MercoPress. South Atlantic News Agency

White House and Congress clash over China trade gap

The United States government refused on Wednesday to name China as a manipulator of currency values to gain unfair trade advantages and rejected a request by Congress members to file a trade case against Beijing on the currency issue.

President George Bush's administration's actions provoked an outcry from members of Congress who said US soaring trade deficits with China had cost thousands of manufacturing jobs and deserved a much tougher response to crack down on unfair Chinese trade practices. This week it was announced China's trade surplus in May reached 22.4 billion US dollars, up 73% over the same month a year ago and 216 billion US dollars in the last twelve months. US Treasury Secretary Henry Paulson, who is leading US efforts to deal with a soaring trade deficit with China, issued his department's semiannual report on Wednesday that found China does not meet the technical requirements for being labeled a currency manipulator. However the report insists the Chinese government's pace to implement various economic reforms to deal with the trade gap is "much too slow and should be quickened". Meanwhile, U.S. Trade Representative Susan Schwab announced late Wednesday that she was rejecting a petition filed in May by a bipartisan group of 42 members of the House of Representatives asking the administration to bring a trade case against China before the World Trade Organization. Schwab recalled that the administration has brought four WTO cases against China in the past 15 months but did not feel a case on the currency issue would be appropriate. Leading members of the US Congress have repeatedly complained about President George Bush administration's failure to take action against China and said they were introducing much tougher legislation. Last year Senators Charles Schumer, a Democrat, and Lindsey Graham, a Republican, pushed legislation that would penalize China by imposing 27.5% cent tariffs on all Chinese imports But this Wednesday they introduced a revised bill that would change the description of the infraction from currency manipulation to "fundamentally misaligned currency for priority action". The measure would set up a schedule of escalating punitive actions against countries designated as having priority misaligned currencies. Those actions would include using the amount that a currency is allegedly undervalued in figuring penalty tariffs to impose on the designated country in dumping cases, when countries are found to be selling products in the U.S. market at below fair value. The legislation would also withhold U.S. votes for loans any designated country might be seeking from the World Bank or other international lending institutions. US manufacturers assert that China is undervaluing its currency by as much as 40% which has provided US consumers with cheaper-priced Chinese imports, but it has driven the trade gap to an all-time high of 232 billion US dollars in 2006.