Chinese language - Paulson to push senators to drop China-tariff bid

WORLD / Wall Street Journal Exclusive

Paulson to push senators to drop China-tariff bid
By MICHAEL M. PHILLIPS and GREG HITT (WSJ)
Updated: 2006-09-25 10:18

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US Treasury Secretary Henry Paulson turns this coming week from
negotiating with Chinese leaders to pressing two persistent US senators
to back off a bill that would levy tariffs on Chinese goods to punish
Beijing for its currency policies.

Senators Charles Schumer (D, NY) and Lindsey Graham (R, SC) appear intent
on forcing a vote this coming week on legislation to impose a 27.5%
tariff on China-made goods -- if Beijing doesn't allow its currency, the
yuan, to rise against the dollar. On three previous occasions, the
senators have been on the brink of bringing the issue to a vote, only to
step back after appeals from the Bush administration, which fears the
bill could ignite a trade war.

Mr. Paulson's mission now is to convince the senators they should give
the newly announced US-China economic dialogue time to work. Senate
Majority Leader Bill Frist (R, Tenn.) sees a possible compromise: kicking
the bill into a lame-duck session after the November 7 elections.

But the senators say they are running out of patience. Unlike the
previous three episodes, this time they have made a written request to
Mr. Frist for a vote next week. "We've had dialogues for years and years,
and we've had no movement," Senator Schumer said. "A dialogue is not good
enough." A spokesman for Mr. Graham says he, too, is committed to
pressing forward. The two lawmakers are to confer with Mr. Paulson early
in the coming week.

Treasury officials say Mr. Paulson is getting unprecedented access to
Chinese decision makers and needs time to make those connections work. On
Friday, the secretary held talks in Beijing with top leaders -- including
a session in which he and President Hu Jintao spontaneously dismissed
their staffs after 30 minutes of conversation and conferred in private
for 20 more.

Mr. Paulson described the Hu meeting, as well as an earlier session with
Premier Wen Jiabao, as "substantive" and "unscripted." US officials said
the conversations touched sensitive issues ranging from China's lack of
enforcement of intellectual-property rights to concerns that Beijing is
keeping the value of the yuan low to give Chinese exporters an edge.

"I find it quite encouraging that there are very few issues -- I can't
think of any -- where there were differences on the principles," Mr.
Paulson said. "Where there are differences is on timing."

Early in his trip, Mr. Paulson suggested he might not have to persuade
Congress to get on board. "I know there's a short-term mentality in the
world today, but I don't think many people are going to judge me by what
comes out of one visit," he said. "And if they do, heaven help this
country." By the time he headed home, though, the secretary had changed
his tune. "It's my job to communicate with people up on the Hill," he
said. "They're clients."

A senior administration official traveling with Mr. Paulson was more
blunt about the political challenge. "Any time we do anything related to
China, we know that there are those groups and individuals out there who
want nothing short of us coming here and taking out the baseball bat on
the Chinese," the official said.

Alarmed at the prospect of a Senate vote, the US Chamber of Commerce, the
National Association of Manufacturers and the Business Roundtable are
rallying opposition. Senate Finance Chairman Charles Grassley (R, Iowa)
says passage is likely if the bill is brought up, in part because "China
hasn't delivered on" on past promises.

With the elections looming, concerns about China and the economy are
helping to stoke voter angst. As a result, said Business Roundtable
President John J. Castellani, the tariff bill is "attractive politically"
to some lawmakers. "The problem is that not always does good politics
make good policy," he said.

Business lobbyists also fear some senators see the vote as a chance to
send a shot across China's bow, knowing President Bush can block the
measure from becoming law -- if it gets through the House, where the
outlook is uncertain.

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