After eight years, that campaign is on the verge of a breakthrough, as the Senate appeared ready Thursday to approve a get-tough approach that had stalled numerous times before: a bill to punish China with high tariffs on some exports if it fails to adopt a market-driven exchange rate.

Economists say China’s artificially cheap currency has cost the United States jobs and billions in lost trade. But opponents of tariffs, including major manufacturers doing business in China, warn that penalizing China could start a trade war that would hurt American businesses even more.

“We’re already in a trade war,” Senator Charles E. Schumer, the New York Democrat who has led the push for tariffs, said in an interview. “We can’t afford to just do nothing. This is a message to China that the jig is finally up.”

The American jobless problem have combined to give the tariff proposal newfound momentum, as the Senate spent much of the afternoon Thursday debating it.

Supporters, casting the measure as a way to spur job growth, were confident the Senate would approve it. Even the measure’s fiercest opponents were grudgingly predicting passage in the Senate, and probably the House.

But 11-hour resistance by leading Republicans has clouded the outcome in the House, where the speaker, John A. Boehner, this week called the tariff plan “dangerous,” and it is unclear if the issue will even come up for a House vote.

China itself voiced strong objections this week and charged that meddling by the United States in Chinese currency violated world trade protocols. The Chinese Embassy has retained one of Washington’s most powerful lobbying shops, Patton Boggs, to represent its interests for $420,000 a year.

Lobbyists for General Motors, Caterpillar, steel producers, textile manufacturers, toy makers, poultry farmers and other businesses have also weighed in, supporting or opposing the tariffs depending on their own business relations with China.

Generally, large manufacturers like Caterpillar that operate in China have opposed it, warning of a backlash. Smaller businesses, like a tube maker in Ohio or a ceramics maker in upstate New York, have supported tariffs because they say China has artificially lowered its prices and gained an unfair edge.

While the Chinese renminbi has risen 6 percent against the dollar since China loosened currency controls last year, economists say it is still vastly undervalued. Meanwhile, China’s trade surplus with the United States stands at $273 billion — more than triple the gap a decade earlier.

In Senate testimony this week, the Federal Reserve chairman, Ben S. Bernanke, went so far as to link China’s undervaluing of its currency to the slow economic recovery worldwide.

“The Chinese currency policy is blocking that process,” Mr. Bernanke testified. “And so it is to some extent hurting the recovery process.”

The Obama administration, however, has been noncommittal about the tariff proposal.

At a news conference on Thursday, President Obama would not say whether he would veto the bill it if it passed, but he raised concerns.

On the one hand, he said, “China has been very aggressive in gaming the trading system to its advantage,” and “it is indisputable that they intervene heavily in the currency markets.”

But he cautioned that he did not want to see the World Trade Organization strike down any steps the United States might take. “Then suddenly U.S. companies are subject to a whole bunch of sanctions,” Mr. Obama said.

Both supporters and opponents of the tariffs see the outcome as hugely significant financially and politically.

Article source: http://www.nytimes.com/2011/10/07/business/senate-nears-approval-of-measure-to-punish-china-over-currency-manipulation.html?partner=rss&emc=rss