Those who favor a tougher line on trade with China are crowing over a recent development on Capitol Hill.
In a show of strength that surprised even supporters, advocates of steep tariffs on Chinese imports were able to flex their political muscles and get Congress to schedule a vote on one of their proposals.
Senate leadership agreed April 7 to allow a vote before the end of July on legislation from Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., that would impose 27.5 percent tariffs on Chinese imports if the country doesn't revalue its currency within six months.
The agreement came because Schumer and Graham were able to force their controversial proposal onto unrelated foreign affairs legislation. Some other senators tried to remove it, but the Senate voted 67-33 — an impressive margin that surprised Graham — to keep the Schumer-Graham provision. Bowing to the show of numbers, Senate leadership agreed to give the provision its own vote.
That doesn't mean Schumer-Graham would pass on its own. Such votes sometimes are for show, but it's evident there's increasing frustration on the issue.
In a statement on the Senate floor, Schumer said it's not critical that his plan become law. Rather, he said, Senate action would send a signal to China and force negotiations to start in earnest.
The Schumer-Graham plan is controversial: Others in Congress who set trade policy, like Rep. Clay Shaw, R-Fla., call it “troubling” and say pushing China too far could collapse its banking system and stoke a global recession. The Bush administration and the National Association of Manufacturers have argued against similar proposals.
The vote got the attention of China, though: The country was sharply critical and told the United States it should look at its own house. That's a fair point, one that even die-hard critics of China acknowledge. The U.S. federal budget deficit is unsustainable, financed in part by money from China, and it is an equally important long-term risk to the American economy. Washington has to correct its own irresponsibility. Still, the vote in the Senate sent a clear signal that frustrations are mounting.
China has pegged its currency to the dollar, at a rate of about 8.3, for more than a decade. China's economy has grown tremendously since then, and it's tough to argue that the country's currency shouldn't have risen in value along with that. U.S. manufacturers feel Chinese exports are unrealistically cheap, by as much as 40 percent.
Several committee chairmen in the House also introduced their own version of a get-tough-with-China bill earlier this month. That proposal would define China's currency policy as illegal under American law, and for the first time would let American companies use the currency argument in cases filed with the U.S. government asking for tariffs.
Supporters of the House bill claim it's compliant with World Trade Organization rules. However, some observers of the Senate said the Schumer-Graham bill's across-the-board tariffs could violate WTO provisions.
It's unclear whether all the political maneuvering will amount to anything. But it is clear concerns are rising in Washington.
Steve Toloken is a Washington-based staff reporter for Plastics News.