Democratic lawmakers, prodding President Barack Obama to take a tougher line on China’s currency, are drawing up legislation and convening hearings on the yuan’s effects on US companies.
Senators Sherrod Brown of Ohio, Charles Schumer of New York and Debbie Stabenow of Michigan will propose legislation setting criteria to find a country has a misaligned currency, and the consequences, according to a draft of the proposal. The House Ways and Means Committee plans a March 24 hearing on the yuan, held at about 6.83 per dollar since July 2008.
The moves reflect pressure on the Obama administration to demand that China allow appreciation in the yuan and end a policy that provides Chinese competitors an unfair advantage, said Scott Paul, executive director of the Alliance for American Manufacturing. Chinese Premier Wen Jiabao on March 14 rebuffed calls for an end to the currency link, saying he doesn’t “think the renminbi is undervalued.”
“We’re in a wretched stretch in the economy,” said Paul, whose Washington-based organization represents US Steel Corp and the United Steelworkers union. “There is an increasing anxiety about jobs, the economy and the role of China.”
Meghan Dubyak, a spokeswoman for Brown, said a press conference to announce the legislation is scheduled for 12:30 pm today in Washington. Matt Williams, a spokesman for Stabenow, confirmed the plans. China’s Ministry of Commerce today said some US complaints on the yuan are “groundless.”
Twelve-month non-deliverable yuan forwards were little changed at 6.6485 per dollar, reflecting bets that the currency will appreciate 2.6 per cent in the coming year.
The yuan rose 21 per cent against the dollar from July 2005 to July 2008, before the government halted its advance to protect exporters. Paul Krugman, a Nobel-prize winning economist at Princeton University in New Jersey, said last week that global economic growth would be about 1.5 percentage points higher if China stopped restraining its currency.
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The value of the yuan, or renminbi, has contributed to souring economic relations with China, the second-biggest US trading partner after Canada.
“We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency,” Premier Wen said at a press conference in Beijing.
Yesterday, US lawmakers urged Treasury Secretary Timothy F Geithner to find that China manipulates its currency. Representatives Timothy Ryan of Ohio and Mike Michaud of Maine, both Democrats, sent a letter signed by 130 lawmakers to Geithner demanding the Obama administration take actions including higher tariffs on Chinese-made imports.
“If the administration fails to act on this issue it will hold back our economic recovery and hurt the ability of American small businesses and manufacturers to increase their production,” Michaud said in a statement.
The draft legislation, similar to a measure considered in the Senate in 2007, would require the Treasury Department to determine if any nation has a currency misaligned with the dollar. The current law requires a finding of currency manipulation, which the Treasury declined to make in April even as it said the yuan was undervalued. The measure wouldn’t single out China by name.
If the Treasury made a misalignment determination for a country such as China, the US would be forced to take actions at the International Monetary Fund and, after 60 days, would have to bar federal procurement from that country. After 360 days of inaction, the US Trade Representative’s office would have to bring a complaint at the World Trade Organization over that nation’s currency, the draft says.
Some US arguments on China’s exchange rate are “groundless” and the trade surplus shouldn’t be used as a justification for appreciation, Ministry of Commerce spokesman Yao Jian said at a press briefing in Beijing.