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Oct. 24, 2011 – 10:25 p.m.

GOP Aims to Broaden China Debate

By Ben Weyl, CQ Staff

House Republicans, hammered by Democrats for refusing to take up legislation aiming at China’s currency practices, hope to widen the debate to a broader range of legislative concerns.

GOP members of the Ways and Means Committee will use a hearing Tuesday to examine alternative policy prescriptions to combat complaints by U.S. companies and workers about an array of trade barriers erected by Beijing.

Whether House Republicans will be able to hold off the politically potent currency issue, which they have shunned along with their allies in the business community, is uncertain.

Ways and Means Chairman Dave Camp, R-Mich., has long planned the hearing, which he said would also focus on the potential China holds for an increased volume of U.S. exports.

“China’s distorting trade policies are deeply troubling and cannot be allowed to stand. Its practices are costing U.S. jobs,” Camp said last week. “China has benefited greatly from globalization, and it must abide by the same rules that afforded it that prosperity.”

The hearing comes two weeks after the Senate passed punitive legislation that would impose sanctions on China essentially based on the value of the yuan, the country’s currency.

Although Camp has been critical of China’s currency practices, he has said Democrats are overly focused on that one issue at the expense of others, including China’s subsidies for domestic industries, and complaints that it does not protect intellectual property, from music and videos to patents and trademarks.

Beijing’s “indigenous innovation” policies, which are designed to protect Chinese companies, as well as its government procurement practices and Google’s decision to pull out of China after last year’s hacking attack all may be discussed at the hearing.

These issues echo complaints from many U.S. companies and business groups such as the U.S. Chamber of Commerce, which want to broaden the reach of American exports, but fear a retaliatory trade war if the currency bill becomes law.

The number of concerns that U.S. companies have about doing business in China is “much larger than the currency issue that Congress tends to focus on,” said Erin Ennis, vice president of the U.S.-China Business Council, which represents about 240 companies that sell U.S.-made goods and services in the Chinese market.

The group’s annual business environment survey, released Monday, showed a variety of concerns about Chinese government practices. Currency policy ranked 26th on the list, but that may reflect that about two-thirds of the companies that responded to the survey are based in China. Half of the respondents reported employing 1,000 or more Chinese workers.

Support for Currency Bill

Amid high unemployment and public jitters over China’s increasing economic and military strength, the currency issue has become powerful.

GOP Aims to Broaden China Debate

On Oct. 11, the Senate passed a measure (S 1619) that would threaten economic sanctions if the Treasury Department finds that — based on a set of economic indicators — a trading partner’s currency is “misaligned.” The bill passed, 63-35, with 16 Republicans joining almost all Democrats in voting yes.

Economists generally agree that the Chinese government maintains the yuan at an artificially low value relative to the dollar to help boost its shipments to other countries and to constrain Chinese purchases overseas. The view is that this puts many U.S. companies at a disadvantage.

Despite apprehensions about retaliation, some small and medium-size U.S. manufacturers support currency legislation. The Alliance for American Manufacturing, a group sponsored by the United Steelworkers union and some American manufacturers, is pushing the Senate-passed bill.

The Obama administration has not taken a formal position on the measure, although it has opposed similar efforts to force its hand in the past. The administration has declined to label China a currency manipulator under a 1988 law.

Two administration officials set to testify Tuesday, Treasury Undersecretary Lael Brainard and Deputy U.S. Trade Representative Demetrious Marantis, are sure to be asked to comment on whether the Senate bill would violate World Trade Organization obligations.

Speaker John A. Boehner, R-Ohio, who has been against similar bills in the past, has been direct in his opposition, calling the Senate bill “dangerous” and voicing a fear of retaliation. China is the biggest foreign holder of Treasury debt and the No. 2 trading partner of the United States.

GOP leadership aides have said there are no plans to bring the Senate bill to the House floor.

But Democrats in both chambers have kept up a steady pressure on Republicans to call it up. The latest effort came Monday, when the office of House Minority Leader Nancy Pelosi, D-Calif., issued a press release accusing Boehner of having his “head in the sand” on the issue, and she included a newspaper article describing manufacturing job losses in his home state.

Even Senate Republicans Lindsey Graham of South Carolina and Jeff Sessions of Alabama have publicly urged Boehner to reconsider.

Rising Pressure

It is considered likely that the House would pass the measure if it were to reach the floor. A similar bill (HR 639) has 230 cosponsors, including 62 Republicans. And House Democrats are pushing a discharge petition to force a floor debate, but that effort has little GOP support.

Camp has not signaled whether he intends to follow Tuesday’s hearing with legislation addressing China’s trade practices. The business community views legislation as a blunt instrument that rarely works, and has resisted such attempts.

“You solve these problems in the WTO, or other negotiations. It’s hard to solve them through unilateral legislation,” said National Foreign Trade Council President Bill Reinsch.

GOP Aims to Broaden China Debate

But Reinsch said that Camp and Republican leaders might feel pressure to take on China in some legislative form, even if they do not take up the bill passed by the Senate.

“I would not rule it out that they will decide that they need to do something,” Reinsch said. “They’ve got this discharge petition staring at them in the face.”

Republican presidential candidate Mitt Romney, who has had sharp words for China and has promised to declare the country a currency manipulator on his first day in office, may be adding to the pressure.

“Are they eventually going to rally around the guy who may be their nominee,” Reinsch asked, “or will they stick to the position the leadership staked out?”

Even if panel Republicans shy away from the currency issue, that does not mean other GOP lawmakers will not push leaders to act. Ways and Means is “not necessarily going to have the same view as the rank and file,” Reinsch said.

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