China currency bill could face slower road in Senate

China currency bill could face slower road in Senate

	Published : Mon, 18 Jun 2007 20:13 By : Agencies Print this Story

WASHINGTON (Thomson Financial) - Efforts to pass a China currency bill in the Senate this year could be slowed by a dispute between the Senate Finance and Senate Banking Committees over what the bill should look like.

Members of Senate Finance Committee, as well as Senators Charles Schumer and Lindsey Graham, have introduced a bill that would require specific trade sanctions to be imposed against governments that interfere in currency markets. Examples of the sanctions include US opposition to changes at the IMF that would help targeted countries, a ban on government procurement, and increased antidumping duties against imports from the targeted countries.

Supporters of this bill said on June 13 that the bill will be approved by the Finance Committee soon and could be approved by a wide majority in the Senate in September.

However, the Senate Banking Committee has other ideas on what to do on currency, and is looking to approve its own bill before the August recess. The Banking bill is expected to make it easier for the US Treasury Department to cite foreign countries as currency manipulators, but allow Treasury to come up with a 'plan of action' for dealing with an undervalued currency.

The approval of two different bills by two different committees could set up a situation in which Senate Democratic leaders have to decide how to merge the two into a single proposal.

'When you have to think about blending the two, it gets to be a more complicated process,' said one Democratic Senate aide.

One factor that could complicate efforts to agree on a currency bill is that Senate Banking is seen as having jurisdiction over currency-related issues, and will likely be reluctant to back any bill that gives Finance more authority over the issue.

Finance Committee members tried to avoid a jurisdictional fight over the bill by including language that would extend a tax break worth billions of dollars to US banks and insurance companies. Sources in the financial services industry said the tax break would help large banks such as Citibank, JP Morgan Chase, and Bank of America avoid US taxes on overseas income that is not repatriated.

Including this language was meant to ensure the Finance Committee would consider the bill, since that committee handles all tax issues. However, Finance is expected to jettison the tax language as soon as it considers the bill, and instead look to approve the tax language later this year or some time in 2008, when the tax breaks expire.

'There is every expectation that this piece will come off the currency bill,' said one industry source who tracks the issue.

The tax break was extended in 2006 for two years, when it was valued at 4.7 bln usd over five years.

pete.kasperowicz@thomson.com

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