Is capitol hill's coming anti-China legislation now veto-proof? TIE asked one of Washington's premier U.S.-China political analysts.

• Author: Nelson, Chris

The title was the "homework assignment" from my guru on international economics, David Smick, and I frankly delayed until the very last second, and for once, we were right. The day we put pen to paper, the chief sponsors of last year's successful House-passed currency misalignment legislation announced that this year, it not only would be re-introduced with bipartisan support, but that the same bill would be introduced in the Senate.

Despite years of tough talk, that little miracle of ego-suppression, not to mention sincerity, had somehow eluded the currency warriors in the Senate, although toward the end of 2010, New York's irrepressible Chuck Schumer (D) did occasionally threaten to drop the House bill onto some "must have" measure facing the pressure of adjournment deadlines.

Had Schumer done that, then Smick's excellent question would have been put to an immediate test--indeed, something of an immediate crisis. President Obama would have been confronted with a choice between either losing some bill badly needed at the last minute, or risking continued rational management of a broad swath of strategically sensitive U.S-China relations.

But no one in the Senate, including Schumer, ever did anything but talk about currency.

That was last year.

This year, despite the U.S. Treasury's just completed, twice-yearly kabuki show of proving without doubt that China does manipulate its

currency, but then saying it lacks the grounds to "cite" China under U.S. trade law, it seems clear the political physics have changed with the Republican takeover in the House and the ascendency to chairman of the Ways and Means Committee of Michigan's David Camp (R).

Camp surprised many, including your humble reporter, with his decision to speak and vote for then-Chair Sandy Levin (D-MI)'s revised China currency bill, which would define "currency misalignment" in ways making it easier for Commerce to accept (or harder for Commerce to reject) a trade case charging that Chinese monetary policy is an illegal subsidy under WTO rules. But the ink was hardly dry on the committee print when we were called by Camp's staff.

"Chris, you did see his speech last night, right? He said China currency would not be a 'major priority' for next [this] year," when Camp was expected to become the new chair.

Message received.

We don't want to spend this whole article on China currency, even though it is now immediately upon us. But it's important to understand that studies consistently show that most U.S. business already in China, when surveyed, list currency misalignment fairly far down their list of concerns. Far more likely are complaints about market access, intellectual property rights, government procurement, the rule of law, and so forth.

And the currency issue is misleading in the sense that while most U.S. (and international) companies primarily sourcing in and producing in China may not be much affected by misalignment, there very definitely is a major class of companies in the United States that are badly hurt by the estimated (guesstimated) 25 percent to 45 percent undervaluation, and they are concentrated in small- and medium-sized steel and parts companies, and specialty manufacturers who are undercut by Chinese competitors.

So even if the macroeconomic effect can be disputed (and it is, bitterly), the cumulative political effect of the constant drumbeat of stories citing recognized experts, such as the Petersen Institute's Fred Bergsten and his numbers on misalignment and the jobs it costs in the United States, means no one in Congress disputes that the renminbi is yet another example of China "not playing fair."

So the renminbi, almost regardless of the objective facts, feeds the litany of "unfair trade practices," including the state subsidies that make it so hard even for successful U.S. companies to do as well as they should. Every member of Congress feels this in his or her bones, even if they aren't willing to go so far as to vote for a currency bill.

The key question becomes whether all of the above adds up to changing the renminbi situation sufficiently that Camp may feel forced to change his mind, and allow the legislation to come up under the rubric of "doing something." Our verdict for the first quarter of this year: not likely. This summer? Maybe. By the fall? That depends! And that's what we want to write about.

First, make no mistake, Republicans are just...