Defying Chinese anger and White House warnings, the US Senate was set Tuesday to approve legislation to punish China for alleged currency manipulation widely blamed here for costing American jobs.
The proposal, powered by a tide of US voter frustration at a sour economy and high unemployment ahead of November 2012 elections, envisions retaliatory duties on Chinese exports if the value of the yuan is unfairly “misaligned.”
The Democratic-controlled Senate was due to approve the measure after 5:30 pm, shifting the spotlight to the Republican-led House of Representatives, where Speaker John Boehner has condemned the “dangerous” bill.
“You could start a trade war. And a trade war, given the economic uncertainty here and all around the world — it’s just very dangerous, and we should not be engaged in this,” Boehner said recently.
President Barack Obama last week declined to back the legislation and worried it could violate World Trade Organization (WTO) rules even as he accused China of “gaming the trade system” in a way that hurts the US economy.
Few in Washington dispute the charge that China keeps the yuan unfairly low against the dollar, giving its goods as much as a 30 percent edge over similar US products, widening the American trade deficit and costing jobs here.
But the measure’s opponents warn that it risks worsening ties with China, and say a rise in the yuan would merely boost manufacturing and jobs in countries such as Vietnam or Malaysia — not in the United States.
They also contend that, if successful, the bill will increase the cost of commodities or consumer goods from China, hurting rather than helping US businesses and families.
The legislation’s backers, an unusual coalition of Democrats and Republicans, have said it’s time for Washington to take on Beijing, and predict a boost in the yuan will make Chinese workers wealthier and more likely to buy US goods, thus creating jobs and narrowing the trade gap.
They also say that current US law and multinational dispute mechanisms have failed to curb what they call Beijing’s unfair practices, which also include favoring Chinese producers for government contracts and tolerating rampant intellectual piracy.