ASSOCIATED PRESS
A Senate panel overwhelmingly approved legislation yesterday that would give the United States additional tools to pressure China and other countries accused of manipulating the value of their currencies.
The bill, sponsored by Sens. Max Baucus, Montana Democrat, and Charles E. Grassley, Iowa Republican, passed the Senate Finance Committee by a vote of 20-1.
The legislation is one of several bills introduced this year aimed at punishing China and other countries accused of manipulating their currencies. Business group representatives say anti-trade sentiment in Congress is strong enough to override a likely presidential veto of a currency bill.
Treasury Secretary Henry M. Paulson Jr. travels to Beijing next week to discuss the currency dispute and other economic issues, such as product safety.
“Treasury cannot support or recommend this approach,” Mr. Paulson said yesterday. Discussions with China, not legislation, are the best way to make progress, he said.
The measure does not specifically mention China and is not as punitive a bill as the proposal before the Senate last year that would have imposed an across-the-board tariff on Chinese imports.
Mr. Baucus and Mr. Grassley introduced their bill last month, after the Treasury Department refused to cite China as a currency manipulator in a semiannual report to Congress.
U.S. manufacturers and many members of Congress say that China keeps its currency, the yuan, undervalued by as much as 40 percent against the U.S. dollar to gain an unfair trade advantage. The cheaper currency means that China’s exports to the United States are less expensive.
Sen. Charles E. Schumer, New York Democrat, who sponsored legislation last year with Sen. Lindsey Graham, South Carolina Republican, that would have slapped a 27.5 percent tariff on Chinese goods, shifted his support to the Baucus-Grassley proposal.
“Our objective this year should be to pass the strongest possible bill we can with the largest possible vote that we can,” Mr. Schumer said.
The legislation would require the Treasury secretary to identify countries with “fundamentally misaligned” currencies and take steps to punish those countries, such as initiating a World Trade Organization dispute if the currency remains misaligned for a year.
A country’s currency is defined as misaligned if its government is intervening in the markets to alter the value of the currency, or if the government imposes currency controls, among other criteria, a summary of the bill said.
Sen. Maria Cantwell, Washington Democrat, was the lone committee member to vote against the bill, which she said could spark retaliation by China, resulting in “unintended consequences” for U.S. companies and consumers. She wants the United States to press China to make legal reforms and improve its intellectual property protection, a key issue for Microsoft Corp., located in Redmond, Wash.
“This is the year that China legislation will likely pass,” said Patricia Mears, director of commercial affairs at the National Association of Manufacturers. “A lot of the anti-trade sentiment we’re seeing is about China.”
The association is a longtime critic of China’s currency policies but has not taken a position on the bill. Its 11,000 member companies include large manufacturers such as General Motors Corp., Honeywell International Inc. and General Electric Co.
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