WASHINGTON (AP) - A Senate panel overwhelmingly approved legislation Thursday that would give the United States additional tools to pressure China and other countries accused of manipulating the value of their currencies.
The bill, sponsored by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa, passed the Senate Finance Committee by a bipartisan vote of 20-1.
The measure would apply 'to any trading partner with (an) out-of-whack currency,' Grassley said. And because many of the bill's punitive measures don't kick in for six months or a year, 'It's a velvet glove with a steel fist inside,' he added.
The vote comes before Treasury Secretary Henry Paulson travels to Beijing next week to discuss the currency dispute and other economic issues, such as product safety.
Sen. Maria Cantwell, D-Wash., was the lone committee member to vote against the bill, which she said could spark retaliation by China, resulting in 'unintended consequences' for U.S. companies and consumers. She wants the U.S. to press China to make legal reforms and improve its intellectual propery protection, a key issue for Microsoft Corp., located in Redmond, Wash.
Several bills were introduced this year aimed at punishing China and other alleged currency manipulators. Business groups representing manufacturers such as General Motors Corp., Honeywell International Inc. and General Electric Co. say anti-trade sentiment in Congress is strong enough to override a likely presidential veto of a currency bill.
The measure approved Thursday does not specifically mention China and is not as punitive a bill as the proposal before the Senate last year that would have imposed an across-the-board tariff on Chinese imports.
Baucus and Grassley introduced their bill last month, after the Treasury Department refused to cite China as a currency manipulator in a semiannual report to Congress.
U.S. manufacturers and many members of Congress say that China keeps its currency, the yuan, undervalued by as much as 40 percent against the U.S. dollar to gain an unfair trade advantage. The cheaper currency means that China's exports to the United States are less expensive.
Sen. Charles Schumer, D-N.Y., who sponsored legislation last year with Sen. Lindsey Graham, R-S.C., that would have slapped a 27.5 percent tariff on Chinese goods, helped develop the Baucus-Grassley proposal.
'Our objective this year should be to pass the strongest possible bill we can with the largest possible vote that we can,' Schumer said.
The legislation would require the Treasury Secretary to identify countries with 'fundamentally misaligned' currencies and take steps to punish those countries, such as initiating a World Trade Organization dispute if the currency remains misaligned for a year.
A country's currency is defined as misaligned if its government is intervening in the markets to alter the value of the currency, or if the government imposes currency controls, among other criteria, a summary of the bill said.
Senate Banking Committee Chairman Chris Dodd, D-Conn., and Sen. Richard Shelby, R-Ala., the top Republican on the panel, have proposed competing legislation. Their bill would tighten the definition of currency manipulation to make it more likely that a country like China would be cited as a manipulator in Treasury reports.
A citation would require Treasury to enter negotiations with the country and consult with the International Monetary Found on the issue.
The two senators said in a July 25 letter to Baucus and Grassley that the Banking Committee would consider their legislation next week.
The China Currency Coalition, which includes steel makers such as Nucor Corp. and the AFL-CIO labor federation, has endorsed a third bill introduced by Reps. Timothy Ryan, D-Ohio, and Duncan Hunter, R-Calif. That proposal would define currency manipulation as a government subsidy and would enable the United States to impose tariffs to counteract the subsidy.
The Hunter-Ryan bill, as well as other China-related legislation, will be discussed during a House Ways and Means hearing Aug. 2.
David A. Hartquist, counsel to the coalition, nevertheless praised the Senate Finance Committee's move.
'This is a very significant step forward in terms of putting pressure on the Chinese government and the Bush administration,' he said.
Associated Press Writer Matthew Daly in Washington contributed to this report.
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