WASHINGTON—Senators Lindsey Graham and Charles Schumer, two leading advocates of trade sanctions against China, said Tuesday that they'd decide this week whether to force a vote on their bill to levy steep tariffs on Chinese imports unless Beijing stops propping up its currency, the yuan.
Graham and Schumer held a closed-door meeting with Treasury Secretary Henry Paulson, who last week made his first visit to China since he replaced John Snow in June.
"We let Secretary Paulson know that status quo is unacceptable for the business relationship between China and the United States," Graham told reporters outside his Capitol Hill office.
Paulson didn't comment on the meeting, but the senators said he'd asked them to hold off making good on Senate Majority Leader Bill Frist's promise to schedule a vote on their legislation this week before lawmakers adjourn for their fall election campaigns.
"Secretary Paulson is a dynamic man who is amazingly talented and knowledgeable about China," Schumer said. "He is optimistic we can get something done (without imposing sanctions), and we believe him—he's a great guy. On the other hand, we've seen for three years that China doesn't like to move. ... And it's our belief they move when pushed."
Graham predicted that the sanctions bill would "pass overwhelmingly" if it were brought to the Senate floor. A Senate vote to defeat similar legislation last year failed 67-33.
The Graham-Schumer measure, which has less support in the House of Representatives, would provide six months of negotiations on currency revaluation between China and the United States, and impose a 27.5 percent tariff on all Chinese imports to the U.S. if the talks failed to produce an accord.
Some American companies benefit from China's trade conditions. There also are concerns that China would respond to steep U.S. tariffs with retaliatory trade measures of its own.
Though Graham recently acknowledged that such a step "would create a political firestorm for years to come," he bristled Tuesday at suggestions that the automatic tariffs and other provisions in his bill are draconian.
"The current practices of the Chinese government are draconian on their own part," Graham said. "If you want to look at the most draconian, I would argue that manipulating your currency to create an advantage in the marketplace is not only unfair and illegal—it's draconian."
The United States' trade deficit with China is one-third larger than it was at the same point in 2005, Graham said, when it reached a record $202 billion.
After completing his visit to China and other Asian countries last week, Paulson said that Washington and Beijing were launching a new U.S.-China strategic dialogue centered on trade, investment and other aspects of their economic relationship.
Peter Morici, a former chief economist for the U.S. International Trade Commission, said that President Bush is reluctant to hurt large companies such as General Electric, Caterpillar and General Motors, which are making large profits in China.
"The Bush administration urgently needs to persuade China and other Asian countries to significantly revalue their currencies and to stop intervening in foreign exchange markets," Morici said Tuesday.
"So far, China has balked at meaningful action," he said. "It has permitted the yuan to appreciate by about 4.5 percent over 15 months. That is hardly enough to have any meaningful effects."
China, Japan and other foreign nations are pursuing a "mercantilist development strategy," Morici said.
"They consistently buy U.S. dollars and securities to keep their currencies and products cheap," he said. "When private purchases of U.S. assets slack off, these governments rev up purchases to keep their currencies and products artificially cheap on U.S. markets. To support these policies, they erect arcane barriers to U.S. exports."
Graham and Schumer met with senior Chinese officials during a trip there in March and returned home optimistic that Beijing was committed to reform.
"Since our visit, things have been pretty much the status quo," Graham said. "Months have passed, and very little has happened."
Even if the sanctions bill isn't acted upon this week—or in a lame-duck session of Congress after the Nov. 7 elections—Schumer said he and Graham have succeeded in raising the importance of Chinese currency manipulation.
"The issue is now on the map—it wasn't when we started," Schumer said.
(c) 2006, McClatchy-Tribune Information Services.
Need to map