The US Senate is poised to pass legislation aimed at pressuring China to raise the value of its currency unless Beijing works with the US to address its concerns, a US senator said on Wednesday.
“We must find a path forward that allows China to meaningfully appreciate its currency to the benefit of both of our economies,” Senate Finance Committee Chairman Max Baucus said in the text of a speech delivered in Beijing. “Economists estimate that China’s currency is undervalued by 20 to 40 percent and correcting this imbalance could create up to 500,000 new US jobs. The US House of Representatives recently passed legislation designed to correct this imbalance. The Senate is poised to follow suit.”
The Senate Finance Committee has jurisdiction over trade issues, giving Baucus a major role in any China legislation that reaches the Senate floor.
US lawmakers argue an undervaluation of the yuan has given Chinese producers an unfair trade advantage. The US has pressed Beijing to allow the yuan to rise more quickly in value to help reduce its reliance on exports and bring about a better balance in the global economy.
The House approved a bill last month threatening China with punitive duties on some exports to the US if the yuan does not rise significantly in value. Congress is on a break ahead of Nov. 2 elections, so any Senate vote would not happen until lawmakers return in the middle of next month.
If the Senate and House agreed on a bill, US President Barack Obama would have to sign it for it to become law. The Obama administration has declined to take a stand on the House legislation.
Baucus’ warning comes just days before a deadline for the US Treasury Department to decide in a semi-annual report whether to formally label China a currency manipulator — a step that would rile Beijing, which says its currency policy is an internal matter.
US Treasury Secretary Timothy Geithner delayed the April 15 report for more than two months to give China additional time to reform its currency policy. Beijing did loosen its currency to the US dollar on June 19 and since then it has risen about 2.4 percent in value.
Geithner has said he plans to work through the G20 leading nations forum to persuade China to allow the yuan to rise more quickly in value. However, it is not clear how much support he has from other G20 members.
G20 finance ministers are scheduled to meet next Friday, followed by a leaders summit Nov. 11 in Seoul.
Baucus, in his speech to the US-China Business Council, said US-China economic relations were at “a fork in the road” similar to 2000, when the US Congress decided to end decades of annual debates over China’s trade status and approve permanent normal trade relations with the Communist power.
“Today, there are two clear paths before us. We can go down the path of division and discord, or we can work together to find mutually beneficial solutions to what divides us,” the Montana Democrat said.
Baucus also called on China to accelerate efforts to join the WTO agreement on government procurements and revise “indigenous innovation” policies that force foreign companies to move their research and development operations to China to access the Chinese market.
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