Federal Reserve Chairman Alan Greenspan warned Congress yesterday not to rush to impose punitive tariffs on imports from China, saying they...

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WASHINGTON — Federal Reserve Chairman Alan Greenspan warned Congress yesterday not to rush to impose punitive tariffs on imports from China, saying they would harm U.S. consumers and protect “few if any American jobs.”

It was Greenspan’s most blunt assessment yet that currency-related legislation already backed by two-thirds of the Senate would hurt the U.S. economy by driving up prices for the Chinese products Americans crave.

A move toward protectionism in the world’s largest economy could also unsettle global financial markets while doing little to protect U.S. jobs, he said.

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Some lawmakers want to impose hefty 27.5 percent tariffs on Chinese goods flowing into the United States if Beijing doesn’t move to a more flexible currency system.

U.S. manufacturers contend Chinese currency is undervalued by as much as 40 percent, making that country’s goods cheaper in the U.S. market and U.S. products more expensive in China.

Greenspan said any sales lost by China would be made up by other countries in Asia and possibly Latin America, which would ship textiles, assembled computers, toys and similar products into the United States without facing the extra 27.5 percent tariffs.

“Few, if any American jobs would be protected,” he told the Senate Finance Committee.

However, the bill’s prime sponsors argued Greenspan was wrong and that the measure would have a positive impact, especially if China agrees to stop linking its currency, the yuan, to the U.S. dollar.

Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., the legislation’s major backers, said it had provisions whereby President Bush could delay for up to two years actually imposing the 27.5 percent across-the-board tariffs if negotiations with China progressed.

Sponsors of the legislation said they expected to have a vote before the full Senate in July.

Even if it passes, it is likely to face a tougher battle in the House, and Bush would almost certainly veto it.

The measure did win 67 votes earlier this year in the Senate on a procedural motion, a surprisingly strong showing that was followed by tougher Bush administration talk on the issue.

Treasury Secretary John Snow began saying China had taken all the preliminary steps necessary to allow more flexibility in its currency and should move immediately to make changes.

The Chinese insist they need more time to prepare their financial system for currency volatility.

Several senators said the patience of Congress was growing thin.

Democratic Sen. Debbie Stabenow from Michigan, a state where foreign competition has battered auto production, said an average $2,000 was added to the cost of a midsize U.S. car sold in China because the yuan was so undervalued.

Sen. Jim Bunning, R-Ky., said the Chinese have “told us to take a hike.”

While the Bush administration in a May report to Congress did not brand China a “currency manipulator,” Snow said yesterday such a designation, which would trigger negotiations, could be made when the Treasury Department next reports on the issue in October.

“I think they are going to move,” Snow said. “If they don’t, we would be left with little option.”

Snow said the administration’s next trade challenges to Chinese practices would be determined after new U.S. Trade Representative Rob Portman completes a “top-to-bottom” review of all trade issues with China.

Finance Committee Chairman Sen. Charles Grassley, R-Iowa, and Sen. Max Baucus of Montana, the top Democrat on the panel, released a joint letter in which they said Portman should pay particular attention to China’s piracy of American intellectual property, its barriers to the sale of U.S. agriculture and service products and its industrial policies.

The administration opposes bills that would impose punitive tariffs, saying they threaten to close off the fastest-growing export market for U.S. goods.

“The White House feels that politically these actions and potential actions against China are exceptionally detrimental to the U.S. economy, and therefore it brought out the big guns,” said Charlene Barshefsky, U.S. trade representative during the Clinton administration.

Snow said he “cannot overstate my firm belief that resorting to isolationist trade policies would be ineffective, disruptive to markets and damaging to America’s special role as the world’s leading advocate for open markets and free trade.”

The Chinese government takes the threats from Congress seriously, Victor Ho, a lawyer who advises business clients on international mergers and acquisitions for Allen & Overy, a law firm, said from Shanghai.

“Shaking the stick works very well,” he said.

“If you can say, ‘If you don’t do this, we are going to slap protectionist barriers,’ it all helps in negotiations.”

Information in the last five paragraphs provided by Bloomberg News