Statement of Eric Author, Vice President and International Trade Council, National Retail Federation

        The National Retail Federation (NRF) submits these written comments to the Subcommittee on Trade of the House Committee on Ways and Means to inform Members of the importance of "normal trade relations" trading status for China to America’s retailers, their workers, and the American consumer.

        NRF is the world's largest retail trade association with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores. NRF members represent an industry that encompasses more than 1.4 million U.S. retail establishments, employs more than 22 million people -- about 1 in 5 American workers -- and registered sales of $3.1 trillion in 2000. NRF’s international members operate stores in more than 50 nations. In its role as the retail industry's umbrella group, NRF also represents 32 national and 50 state associations in the U.S. as well as 36 international associations representing retailers abroad.

        As we have consistently in years past, NRF and the U.S. retail industry strongly supports the renewal of China’s normal trade relations (NTR) status for several reasons:

• NTR for China helps retailers supply American families with a wide range of value-priced merchandise;
• NTR for China creates high-paying jobs related to both exports to China and imports from China;
• Failure to renew China's NTR status would deal a severe blow to Hong Kong.

        Perhaps no one understands better than retailers the importance NTR for China plays in helping American families purchase well-made, value-priced goods. Every day, NRF’s members shop the United States and the world in search of consumer goods that meet American families' demands for quality at competitive prices.

        China offers us an opportunity to provide the goods these consumers demand at prices that fit their increasingly tight budgets. For many products, such as toys and consumer electronics, China is a low-cost alternative to other foreign producers. In other cases, such as high-quality silk apparel, sold not only by high-end department stores but also by mass retailers, China is the only source of a given product at affordable prices. In the case of silk apparel, even U.S. producers are not alternative suppliers.

        Imports of consumer products from China are clearly significant, and failure to renew NTR would have broad effects on American families. In 2000, NRF estimates that retailers imported about $80 billion (at first cost) of consumer goods from China, and NTR duty status provided retailers, and consequently, American consumers, $40 billion in tariff savings. In today’s highly competitive market, these duty savings are passed along directly to consumers. More specifically, toys imported from China account for about half of all toys sold in the United States. Moreover, footwear imported from China accounts for about 60 percent of all footwear sold in the United States. The Bank for International Settlements found that declining import prices generally in the United States lowered the annual rise in U.S. consumer prices by 0.9 percentage points (Bank for International Settlements, 68^th Annual Report, issued June 8, 1998, pages 24-25). Imagine what would happen to the inflation rate -- and American families' budgets -- if the prices of consumer goods imported from China shot up by as much as 66 percent (non NTR tariff rates).

III. NTR for China Creates Good Jobs in the United States

        NTR for China creates high-paying jobs in the United States. As you have heard from many, U.S. exports to China support hundreds of thousands of American jobs every year. These include high-paying jobs in growing industries such as telecommunications, information technology, aviation and power generation. But what is not as widely known is that U.S. imports from China, which are more directly affected by NTR tariff treatment, support an even larger number of high-paying U.S. jobs than U.S. exports to China. The Trade Partnership estimates that U.S. imports of consumer goods alone from China in 1998 supported more than 1.7 million American jobs in such high-paying sectors as manufacturing (the jobs related to making cash registers and trucks to transport goods to stores, for example), finance and insurance, transportation, wholesaling and, of course, retailing. Failure to renew NTR for China would put many of these jobs at risk.

        We cannot forget that failure to renew China's NTR status would deal a severe blow to Hong Kong. Hong Kong is the main gateway for China's trade and investment abroad. Hong Kong estimates that in 2000 it handled 70 percent of China’s export to the United States and 27 percent of U.S. exports to China. The majority of Hong Kong's manufacturing industry is now located across the border in China, and many multinationals make Hong Kong their international base. The government of Hong Kong projects denial to China of NTR status would curtail Hong Kong’s GDP by 2.3 to 3.3 percentage points.

V. Conclusion

        Not extending China's NTR status could have serious domestic consequences, both for retailers and American consumers. The American retail industry urges the Committee to recommend a continuation of China's NTR status.