Us Senators to visit China for Economic talks

WASHINGTON, Mar 20: U.S. senators and senior Bush administration officials head to China this week, kicking off a decisive period in bilateral economic relations leading up to President Hu Jintao's visit to Washington next month.

''These are momentous times for trade relations between America and China,'' Sen. Charles Schumer, a New York Democrat, said at joint news conference with Sen. Lindsey Graham, a South Carolina Republican, ahead of their trip to pressure Beijing to revalue its yuan currency at a higher exchange rate to the dollar.

The latest deadline of March 31 follows months of frustration that changes made by China to its exchange rate mechanism last July have only led to an estimated 3 per cent rise in the yuan's value, rather than the 15 per cent to 40 per cent increase that many had sought.

''You have our vote scheduled for the 31st. You have President Hu's visit and you have the currency report,'' Schumer said, referring to a trio of events that have the potential to shape U.S.-China economic relations for years to come.

Schumer and Graham are co-authors of a bill opposed by the Bush administration and many in the business community that threatens China with a 27.5 per cent tariff on its exports to the United States unless Beijing agrees to revalues it yuan ''at or near its fair market value,'' as determined by Washington.

Many U.S. lawmakers and manufacturers believe the yuan is so undervalued that it gives China's products an unfair advantage that has cost millions of American jobs and fuelled a bilateral trade gap that hit a record 2 billion last year.

Critics call the Graham-Schumer bill a dangerous plan that would roil relations with the United States' third-largest trading partner and fastest-growing export market.

They also doubt it would accomplish its goal, fearing it could boost prices for U.S. consumers if companies don't shift to other foreign suppliers after tariffs are imposed.

''We just feel it's the wrong approach, although we all share the same goal,'' said John Frisbie, president of the U.S.-China Business Council.

Schumer and Graham first offered the bill as an amendment to other Senate legislation nearly a year ago, when it unexpectedly survived an attempt to kill it by a vote of 67-33.

Since that watershed event, there have been a series of deadlines for another vote on the bill, and each time the senators have agreed to give China more time to act.

FUTURE CLOUDY

Still, many experts doubt the Graham-Schumer bill would make it through the U.S. House of Representatives and be signed into law by President George W. Bush, even if it passes the Senate in its current form.

''I think the chances are rather slim,'' said Ed Gresser, trade policy director at the Progressive Policy Institute.

''This would be a very major violation of WTO (World Trade Organization) obligations and interfere with the fastest-growing U.S. export market as well as the fastest growing source of imports.'' Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, has also announced plans for a bipartisan China bill that could reduce support for the Graham-Schumer legislation and give senators an alternative, said Greg Mastel, chief international trade advisor at Miller and Chevalier, But others said it was easy to imagine a scenario where Schumer and Graham return disappointed from the trip and push for a straight up-or-down vote.

The House could follow suit if a high-level U.S.-China trade meeting set for April 11 in Washington goes badly and there is no further progress on currency reform by Hu's visit in late April.

''It's an election year and the trade balance keeps getting worse,'' said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, citing two factors driving the Graham-Schumer bill.

Congressinal tempers will be especially hot if the Treasury Department, in a report scheduled to be issued next month -- though it often is delayed -- again fails to formally label China as a currency manipulator, Vargo said.

Commerce Secretary Carlos Gutierrez will also be in China later this week to prepare for the April 11 Joint Committee on Commerce and Trade (JCCT) meeting. He will be proceeded by two other top U.S.

officials -- Deputy U.S. Trade Representative Karan Bhatia and Commerce Undersecretary Franklin Lavin.

Gutierrez has warned the JCCT meeting could be called off if Beijing is not prepared to address a number of trade irritants, including widespread piracy and counterfeiting of U.S. goods and continued obstacles to U.S. imports.

Washington also wants China to follow through on a promise to join the World Trade Organization's government procurement agreement, opening up new markets for many American companies.

Concrete action on those fronts could buy Beijing more time from Congress to gradually revalue its currency, said Cal Cohen, president of the Emergency Committee for American Trade.

''I believe what members are looking for is momentum ...

China needs to demonstrate in some areas they are ready to move forward,'' Cohen said.

REUTERS