Boehner: Bill on China yuan "dangerous"

[tcjams]

WASHINGTON (Reuters) - A U.S. bill to pressure China into letting its currency rise in value, which has drawn warnings from Beijing of a possible trade war, ran into opposition from the top Republican in Congress on Tuesday.

Strong misgivings expressed by House of Representatives Speaker John Boehner were the first clear sign the currency legislation might fizzle out like similar bills since lawmakers began targeting China's yuan policy in 2005.

"I think it's pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency," Boehner said.

On Monday, the Senate voted to open debate on a bill that calls for U.S. tariffs on imports from countries with deliberately undervalued currencies, prompting an angry rebuke from China.

Officials in Beijing have accused lawmakers of pandering to U.S. voters ahead of next year's presidential and congressional elections. U.S. critics of the bill have said it could stoke trade tensions just as the world economy is facing a sharp slowdown in growth.

"While I've got concerns about how the Chinese have dealt with their currency, I'm not sure this is the way to fix it," Boehner told reporters.

House speakers normally get their way on legislation. But Democrats promptly urged Boehner to keep a promise he made when he took office in January and let the House to "work its will."

The speaker, who represents the rustbelt state of Ohio, also has to contend with signs of growing support from rank-and-file members of his own party for the legislation, and tough talk about China from a top Republican presidential candidate.

In a hint of unease about the bill in the White House, a top U.S. official said the Obama administration has begun discussions with lawmakers about whether it is "the right approach" to the long-running currency issue.

Acting U.S. Commerce Secretary Rebecca Blank told CNBC television the best solution to what American officials view as an undervalued Chinese currency remains "an open question," despite signs of bipartisan support for legislation that has raised angry warnings of a potential trade war from Beijing.

"The administration is talking with people in the Senate about whether this bill is the right approach or whether there are other approaches to take," she said. "Those conversations are under way."

ANGRY CHINESE RESPONSE

White House spokesman Jay Carney said the administration was still reviewing the currency bill.

"We share the concerns of members (of Congress) about the valuation of the currency and the need to appreciate it," he told reporters aboard Air Force One. The administration wanted to be sure any measure met U.S. "international obligations."

Senators voted 79-19 on Monday to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies.

The latest of the almost annual attacks by the U.S. Congress on a core Chinese economic policy has drawn an angry response from Beijing. China's central bank and the ministries of commerce and foreign affairs accused Washington of "politicizing" currency issues and putting the global economy at risk of a trade war.

Many economists say Beijing deliberately holds down the value of its yuan currency to give Chinese exporters an edge in global markets. China says it is committed to gradual currency reform and notes that the yuan has risen 30 percent against the dollar since 2005.

In an argument that has gained traction with U.S. unemployment stuck above 9 percent as 2012 elections draw near, supporters of the bill say that if the yuan was allowed to rise, U.S. imports from China would fall and U.S. exports to the fast-growing Chinese market would increase, cutting an annual trade gap of more than $250 billion and creating jobs for American workers.

QUANDARY FOR REPUBLICANS

Republicans have been all over the map on the yuan issue. Many lawmakers in the party traditionally oppose actions that might violate free trade principles. But a leading Republican presidential candidate, Mitt Romney, has said he would name China a currency manipulator on his first day in office if elected.

Despite Boehner's expressed doubts about the bill, backers of the legislation in the House said the measure now has 225 co-sponsors, including 61 Republicans.

Representative Sander Levin and other Democrats at a news conference urged House Republican leaders to drop their resistance to bringing up the bill, which is expected to face a Senate vote later in the week.

"The pressure is going to mount on Republican leadership to explain why they support a policy that costs Americans jobs," said Nadeam Elshami, a spokesman for House Democratic leader Nancy Pelosi.

Republican Senator Lindsey Graham, a prominent currency bill proponent, called Chinese criticism of the bill "ill-advised."

"We all want a healthy trading relationship with China, but their business practices -- from intellectual property theft to currency manipulation -- has created an unhealthy business relationship," he said.

(Additional reporting by David Morgan, Tom Ferraro and Laura MacInnis; writing by Paul Eckert; Editing by Mohammad Zargham and Vicki Allen)

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[TimS]

F#ck China.....level the playing field. We cannot compete with any country that subsidizes their industry, internally manipulates their currency value or does not have a decent cost of living pay scale. Our government should levy whatever tarriff or tax necessary to be competitive

Edited October 4, 2011 by TimS

[puff26]

US Senate backs debate on currency law amid yuan row

04 October 11 01:27 ET

The US Senate has voted in favour of debating laws which could pressure China to let its currency rise in value.

The bill would give the US government the power to add tariffs to goods imported from countries deemed to be undervaluing their currencies to boost exports.

Some politicians and trade groups say China uses its currency in such a way.

The Chinese government said that it "firmly opposed" the bill.

It accused the US of using the "so-called currency imbalance as an excuse to upgrade the exchange rate further, to take protectionist measures, [which is] a serious breach of World Trade Organisation rules, [and] seriously interfere with economic and trade relations".

Though the bill does not specifically mention China, it would enable the US government to put punitive duties on a country with a misaligned currency.

'Unfair competitive advantage'

Unlike most other major currencies, China does not allow its currency, the yuan, to float freely on exchange markets. Academics have argued it could be undervalued by as much as 20% - 40% compared to the US dollar.

China has been accused of keeping the value of its currency artificially low in a bid to make its exports cheaper and more competitive than rivals. At the same time, it also makes goods from abroad more expensive for the Chinese buyers than products manufactured at home.

Many US politicians have said that China's currency policies have not only hurt US businesses but have also had an impact in the job market.

"My colleagues, both Democrats and Republicans, agree that China's deliberate actions to devalue its currency give its goods an unfair competitive advantage in the marketplace," Senate majority leader Harry Reid said.

"In the last decade alone, we have lost 2 million American jobs to China because of a trade deficit fuelled by currency manipulation," he added.

The debate on the value of the yuan and its effect on the US economy has been fanned further by a slowdown in the US and fears that it may be slipping into a recession.

At the same time, a high rate of unemployment has also become a huge problem for the authorities as they try to kick start growth in the world's biggest economy.

Unilateral approach?

The US and China's other trading partners have been putting pressure on China to let its currency appreciate. While Beijing has allowed its currency to rise in the past 12 months, its critics have said that the appreciation has been too little.

The yuan has gained almost 5% against the US dollar during the period and over 8% against the euro.

However, China has maintained that a sudden rise in the yuan's value would not only hurt its export sector but also have a detrimental effect on its overall economy.

Critics of the currency bill warned that any such law may negate efforts for a cordial agreement with China.

The Emergency Committee for American Trade said the bill was "a highly damaging unilateral approach that will undermine broader efforts to address China's currency undervaluation".

Others have argued that the US has created its own economic problems and that antagonising the Chinese could potentially provoke a trade dispute which would be even worse for the economy.

"Using anti-dumping and countervailing duties to address currency valuation is misguided and could lead to a trade war," said Stephanie Lester of The Retail Industry Leaders Association.

"Sparking a trade war with China - one of our largest and fastest growing export markets - could have disastrous consequences for American companies and workers, and for our economic recovery," she added.

The passing of the procedural vote allows debate to take place for the rest of the week in the Senate.

However, even if it passes the upper house of Congress, the bill could get stalled in the House of Representatives.

Republican leaders are not seen as too keen on the bill and the Obama administration has been wary about how the proposed law would be perceived in China.

[bladowzanow]

F#ck China.....level the playing field. We cannot compete with any country that subsidizes their industry, internally manipulates their currency value or does not have a decent cost of living pay scale. Our government should levy whatever tarriff or tax necessary to be competitive

Love it Tim!

Take care