Alerting that it has used up its patience with subtle attempts to influence Beijing to allow its currency, the yuan, to appreciate in value, the United States Congress approved the means for stronger measures against China to help balance the currency issue.
After a panel approved the measure, thereby exhibiting support for US manufacturers prior to the November election, the House will now vote in the coming weeks on the legislation pushing China to increase the value of the yuan. Critics charged Obama’s Democratic Party with hurrying the actual measure in a last minute effort in order to earn labor union support before the elections on November 2, where the headline news is the shaky United States economy.
Obama’s allies in Congress approved this measure, which basically accuses Beijing of wiping out United States manufacturing employment through its weak yuan exchange rate policy, only one day after President Obama discussed the currency issue with Chinese Premier Wen Jiabao in a meeting in New York.
The House Ways and Means Committee, which creates tax laws and regulations, elected to increase the capabilities of the Commerce Department in order to enable it to be able to impose tariffs on another nation when it is observed to be influencing its currency’s value. Following concerns issued by Republican Party rivals that the measure would breach United States responsibilities within the World Trade Organization, the Democrats modified the bill . Committee staff now assure that the new bill is WTO compliant.
China has previously discontinued a pegged exchange rate to the dollar last June under pressure from the United States however, the exchange rate to the dollar is managed by the People’s Bank of China, which establishes a day-to-day rate, and ever since the discontinuation of the peg, Beijing has only permitted the yuan to rise 1.9%. The United States accuses China of artificially depressing the yuan’s value so that its exports receive an unfair price advantage.
Lawmakers defended against cautions from lobbyists representing businesses including Wal-Mart Stores Inc., Caterpillar Inc., and Citigroup Inc., who contend the measure may well result in retaliation aimed at US companies conducting business in China ultimately curbing exports to the country.
“This could damage our efforts to ‘sell American’ and compete successfully in the growing China market,” Texas Republican Representative Kevin Brady, who heads the committee’s trade panel, stated prior to the vote. He added that increasing United States companies’ accessibility to China’s substantial consumer marketplace as well as protecting United States intellectual property rights “would benefit thousands more American workers than a focus on Chinese currency alone.”
“China’s persistent manipulation is a major distortion in the international marketplace,” said chairman of the House Ways and Means committee Sander Levin. “[The yuan] has a major impact on American workers and therefore American jobs. That’s what this is really all about.”
The draft legislation would would still call for the United States Commerce Department to ascertain the actual degree to which a foreign currency is undervalued with regard to any cases of unfair trade practices delivered to it.
Levin stated today that the measure was rewritten to conform with WTO rules and it would clear the way for US manufacturers to be able to request the Commerce Department for countervailing duties on Chinese goods in order to make up for the “subsidy” of a weak currency, based on documents published by the committee.
President Obama pressed China’s Premier Wen Jiabao in a two-hour meeting at the United Nations yesterday to raise the yuan’s value more. Wen stated this week that a 20 percent rise in the value of the currency would lead to serious employment losses and also bring about social unrest in China. “We cannot imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs.”
According to Treasury Department spokeswoman Natalie Wyeth, President Obama has not yet taken a position on the bill.
