Top Bush aides warn against China currency bills

U.S. Treasury Secretary Henry Paulson and other top Bush administration officials warned on Tuesday of risks to the U.S. and global economies if Congress passes legislation aimed at punishing China for its currency policy.

"At a time when U.S. exports are growing globally, such legislation also exposes the United States to the risk of 'mirror legislation' abroad and could trigger a global cycle of protectionist legislation," Paulson, U.S. Trade Representative Susan Schwab and Commerce Secretary Carlos Gutierrez said in a joint letter to senior senators.

Paulson, who is in China this week, and the other senior administration officials said they shared the lawmakers' concern "that China's currency is undervalued and that the pace of economic reform is too slow, to the detriment of American businesses and workers."

But a bill passed last week by the Senate Finance Committee and another scheduled for a vote on Wednesday in the Senate Banking Committee will not accomplish their goals of persuading China to "implement economic reforms and move more quickly to a market-determined exchange rate," the officials said.

Instead, those bills "would substantially weaken the position of the United States in our ongoing efforts to achieve essential economic reforms in China and around the world, while jeopardizing our rapidly growing exports that have benefited American workers and farmers," they said.

The best way to pressure China to revalue its currency is through intensive dialogue, "coupled with appropriate reliance on WTO litigation and WTO-consistent trade remedies under U.S. law," the officials said.

The Bush administration has employed all those tools and is beginning to get results, "although more is needed and at a faster pace," they said.

Certain provisions of both bills "appear to raise serious concerns under international trade remedies rules and could invite WTO-sanctioned retaliation against U.S. goods and services," they warned.