WASHINGTON (AFX) -- Following a weeklong trip to China, two of the Senate's most vocal critics of Beijing's currency policies agreed Tuesday to delay a vote on legislation that would slap punitive tariffs on Chinese goods.
'We were very pleased with the results of our trip.?We learned that the Chinese have come to a conclusion that a fixed currency is no good for China -- at least [not] any longer,' Sen. Charles Schumer, D-N.Y., said at a news conference.
The bill, introduced last year by Schumer and Sen. Lindsey Graham, R-S.C., would put 27.5% tariffs on all Chinese goods unless Beijing moves aggressively to loosen a peg between its yuan currency and the U.S. dollar. It was scheduled for a vote on Friday.
Schumer and Graham spoke to reporters after a closed-door meeting with Treasury Secretary John Snow. The lawmakers emphasized that they are ready to bring the bill back to the floor by the end of September if they're unsatisfied with China's efforts in coming months to further loosen the tether between the yuan and the dollar.
'For me to abandon the idea of imposing tariffs, I have to be convinced that the Chinese have abandoned the idea of getting an unfair trade advantage through manipulating the currency.?After my visit, I am optimistic they're moving in that direction, but the jury's still out,' Graham said.
Schumer and Graham, along with Sen. Tom Coburn, R-Okla., spent last week's congressional recess visiting top Chinese government and business officials.
The Bush administration has opposed the tariff legislation. And some lawmakers have warned that imposing punitive tariffs would spark a damaging trade war.
But Graham said a previously adversarial relationship with the White House over the bill had become more cooperative.
'I think they understand us better.?We understand the administration's position better.?But, more importantly, we understand China better,' Graham said.
Still some concern about China
Treasury spokesman Tony Fratto said Snow and the senators agreed that 'economic reforms in China need to continue apace.'
'We share many concerns about economic reforms in China,' Fratto said. Treasury's views of the tariff legislation are 'well known,' he said.
Meanwhile, the top Republican and the top Democrat on the Senate Finance Committee on Tuesday offered legislation that would give the Treasury Department and the U.S. Trade Representative tools to address currency manipulation by foreign governments, but would avoid the imposition of punitive tariffs.
'I know the American public is nervous about China, and there is a temptation to respond harshly to the economic challenge that China poses, but we need to resist that urge and make responsible policy,' said Sen. Max Baucus of Montana, the committee's senior Democrat.
The bill sponsored by Baucus and Senate Finance Committee Chairman Charles Grassley, R-Iowa, would require the administration to take specific actions against countries found to be currency manipulators, including disapproval of loans through international financial institutions, such as the Asian Development Bank, disapproval of insurance through the Overseas Private Investment Corp.,
The bill would create a new assistant secretary position at the Treasury Department to focus on currency-related issues.
China has maintained the peg by buying hundreds of billions of dollars worth of U.S. assets, including Treasurys, corporate bonds, and mortgage-backed securities. The buying is a major reason for the relatively low real U.S. interest rates.
Lawmakers and U.S. companies complain that the peg significantly undervalues the yuan, putting U.S. manufacturers and workers at a competitive disadvantage. They also charge that China has done little to enforce intellectual property rights, leaving U.S. firms vulnerable to theft by software pirates and other copyright violators.
The U.S. trade deficit with China grew by 24% in 2005 to $201.6 billion, more than a quarter of the total trade gap, government data show.
Despite opposition from Republican leaders and the White House, the Graham-Schumer legislation easily survived a key procedural vote last year. The lawmakers, however, have repeatedly agreed to delay action on the legislation pending action by China.
China moved last fall to somewhat loosen the currency peg, but the limited appreciation of the yuan has renewed frustration among lawmakers and the administration.
China, meanwhile, has repeatedly warned against the 'politicization' of trade issues.
Administration officials have also started to talk tough about China's trade practices.
Commerce Secretary Carlos Gutierrez earlier this month complained that U.S. firms do not have fair access to Chinese markets and that Beijing has made few arrests of pirates who steal U.S.-made software, music and movies, or counterfeiters who make phony drugs, auto parts and electrical equipment. This story was supplied by MarketWatch. For further information see www.marketwatch.com.