Bill targeting trade deficit would tax imports from China
The Senate fired the opening round in a new effort to punish China and other countries for holding down the value of their currencies, reviving a Democratic-led campaign billed as a way to staunch the loss of U.S. manufacturing jobs.
The legislation, which would slap tariffs on imports from countries found to be “manipulating” their currencies, drew rare bipartisan support in clearing a procedural hurdle Monday, 79-19. The measure is expected to be approved by the Senate this week.
Beyond that, its prospects are murky. The White House has been cool to the congressional effort, and the bill’s chances are uncertain in the GOP-controlled House.
House Majority Leader Eric Cantor (R-Va.) raised concerns Monday that the measure could ignite a trade war with China that could result in higher prices for U.S. consumers. Large business organizations, including the U.S. Chamber of Commerce, have urged lawmakers to oppose the measure, as has the Club for Growth, an influential conservative group.
Supporters of the measure counter that an artificially low currency holds down prices on Chinese imports, making it hard for American-made products and workers to compete.
“We simply have no choice but to defend and protect U.S. jobs and the U.S. economy,” said Sen. Charles Schumer (D-N.Y.), a chief sponsor of the legislation. “This is not about China-bashing. This is about defending American jobs and American manufacturers.”
Sixteen Republicans and three Democrats voted against going forward with the measure. A similar bill was passed about a year ago by the then-Democratic-controlled House, but the legislation died in the Senate.
Nearly 2 million U.S. manufacturing jobs have been lost during the last decade because of sharply higher imports from China, according to a report from the liberal-leaning Economic Policy Institute.
But some experts say that China’s currency policies are only one of many factors contributing to America’s huge trade deficit. They warn that punitive measures could inflame tensions at a time when both countries are facing pressure from citizens over economic problems.
Critics also argue that the legislation would not create jobs in America. Rather, they said, jobs would simply shift from China to other low-cost countries.
The business groups, in a letter to senators, worried that imposing tariffs on Chinese imports might lead to retaliation against U.S. exports to the fast-growing Chinese market. They said the congressional action could impede administration talks with China on other issues as well.
The legislation, besides penalizing imports from countries found to be undervaluing their currency, also would revamp the way the Treasury Department defines currency manipulation.
Cantor, in expressing skepticism about the bill, said he wanted more information from the administration on “unintended consequences that may result,” particularly on consumer prices.
“If there are unfair practices going on, we should look to our trade representative and the administration to address those,” he said.
Over the last two years, President Obama and Treasury Secretary Timothy F. Geithner have criticized China’s currency policies. But they have been reluctant to take tough measures that could imperil increasingly complex relations with a country that is the biggest foreign holder of U.S. Treasury bonds.
As in the prior administration, Treasury officials have repeatedly declined to label China a currency manipulator, a charge that would enrage Beijing and begin a process in the U.S. that could lead to sanctions.
White House Press Secretary Jay Carney noted Monday that China has allowed the value of its currency to rise.
“We’ve seen some appreciation since last summer, which has been useful and good, but not enough,” Carney said. “The currency remains substantially undervalued, and that has an economic impact and we need to see continued progress.”
Carney said the administration was reviewing the bill.
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