- The Washington Times - Tuesday, March 28, 2006

ASSOCIATED PRESS

Two U.S. senators said yesterday they would delay for six months a vote on a bill punishing China for restricting its exchange rate, saying they had seen signs of currency reform during a recent trip to China.

The bill, sponsored by Sens. Lindsey Graham, South Carolina Republican, and Charles E. Schumer, New York Democrat, has drawn strong support from both parties in Congress, where frustration is growing with Chinese policies that lawmakers say hurt American workers and the economy.

The bill would impose 27.5 percent tariffs on Chinese imports if the currency dispute is not settled. The lawmakers said they would delay a vote to no later than Sept. 29. If the pace of China’s currency reform slowed before then, they said, they would call for a vote.

During a press conference, Mr. Graham said he hoped that Chinese President Hu Jintao would announce further currency reforms during his visit to Washington next month. He warned that “the jury is still out” and promised to call a vote on his bill if reform was not pursued.

Mr. Schumer said the “Chinese see the fact that manipulating their currency cannot continue.”

“We believe that if we hadn’t introduced this strong medicine, nothing ever would have happened,” he said. “Now that we’re on the path to progress, we don’t have to fire this so-called ‘nuclear weapon,’ but can hold it in abeyance, as we carefully watch and wait and expect continued progress.”

U.S. lawmakers want China to take steps to allow the yuan to strengthen against the dollar, saying the currency is undervalued by up to 40 percent.

The undervalued currency, U.S. manufacturers and politicians say, gives Chinese exports an unfair trade advantage, contributing to the United States’ record $202 billion trade deficit with China last year.

Mr. Graham and Mr. Schumer returned Sunday from a trip to China, where they met with top officials.

The lawmakers said that up to 67 of the Senate’s 100 members have indicated they would vote for the bill, which calls for the new tariffs to be imposed two years after passage, allowing time for further negotiations.

Mr. Graham said the Senate would overwhelmingly support the bill if China failed to implement more reforms by September. “Not only will we have a vote, we will have an overwhelming vote,” Mr. Graham said after the press conference. “There is no way to stop this if the Chinese go backward.”

China revalued the yuan in July, raising its value by 2.1 percent and cutting its link with the U.S. dollar, allowing it to trade instead against a basket of currencies. Since then, however, the yuan has appreciated only about 1 percent against the dollar — which U.S. critics say is far too small.

Chinese leaders have said they plan eventually to let the yuan trade freely on world markets, but that doing so immediately would cause financial turmoil and damage the Chinese economy.

Also yesterday, Sens. Charles E. Grassley, Iowa Republican, and Max Baucus, Montana Democrat, said they would introduce a bill meant to spur foreign countries, specifically China, into revaluing unfair currency rates.

The bill would require the Treasury Department to engage foreign governments and the International Monetary Fund to resolve currency “imbalances” with the dollar. It would also create a new Treasury Department position: an assistant secretary who would focus on currency and exchange-rate issues.

Mr. Baucus acknowledged that “the American public is nervous about China.” But the United States, he said, should resist the urge to “respond harshly to the economic challenge that China poses” and instead “make responsible policy.”

“We need to engage China and other nations firmly, but with an eye to economic opportunities as well as economic concerns,” he said.

Mr. Baucus said the bill would move forward independent of other legislation dealing with China’s economic policies.

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