UPDATE 2-US business urges Pelosi to not push China bill

* Top Democrat says China "not playing by the rules"
* House to hold hearing on China currency in September
* Lawmakers to vote on three manufacturing bills next week (Adds Hoyer quotes, background)
By Doug Palmer
WASHINGTON, July 23 (Reuters) - A coalition of U.S. business groups urged House of Representatives Speaker Nancy Pelosi not to include legislation aimed at forcing China to revalue its currency in a pre-election package of bills intended to help U.S. manufacturers.
"We agree that China needs an exchange rate that better responds to global trade flows ... We strongly disagree that legislation is the best means to achieve that goal," the U.S.-China Business Council and about two dozen other business groups said in a letter released on Friday.
House Democrats, in the run-up to the congressional elections in November, have started touting a "Make it in America" agenda aimed at boosting manufacturing jobs.
Bowing to pressure for action on China's currency, which many lawmakers believe is unfairly undervalued against the dollar by 25 percent to 40 percent, the House Ways and Means Trade Committee will hold a hearing on possible legislative options when lawmakers return the week of Sept. 12 from a six-week recess that begins July 31.

"We're prepared to compete with anybody in the world but, we can't compete when the rules are skewed against us and that is what the hearing will address ... We frankly think there are a number of areas in which China is not playing by the rules," House Majority Leader Steny Hoyer told reporters.
Representative Tim Ryan, an Ohio Democrat, is expected to testify at the September hearing on a bipartisan bill he has crafted with Representative Tim Murphy, a Pennsylvania Republican, which has 130 co-sponsors in the House.
It would require the Commerce Department to apply countervailing or anti-dumping duties against countries that are found by the U.S. government to have a fundamentally undervalued exchange rate against the U.S. dollar.
It is similar to a bipartisan bill backed by Senator Charles Schumer of New York and others in the Senate.
"China is unlikely to proceed more quickly with currency reforms if threatened with this action," the business groups said in their letter to Pelosi and Hoyer.
Rather than accomplish its goal of helping U.S. manufacturers, the Ryan-Murphy bill would "likely result in the loss of jobs and market share in many competitive U.S. agricultural, manufacturing and service industries that either operate in or export to China," the groups said.
However, many U.S. steel, textile and other import-sensitive manufacturers say the legislation would help keep jobs in the United States.
The House will vote on three bills next week as part of its manufacturing agenda.
One would require the White House to develop and update a manufacturing strategy every four years.
A second would bar President Barack Obama from submitting any free trade agreement to Congress until a commission established by the bill makes recommendations for cutting the U.S. trade deficit and Congress has held hearings on the ideas.
The third would create a $15 million fund to support the development of a National Clean Energy Export Strategy and provide export assistance to clean energy companies.

Mexico's largest pot bust likely hit Sinaloa gang

MEXICO CITY – Mexico's largest-ever seizure of marijuana packaged for sale is even bigger than the original estimate of 105 tons and probably belonged to the country's most powerful drug-trafficking cartel, authorities said Tuesday.
The Sinaloa cartel run by Mexico's most wanted fugitive, Joaquin "El Chapo" Guzman, now is moving drugs through the Tijuana corridor "unimpeded," said a U.S. law enforcement official in Mexico, a possible reason why violence has dropped in the city across the border from San Diego, California, since a bloody peak in 2008.
President Felipe Calderon recently praised the city's new calm as a success story in Mexico's drug war.
Many have speculated the drop in violence just means the Sinaloa cartel has cut a deal with remnants of the Arrellano Felix gang, which became one of the country's dominant cartels in the 1990s through control of Tijuana's lucrative land and sea routes leading into California, but has suffered from the arrests and deaths of its top leaders since 2002.
Calderon dismissed the idea of an arrangement in a recent interview with The Associated Press, saying the new calm came in part from government cooperation and the arrests of key cartel leaders.
"The truth is that in the last two years, the government has made important hits on the criminal structures," he told the AP.
But the U.S. official said it was a possibility.
"There could be a pact. We don't know for certain if there is one, what that pact would be. But Sinaloa has been able to operate there unimpeded by other cartels," said the official, who spoke on condition of anonymity for security reasons.
Mexican soldiers and police grabbed the U.S.-bound marijuana in pre-dawn raids Monday in three neighborhoods when 11 people arrested after a shootout led authorities to the drugs.

Army officials first said the drugs weighed 105 tons and had an estimated street value of 4.2 billion pesos, about $340 million. But authorities said the haul was even bigger Tuesday, counting 15,300 packages — 5,000 more than first announced. It weighed 134.2 tons, said Ramon Gomez, a spokesman for the federal Attorney General's office.
By comparison, U.S. authorities seized a total of 123 tons of marijuana during 2009 at all San Diego-area border crossings.
Calderon's security spokesman, Alejandro Poire, agreed the drugs likely belonged to Sinaloa and called it a historic seizure.
"This is an important milestone that demonstrates the ability of the Mexican state when security forces in three levels of government coordinate and take responsibility around a common goal," he said.
But the bust indicates what U.S. Department of Justice figures already show — that marijuana cultivation is up in Mexico since 2005, more than doubling to 21.5 million metric tons in 2008. Marijuana seizures on the U.S. side of the border also have increased from about 1,000 to 1,500 metric tons between 2005 and 2009.
A U.S. State Department report said the decline comes as Mexican security forces focus more harder drugs such as methamphetamines — but also on fighting and arresting the traffickers.
"With the Mexican military changing its role and more actively going after organized crime groups, it could have affected that, stopped crop eradication," the U.S. official said.
Poire denied the Calderon government has backed off of seizures and eradication, saying they are up over the first four years of the previous administration by 100 tons.
"This administration has maintained an important effort in the eradication and confiscation of illicit substances," he said.
The drugs were found stored in tractor trailers and houses wrapped in different colors and labeled with apparently coded phrases and pictures that included the cartoon character Homer Simpson. They appeared to make up a major distribution center traced directly to Guzman, who has expanded the reach of his cartel along the U.S.-Mexico border since escaping from prison in 2001.
The Sinaloa cartel controls distribution in neighboring Sonora state and the city of Mexicali, only 120 miles east of Tijuana. It also controls areas to the east and is warring for control of the border city of Cuidad Juarez, across from El Paso, Texas.