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Senate slap of China a sign that patience is wearing thin on trade

With jobs at a premium in the US, senators from states hard-hit by job losses to Chinese manufacturing passed a bill to sanction China for manipulating its currency.

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Today, the situation is reversed. The Senate, driven by lawmakers from states hard-hit by the China trade, passed a currency bill that the House is unlikely to take up and the White House has yet to endorse.

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House Speaker John Boehner says the bill would set off a “very dangerous” trade war with China. House leaders, claiming that the White House is with them, would prefer working the issue out through negotiation with China.

On Monday, China’s vice-foreign minister Cui Tiankai said at a news briefing that if the US Senate bill were to become law, it would result in a trade war between the US and China that “would be a lose-lose situation for both sides.”

Pressed on this issue, House majority leader Eric Cantor (R) of Virginia said on Tuesday that he wants to see whether the Obama administration supports the bill before committing to a floor vote. “Clearly they’ve got concerns as well,” he said at a briefing on Tuesday.

In fact, lawmakers on both sides of this issue say it’s possible that the mere threat of sanctions will pressure China to adjust the value of its currency as a preemptive move.

“This is not a symbolic bill. If we pass this bill by a bipartisan majority, something will go to the president’s desk,” said Senator Schumer in a floor speech before the vote. “And long before that occurs, the Chinese will begin to step back from their unfair trade practices.”

Since Congress’s last vote on the issue in 2010, China has raised the value of its currency, the renminbi (RMB), by some 6 percent in nominal terms, according to the US-China Commission. But it is still believed to be undervalued by 3 to 23 percent.

One source of pressure on House Republicans is the stance on trade taken recently by two GOP presidential hopefuls, former Govs. Mitt Romney and Jon Huntsman Jr., former US ambassador to China, who are backing sanctions against currency manipulation.

“Romney’s trade policy contains positions on China that are stronger than any provisions in this [Senate] currency bill,” says Alan Tonelson, a research fellow at the US Business and Industry Council, a national business organization representing small and medium-size domestic manufacturers.

“We’re in uncharted waters economically, and there is no telling how a painful recession and astronomical unemployment rates will affect US politics,” he adds.

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