UPDATE: Vote on China bill delayed; Obama criticises China but urges caution on bill

Updated On: Oct 07, 2011

the US Senate has voted on Thursday to send the Currency Exchange Rate Oversight Reform Act, a legislation which punishes China for its undervalued currency, toward a final vote on Tuesday at the earliest. US President Barack Obama has also hit out at China, but cautioned that the US must be circumspect at dealing with the issue.

On Thursday night, during the vote on the currency bill, Democrats and Republicans got into a fight over how to conclude debate on the bill and complete voting on amendments. The argument took place after Senate Majority Leader, Democrat Harry Reid tried to curtail Republican ability to bring forth amendments, leading Senate Minority Leader, Republican Mitch McConnell to raise objections. The Senate finally voted 62-38 on Thursday to curb debate and send the bill toward a final vote next week.

The bill faces challenges in the House of Representatives where it may never face a vote, given House Speaker John Boehner’s opposition against the bill. Boehner has warned of a trade war should the bill pass, but supporters of the bill like Democratic Senator Sherrod Brown said that a trade war would not occur as China cannot afford a trade war with a country that purchases more than $300 billion of its goods each year.

Other supporters like House Democratic Leader Nancy Pelosi said, "Now is the time for the House Republican leadership to stand with American workers by allowing the House to pass the bipartisan China currency bill, and put more Americans back to work."

Report: Obama hits China on trade; cautious on currency bill (Reuters, 6 Oct 2011)

Report: Leaders Step Up Pressure on China (Wall Street Journal, 7 Oct 2011)

Meanwhile, President Obama has accused China of "gaming" the international trade system by deliberately keeping the yuan low, but stopped short of supporting the currency bill.

"China has been very aggressive in gaming the trading system to its advantage and to the disadvantage of other countries, particularly the United States," President Obama told a news conference.

He added, "It is indisputable that they [China] intervene heavily in the currency markets and that the RMB, their currency, is lower than it probably would be if they weren't making all those purchases in the currency markets."

However, President Obama urged caution when dealing with the issue. "My main concern ... is whatever tools we put in place, let's make sure that these are tools that can actually work, that they're consistent with our international treaties and obligations," Obama said. "I don't want a situation where we're just passing laws that are symbolic knowing that they're probably not going to be upheld by the World Trade Organization."

The authors of the bill assert that it adheres to World Trade Organisation rules.

If the House were to pass the bill, Obama would face a tough choice, as signing it would infuriate China, whose cooperation was needed by the US on economics and on flash points like North Korea. But vetoing the bill would cause Obama to lose votes in industrial heartland states like Ohio and Michigan for the upcoming elections.

Scott Paul, executive director of the Alliance for American Manufacturing, remarked, "I think Obama would prefer not to take a position, but if he wants to be consistent with his past policies and statements, he will sign the bill."

Report: Obama hits China on trade; cautious on currency bill (Reuters, 6 Oct 2011)

Report: US Senate delays vote on currency bill amid differences (BBC, 7 Oct 2011)

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