U.S. "patience has run out" after seven years of pressing China for currency reform, House Ways and Means Committee Chairman Sander Levin said at the start of a hearing on China's trade and industrial policies.
He called China's exchange rate policy "a prime example of Chinese mercantilism" that includes restrictions on foreign access to government procurement, trade-distorting subsidies, export restraints on raw materials and failure to crack down on copyright piracy and goods counterfeiting.
Levin's remarks reflect frustration that China has not taken advantage of a window to revalue its currency that U.S. Treasury Secretary Timothy Geithner opened in April, when he delayed a semi-annual report on whether any countries were manipulating their currencies for an unfair trade advantage.
Many Western economists believe China's currency, known as the yuan or renminbi, is undervalued by as much as 40 percent, effectively subsidizing Chinese exports and taxing U.S. and other exports to the Asian manufacturing giant.
"The administration constructively set the G-20 meeting as an important juncture for China to change its inflexible currency practices," Levin said, referring to next week's Group of 20 leaders meeting in Toronto.
"If China does not act, and the administration does not respond promptly thereafter, the Congress will act," he said.
In another sign of the heat lawmakers are feeling on the issue as voters head to the polls in November, the Senate Finance Committee scheduled a hearing for next Wednesday to hear from U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke on how the Obama administration intends to handle the growing trade irritants.
SCHUMER OPTIMISTIC
Levin has been a moderating force in recent months on the currency issue as Senator Charles Schumer and several of his colleagues have pushed for a bill that would allow the United States to use countervailing duties against countries with "fundamentally misaligned" exchange rates.
Schumer, a member of the Senate Democratic leadership, has said he intends to seek a Senate vote on his bill this month and predicts it will be passed overwhelmingly.
John Frisbie, president of the U.S.-China Business Council, warned the Ways and Means panel such an approach would probably run afoul of World Trade Organization rules.
"We strongly recommend against this approach, even though we support the goal of seeing China's exchange rate move more quickly to reflect market influences," Frisbie said.
Republican Representative Kevin Brady said the Schumer bill did little to reduce the huge "trade imbalance with China, potentially exposes American exporters to retaliation and will amount to a consumer tax on American families and businesses."
Brady said he shared the concern many lawmakers have about China's currency, and criticism of China's trade and industrial policies came from both sides of the aisle.
"Unless China immediately begins to eliminate trade barriers and end its policies of economic nationalism by opening its market to American-made goods and services, it could spur a breakdown in our relationship that will wreak havoc on both our countries and the global economy," said Representative Dave Camp, the top Ways and Means Republican (Reuters).
