Lawmakers will take aim at one of China's core economic
policies on Monday when the Senate begins debating legislation designed to press China to
let its currency rise in value in the hope of spurring job creation.
Here are some questions and
answers about the debate on China'scurrency policies:
WHY ARE U.S. LAWMAKERS
FOCUSING ON THE CHINESE CURRENCY?
Democratic Party lawmakers,
with increasing support from Republicans, have argued since 2005 that China
fixes the value of its currency too low. The policy keeps Chinese goods
artificially cheap, spurring imports of Chinese goods while making U.S. goods
more expensive in China, critics say.
In an argument that has gained
popularity with the unemployment rate stuck above 9 percent as next year's
elections draw near, supporters of the bill say that if Beijing allowed the
yuan, or renminbi, to rise more swiftly in value, Chinese imports would fall
and exports would rise, creating jobs.
WHAT DOES THE LATEST CURRENCY
BILL AIM TO DO?
The Currency Exchange Rate
Oversight Reform Act of 2011 instructs the Commerce Department, at the request
of a company, to investigate whether a foreign government is subsidizing its
companies by undervaluing its currency.
The bill would make it easier
for firms to persuade the department to impose countervailing duties against exports
from countries with misaligned currencies on a case-by-case basis. It also
requires that currency undervaluation be considered for determining
anti-dumping duties.
In a provision aimed at China,
it requires Treasury to designate certain countries for priority action if they
have engaged in "protracted, large-scale intervention" in the
currency exchange market or have engaged in "excessive and prolonged"
accumulation of foreign exchange reserves.
Federal purchases of goods and
services from the country would be prohibited unless the country is a member of
the World Trade Organization's Government Procurement Agreement -- a pact China
has yet to join.
WHAT STEPS WILL THE SENATE
TAKE THIS WEEK?
Sponsors and most observers
predict the bill easily will clear a 60-vote procedural vote on Monday evening
to begin debate and consider amendments. One of the bill's authors, Democratic
Senator Charles Schumer, has voiced confidence the legislation would pass with
strong bipartisan support later in the week.
Analysts say a
"clean" currency bill -- legislation without unrelated amendments
tacked on to win over lawmakers' support -- has a greater likelihood of passing
quickly.
WHAT ARE THE CURRENCY BILL'S
PROSPECTS?
The bill is widely expected
to pass the Democratic-controlled Senate, which would send it to the House of
Representatives, a chamber run by traditionally free-trade-friendly
Republicans.
Similar legislation passed
the House last year with 99 Republicans votes, and supporters have lined up
more than 200 co-sponsors for the bill this year -- just short of the 218 that
would be needed for passage.
However, it remains unclear
whether House Speaker John Boehner and Majority Leader Eric Cantor will bring
the bill up for a vote.
Conservative and anti-tax
groups that are the main inspiration for the Tea Party movement have come out
against the bill and 51 U.S. industry groups wrote Congress warning it would
spark a trade war.
President Barack Obama has not
taken a formal position on the bill, but since he took office in 2009, the
Treasury Department has declined to name China a currency manipulator in five
semi-annual reports to Congress. Obama, who has preferred dialogue with China to
punitive measures, sent a senior Treasury official to Beijing last week to hold
talks.
HOW DOES CHINA VIEW THE
CURRENCY DEBATE?
China stridently opposes the
bill and rejects outside criticism of its exchange rate as interference in a
sovereign policy decision and the politicization of trade issues. China's
long-held stance is that the exchange rate was not to blame for the trade
imbalance between the two countries or unemployment in the United States.
Chinese officials argue that
as a result of exchange-rate-policy changes in 2005 and 2010, the yuan has
appreciated about 30 percent. Rising wages and higher inflation in China are
further eroding China's comparative advantage.
Source : Reuters
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