Why China 'trade war' bill is tying House Republicans in knots

The bill to punish China for manipulating its currency – and allegedly stealing American jobs – is setting off a clash within Republican ranks on Capitol Hill.

The bill, which would impose tariffs on Chinese goods, has already passed the Senate with bipartisan support and would likely pass the House if brought to the floor. But so far, House Speaker John Boehner refused to do so.

With multinational corporations and conservative antitax groups – key Republican constituencies – opposed to the bill, Mr. Boehner has been loath to let it see the light of day, given that it could be vetoed by President Obama anyway.

But pressure on Boehner is mounting. Lawmakers representing states hardest hit by the rise of Chinese manufacturing want to go on the record supporting the bill, and GOP presidential hopeful Mitt Romney has taken a stand on China currency even more aggressive than the Senate bill.

Boehner has called the measure “very dangerous.” His concern is that raising tariffs on Chinese goods could spark a damaging trade war at a time when the economy is ill-suited to absorb another blow.

“I have made my position pretty clear that I’ve got grave concerns about this bill,” he added at a briefing on Wednesday. For Congress to act now “poses a very severe risk of a trade war and unintended consequences that could come as a result.”

Boehner is asking the president to stick his neck out and clarify whether he would veto the bill. “It’s time for the president to lead,” he said.

China's manipulation of its currency has long angered Washington. But the current jobs crisis has given the issue added impetus. Backers of the bill say that, by keeping the value of its currency artificially low, China gives its goods as much as a 30 percent price edge in US markets and a comparable disadvantage for American goods in China. The Senate bill would authorize economic sanctions if a trading partner is found to be maintaining its currency at an artificially low level to gain a trade advantage.

China has already signaled its displeasure. It let the value of its currency sink for the second day in a row on Thursday – a move analysts interpret as a rebuff of the Senate vote.

For their part, major US corporations are also worried.

“The American companies who have become invested in China don’t want change,” says Peter Morici, former chief economist at the US International Trade Commission and a professor at the University of Maryland.

“American companies like GE and Caterpillar, who have outsourced American jobs and corporate functions to China and are now clients of Beijing’s protectionism, have convinced President Obama the China currency bill is protectionist and would start a trade war,” he adds.

Technically, the bill has already come to the House floor for a vote. But Democrats brought it up via a highly partisan legislative procedure that would have also forced Republicans to vote against a popular trade bill with Colombia, so the motion failed. But GOP senators are pushing House Republicans to take up the bill themselves.

“You’re miscalculating where the country is on this issue,” said Sen. Lindsey Graham (R) of South Carolina, in remarks addressing House Republicans at a briefing on Wednesday. South Carolina has lost some 41,800 jobs due to trade with China since 2001, according to a recent report by the Economic Policy Institute.

A critical mass of House Republicans are on record supporting the aims of the Senate bill. A similar House measure attracted 63 Republican sponsors, despite opposition from House GOP leaders. Overall, the bill has 225 sponsors – enough to pass the bill.

In 2010, when the House was in Democratic hands, 99 Republicans voted to back a similar bill, which passed, 348 to 79, but was never taken up by the Senate.

Supporters say that if a currency vote is to occur in the House this time, it’s going to require action on the presidential level – or a stronger push from public opinion. If Obama commits to signing the bill, it puts renewed pressure on House GOP leaders.

At the same time, should former Massachusetts Governor Romney pick up momentum in the GOP primary, his outspoken stands on China trade could also have more sway with House Republicans.

In his economic plan, released Sept. 5, Romney called for confronting China on trade abuses. He pledges on Day 1 to issue an executive order listing China as a currency manipulator and directing the Department of Commerce to assess countervailing duties on Chinese imports, if China does not quickly move to float its currency.

“I'm afraid that people who've looked at this in the past have been played like a fiddle by the Chinese,” said Romney at a presidential debate in Hanover, N.H., on Tuesday. “And the Chinese are smiling all the way to the bank, taking our currency and taking our jobs and taking a lot of our future. And I'm not willing to let that happen.”

“Governor Romney last night couldn’t have been clearer,” said Sen. Jeff Sessions (R) of Alabama, a Senate sponsor of the China currency bill. “I was very pleased with what he said.”