Senators plan bill to press China on currency

WASHINGTON — The top Democrat and Republican on the Senate Banking Committee said Tuesday that they would introduce legislation giving the Treasury Department stronger tools to confront China’s currency practices.

“A change in our currency manipulation policy is long overdue,” Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) said in a statement. “America’s companies and workers deserve an opportunity to compete on fair terms with countries such as China.”

Dodd and Sen. Richard C. Shelby (R-Ala.), announced their plans one day before the Treasury Department releases a semiannual report on foreign currency practices, which is expected to again stop short of formally labeling China a currency manipulator.

The two senators also beat senior members of the Senate Finance Committee to the punch. The top Democrat and Republican on that panel have scheduled a news conference today to unveil their currency bill.

“I have long believed that China manipulates its currency, thereby giving it an unfair trade advantage,” Shelby said. “Although evidence gathered by the Treasury clearly supports this conclusion, Treasury has regrettably declined to label China a currency manipulator.”

Many lawmakers believe China deliberately undervalues its currency by as much as 40% to give Chinese companies an unfair advantage in international trade. The Treasury Department has pushed China to move to a more flexible market-oriented exchange-rate policy but has frustrated many lawmakers and manufacturers by refusing to label China as a currency manipulator.

Earlier Tuesday, Treasury Secretary Henry M. Paulson Jr. said he still believed the best way to get China to move faster on currency reform was “through direct discussions and negotiations, not through legislation.”

Dodd and Shelby said their bill would change the definition of currency manipulation to make it harder for the Treasury Department to avoid making that finding for China.

Countries with a material global account surplus and a significant bilateral trade surplus with the United States would be classified as “currency manipulators, without regard to intent,” they said.

The bill would also require a number of Treasury Department actions should currency manipulation be found. They include developing a plan of action within 30 days that sets benchmarks and time frames for the foreign trading partner to reform its currency practices.

It mandates U.S. action through the International Monetary Fund to pressure countries to end currency manipulation and authorizes the Treasury Department to file a World Trade Organization case if “goals and benchmarks are not met within nine months.”

The legislation also creates a process for Congress to formally voice its disapproval if the Treasury Department fails to cite a country for currency manipulation.

Other provisions would hold the Treasury Department’s feet to the fire in terms of pressuring China to open its financial services markets to more U.S. companies.

Senior Democrats in the House of Representatives have also said they plan to move currency legislation this year.