China currency bill prospects murky as U.S. eyes G20
A bill aimed at forcing China to strengthen its currency looks set to languish during a "lame-duck session" of U.S. lawmakers that opens next week -- handing the issue to a new Congress that may have different priorities.
The House of Representatives passed a bill in September that would treat an undervalued currency as an unlawful subsidy that can be remedied by slapping duties on selected Chinese goods. The bill will expire if the Senate does not act before the new Congress elected on November 2 begins work in January.
U.S. officials say Beijing keeps the yuan's value low against the dollar to aid exports at the expense of U.S. jobs.
The lame-duck session that fills the gap between the congressional elections in November and the launch of the new Congress in early January opens on Monday and will likely wind down in early December after tackling only must-do items.
Democratic leaders still in control of both chambers expect Republicans to block most legislation in the wake of their November 2 election victory, and trade has lower priority than domestic issues like tax cuts and unemployment benefits, congressional aides said.
While the Senate will remain under Democratic control in the new Congress, the House will be run by the Republicans, whose top leaders, presumptive Speaker John Boehner and Majority Leader Eric Cantor, voted against the currency bill.
Among the main sponsors of China currency legislation in the U.S. Senate contacted by Reuters, only Democratic Senator Sherrod Brown's office expressed a commitment to push for the bill in the lame-duck session.
Donald Straszheim, head of China research at the investment advisory firm ISI Group in California, said he saw no chance of a bill moving in the lame-duck session and that prospects the new Congress would pursue it were just as dim.
"Passing a 2010 House bill look-alike and signing it into law would be the nuclear option and is not going to happen," he said.
Both Sides Eye G20
Despite the crowded agenda of the short lame-duck session, supporters and opponents of the currency bill are keeping one eye on Congress and the other on this week's summit of the Group of 20 global economic powers in South Korea.
U.S. President Barack Obama met with Chinese President Hu Jintao on Thursday on the sidelines of the summit, where hopes are fading for G20 leaders to agree on specific commitments for reducing global imbalances.
U.S. Treasury Secretary Timothy Geithner will meet in Seoul on Friday with top Chinese economic officials, his office said.
Geithner has held out the G20 as the best forum to address China's currency issue. He postponed a semi-annual report, due on October 15, on labeling China a currency manipulator with an eye on progress at the G20 summit.
"Barring a miracle at the G20 summit this week, the ball will be in the Senate's court on November 15 and we expect it to act," said Charlie Blum, executive director of the Fair Currency Coalition, a proponent of the bill.
"We are still concerned about the prospect of something moving in the lame-duck," said Christopher Wenk, senior director for international policy at U.S. Chamber of Commerce.
The chamber's position is that China's currency policies need to be addressed, but it does not think U.S. legislation is the way to do it.
With Hu slated to visit the United States in January, analysts say Beijing might offer some gestures to soothe its critics and Washington would avoid issuing a damning currency report until after he leaves.
But a G20 negotiator in Seoul said China was "resisting all the wording on how to rebalance and rectify external imbalances, the measures, the timelines, the process -- every single element."
Little to Gain
If the G20 approach fails with China, labor and manufacturing groups that argue China steals jobs by suppressing the value of the yuan to make its products cheaper will renew calls for unilateral U.S. action.
China released its currency from a de facto peg to the U.S. dollar in June, but has permitted the yuan to strengthen less than 3 percent since. China's overall trade surplus widened in October $27.1 billion from September's $16.9 billion.
"Passing legislation to hold China and other nations accountable for currency manipulation is one of the few things the Senate could do to spur job growth in America in the short time that remains this year," said Scott Paul, executive director of the Alliance for American Manufacturing.
Heritage Foundation economist Derek Scissors said, however, that behind closed doors, members of Congress know that currency legislation will "accomplish almost nothing."
[Source: By Paul Eckert, Reuters, Washington, 11Nov10]
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