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WASHINGTON: US lawmakers criticised US President Barack Obama's administration Thursday for not pressuring China enough over its rigid currency as they set the stage for slapping import duties on Chinese goods.
As Obama returned home without any pledge from China to make its yuan flexible, Republican and Democratic lawmakers sent a letter to the Commerce Department calling for an investigation into "China's currency manipulation."
It is "a potential first step in a process that could lead to significant, US-imposed tariffs on imports from China," said Democratic Senator Charles Schumer, who jointly wrote the letter with Republican Senator Lindsey Graham.
The Obama administration, like the Bush administration before it, has refused to brand China a currency manipulator under a law requiring it to determine whether any foreign economy manipulates its currency against the US dollar.
The bipartisan move Thursday asking for the probe was "an alternative path to formally rebuke China," Schumer said.
"If the agency determines that China's currency practices amount to a form of subsidy that is actionable under international trade agreements, the Chinese could be subject to stiff penalties," he said.
Lawmakers and several industry groups claim that Beijing was artificially weakening the yuan value to boost its export competitiveness, a factor they blamed on the record US$268 billion trade deficit with China last year.
US Treasury Secretary Timothy Geithner faced tough questioning on the yuan issue from lawmakers Thursday during a hearing of the congressional joint economic committee, one of the rare legislative panels with both House of Representatives and Senate members.
"I just think it's time to get the stick out and say, 'Okay, we have to do something about this. This is going the wrong direction,'" Republican Senator Sam Brownback said.
Also Thursday, the US-China Economic and Security Review Commission, a congressional advisory panel, called on lawmakers to consider legislation "that has the effect of offsetting the impact on the US economy of China's currency manipulation."
Geithner assured lawmakers he was confident China would allow its currency to be more flexible, citing a commitment Beijing had made to allow the yuan to fluctuate.
"China, as I've said many times, has committed to move," he said. "They understand they need to do it. I think they want to do it. And I'm actually quite confident they will do it."
Geithner acknowledged that China and several other Asian nations had intervened in the foreign exchange market, apparently to contain the rise of their currencies.
"The scale of intervention declined dramatically in the peak of the crisis. It started to increase again in China and countries around the world," he said, citing the latest financial crisis which peaked around the end of 2008.
Obama, on his maiden China visit, tactfully voiced US worries that China's yuan currency was being kept artificially low to boost Chinese exports.
"I was pleased to note the Chinese commitment, made in past statements, to move toward a more market-oriented exchange rate over time," Obama said as Chinese leader Hu Jintao looked on.
"I emphasised in our discussions, as have others in the region, that doing so based on economic fundamentals would make an essential contribution to the global (economic) rebalancing effort," Obama said.
Hu made no fresh offer of action.
International Monetary Fund chief Dominique Strauss-Kahn had said Beijing should let the yuan rise "sooner rather than later," saying it would benefit both China and the global economy.
"The renminbi (yuan) is undervalued. It's not only in the interests of the global economy but also in the interests of China to have a revaluation," Strauss-Kahn said in a trip to Beijing also this week.
The yuan's exchange rate with the dollar has been virtually at a fixed rate to the mostly weak US dollar since July 2008, three years after Beijing decided to abandon the Chinese currency's decade-old peg to the greenback.
Between 2005 and the summer of 2008, the yuan appreciated by about 21 per cent, at which point Beijing set its value at around 6.8 to the dollar, said the US-China commission in its report.
"The RMB (yuan) remains undervalued," it said, adding that the extent of the undervaluation was hard to estimate because it has never been freely traded.
- AFP/yb
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