China under pressure over currency
China under pressure over currency
By Eoin Callan and Krishna Guha in Washington and Richard McGregor in Beijing
Copyright The Financial Times Limited 2007
Published: June 13 2007 06:28 | Last updated: June 14 2007 03:05
China came under increased pressure to revalue its currency on Wednesday as a bipartisan group of US senators introduced legislation designed to push the Bush administration towards a full-blown trade dispute with Beijing.
The bill would send exchange rate disputes to the World Trade Organisation by treating them as unfair export subsidies and includes a range of sanctions. The move will increase pressure on the White House to toughen its stance on Beijing.
Lawmakers say China’s fixed exchange rate subsidises its exports and has contributed to a record annual bilateral US trade deficit of $233bn (£118bn).
The most immediate target of the legislation is the renminbi. But it also calls for changes in US policy on exchange rates.
The bill requires the Treasury to co-ordinate with the Federal Reserve and other central banks to intervene in currency markets when the exchange rates of other countries have become distorted.
The legislation has gathered momentum in the Senate and would allow US companies to appeal for anti-dumping duties on Chinese goods based on the distorted value of the currency.
The bill was introduced by Max Baucus, chairman of the Senate finance committee, and co-sponsored by Charles Grassley, ranking Republican on the committee. It is also backed by Charles Schumer and Lindsey Graham, who previously proposed a unilateral 27.5 per cent US tariff on Chinese goods that would have violated WTO rules. A tougher version of the bill is being prepared by a bipartisan group in the House of Representatives.
Mr Schumer said: “This breakthrough proposal is like nothing else because it’s tough, wide-reaching and WTO-compliant. The previous legislation got China’s attention; the purpose of this legislation is to force change.”
David Christy, a lawyer at Miller and Chevalier, said any attempt by the US to apply anti-dumping duties against Chinese goods based on the value of the country’s currency could fall foul of WTO rules.
The US Treasury, meanwhile, again shied away from branding Beijing a currency manipulator in its semi-annual currency report to Congress.
However, for the first time in this context it said that the renminbi was “under-valued”.
Rather than identifying a country as a “manipulator”, the proposed law would call for the Treasury to identify cases of “currency misalignment”.
Countries would be put on a watch list or, for serious misalignment, a “priority watch list”, compelling the Treasury to refer the case to the WTO to be challenged as a subsidy.
Clay Lowery, a Treasury official, said: “We do understand what many members of Congress are trying to do. We have many of the same objectives.”
But he added: “We believe that the best way to engage China regarding its foreign exchange regime is through dialogue and through negotiation and engagement and not necessarily through legislation.”
The Chinese foreign ministry this week warned: “Economic and trade issues should not be politicised, and related problems, especially ones arising from the US domestically, should not be dragged into China-US trade.”
By Eoin Callan and Krishna Guha in Washington and Richard McGregor in Beijing
Copyright The Financial Times Limited 2007
Published: June 13 2007 06:28 | Last updated: June 14 2007 03:05
China came under increased pressure to revalue its currency on Wednesday as a bipartisan group of US senators introduced legislation designed to push the Bush administration towards a full-blown trade dispute with Beijing.
The bill would send exchange rate disputes to the World Trade Organisation by treating them as unfair export subsidies and includes a range of sanctions. The move will increase pressure on the White House to toughen its stance on Beijing.
Lawmakers say China’s fixed exchange rate subsidises its exports and has contributed to a record annual bilateral US trade deficit of $233bn (£118bn).
The most immediate target of the legislation is the renminbi. But it also calls for changes in US policy on exchange rates.
The bill requires the Treasury to co-ordinate with the Federal Reserve and other central banks to intervene in currency markets when the exchange rates of other countries have become distorted.
The legislation has gathered momentum in the Senate and would allow US companies to appeal for anti-dumping duties on Chinese goods based on the distorted value of the currency.
The bill was introduced by Max Baucus, chairman of the Senate finance committee, and co-sponsored by Charles Grassley, ranking Republican on the committee. It is also backed by Charles Schumer and Lindsey Graham, who previously proposed a unilateral 27.5 per cent US tariff on Chinese goods that would have violated WTO rules. A tougher version of the bill is being prepared by a bipartisan group in the House of Representatives.
Mr Schumer said: “This breakthrough proposal is like nothing else because it’s tough, wide-reaching and WTO-compliant. The previous legislation got China’s attention; the purpose of this legislation is to force change.”
David Christy, a lawyer at Miller and Chevalier, said any attempt by the US to apply anti-dumping duties against Chinese goods based on the value of the country’s currency could fall foul of WTO rules.
The US Treasury, meanwhile, again shied away from branding Beijing a currency manipulator in its semi-annual currency report to Congress.
However, for the first time in this context it said that the renminbi was “under-valued”.
Rather than identifying a country as a “manipulator”, the proposed law would call for the Treasury to identify cases of “currency misalignment”.
Countries would be put on a watch list or, for serious misalignment, a “priority watch list”, compelling the Treasury to refer the case to the WTO to be challenged as a subsidy.
Clay Lowery, a Treasury official, said: “We do understand what many members of Congress are trying to do. We have many of the same objectives.”
But he added: “We believe that the best way to engage China regarding its foreign exchange regime is through dialogue and through negotiation and engagement and not necessarily through legislation.”
The Chinese foreign ministry this week warned: “Economic and trade issues should not be politicised, and related problems, especially ones arising from the US domestically, should not be dragged into China-US trade.”
posted by Carlos T Mock at 10:30 AM
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