WASHINGTON — The Bush administration immediately rejected a request made Thursday by the AFL-CIO and a dozen industry associations to investigate whether China is drastically undervaluing its currency and consequently lowering export prices to the detriment of U.S. producers, such as textile mills.

The petition filed by the union and industry groups including steel, metal products and plastics added fuel to the presidential campaign issue of the loss of manufacturing jobs. The U.S. has shed some 2.5 million jobs since President Bush took office in 2001. The petitioners argued that China lowballs its currency by as much as 40 percent and won’t seek a market-based currency unless there’s a threat of trade or other sanctions.

The petition was rejected in a statement from U.S. Trade Representative Robert Zoellick’s office. A USTR spokesman expressed “serious concerns” about China’s currency situation, but said the issue was already being addressed by “unprecedented” negotiations. For example, he said, “The Chinese are actively working to modernize their financial infrastructure to prepare for a flexible exchange rate regime.”

The union and industry groups, acting as the China Currency Coalition, contended that if China’s currency goes unchecked for much longer its market edge in the U.S. for various goods, such as textiles and apparel, will worsen. Last year, the U.S. trade deficit with China was $125 billion and it is expected to grow to around $160 billion this year.

“American workers, employers and communities are angry and frustrated because our own government is simply failing to manage our important trade relationship with China in a way that gives our businesses and workers a fighting chance of competing fairly,” AFL-CIO secretary-treasurer Richard Trumka said Thursday at a news conference.

While the majority of Republicans in the GOP-controlled Congress back the President on the issue, some from the party have joined Democrats in agitating for more aggressive action. Sen. Lindsay Graham (R., S.C.) has parted ways with Bush by sponsoring legislation with Sen. Charles Schumer (D., N.Y.) that would impose 40 percent tariffs on Chinese imports if the yuan isn’t revalued upward.

“We must stay on the offensive against Chinese currency manipulation,” Graham said in a statement.

This story first appeared in the September 10, 2004 issue of WWD. Subscribe Today.

Rep. Sander Levin (D., Mich.), the top Democrat on the House Trade Subcommittee and a trade adviser to Democratic presidential candidate Sen. John Kerry, said in rejecting the petition the USTR “seems to concede the facts of China’s currency manipulation.” Levin said, “We need action, not an apology for the status quo in our economic relationship with China.”

Kerry’s campaign did not return phone calls seeking comment Thursday, but in his platform he said he would investigate China’s currency policy.

U.S. textile and apparel producers are also clamoring for new limits on Chinese imports, as quotas limiting global apparel trade for World Trade Organization members are lifted on Jan. 1.

South Carolina Rep. John Spratt, the Democratic co-chair of the House Textile Caucus, introduced a bill Thursday calling for the administration to negotiate an agreement with China keeping quotas on its apparel and textile exports to the U.S. The Chinese said Wednesday they would not negotiate such a deal.