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US gears up to tackle China over yuan

Critics say they will now press Congress to do what the Bush administration has refused to do: Brand China as a currency manipulator and impose economic sanctions as a way to deal with the US' soaring trade deficit.

The administration issued its long-awaited currency report on Monday in which it said China did not meet "technical requirements" to be designated as a country that is managing its currency to gain unfair trade advantages.

Treasury Secretary John Snow, however, warned that China must move further to allow its currency's value to be set by market forces or face the possibility that the administration will act when the next report to Congress is due in April.

"It is imperative that China move toward greater flexibility as quickly as possible," Snow said in a statement accompanying the report.

That warning did not soothe critics, who said the administration had used the same tough talk six months ago only to blink again and refuse to brand China as a currency manipulator. That designation eventually could lead to US sanctions if the administration should win a case before the WTO.

AFL-CIO Secretary-Treasury Richard Trumka called the new report "a slap in the face to America's workers and manufacturers."

Senator Chuck Schumer, a Democrat from New York, one of Congress' main critics of China's currency policies, said the "administration's lack of action today hurts all Americans by refusing to acknowledge the obvious -- that China manipulates its currency."

He and Senator Lindsey Graham of South Carolina, another China critic and member of President George W. Bush's Republican Party, had postponed a vote this month on their legislation to impose 27.5 percent penalty tariffs on all Chinese imports to allow Bush to negotiate the issue with Chinese leaders during his recent visit.

Graham said he now expects that, in the near future, "Congress will speak loudly and forcefully" on the matter. Their legislation gained 67 votes last spring of 100 in the Senate on a procedural motion.

Snow said China's decision to allow a 2.1 percent revaluation of its currency last July had been a factor in deciding not to brand China a currency manipulator.

Frank Vargo, vice president for international trade at the National Association of Manufacturers, said that while China had said in July it would allow its currency to move as much as 0.3 percent daily, it had risen in value against the dollar by only an additional 0.3 percent since the initial July revaluation.

"At this rate it will take 100 years to move in a manner that will affect trade," he said.

Alan Tonelson, research fellow for the US Business and Industry Council, another manufacturing group, said he believed the administration's failure to act would build support for the Schumer-Graham legislation and a bill in the House of Representatives being sponsored by Representatives Duncan Hunter of California and Tim Ryan of Ohio. That measure would allow US businesses to seek penalty tariffs against Chinese competitors on grounds China is manipulating its currency.

"We are looking to Congress," Tonelson said. "It is clearer than ever that America's domestic manufacturers cannot count on any help from the White House to remedy this totally unacceptable situation."
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