Two US senators came under fire yesterday after they vowed to force a vote on a bill to impose a 27.5 per cent tariff on Chinese goods, a move that could damage the trade relationship between the United States and China.

Senators Charles Schumer and Lindsey Graham vowed to force a vote by Saturday on legislation to impose a 27.5 per cent tariff on Chinese goods if the government does not significantly raise the value of its currency within six months.

"As an advocate of free trade, I wrote a letter on behalf of my association to all the members of the House and Senate, asking them to oppose the Schumer and Graham proposal," said Frank Keating, president of American Council of Life Insurance (ACLI).

ACLI is a Washington-based trade association whose 377 member companies account for 91 per cent of the life insurance industry's total assets in the United States.

"It is encouraging to see that Schumer said he didn't expect the bill to go anywhere," added Keating, a former Oklahoma governor who has also served under Presidents Ronald Reagan and George H.W. Bush.

"It is impossible for this legislation to pass," said Mei Xinyu, a trade researcher at the Chinese Academy of International Trade and Economic Co-operation. "And the yuan's appreciation is insufficient to rein in the growth of China's exports."

With little chance of the legislation being passed, Schumer last week said he wants to use the threat of tariffs to spur Chinese officials to boost the yuan and doesn't want the bill to become law.

China ended the yuan's peg to the US dollar in July 2005, and the value of the yuan against the dollar has risen 2.41 per cent since then, but this has failed to quell calls in some circles for a further appreciation.

Central bank Governor Zhou Xiaochuan said last Thursday that China plans to end exchange controls on the yuan and open its financial markets, but gave no timetable.

"We will continue our efforts to develop our financial market and widen it gradually, but will push for the free convertibility of the yuan in a stable manner."

Schumer and Graham first offered their bill as an amendment to other legislation in April 2004, but stepped back after appeals from the Bush administration, which fears the bill could ignite a trade war.

The senators claim China's currency is undervalued by 15 to 40 per cent, giving China a competitive edge in exports and resulting in a growing trade surplus with the United States.

China's trade surplus widened to US$18.8 billion in August from US$14.6 billion in July, according to the latest statistics from the customs bureau.

Last month, Schumer and Graham told reporters they would demand a vote before Saturday unless China takes more steps toward revaluing soon.

US Treasury Secretary Henry Paulson also urged the two senators to drop the bill during his recent visit to Beijing.

Paulson's mission now is to convince the senators they should give the newly announced US-China economic dialogue time to work.

(China Daily 09/27/2006 page9)