Trade deficit adds to pressure on China

The widening trade deficit is adding pressure on Senate
Democratic leaders to take legislation to remedy currency manipulation by
China.

Democratic Conference Vice Chairman Charles Schumer (N.Y.)
said last week both he and Majority Leader Harry Reid (D-Nev.) are closely
eyeing how to add it to an already chock-full four-week agenda that begins in
September.

{mosads}“We’re very interested in bringing it up, yes,” said
Schumer, who called the issue an “economic imperative.”

“It makes it a lot easier to buy cheap imports, hurts our
more-advanced exports, and it hurts our overall economy,” said Schumer, who
repeatedly has played the bad cop with China to the executive branch’s good cop
through two administrations.

The Obama administration does not want Schumer’s bill to
move forward, and White House Chief of Staff Rahm Emanuel has asked Schumer to
hold off, fearing even a Senate vote on the bill could impede U.S.-China
relations.

But lawmakers worried about rising unemployment ahead of November’s
mid-term elections are under increasing pressure to take actions to help
workers and the economy.

In a surprise, the U.S. trade gap widened by 19 percent in
June, the Commerce Department reported this week, raising concerns the economic
recovery is sliding backward.

Officials said the $49.9 billion deficit was the worst since
October 2008, just before the crisis hit in full force — and it followed a $42
billion gap in May.

The largest U.S. trade deficit is with China, and many
economists believe that country’s currency policies exacerbate the imbalance.
The U.S. gap with China specifically hit $26.2 billion in June, another
statistic at its worst level since October 2008.

U.S. manufacturers and workers argue China manipulates its
currency, keeping it artificially low to make it easier to sell its exports. By
some estimates, China’s currency is undervalued by 25 percent to 40 percent
against the U.S. dollar.

China announced this summer it would allow more flexibility
in its currency’s value, but the yuan has strengthened little since then.
That’s increased frustration among U.S. manufacturers and labor groups.

Schumer’s bill would allow the Commerce Department to
consider currency when imposing anti-subsidy duties on imports, which could
lead to much higher tariffs on Chinese products.

“Every day, billions of dollars leave this country, and they
never come back, because of the currency,” said Schumer. “The number of people
who believe we should do something about this is growing on both sides of the
aisle.”

Schumer acknowledged the Obama administration prefers a
different strategy, but said officials understand the importance of the
problem. He also hinted that Obama can use pressure from Congress to push
Beijing into action while still appearing gentle himself.

“I think they would be happy to have someone else pushing
harder. I don’t get anyone yelling at me about it, which I used to five years
ago.”

Schumer in 2005 pushed a currency manipulation bill through
the Senate with 67 votes, only to hold off on pressing the House to take up the
bill to allow Chinese officials time to address the problem.

Schumer more recently had vowed to move legislation in the spring, but his bill was not taken up by the Senate.

Schumer said it is too soon to know where the bill will fall
into the mix of priorities that he and other Democratic leaders are juggling as
they consider the Senate’s September agenda.

“We’d have to see what the vehicle is, for instance,” he
said. “But I know that Leader Reid feels strongly about it, as do other people
in the caucus.”