By Howard Schneider
Washington Post Staff Writer
Thursday, September 23, 2010; A15
House leaders are moving forward with legislation to combat China's currency policies, adding to pressure from the Obama administration and giving lawmakers an election-year chance to vote on a sensitive trade matter.
The House Ways and Means Committee plans to vote Friday on a bill that would expand the Commerce Department's power to impose duties on Chinese imports in response to that country's currency being undervalued on world markets.
The effect of China's currency policy is to make its goods cheaper, but federal rules restrict Commerce's ability to respond as forcefully as in other instances in which a government underwrites exports.
After months in which the administration encouraged China to allow the value of its currency to float more freely - and saw little progress - House leaders said they felt it was time to push ahead.
"Clearly, China has a strategy as to how it competes in an increasingly globalized economic world. The American people want the assurance that our nation has a strategy," Ways and Means Chairman Sander M. Levin (D-Mich.) said in a written statement. "Our citizens sense that for us to compete effectively it cannot include acceptance of a structure . . . that allows the important nation of China to artificially tilt the playing field."
A vote on the House floor is expected next week. Levin's statement said the legislation had been amended to make it consistent with World Trade Organization rules. Similar legislation is pending in the Senate, but no committee vote has been announced.
Some business groups oppose the bill, arguing that it could backfire if it raises trade tensions with China and prompts the Chinese government to use the many tools at its disposal to interfere with American companies. China is a major destination for U.S. exports - about $70 billion a year - although the United States runs a trade deficit of about $200 billion a year with that country. Duties on Chinese imports might also raise prices for U.S. consumers.
Regardless of whether legislation is enacted before Congress adjourns in coming days for the midterm elections, the vote could figure in the campaign and in the administration's diplomatic pressure on China.
High unemployment and the sluggish economy are central issues in the elections, and the steady flow of Chinese imports - resurgent after the recent recession - has been connected by some economists and lawmakers from both parties to the loss of American manufacturing jobs.
Estimates of the undervaluation of the yuan, also known as the renminbi, run as high as 40 percent.
The Obama administration, like the Bush administration before it, has preferred to address the currency issue through diplomatic channels. The United States has refrained from designating China a currency "manipulator" under U.S. laws and instead has used platforms such as the Group of 20 nations to press for change. The G-20, the International Monetary Fund and other organizations have stressed that China's large trade surpluses are a problem for the world economy and that an exchange rate that was more free-floating would be one way to address the situation.
Negotiations won a 20 percent rise in the yuan during President George W. Bush's tenure, but there has been little change in the currency's value since Chinese officials promised in June that its management of the currency would be relaxed.
Last week, Treasury Secretary Timothy F. Geithner signaled a tougher stance and told lawmakers that he thought pressure from their end might help persuade the Chinese to move.