|Video grab of C-SPAN shows the U.S. Senate passed the currency bill in Washington, the United States, Oct. 11, 2011. The U.S. Senate on Tuesday passed a controversial currency bill which threatens to punish China for so-called "currency manipulation" with retaliatory tariffs, despite strong opposition from China and many U.S. business groups. The Currency Exchange Rate Oversight Reform Act was passed in a vote of 63-35 at the Senate. (Xinhua Photo)
WASHINGTON, Oct. 11 (Xinhua) -- The U.S. Senate on Tuesday passed a controversial currency bill which threatens to punish China for so-called "currency manipulation" with retaliatory tariffs, despite strong opposition from China and many U.S. business groups.
The Currency Exchange Rate Oversight Reform Act, sponsored by Senators Charles Schumer, Sherrod Brown and other Democratic and Republican Senators, was passed in a vote of 63-35 at the Senate. The bill is especially directed at China's currency, the yuan, which the U.S. claimed is undervalued to make Chinese exports to the U.S. cheaper.
With alleged goals of reducing trade imbalance between the two countries and creating more jobs at home, the U.S. Senate bill aims to make it easier for the U.S. government to designate China as a "currency manipulator" and slap retaliatory tariffs on goods imported from China.
But the prospects of the bill becoming law remains in doubt, as it still has to clear the House of Representatives and then be signed by U.S. President Barack Obama before becoming law. Both Obama and House Speaker John Boehner have expressed their reservations about the legislation.
Obama told a White House news conference last Thursday that his main concern about the Senate bill is that it may not be consistent with international treaties and obligations, and will not be upheld by the World Trade Organization.
Boehner also made it clear last week that it is "pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency. "
The U.S. Senate's move came at a time when the U.S. unemployment is hovering above 9 percent and both the Democratic and Republican parties are gearing up for next year's presidential election, which is expected to be dominated by the unemployment and other economic issues.
U.S. companies doing business in China are also opposed to the Senate's passing of the bill. In a letter sent in late Sept. to Senate leaders, 51 U.S. business and industry organizations, including American Association of Exporters and Importers, American Chamber of Commerce in China, and Agriculture Transportation, warned that "unilateral legislation on this issue would be counterproductive not only to the goals related to China' s exchange rate that we all share, but also to our nation's broader objectives of addressing the many and growing challenges that we face in China."
Arguing that the yuan's exchange rate is not the cause of China- U.S. trade imbalance, China has voiced its strong opposition to the U.S. Senate's passing of the bill, warning the U.S. politicians against politicizing the issue of China's currency and resorting to trade protectionism.
China's Vice Foreign Minister Cui Tiankai on Monday warned that the bill could trigger a trade war and hold back global economic recovery. "(The currency bill) in no way represents the reality of the economic and trade relationship between China and the United States, and it might have an adverse impact on the development of the relations between the two countries," he said.
"Should the proposed legislation become law, the only result would be a trade war between China and the U.S. and that would be a lose-lose situation for both sides," Cui added.
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