The Senate stepped back from the brink in its face-off with China over
Beijing's practice of keeping the yuan weak against the dollar.
Sens. Charles Schumer, a New York Democrat, and Lindsey Graham, a Republican
from South Carolina, announced yesterday that they wouldn't force an immediate
vote on a bill that would impose 27.5% tariffs on all imports from China in
retaliation for the alleged advantage that Beijing's currency policies give to
Chinese firms.
Senate leaders had promised Messrs. Schumer and Graham that the full Senate
would vote on their bill by Friday. Both men returned from a trip to China this
month, however, persuaded that Beijing was moving gradually toward a more
flexible exchange-rate policy and that their tariff bill would disrupt
commercial and political relations between the two powers.
Meanwhile, the two top-ranking senators on the Finance Committee, Republican
Charles Grassley of Iowa and Democrat Max Baucus of Montana, unveiled an
alternative bill, which they hoped would drain support for the more severe
Schumer-Graham version. Their bill would leave it up to the Treasury Department
to decide if China deserved retaliation -- and would offer much milder
sanctions.
The committee leaders' bill is intended to strengthen the hand of the
administration of President Bush in negotiating with China over currency issues
without igniting a trade war or disrupting Washington's relations with Beijing,
as many fear the tougher alternative would do.
In July, Beijing raised the official exchange value of the yuan by 2.1%
against the dollar and promised to allow the rate to reflect market forces.
Since then, the yuan has crept up an additional 1%.
Even as Chinese officials reassure visiting U.S. delegations, they have been
careful to avoid the appearance that they are caving into American pressure.
In newly released comments, China's central-bank governor, Zhou Xiaochuan,
ruled out "shock therapy" to reduce the country's surging trade surplus with the
U.S. "China will only consider to take the gradualist reform approach," Mr. Zhou
said in a March 20 speech summarized yesterday on the People's Bank of China Web
site.