Senior Democrats in the US House of Representatives vowed to pass legislation aimed at protecting American jobs by pressuring China and Japan to raise the value of their currencies.
“What we want to do is find the most effective way to not only send a message, but to bring about action,” House Trade Subcommittee Chairman Sander Levin, a Michigan Democrat, told reporters. “We’re looking at a variety of options.”
Levin presided over an unusual joint hearing that brought together lawmakers from three separate House panels—the Ways and Means subcommittee on Trade, the Financial Services subcommittee on Domestic and International Monetary Policy, Trade and Technology, and the Energy and Commerce subcommittee on Trade and Consumer Protection.
Senior lawmakers said it was the first such hearing they could recall and a sign of the widespread concern in Congress about the perceived unfair advantage that Chinese and Japanese currency practices give exporters in those countries.
“I hope people will take from this (joint hearing) the grave significance of this issue,” said House Financial Services Chairman Barney Frank, a Massachusetts Democrat.
“The fact is that the economic condition of the average American worker has been eroded” and Congress is determined to do something about it, Frank said.
House Commerce Committee Chairman John Dingell, a Michigan Democrat, said he was particularly frustrated with the Bush administration’s unwillingness to label Japan as a currency manipulator. He accused Tokyo of deliberately undervaluing the yen to subsidize automobile exports.
“Thus, I am forced to conclude that it is incumbent upon this Congress to pass legislation that would require the administration to monitor and address unfair foreign currency practices more adequately,” Dingell said.
Several witnesses, including the AFL-CIO labor federation’s policy director Thea Lee, urged Congress to pass legislation crafted by Rep. Tim Ryan, an Ohio Democrat, and Rep. Duncan Hunter, a California Republican, which would allow the Commerce Department to slap duties on goods from countries that manipulate their currency for a trade advantage.
Levin told reporters that Congress could start action on legislation in coming weeks.
“It’s moving. . . There’s various alternatives. The Ryan-Hunter bill is clearly one of them,” Levin said.
Lawmakers are frustrated that four years of Bush administration pressure on the China to revalue its currency hasn’t produced more results.
The issue is expected to dominate a high-level US-China economics meeting led by US Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi in Washington this month.
Stephen Roach, chief economist at Morgan Stanley, urged lawmakers to think twice before passing protectionist legislation that could backfire on the United States.
“You’re treading on very dangerous territory here,” Roach said, noting the real root of the United States’ huge trade deficit is the low US saving rate.
Slapping sanctions on China or taking other steps to force Beijing to revalue its currency, the yuan, could boomerang on the United States in the form of higher interest rates and a sharp plunge in the value of the dollar, Roach said.
Several Republican lawmakers also urged caution, although concern about China’s exchange rate crossed party lines.
Fred Bergsten, director of the Peterson Institute for International Economics, said there was a greater risk to the US and global economy from doing nothing about Asian currencies, particularly China’s.
He called for a much more aggressive strategy to get China to value its currency at a higher exchange rate to the dollar.
Bergsten said he did not believe Japan was manipulating its currency. But that does not let Tokyo “off the hook” because the yen is still significantly undervalued, he said.
The Chinese yuan needs to strengthen by about 35% against the dollar, and by at least 15% against all currencies, over the next several years, Bergsten said.
That would reduce the US cu