U.S. Lawmakers Gear Up to Seek New Yuan Policy
By KATHY CHEN
WASHINGTON—The U.S. trade deficit with China in June hit its highest level in nearly two years and could spur congressional pressure on Beijing to revamp its currency policy.
America’s trade deficit with China jumped 17% in June over the previous month to $26.2 billion, the biggest gap since October 2008. Earlier this week, China said its overall trade surplus hit $28.7 billion in July, an 18-month high.
The Commerce Department figures could set the stage for a fight in Congress this fall over China’s currency policy. Some lawmakers, arguing that China has set the yuan artificially low to make its exports more price competitive on global markets, are keen to pass laws that would penalize countries that are found to be manipulating their currencies.
China, under pressure from the U.S. and other countries, announced a shift to a more-flexible exchange rate in June. But the yuan has appreciated less than 1% since then, and some economists say that it remains undervalued against the dollar by at least 25%.
While efforts to pass such legislation have made little headway, lawmakers and industry groups agree that the issue could gain traction in September, given that voters, who head to the polls in November, are angry about the country’s continued weak economy and high unemployment rate.
A number of bills have garnered bipartisan support, including measures promoted by Tim Ryan (D., Ohio) and Patrick Murphy (D., Pa.) in the House, and by Charles Schumer (D., N.Y.) in the Senate.
These efforts would, among other things, make it easier for companies to seek import duties on goods from countries designated as having undervalued currencies. The Ryan-Murphy bill has more than 127 co-sponsors, including 37 Republicans.
Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi (D., Calif.), said the House Ways and Means Committee would hold a hearing on the currency issue in September after Congress returns from summer recess.
“But no final decisions have been made on moving legislation forward,” he said.
Sen. Sherrod Brown (D., Ohio), a co-sponsor of the Schumer bill and a member of President Barack Obama’s Export Council, wrote Mr. Obama on Aug. 4, urging the administration to take tougher measures to address “unfairly subsidized exports” by countries such as China. Ten other senators signed the letter, including Republicans Jim Bunning of Kentucky and Olympia Snowe of Maine.
The Treasury Department on Wednesday declined to comment on the U.S.-China trade gap or China’s currency policy.
Business groups are expected to intensify their lobbying on the issue, although they differ over whether punitive legislation aimed at China’s currency policy is the best solution for narrowing the U.S.-China trade gap.
Augustine Tantillo, executive director of the American Manufacturing Trade Action Coalition, a Washington trade group representing U.S. manufacturers, says the group backs the Ryan-Murphy bill and is lobbying lawmakers, targeting those from Midwestern and Southeastern states with large manufacturing sectors and high unemployment.
“These trade surpluses aren’t a result of happenstance,” he said. “We’re hoping concerns about job creation and the fall election environment will finally give us an opportunity to bring the legislation to a vote.”
Erin Ennis, vice president for the U.S.-China Business Council, which represents U.S. companies doing business in China, said the window for China to “show it was serious” about addressing U.S. concerns about the yuan would close in September, when Congress returns to session.
But while Ms. Ennis expected the Chinese currency policy to be a major issue in the fall, “this isn’t our member companies’ top priority,” she said.
Rather, she said that Congress and the administration should focus on reducing barriers to China’s market and on the country’s new “indigenous innovation” policy, which many Western companies say unfairly favors Chinese companies by promoting domestic innovation.
Write to Kathy Chen at firstname.lastname@example.org
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