Posted by: mulrickillion | October 20, 2011

Senate Approves China Currency Bill

Hong Kong Trader,  14 Oct 2011

In the evening of 11 October, the Senate voted 63 to 35 to approve legislation (S. 1619) that would address the alleged undervaluation of the yuan by reforming and enhancing U.S. oversight of currency exchange rates. Congress is also expected to approve on 12 October four other pieces of legislation of potential interest to Hong Kong and mainland Chinese exporters, namely the pending free trade agreements with South Korea, Colombia and Panama and legislation to renew the lapsed Generalised System of Preferences programme. In addition, Congress is considering a jobs bill that may include various Buy American provisions that critics have argued could lead to similar restrictions being imposed by U.S. trade partners.

While the Obama administration has not yet issued a formal statement explaining its position on the China currency legislation, President Obama on 6 October called on lawmakers to ensure that any such bill fully complies with WTO requirements and is not merely a symbol that will be subject to a successful WTO challenge. Obama also emphasised the need to have tools that are not only legal but effective in achieving U.S. objectives. The Obama administration has so far favoured co-operation over confrontation in its dealings with the mainland and has sought to resolve trade and economic disagreements through bi-lateral channels such as the Joint Commission on Commerce and Trade and the Strategic and Economic Dialogue. It is therefore not certain that a particularly assertive China currency bill would be signed into law by the president if it ever reached his desk, and to reach the president’s desk the bill would also have to overcome the opposition shown by Republican leaders in the House of Representatives. Democratic supporters in the House are nonetheless trying to garner the support of rank-and-file Republicans who backed previous efforts on this front. Meanwhile, the Chinese government has voiced strong opposition to the legislation, with the People’s Bank of China warning that it “might result in a trade war that no one would like to see.”

The administration is, however, looking for other less controversial ways to ensure that mainland China lives up to its international commitments. For example, the Office of the U.S. Trade Representative announced on 6 October that it has submitted to the WTO information identifying nearly 200 subsidy programmes that mainland China has failed to notify as well as 50 subsidy programmes in India that have not previously been notified. The USTR believes that the fact that China has not notified its subsidy programmes in over five years represents a lack of transparency that “severely constrains the ability of WTO Members to ensure that each government is playing by the rules.” The USTR indicates that it would have preferred to avoid these filings but ultimately decided it was the best option to “hold China and India accountable and to enforce the rules that all WTO members must follow.”

A USTR press release explains that all WTO members are obligated to submit subsidy programme information on a regular basis to allow others to assess the nature and extent of those programmes. This obligation “is particularly significant for members like China,” the USTR states, “where inadequate transparency in so many areas places a tremendous burden on other WTO members seeking to better understand China’s trade policy measures.” The U.S. has therefore provided to the WTO the “voluminous information” it has developed regarding subsidy programmes in China and India in the course of various countervailing duty and other investigations and requested the prompt provision of detailed information and data from the countries themselves regarding the operation of these programmes.

hktdc.com – Senate Approves China Currency Bill

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