US senators unveil bill pressuring China on currency

WASHINGTON, June 13 (Reuters) The top Democrat and Republican on the Senate Banking Committee said they would introduce legislation giving the US Treasury Department stronger tools to confront China's currency practices.

''A change in our currency manipulation policy is long overdue,'' Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat, said in a statement yesterday. ''America's companies and workers deserve an opportunity to compete on fair terms with countries such as China.'' Dodd and Sen. Richard Shelby, an Alabama Republican, announced their plans just one day before the US Treasury Department releases a semi-annual report on foreign currency practices, which is expected to again stop short of formally labeling China a currency manipulator.

The two senators also beat senior members of the Senate Finance Committee to the punch. The top Democrat and Republican on that panel have scheduled today afternoon press conference to unveil their own currency bill.

''I have long believed that China manipulates its currency, thereby giving it an unfair trade advantage. Although evidence gathered by the Treasury clearly supports this conclusion, Treasury has regrettably declined to label China a currency manipulator,'' Shelby said in a statement.

Many lawmakers believe China deliberately undervalues its currency by as much as 40 percent to give Chinese companies an unfair advantage in international trade.

The US Treasury Department has pushed China to move to a more flexible market-oriented exchange rate policy, but has frustrated many lawmakers and manufacturers by refusing to label China as a currency manipulator.

Earlier yesterday, US Treasury Secretary Henry Paulson said he still believed the best way to get China to move faster on currency reform was ''through direct discussions and negotiations, not through legislation.'' Dodd and Shelby said their bill would change the definition of currency manipulation to make it harder for Treasury to avoid making that finding for China.

Countries with a material global account surplus and a significant bilateral trade surplus with the United States would be classified as ''currency manipulators, without regard to intent,'' they said.

The bill would also require a number of Treasury Department actions once currency manipulation is found. Those including developing a plan of action within 30 days that sets benchmarks and timeframes for the foreign trading partner to reform its currency practices.

It mandates US action through the International Monetary Fund to pressure countries to end currency manipulation, and authorizes the Treasury Department to file a World Trade Organization case if ''goals and benchmarks are not met within 9 months.'' The legislation also creates a process for Congress to formally voice its disapproval if Treasury fails to cite a country for currency manipulation.

Other provisions would hold Treasury's feet to the fire in terms of pressuring China to open its financial services markets to more US companies.

Senior Democrats in the US House of Representatives have also said they plan to move currency legislation this year.

Reuters AKD VP0453