spokesman, signalled the administration would resist such pressure. “The administration's financial diplomacy approach has been effective and progress is being made in moving China to a flexible exchange rate regime,” he said.
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