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Senate Nears Approval of Measure to Punish China Over Currency ManipulationBy ERIC LICHTBLAUPublished: October 6, 2011 Recommend Twitter Linkedin Top of FormBottom of FormE-Mail Print Single Page Top of FormBottom of FormReprints ShareWASHINGTON — In one of Capitol Hill’s longest running battles, opponents of China’s trade policies have used threats, negotiation, protests from small American businesses and even the occasional Peking duck dinner in a failed effort to stop China from manipulating its currency. Enlarge This ImageJ. Scott Applewhite/Associated PressLindsey Graham, left, and Charles E. Schumer proposed a tariff on Chinese goods. Add to PortfolioGeneral MotorsGo to your Portfolio ?After eight years, that campaign is on the verge of a breakthrough, as the Senate appeared ready Thursday to approve a get-tough approach that had stalled numerous times before: a bill to punish China with high tariffs on some exports if it fails to adopt a market-driven exchange rate. Economists say China’s artificially cheap currency has cost the United States jobs and billions in lost trade. But opponents of tariffs, including major manufacturers doing business in China, warn that penalizing China could start a trade war that would hurt American businesses even more. “We’re already in a trade war,” Senator Charles E. Schumer, the New York Democrat who has led the push for tariffs, said in an interview. “We can’t afford to just do nothing. This is a message to China that the jig is finally up.” The American jobless problem have combined to give the tariff proposal newfound momentum, as the Senate spent much of the afternoon Thursday debating it. Supporters, casting the measure as a way to spur job growth, were confident the Senate would approve it. Even the measure’s fiercest opponents were grudgingly predicting passage in the Senate, and probably the House. But 11-hour resistance by leading Republicans has clouded the outcome in the House, where the speaker, John A. Boehner, this week called the tariff plan “dangerous,” and it is unclear if the issue will even come up for a House vote. China itself voiced strong objections this week and charged that meddling by the United States in Chinese currency violated world trade protocols. The Chinese Embassy has retained one of Washington’s most powerful lobbying shops, Patton Boggs, to represent its interests for $420,000 a year. Lobbyists for General Motors, Caterpillar, steel producers, textile manufacturers, toy makers, poultry farmers and other businesses have also weighed in, supporting or opposing the tariffs depending on their own business relations with China. Generally, large manufacturers like Caterpillar that operate in China have opposed it, warning of a backlash. Smaller businesses, like a tube maker in Ohio or a ceramics maker in upstate New York, have supported tariffs because they say China has artificially lowered its prices and gained an unfair edge. While the Chinese renminbi has risen 6 percent against the dollar since China loosened currency controls last year, economists say it is still vastly undervalued. Meanwhile, China’s trade surplus with the United States stands at $273 billion — more than triple the gap a decade earlier. In Senate testimony this week, the Federal Reserve chairman, Ben S. Bernanke, went so far as to link China’s undervaluing of its currency to the slow economic recovery worldwide. “The Chinese currency policy is blocking that process,” Mr. Bernanke testified. “And so it is to some extent hurting the recovery process.” The Obama administration, however, has been noncommittal about the tariff proposal. At a news conference on Thursday, President Obama would not say whether he would veto the bill it if it passed, but he raised concerns. On the one hand, he said, “China has been very aggressive in gaming the trading system to its advantage,” and “it is indisputable that they intervene heavily in the currency markets.” But he cautioned that he did not want to see the World Trade Organization strike down any steps the United States might take. “Then suddenly U.S. companies are subject to a whole bunch of sanctions,” Mr. Obama said. Both supporters and opponents of the tariffs see the outcome as hugely significant financially and politically. (Page 2 of 2)That was evident this week when the Club for Growth, a conservative free-market advocate that has led opposition to the bill, warned lawmakers that a vote supporting tariffs “will count heavily as an antigrowth action” on the group’s Congressional “scorecard,” which helps determine the group’s level of support. Club for Growth’s political muscle is already being felt. In the House, 99 Republicans supported a tariff plan last year. But after the club intensified its opposition, Representative Tim Ryan, an Ohio Democrat who favors tariffs, complained this week that “all of a sudden you can’t get a lick of Republican support.” Early in the week, Chris Chocola, a former congressman who leads the Club for Growth, was pessimistic about chances of stopping the bill. “It’s not politically expedient to defend China, so you won’t find many who will do that in words or deeds,” he said. By midweek, after sharply critical remarks from Mr. Boehner on Tuesday, Mr. Chocola’s outlook had brightened. “I give Boehner a lot of credit,” he said. “He clearly doesn’t want to bring it to the floor. And we’re trying to do everything we can to prevent it from getting to the floor.” The maneuvering reflected the stops and starts on the issue as a whole since 2003, when Mr. Schumer and Senator Lindsey Graham, the South Carolina Republican, first proposed a 27.5 percent tariff on Chinese goods. The two senators visited China in 2005 to press economic officials there to allow their currency to rise to market rates. They were greeted with a high-level banquet at the Great Hall of the People — Mr. Schumer pronounced the Chinese dishes “extraordinary” — and by China’s assurances that it would begin liberalizing monetary policies and allowing market forces to determine values. The United States saw some early signs of improvement, but progress stalled. The Bush administration, after avoiding confrontations with China for years on the issue, took it to the World Trade Organization in 2007 over trade barriers. The United States imposed tariffs on Chinese tires in 2009, and China followed the next year with steep tariffs on American poultry imports. Tariff opponents see the tit-for-tat as a small-scale version of the kind of trade wars they predict will break out en masse if the current plan becomes law. “Every time we engage in protectionist behavior,” Mr. Chocola said, “bad things happen.” ................
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