The U.S. House of Representatives has approved a measure that would punish China and other countries that undervalue their currencies. The 348-to-79 vote came Wednesday, hours after President Barack Obama expressed concern about the Chinese practice related to its currency.
President Obama spoke about the issue in the U.S. state of Iowa Wednesday. "I will say the reason that I'm pushing China about their currency is because their currency is undervalued," he said.
The president says the undervaluing is a contributing factor to the massive trade imbalance between the United States and China.
U.S. lawmakers and businesses accuse Beijing of keeping the yuan artificially low so Chinese-made goods will have a price advantage on world markets. They say this has led to a loss of millions of manufacturing jobs in the U.S.
The speaker of the House of Representatives, California Democrat Nancy Pelosi, says the U.S.-China trade deficit has dramatically increased since lawmakers took up the issue two decades ago. "Remember I said the trade deficit was $5 billion a year 20 years ago when we were having this debate then? It is now $5 billion a week," she said.
Pelosi said the legislation would strengthen the Obama administration and future U.S. governments in negotiations with the Chinese.
Ohio Democrat Tim Ryan, who sponsored the bill, says the currency manipulation means the Chinese government is artificially subsidizing exports to the United States, translating into low-priced goods from China that hurt the U.S. economy "It may be cheap, because it is being subsidized by their government. But it's putting American workers and American manufacturers out of business," he said.
Republicans, while agreeing the Chinese currency is undervalued, expressed concern that the bill does not cover other issues with China, including intellectual property rights, and say it is punishing American consumers.
"While this legislation addresses an important issue, it will not address many more pressing trade concerns with China, and it will not advance the goal of doubling exports in five years," said Michigan Republican Congressman Dave Camp.
The House bill allows the Commerce Department to authorize tariffs on products from countries with an artificially weak currency.
Hours before the vote, China's central bank pledged to increase the flexibility of the yuan.
China said in July that it would allow the yuan to trade more freely against a basket of other currencies, but its value has increased just slightly since then.
President Obama discussed the issue with Chinese Premier Wen Jiabao on the sidelines of the United Nations General Assembly last week, urging the Chinese leader to do more to ease tensions over the issue.
But Mr. Wen told U.S. and Chinese business leaders before his meeting with Mr. Obama that there would be "major turbulence" in China if there were a substantial increase in the yuan.
He blamed the huge U.S. trade deficit on the structure of Chinese-U.S. investment and trade, not the value of China's currency.
The U.S. Senate may vote on a similar measure in November.