Senate Postpones China Currency Vote

Vote to impose sanctions on China for its unfair currency practices was put off, delayed by the partisan divisions that have come to characterize this Congress.

WASHINGTON (AP) -- A Senate vote to impose sanctions on China for its unfair currency practices was put off Thursday, delayed by the partisan divisions that have come to characterize this Congress.

The bill, which makes it easier to raise tariffs against Chinese goods if China keeps its currency undervalued, is now set for a likely vote Tuesday, when it is expected to pass with bipartisan support.

But partisanship ruled the day Thursday when Democratic Senate Majority Leader Harry Reid and Republican leader Mitch McConnell couldn't agree on what amendments would be allowed, and Democrats used their majority powers to push through a rule change that restricts the offering of non-relevant amendments to legislation.

The China currency legislation, years in the making, reflects frustration at the failures by the Obama administrations and past presidents to change Chinese policy through diplomacy, and the Chinese economic onslaught that saw the trade deficit with China hit $273 billion last year.

It is aimed at the practice of keeping the yuan, the Chinese currency, undervalued against the dollar, making Chinese exports cheaper and U.S. products sold in China more expensive. Economists say the yuan is 25 percent to 30 percent undervalued, with some putting the figure as high as 40 percent, giving Chinese producers a significant advantage against American competitors.

Republican Sen. Lindsey Graham cited estimates that China has cost the U.S. some 2 million manufacturing jobs in the past decade and that the advantage Chinese producers have because of the undervalued currency could prove devastating as China prepares to enter world markets in commercial aircraft and automobiles.

"We cannot continue to let China flaunt the rules," Democratic Sen. Chuck Schumer said if action isn't taken, "we may never recover as a country. This is serious stuff."

The legislation, even if it passes the Senate, is still a long way from becoming law. House supporters of a similar bill say they have 225 co-sponsors, enough to pass it, but Republican House of Representatives Speaker John Boehner doesn't like it and could prevent it from reaching the floor for a vote. He said this week that it was "pretty dangerous" to tell another country how to set its monetary policy.

The White House has remained noncommittal, but has emphasized the importance of working through diplomatic and international channels rather than challenging the Chinese with unilateral action that could result in retaliation from the Chinese.

President Barack Obama said at a news conference Thursday that it was "indisputable" that the Chinese "intervene heavily in the currency markets." He said China "has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States."

He said the Senate bill was an effort to get at these practices, but he stressed that whatever tools are put in place must adhere to international treaties and obligations.

But the legislation has bipartisan backing from senators responding to popular resentment to the way China has come to dominate U.S. markets and driven American manufacturers out of business.

The Alliance for American Manufacturing, a labor-management partnership that supports the bill, cites figures that a 28.5 percent appreciation of the yuan would create up to 2.25 million American jobs and reduce the annual trade deficit by $190.5 billion.

The legislation is widely opposed by larger companies and groups that do business with China, which warn that Beijing would retaliate against American companies, initiating a trade war.

"Unilateral action by the United States will only serve to increase trade tensions and negatively impact the U.S. economic recovery during this fragile period in the global economy," Bruce Josten of the U.S. Chamber of Commerce wrote senators this week.

Erin Ennis, vice president of the U.S.-China Business Council, said the Chinese could also react in more subtle ways, such as choosing European over American aircraft and picking fewer American companies for Chinese government procurement contracts. She also questioned whether a fairer currency rate would bring jobs back to the U.S., saying that lower-wage countries such as Vietnam or Bangladesh would move in if Chinese goods become more expensive.

Chinese Foreign Ministry spokesman Ma Zhaoxu said in a statement this week that the bill violated World Trade Organization rules "and seriously disturbed China-U.S. trade and economic relations."

But Democratic Sen. Sherrod Brown, a chief sponsor of the legislation, said it was unlikely China would start a trade war. "You don't initiate a trade war if you are China. ... We're their biggest customer. They have way more to lose than we do if they initiate a trade war."

Regardless of the outcome of the currency legislation, the debate gave senators an opportunity to vent on a long list of Chinese practices that impede U.S. sales to that country, including violation of intellectual property rights, technology theft, cyber espionage and Chinese government subsidies to domestic industries.

Democratic Senate Foreign Relations Committee Chairman John Kerry said it was "an important debate because I think China needs to carefully think about and process the substance of what people are saying here on the floor of the United States Senate." He added: "I don't think that we're here to rupture that relationship. I think we're here to send a message to the Chinese about the urgent need to repair it."