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Schumer, Graham drop efforts to push for punitive tariff legislation

WASHINGTON, DC – 10/02/06 – Two US senators have abandoned their efforts to push for legislation that would have slapped a stiff “blanket” tariff on Chinese exports to the US.

The lawmakers – Democrat Charles Schumer of New York and Republican Lindsey Graham of South Carolina – promised, however, to renew efforts next year to spur Beijing to change its currency policies that, they assert, cost millions of American jobs.

Graham said that President George Bush met with the lawmakers late last week, asking them to scrap this week's vote on the bill – S.295 – that would have imposed a 27.5% tariff on Chinese products coming into the US unless China agreed to a six-month window of negotiations aimed at revaluing its currency.

Bush, Graham said, wanted lawmakers to give new Treasury Secretary Henry Paulson more time to persuade Beijing to take steps to allow the Chinese yuan to strengthen against the dollar.

Both Schumer and Graham – strong critics of the Bush Administration’s free trade policies and, most vocally, the US trade relationship with China – have charged that the country’s currency is undervalued by up to 40%, making Chinese goods cheaper for American consumers and, at the same time, making US-made products more expensive in China.

Schumer said that several senators are “in the early stages of discussing a tough, strong bill" that would focus on “pressuring China to live up to commitments it made when joining the World Trade Organization in 2001.”

He did not provide details, but said that bill “could be considered by lawmakers early next year.”

Many analysts believed the bill would have passed, given what appears to be a growing shift toward protectionism on Capitol Hill, but the bill had little chance of becoming law because there was no parallel legislation in the House of Representatives.

According to Capitol Hill sources, had the bill reached the president’s desk, he almost certainly would have vetoed it.
Last week, Graham had predicted that the sanctions bill would ''pass overwhelmingly'' if it were brought to the Senate floor. A Senate vote to defeat similar legislation last year failed on a vote of 67-33.

Chinese leaders have said they plan eventually to let the yuan trade freely on world markets, but that doing so immediately would cause financial turmoil and damage the Chinese economy.

Schumer called the bill a "blunt instrument that pushed the Chinese to move.”

The legislation faced vocal criticism from several national industry and trade groups including the US Council for International Business, the National Retail Federation and the US-China Business Council (USCBC), which issued a statement praising the decision to cancel the vote on the bill. 

"USCBC believes that constructive engagement along the lines of the Strategic Economic Dialogue formed last week between US and Chinese leaders is the best way to ultimately resolve this key issue,” it said.

In the meantime, it said, “the US government, our G-7 allies, and the IMF need to continue to press China to allow its exchange rate to more quickly reflect market forces."

After completing his visit to China and other Asian countries several weeks ago, Treasury Secretary Paulson said that Washington and Beijing would soon be launching a new US-China strategic dialogue centered on trade, investment, and other aspects of their economic relationship.

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