WASHINGTON — Sens. Charles Schumer and Lindsey Graham on Tuesday delayed for a third time a vote on their bill to impose a 27.5 percent tariff on all Chinese imports, saying the Chinese have made progress in allowing their currency to appreciate against the dollar.
The two senators made their appraisal after discussions in China last week with government and business leaders. However, the pair said China’s steps toward monetary reform have not gone far enough and they expect to see more substantial appreciation.
Schumer (D., N.Y.) and Graham (R., S.C.) set a new deadline of Sept. 29 for a vote on the bill if China’s currency does not appreciate substantially.
“We believe if we hadn’t introduced this strong medicine, nothing would have ever happened,” Schumer said during a news conference. “But we also believe now that we are on the path to progress. We don’t have to fire this so-called nuclear weapon, but can hold it in abeyance as we carefully watch and wait and expect continued progress.”
Schumer cited two positive moves: a decision by China to raise the value of the yuan by another 1 percent and inclusion of a commitment to allow its currency to float in the government’s new five-year plan.
Opponents of China’s currency policy, including U.S. textile executives, charge that it artificially lowers the price of Chinese goods by 15 to 40 percent, contributes to the $200 billion trade deficit with China, puts U.S. companies at a disadvantage and leads to job losses for Americans.
China raised the value of its currency by 2.1 percent last July in a move to change the peg of the yuan to a so-called basked of currencies, but many critics claimed the change was insignificant.
“The textile industry has been hurt by some things I can’t control and by some things that China can control,” Graham said after the news conference. “I’ve learned from this trip that their banking system will not allow them to go to a floating currency overnight, that the worst thing that could happen is destabilizing China’s economic reforms. So gradual progress is in the best interest of both nations, and I think that is where we are headed. So I’m going to tell my textile leaders that ‘you are seeing change, change is occurring,’ and in six months we’ll know if it is real.”
A spokesman for the American Manufacturing Trade Action Coalition said: “Our people need relief and they need relief now. I think there is going to be some change, but the question is simply how much? I think the U.S. government has to do something or look like it is doing something to maintain its credibility on the issue.”
On the other side of the debate, Stephen Lamar, senior vice president at the American Apparel & Footwear Association, said: “The momentum behind [the bill] was that nothing was being done on currency, but now you’ve got other people doing something on currency and trying to address the issue, including the Chinese, [the] administration and Congressional action. That shifts the momentum away from Schumer-Graham toward a more comprehensive approach that is much more responsible.”
Congressional action came from Sens. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, and Max Baucus (D., Mont.), the committee’s ranking Democrat, who introduced a broader and seemingly less punitive alternative to the Schumer-Graham bill Tuesday.
The bill would require the U.S. Treasury Secretary to identify “fundamentally misaligned” currencies adversely affecting the economy, disallow non-market economies with such currencies from achieving market economy status, create a Senate-confirmed official within the office of the U.S. Trade Representative to enforce trade agreements and provide remedies for countries employing harmful currency policies. This would include opposing multilateral bank financing for the countries, disapproving loans from the Overseas Private Investment Corp. and refusing to increase an offending country’s voting share in the International Monetary Fund. The OPIC is a U.S. government investment bank and the IMF is an organization of 184 member countries that promotes global monetary cooperation.