A U.S. bill to pressure China into letting its currency rise in value, which has drawn warnings from Beijing of a possible trade war, ran into opposition from the top Republican in Congress on Tuesday.
Strong misgivings expressed by House of Representatives Speaker John Boehner were the first clear sign the currency legislation might fizzle out like similar bills since lawmakers began targeting China's yuan policy in 2005.
I think it's pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency, Boehner said.
On Monday, the Senate voted to open debate on a bill that calls for U.S. tariffs on imports from countries with deliberately undervalued currencies, prompting an angry rebuke from China.
Officials in Beijing have accused lawmakers of pandering to U.S. voters ahead of next year's presidential and congressional elections. U.S. critics of the bill have said it could stoke trade tensions just as the world economy is facing a sharp slowdown in growth.
While I've got concerns about how the Chinese have dealt with their currency, I'm not sure this is the way to fix it, Boehner told reporters.
House speakers normally get their way on legislation. But Democrats promptly urged Boehner to keep a promise he made when he took office in January and let the House to work its will.
The speaker, who represents the rustbelt state of Ohio, also has to contend with signs of growing support from rank-and-file members of his own party for the legislation, and tough talk about China from a top Republican presidential candidate.
In a hint of unease about the bill in the White House, a top U.S. official said the Obama administration has begun discussions with lawmakers about whether it is the right approach to the long-running currency issue.
Acting U.S. Commerce Secretary Rebecca Blank told CNBC television the best solution to what American officials view as an undervalued Chinese currency remains an open question, despite signs of bipartisan support for legislation that has raised angry warnings of a potential trade war from Beijing.
The administration is talking with people in the Senate about whether this bill is the right approach or whether there are other approaches to take, she said. Those conversations are under way.
ANGRY CHINESE RESPONSE
White House spokesman Jay Carney said the administration was still reviewing the currency bill.
We share the concerns of members (of Congress) about the valuation of the currency and the need to appreciate it, he told reporters aboard Air Force One. The administration wanted to be sure any measure met U.S. international obligations.
Senators voted 79-19 on Monday to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the U.S. government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies.
The latest of the almost annual attacks by the U.S. Congress on a core Chinese economic policy has drawn an angry response from Beijing. China's central bank and the ministries of commerce and foreign affairs accused Washington of politicizing currency issues and putting the global economy at risk of a trade war.
Many economists say Beijing deliberately holds down the value of its yuan currency to give Chinese exporters an edge in global markets. China says it is committed to gradual currency reform and notes that the yuan has risen 30 percent against the dollar since 2005.
In an argument that has gained traction with U.S. unemployment stuck above 9 percent as 2012 elections draw near, supporters of the bill say that if the yuan was allowed to rise, U.S. imports from China would fall and U.S. exports to the fast-growing Chinese market would increase, cutting an annual trade gap of more than $250 billion and creating jobs for American workers.
QUANDARY FOR REPUBLICANS
Republicans have been all over the map on the yuan issue. Many lawmakers in the party traditionally oppose actions that might violate free trade principles. But a leading Republican presidential candidate, Mitt Romney, has said he would name China a currency manipulator on his first day in office if elected.
Despite Boehner's expressed doubts about the bill, backers of the legislation in the House said the measure now has 225 co-sponsors, including 61 Republicans.
Representative Sander Levin and other Democrats at a news conference urged House Republican leaders to drop their resistance to bringing up the bill, which is expected to face a Senate vote later in the week.
The pressure is going to mount on Republican leadership to explain why they support a policy that costs Americans jobs, said Nadeam Elshami, a spokesman for House Democratic leader Nancy Pelosi.
Republican Senator Lindsey Graham, a prominent currency bill proponent, called Chinese criticism of the bill ill-advised.
We all want a healthy trading relationship with China, but their business practices -- from intellectual property theft to currency manipulation -- has created an unhealthy business relationship, he said.