Last week, the House Ways and Means Committee approved a bill aimed at addressing China's currency practices. It is scheduled for a vote by the full House sometime this week. In hearings, Committee Chairman Sander Levin (D-MI) stated, "the status quo with currency imbalances is unacceptable and unsustainable." He argued that China's "mercantilist policies" distort trade and slow U.S. economic growth and job creation.

Levin had listed a number of potential policy responses. None of the remedies promise quick or significant relief to America's jobs deficit. A number of them risk serious side effects. The committee settled on one which may be more symbolic than potent. The bill seeks to increase the chances for American businesses to win tariff protection by treating China's currency policy as an illicit subsidy. The bill was watered down significantly so it would not run afoul of global trading rules.

The fundamental problem is a disconnect between U.S. policymakers' sense of what global rules of economic conduct ought to say and what they actually say. Two prominent examples of this disconnect can be found in the rules of the World Trade Organization: An agreement on subsidies and countervailing measures establishes the conditions under which a nation can retaliate against a trading partner's export-encouraging practices; Another specific provision -- Article XV -- says that exchange rate manipulation should not be used to frustrate the intent of the trade agreement.

These provisions form the basis of some of the most prominent U.S. plans for action against China. This week's House bill would let U.S. firms seek tariff protection from Chinese goods "subsidized" by an undervalued exchange rate. A WTO case on Article XV would take China to task for the trade distortions resulting from a misaligned exchange rate.

But the WTO does not allow retaliation against any and all subsidies. It sets some strict conditions on which ones are actionable. According to veteran international trade lawyers, there is serious doubt that a distorted currency would meet those conditions. Nor does Article XV offer much clarity about lines that cannot be crossed. In each case, there is an important gap between the rules as they stand and the rules as envisioned by China's U.S. critics.

With such a disconnect, there are three options. The United States government could pretend global rules read more favorably; it could ignore the rules and strike out, perhaps by imposing a broad unilateral tariff; or it could seek to modify the rules through negotiation. The first approach risks the appearance of flouting international agreements and sparking new trade conflicts. The second approach would leave no doubt about U.S. contempt for global accords and would risk destroying the rules-based multilateral trading system.

The remaining option, then, is to seek new agreement on proper international economic behavior. Fortunately, the groundwork for such an agreement is already in place. The Group of 20 leaders, meeting in Pittsburgh last year, endorsed a framework for "Strong, Sustainable, and Balanced Growth." Earlier this month, John Lipsky of the International Monetary Fund said in a speech that, while there had been substantial "buy-in" to the idea of rebalancing, the plans that had been put forward to date fell short of what was needed.

While discussions of the principles undergirding the global economic system should be inclusive, the implementation problems are really the concern of a small number of large countries. This suggests a new solution. A G-20 Implementation Subgroup, consisting of the United States, Japan, China, and Germany, would be well-positioned to craft a more serious program than we have seen to date. Representatives of the European Central Bank and the IMF could also attend, given those institutions' relevant roles.

This should not be a meeting to talk down the dollar, nor to vent criticisms of China. Rather, the Subgroup would have a mandate to discuss the broad range of macroeconomic policies needed to achieve the kind of global rebalancing that meetings of the full G-20 have already endorsed. This would certainly include ways for China to address its unhealthy global surplus, but it would also include discussion of deficit reduction measures to reduce U.S. borrowing. If the subgroup meeting were held in January, it could take into account the recommendations of the U.S. bipartisan deficit reduction commission.

This approach has the virtue of engaging the key players in a multilateral discussion in a group sufficiently small that it might reach agreement on action. The multilateral approach is preferable to unilateral or bilateral pressure both in that the underlying problem is multilateral and in its avoidance of the kind of national rivalries that can emerge in bilateral discussions.

There are obvious potential pitfalls to such an approach. There could be a complete failure to reach agreement, for example. These are deep-seated problems that run up against serious domestic concerns. Or there could be ill-advised attempts at a quick fix, as some have characterized a previous effort at coordinated action, the 1985 Plaza Accord.

But the other options on the palette are unpalatable. There is a broad sense among U.S. policy folk (and some abroad) that bounds of proper international economic behavior have been crossed. The problem is that those bounds are not spelled out anywhere. This mix of ambiguity and discontent seems like a recipe for serious conflict. A meeting with a pre-set mandate to address imbalances would offer the best opportunity to defuse some of those festering tensions.