WASHINGTON – Two U.S. senators said Thursday that they will abandon legislation that would have punished Chinese goods with steep tariffs. The lawmakers promised, however, to renew efforts next year meant to spur Beijing to change currency policies they say cost millions of American jobs.
Sen. Lindsey Graham, a Republican, said President George W. Bush met with the lawmakers Thursday, asking them to scrap this week's vote on a bill that would have imposed a 27.5 percent tariff on Chinese products coming into the United States unless China went further to revalue its currency.
Bush, Graham said, wanted lawmakers to give new Treasury Secretary Henry Paulson more time to persuade China to take steps to allow the yuan to strengthen against the dollar. Critics say China's currency is undervalued by up to 40 percent, making Chinese goods cheaper for American consumers and U.S. products more expensive in China.
"The hope is to have a constructive dialogue with the Chinese where reform will move forward without legislation," Graham said. But, he added, "the jury is still out" about China's currency policies.
Sen. Charles Schumer, a Democrat, said 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 the growing anti-trade sentiment in a nation facing skyrocketing deficits. But the bill had little chance of becoming law because there was no parallel legislation in the House of Representatives. Had such a bill reached Bush's desk, the president almost certainly would have vetoed it.
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," and noted small increases in the value of China's currency.
"It's now time to try, instead of using a blunt instrument, to refine our instrument and pass some legislation that will force the Chinese to go the rest of the way," Schumer said.
The senators have expressed hope that Paulson's personal connections in China can resolve a three-year-old impasse that his predecessors at the Treasury Department could not fix. Paulson made some 70 trips to China while at Goldman Sachs to drum up business for the investment firm.
American companies say Chinese currency policy is partly responsible for the loss of nearly 3 million manufacturing jobs since Bush took office. They say the undervalued currency has contributed to the United States' record $202 billion trade deficit with China last year.