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Senators court 2012 voters with China currency

Oct 3, 2011, 3:41 a.m.
A 100 yuan banknote (R) is placed next to a $100 banknote in this picture illustration taken in Beijing November 7, 2010. REUTERS/Petar Kujundzic

By Doug Palmer

WASHINGTON (Reuters) - For U.S. lawmakers eyeing their re-election prospects next year, this week provides a chance to show they mean business about cracking down on China's currency practices and returning jobs to America.

Critics say the legislation that looks set to pass the U.S. Senate this week is more likely to help a factory worker in Hanoi than in Ohio, and could expose the United States to a damaging trade row with its fastest-growing export market.

But those arguments don't wash with Senator Sherrod Brown, a Democrat from the manufacturing heartland of Ohio.

He recounts U.S. warnings to China going back to the 1990s, when Congress fought annually over trade relations.

"That was back when our trade deficit with China was $10 billion. Now it's $200 billion plus. This will help to level the playing field. China gaming the currency system has clearly undercut our ability to compete in many things," Brown said.

"We have not been aggressive enough with China. I think it's cost a lot of people a middle-class standard of living in my state. It's caused too many teachers and firefighters and police officers to be laid off, when plants are closed and there's no money to pay them," Brown said.

Jobs are such a hot topic in early 2012 campaigning that prospects for the China currency bill to pass Congress could be stronger than in previous years, potentially putting President Barack Obama on the spot over whether to veto it.

Obama carried Ohio, a union-heavy state where concerns about trade resonate, in the 2008 election after it went for Republican George W. Bush in the two previous contests.

Republican presidential candidate Mitt Romney put China center stage of the campaign this month when he promised he would "clamp down on China when they cheat."

SMALL BILL, BIG STAKES

The legislation probably would raise duties on only a small portion of imports from China, which totaled about $365 billion last year, far more than from any other supplier.

The Congressional Budget Office estimated a similar bill passed last year by the House, but not the Senate, would collect only about $125 million in duties over 10 years based on expectations that few goods would qualify for the relief.

But every attempt by U.S. lawmakers to hit China for its trade practices is hugely sensitive for Beijing.

"The race for the U.S. presidential election has heightened, and the yuan exchange rate is now a target again," official news agency Xinhua said in a commentary on Sunday.

It slammed the claims of the bill's supporters as "expedient and shallow." [ID:nL3E7L209N]

Many in the United States agree.

"It is very easy to say that China is the bogeyman," said Doug Guthrie, dean of business at George Washington University. He said the bill would do little to help U.S. jobs and would raise U.S. import costs, but said it might yet pass.

"The sad thing is that even though Obama gets that, he is afraid of these political people" in the White House who might recommend he sign it to win votes, said Guthrie.

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