The Senate passed legislation Tuesday aimed at punishing China for alleged currency manipulation, which has been widely blamed for costing American jobs.
The bill would require the U.S. to impose tariffs on imports from China to counteract the country undervaluing its currency. China allegedly keeps the value of its currency low through artificial means to make its exports cheap and imports more expensive.
“Today’s strong bipartisan vote in the Senate to pass China currency legislation is a step forward for American workers, American manufacturers, and American competitiveness,” Democratic Leader Nancy Pelosi said after the bill passed. “This legislation has the potential to create more than one million jobs here at home.”
“The United States must demand that the Chinese government take its thumb off the scale and allow its currency to respond to market forces,” she continued. “For too long, the Chinese government has manipulated the value of its currency, harming U.S. manufacturers and costing American jobs.”
Lawmakers voted 63-35 to approve the Currency Exchange Rate Oversight Reform Act. Seventeen Republicans voted for the bill and only five Democrats voted no.
The legislation faced a gloomy future in the Republican-led House of Representatives amid warnings from leaders there that it could spark a trade war between the two economic giants.
“We are in trade war. But today we’re fighting back,” said Democratic Senator Sherrod Brown, one of the bill’s chief champions, celebrating an end to “the unilateral disarmament approach we’ve taken for the past decade.”
The proposal, powered by a tide of U.S. voter frustration at a sour economy and high unemployment ahead of November 2012 elections, envisions retaliatory duties on Chinese exports if the value of the yuan is unfairly “misaligned.”
“I urge Speaker Boehner and Republican Leader Cantor to allow a vote on this bill in the House, where it received strong, bipartisan support last Congress and, I believe, will pass with wide support this year,” House Democratic Whip Steny H. Hoyer (MD) said. “Our businesses have what it takes to succeed on a level playing field, and this bill will help them do so.”
Republican House Speaker John Boehner has signalled that he will not bring the legislation to a vote, calling it “dangerous” to economic relations between the worlds number-one and number-three economies and even spark a “trade war.”
President Barack Obama last week declined to back the legislation and worried it could violate World Trade Organization (WTO) rules even as he accused China of “gaming the trade system” in a way that hurts the US economy.
Few in Washington dispute the charge that China keeps the yuan unfairly low against the dollar, giving its goods as much as a 30 percent edge over similar US products, widening the American trade deficit and costing jobs here.
But the measure’s opponents warn that it risks worsening ties with China, and say a rise in the yuan would merely boost manufacturing and jobs in countries such as Vietnam or Malaysia — not in the United States.
They also contend that, if successful, the bill will increase the cost of commodities or consumer goods from China, hurting rather than helping U.S. businesses and families.
The legislation’s backers, an unusual coalition of Democrats and Republicans, have said it’s time for Washington to take on Beijing, and predict a boost in the yuan will make Chinese workers wealthier and more likely to buy US goods, thus creating jobs and narrowing the trade gap.
They also say that current U.S. law and multinational dispute mechanisms have failed to curb what they call Beijing’s unfair practices, which also include favoring Chinese producers for government contracts and tolerating rampant intellectual piracy.
With additional reporting by Eric W. Dolan