The Democrat-controlled Senate voted 62-38 for the legislation, clearing the 60-member threshold required to bring the bill to a final vote. The Senate’s passage of the bill is likely to set up a conflict with the House of Representatives, whose Republican leadership has said they do not favour the legislation.
The White House also has been expressing reservations about the bill. On Thursday, President Barack Obama told reporters: “I don’t want a situation where we’re just passing laws that are symbolic knowing that they’re probably not going to be upheld by the World Trade Organisation, for example, and then suddenly US companies are subject to a whole bunch of sanctions.”
The drafters of the bill, led by Charles Schumer, Democratic senator from New York, say the legislation has been drafted to be compliant with WTO law. But the use of estimates of currency undervaluation to calculate US anti-subsidy import duties, as the bill proposes, has never been tested in the WTO’s dispute settlement system. The bill applies to all US trading partners, raising the prospect of a string of disputes with other east Asian or Latin American countries, but its proponents have made clear that the main target is China.
The margin of victory in the Senate was much narrower than a 79-19 procedural vote on the same bill earlier in the week, with some Republicans expressing concern that they had not been able to add amendments to the legislation.
The White House and the Republican leadership in the House of Representatives have tried to shift the focus of the US economic relationship with Beijing away from a narrow concentration on the exchange rate to a wide range of issues including state subsidies, intellectual property rights and restrictions on foreign investment.
Yesterday, the US trade representative’s office accused China and India of failing to notify trading partners of their subsidies for domestic industry as required by WTO rules. The US said it was asking the WTO to demand the information, which it said Beijing and New Delhi were years late in providing.
Ron Kirk, US trade representative, said that the situation had become “intolerable” and that the US was required to act. “Every member of the WTO is required to come clean on its subsidy programmes on a regular basis,” he said. “China has not notified its subsidy programs in over five years.”
Earlier this year, a dispute broke out over cotton subsidies in the course of negotiations over a forthcoming meeting of ministers from all the WTO’s member countries in December. The US, resisting proposals from other governments to agree a standalone package of measures, including cuts to its cotton subsidies, said that China was demanding reform of US cotton payments while failing to provide details of its own.
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