By  on August 2, 2007

WASHINGTON — The Senate Banking, Housing and Urban Affairs Committee passed a bill Wednesday that would pressure China to raise the value of its currency by giving the Treasury Department more leeway in finding China guilty of currency manipulation.

The bill, introduced by Sens. Christopher Dodd (D., Conn.) and Richard Shelby (R., Ala.), would "strengthen the existing manipulation framework by removing the 'intent' requirement from the criteria needed for the Treasury to find that a nation is manipulating its currency," Shelby said.

Critics of the Bush administration's approach have said it uses the "intent" factor to avoid labeling China a currency manipulator.

The bill's passage by a 17-to-4 vote followed another bill approved by the Senate Finance Committee last week that calls for punitive action against China if it doesn't reform its currency, the yuan. The actions in the Democratic-controlled Senate drew a sharp response from the Bush administration.

Treasury Secretary Henry Paulson Jr., Commerce Secretary Carlos Gutierrez and U.S. Trade Representative Susan Schwab, in a letter sent to Senate Majority Leader Harry Reid on Monday, called the legislative proposals the "wrong approach."

"These bills will not accomplish our shared goal of persuading China to implement economic reforms and move more quickly to a market-determined exchange rate," the three cabinet members said in the letter, warning the proposals could spark a trade war.

But Dodd, underscoring the sentiments of many in Congress, said at the hearing: "Dialogue alone does not produce the results necessary to level the playing field for American workers and businesses. That is why we introduced [the bill]. It is legislation that creates tough new authority for [the administration] and Congress to address currency manipulation and market access barriers."

The Senate Finance Comm-ittee's bill, sponsored by Sens. Max Baucus (D., Mont.), Chuck Grassley (R., Iowa), Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.), would establish new rules to punish China, including the imposition of U.S. antidumping duties, if the country doesn't raise the value of its currency. The Dodd-Shelby bill does not provide any trade remedies, but it does require consultations — as does the Baucus bill — at the World Trade Organization if the Treasury secretary finds manipulation and if bilateral talks fail, which could ultimately result in WTO sanctions.Both legislative proposals give the president authority to waive any recommendations for punitive remedies against China for national security and economic reasons. Senate leaders will now have to find a compromise between the two bills.

Many in the U.S. textile industry have lobbied for a stronger currency bill that contains trade remedies, such as countervailing duties.

"Certainly, whatever legislation moves to the floor has to have a [countervailing duty] remedy because it is the most effective remedy out there, and we would like to see that in the bill," said a spokesman for the American Manufacturing Trade Action Coalition, which represents textile manufacturers, including Milliken & Co. "In our view, this bill needs to be strengthened."

Retailers are opposed to the bills pressuring China to revalue its currency.

"The remedies in the bill would harm U.S. companies doing business in China, the largest export market for U.S. goods and services," Erik Autor, vice president and international trade counsel at the National Retail Federation, said in a statement.

The House Ways and Means Committee is set to hold a hearing today to consider several bills targeting China's currency with U.S. trade remedies, as it tries to build a consensus on what legislation it might move when lawmakers return from a monthlong recess in September.

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