Fight Over China Currency Policies Threatens Vote on Trade Bill

NG_NM

Both sides say the vote will be close, but absent a breakthrough in negotiations, the 60-vote threshold will be difficult to meet. At the root of the dispute is China, which is not even a party to the Trans-Pacific Partnership, the trade agreement Mr. Obama hopes to make a capstone of his administration.

Voting to proceed to the measure on trade promotion “is saying this bill is worthy of debate,” Mr. McConnell pleaded on the Senate floor Monday, promising that senators could add amendments.

But opponents sensed the momentum was on their side.

“We’re going to win,” said Senator Sherrod Brown, Democrat of Ohio, who has led the effort to demand trade promotion authority be considered only with other measures on trade enforcement and assistance for workers dislocated by trade accords.

The customs bill in question has created a stew of conflict over issues as varied as child labor and enforcement of import duties. Candy makers want to preserve a loophole — closed in the customs bill — that allows them to import African cocoa harvested by child labor. Automakers are demanding the inclusion of a tough measure allowing companies to challenge trading partners that they say artificially depress the value of their currency to raise the price of American imports and lower the cost of their exports.

Republicans accuse Democrats of reneging on their promise to move forward on trade promotion authority on the condition that it is linked only with a measure expanding assistance to workers displaced by economic globalization. Democrats say Republicans coaxed them into putting their most desired trade measures into a bill that is now being dumped.

Trade promotion authority would give allow the president to complete the Pacific deal, knowing that any final accord could still be voted down by Congress but could not be amended. Mr. Obama has repeatedly framed the Pacific accord as a way to counter China’s rising power in Asia, giving countries like Malaysia, Brunei, Japan, Singapore and Vietnam an economic alliance that would be a counterweight to China’s increasingly assertive policies in the region.

But a bipartisan coalition, including Mr. Brown, and Senator Lindsey Graham, Republican of South Carolina, is challenging the administration to do far more.

“If the White House and our foreign policy community were so interested in dealing with China, we would have been much more aggressive in passing a currency bill that would allow us to go toe to toe on these issues,” Mr. Brown said. “We’re doing none of that.”

The coalition has told the White House there will be no trade promotion authority bill without a provision aimed at China’s currency policies.

“I have said to them for three to four months, if you do currency alongside T.P.A. but at same time, it would help your cause,” said Senator Charles E. Schumer, Democrat of New York.

But senior administration officials remain opposed to the senators’ solution, a measurethat would require the Commerce Department to investigate currency policy after a complaint is filed, then impose duties to raise the cost of an imported good to counter currency manipulation.

Commerce Secretary Penny Pritzker called it “a terrible idea,” even though it would bolster the authority of her cabinet agency.

“There’s one authority over our currency,” she said. “We should strengthen Treasury. We should not dilute this by having more than one department responsible for currency.”

Josh Earnest, the White House press secretary, said any measure to counter a foreign power’s currency policies could backfire, undermining the Federal Reserve Board, which uses the flow of currency to tighten or loosen economic growth in the United States.

More to the point, Republicans say, a tough currency measure attached to trade promotion authority would doom the Pacific trade accord, scaring away important countries like Japan and Malaysia in a misguided jab at China.

“Is the goal to get T.P.A. done, or is it to crush the president’s trade agenda?” asked a Republican aide on the Senate Finance Committee.

The customs bill in question is multifaceted. Besides the currency measure, it includes the creation of an interagency trade enforcement center and a system to respond faster to unfair trade practices like the dumping of exports at prices below the cost of production. Another provision would require the Customs and Border Protection agency to expeditiously investigate allegations of customs duty evasion. Still another would close a 75-year-old loophole that allows the importation of goods made by child labor if a company cannot find those goods elsewhere.

Candy makers are opposing that last provision on the novel ground that it would kill Ghana’s cocoa trade.

But as the trade legislation becomes more complex, so does the task of winning approval. Outside conservative groups like Heritage Action for America, the political arm of the Heritage Foundation, have generally stayed quiet on trade promotion authority, torn between their support for free trade and their distrust of Mr. Obama. Now they are encouraging opposition if trade promotion authority is linked to trade adjustment assistance, which they oppose as a waste of federal tax dollars.

“Heritage Action has always been a free trade organization, but free-market conservatives are understandably split on this president’s request for fast-track authority. Including an egregiously ineffective welfare program in a bill intended to promote trade will only exacerbate the problem,” Michael A. Needham, the group’s chief executive said Monday.

If Democrats bring down the procedural motion to proceed to trade, both sides say that is not likely to be the last word. Negotiations have already begun on a broader trade bill that could include some currency provision, perhaps weaker than the one in the disputed customs measure.