http://www.nytimes.com/2006/03/29/business/worldbusiness/29trade.html
WASHINGTON, March 28 — Two of China's most relentless critics in Congress
announced a temporary cease-fire on Tuesday in their long-running attack on
China's foreign-exchange practices.
In an about-face, Senator Charles E. Schumer, Democrat of New York, and
Senator Lindsey Graham, Republican of South Carolina, dropped plans for a bill
that would threaten steep tariffs on Chinese imports if Chinese leaders refuse
to let their currency, the yuan, rise in value against the dollar.
Both lawmakers said they had become more optimistic as a result of their
weeklong trip to China, where Chinese leaders emphasized their willingness to
let their currency float more freely and to address other aspects of their
nation's growing trade deficit with the United States.
"We learned that the Chinese have come to a conclusion that a fixed currency
is no good for China," Mr. Schumer said Tuesday. "We believe that the progress
we have seen in the last two or three weeks will continue."
Mr. Schumer and Mr. Graham said they would not demand a Senate vote on their
bill, which would threaten China with a 27.5 percent tariff on all exports to
the United States if it did not let its currency move in line with market
forces.
Though they said that they reserved the right to push for a vote by the end
of September, the two senators made it clear they hoped to let the matter drop.
China has kept its currency at an almost fixed exchange rate against the
dollar for more than a decade, and American manufacturers have long complained
that the yuan's low valuation has given Chinese imports an extra competitive
edge.
Political anxiety about China's huge trade surplus and its competitive
pressure on American producers has risen in many quarters of Congress. The Bush
administration, though a staunch defender of trade with China, has bluntly
criticized Chinese leaders for failing to address a long list of trade
complaints and has hinted it might accuse China of engaging in "currency
manipulation."
Mr. Schumer and Mr. Graham have been threatening to force a Senate vote on
their bill for nearly two years, but they have repeatedly held back after
receiving assurances that China was moving toward a more flexible exchange-rate
policy.
Last July, China announced a 2.1 increase in the value of the yuan and said
it was moving away from a fixed exchange rate. But the yuan barely budged again
until earlier this month, when the government allowed it to edge up another 1
percent.
As a practical matter, American companies are ambivalent about the entire
issue.
The National Association of Manufacturers has complained about China's
exchange rates for years, but it has opposed the Schumer-Graham bill out of fear
that it would imperil a trade relationship that is vital to many American
companies.
The group estimates that about a quarter of all manufactured goods from China
come from subsidiaries of American companies. But that estimate does not include
large volumes of imports from Chinese companies working as subcontractors to
American manufacturers.
Senator Charles Grassley of Iowa and Senator Max Baucus of Montana,
respectively the top Republican and Democrat on the Senate Finance Committee,
are pushing a separate bill that would focus more attention on currency policies
but stop short of threatening tariffs on imported goods.
