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.

J. Scott Applewhite/AP
Sen. Chuck Schumer (D) of New York, joined by Sen. Jeff Sessions (R) of Alabama, talks to reporters in Washington last week after the vote that cleared the way for debate on the bill to impose tariffs on Chinese imports as a penalty for currency manipulation. The bill passed the Senate Tuesday.

The Senate voted Tuesday to pass a bill that would sanction China for currency manipulation – a sign that the massive loss of manufacturing jobs, widely viewed as a result of unfair trade practices by China, can no longer be dismissed, especially by lawmakers representing hardest-hit states and districts.

Strong moves against the second largest economy in the world are not taken lightly in Washington, especially by a powerful free-trade lobby that has managed to block antifree-trade moves in the past.

The Senate bill authorizes punitive tariffs on nations deemed to have engaged in “protracted, large-scale intervention” in the currency exchange market – a provision seen as directed against China.

Like a similar measure voted in the House last year, the bill is not likely to become law. But the bipartisan support for the bill in the Senate shows that, in a time when US jobs are at a premium, patience with China is wearing thin.

“China has taken advantage of Americans in every way. Currency is at the top of the list,” said Sen. Charles Schumer (D) of New York, a sponsor of the bill. “For the first time this body, in a bipartisan way, is saying enough is enough…. It’s no longer competition over shoes, it’s competition over the highest-end things we do.”

On a monthly basis, the US imports about 640 percent more advanced technology products from China than it exports to China, according to the US-China Economic and Security Review commission. The US trade deficit with China accounts for more than half of the US trade deficit with the world.

Views on what is to be done to address this imbalance do not fall out on partisan lines. Senate GOP leaders urged a vote against the bill, and the Club for Growth, which funds primary challenges against Republicans not deemed conservative enough, is pressuring GOP lawmakers to oppose the currency bill.

Still, 16 Republicans, mainly from states hard-hit by job loss, joined all but four Democrats to pass the Senate bill, 63 to 38.

“We are getting hurt in this relationship,” said Sen. Jeff Sessions (R) of Alabama, whose state has lost some 44,300 jobs to China since 2001, according to a recent study by the Economic Policy Institute.

In 2010, the House, then controlled by Democrats, passed a similar currency bill with broad bipartisan support. Ninety-nine Republicans, notably not including top leaders, voted with all but five Democrats to pass the measure, 348 to 79. It failed to get to a vote in the Senate.

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.

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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