By Ian Swanson - 03/23/10 11:46 PM EDT
Sen. Charles Schumer (D-N.Y.) said Tuesday he would seek a vote by May on legislation that would punish China for currency manipulation.
The public call for a Senate vote before the Memorial Day recess builds pressure on President Barack Obama to take a tougher line with the world’s fastest-rising economic power.
U.S. budget deficits are aggravating China, which holds $2.4 trillion in currency reserves, much of which is held in U.S. dollars.
China’s purchases of U.S. Treasury bills have helped the U.S. finance its debt without raising interest rates but have also cheapened the Chinese currency and made Chinese exports to the U.S. less expensive, hurting U.S. manufacturers and workers, according to Schumer and other lawmakers.
China warned this week that if the U.S. punishes it for its currency policy, it will set off a trade war where the U.S. will suffer more than China.
Schumer and co-sponsor Sen. Lindsey Graham (R-S.C.) said they believed the only way to get China to change the value of its currency was through pressure.
“We intend to move this legislation quickly,” Schumer said. “My feeling is China won’t do anything without pressure.”
Both said during a press call on Tuesday that they hoped their legislation would lead the Treasury Department to find that China manipulates its currency.
Treasury is set to issue a report by April 15; over a series of reports issued during the Bush and Obama administrations, it has repeatedly refused to mark China as manipulating its currency.
A finding that China manipulates its currency would mean Treasury would have to seek negotiations with the Chinese, though the Chinese would be unlikely to reciprocate.
Some observers think the Schumer-Graham legislation is mostly intended to pressure Treasury into issuing a finding that China manipulates its currency.
But Schumer insisted Tuesday he would push the legislation regardless of Treasury’s actions, and that he aimed for a vote by May. Schumer said he and other co-sponsors are looking for vehicles on which to attach their legislation.
Schumer and Graham sponsored similar legislation in 2005 that won 67 votes in the Senate but was never taken up in the House. The two backed off pursuit of the bill after the successful Senate vote to give China time to deal with the issue.
China did allow its currency’s value to strengthen after that vote, but it has now re-pegged the yuan to the dollar.
This means China’s currency rises and falls with fluctuations in the dollar’s value. Critics say this means China’s currency is undervalued, and that it lowers the price of Chinese exports while making U.S. exports to China more expensive.
The legislation introduced by Schumer and Graham would make it easier for the government to impose duties on Chinese imports to the U.S. if the Commerce Department finds that China has manipulated its currency.
It also sets up a new set of criteria for Treasury to consider when judging if a country has manipulated its currency.
2.4M jobs lost
The tough comments from Schumer and Graham come the same day a report by the left-leaning Economic Policy Institute (EPI) found the U.S. lost 2.4 million jobs to China between 2001 and 2008.
“These figures exceeded even our worst expectations,” Schumer said.
The EPI report blamed the growing trade deficit with China for the job losses, and said China’s currency manipulation is a major factor.
Every state experienced job losses because of increased trade from China, but the report said Texas and California were the hardest hit.
It blamed high job losses in computers, electronic equipment and parts industries, which are concentrated in those two states.
The three hardest-hit congressional districts are all in Silicon Valley, the report said. Districts represented by Reps. Anna Eshoo (D-Calif.), Mike Honda (D-Calif.) and Zoe Lofgren (D-Calif.) have lost the most jobs, it said.
North Carolina was also hit hard, according to the report. That state has seen textile, furniture and other small manufacturing industries shrink as companies faced competition from lower-priced Chinese goods.
U.S. business groups have helped stem legislation targeting China’s currency in the past, but the U.S. Chamber of Commerce signaled this week it would be more reluctant to step in because of mounting problems U.S. businesses are having in China.
While the Chamber has taken no position on Schumer’s bill, it is upset with a number of government policies designed to prop “indigenous innovation” businesses in China.
“There is a growing sense of impatience, concern and frustration,” said Jeremie Waterman, who works on China policy at the Chamber.
Businesses increasingly are wary of doing business in China. A survey from the American Chamber of Commerce in China found that 38 percent of U.S. companies operating there feel they are unwelcome to participate and compete in the Chinese market.
That’s up from 26 percent a year ago and 23 percent in 2008.