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Senate threatens tariff unless china revalues currency Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=10000080&sid=arGZrTeDSkxo&refer=asiahttp://www.bloomberg.com/apps/news?pid=10000080&sid=arGZrTeDSkxo&refer=asia
China Says U.S. Demand to Alter Yuan, Exports Unfair (Update4)
April 7 (Bloomberg) -- China said U.S. pressure to revalue the yuan and curb a surge of textile exports is unfair.
``The U.S. should look into itself for the trade deficit problem,'' Foreign Ministry Spokesman Qin Gang said at a regular press briefing in Beijing. ``In recent years, we have done a lot of reform work related to improving the exchange rate mechanism, such as accelerating the reform of state-owned commercial banks and allowing the convertibility of the current account.''
The U.S. Senate voted 67-33 to allow debate on a proposal offered by Senators Charles Schumer, a Democrat of New York, and Lindsey Graham, a Republican of South Carolina, to levy a tariff of 27.5 percent on all Chinese-made goods imported to the U.S. unless China revalues its currency.
In testimony before Schumer and other members of the Senate Banking Committee today, U.S. Treasury Secretary John Snow called the bill a ``bad mistake'' and urged senators to let his ``financial diplomacy'' to the work its course. China has taken a ``number of steps'' to end its peg, Snow said.
``Financial diplomacy will do better than the sledgehammer you propose to hit them with,'' Snow said in response to a question from Schumer. ``You don't want to get there by disrupting the financial system of China and provoking another Southeast Asia crisis.''
Exchange Rate
The measure, an amendment to a larger bill setting foreign policy guidelines, reflects frustration among members of both U.S. political parties over the growing trade deficit with China, which last year reached almost $162 billion. Advocates of the measure say the low rate of the yuan makes China's exports artificially cheap.
U.S. Senate Republican leaders, in acknowledgement of the 2-1 margin of support yesterday for the tariff proposal, today accepted an agreement in which the Senate will hold a separate vote on the Schumer-Graham proposal later this year rather than allow the matter to further delay the larger policy bill.
``The vote yesterday showed stunningly how strong the sentiment for change on China trade policy is here in the Senate,'' Schumer said. ``China should start playing by the rules now to avoid the need for legislation forcing them to do so.''
Under the agreement, announced today by Senate Republican Whip Mitch McConnell, the Senate will vote on the China tariff bill no later than July 27. In return, advocates of the tariff agreed to stop trying to attach the language to the larger policy bill or any other legislation.
`He's Negotiated Zero'
The bill's sponsors held off introducing the bill last year at Snow's request for more time to negotiate an agreement with China, Schumer said.
``Well, he's negotiated exactly zero. He has gotten zero gains,'' Schumer said. ``The Treasury is glad I am doing this, maybe it will give them a little leverage'' with the Chinese.
Snow, in his testimony today to the Senate Banking Committee, said the deficit with China is ``on the path'' to widen again this year.
China fixed its currency to around 8.30 to the dollar in 1995 and allows the yuan to fluctuate 0.3 percent above and below that rate.
China is laying the groundwork for a more flexible exchange- rate system and may introduce changes ``unexpectedly,'' Premier Wen Jiabao said on March 14. The government has yet to agree on how to adjust the peg, he said the same day.
The U.S. textile industry petitioned the Bush administration to impose caps on imports of knit shirts, brassieres, pants and other clothing from China, saying a surge in those imports endangers their industry.
`Disguised' Quotas
``More petitions will be filed in the weeks ahead,'' said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition yesterday. ``We will keep filing petitions until the United States and China reach a comprehensive agreement to moderate the growth of Chinese imports.''
The four-decade system of global quotas on textile trade ended Dec. 31. Chinese garment exports to the U.S. surged 47 percent in January. During the first quarter of the year, total imports are up 63 percent from the same period last year, according to tabulations of Commerce data by the textile industry. The U.S. didn't provide totals of imports.
China ``strongly opposes'' the textile restrictions, Chong Quan, Beijing-based spokesman of the Ministry of Commerce said in a statement on the government's Web site.
``Any attempts to extend the quota system in a disguised manner will harm the principle of free and fair trade,'' Chong said.
Last Updated: April 7, 2005 16:53 EDT
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