Levin Opening Statement on China Trade

Aug 2, 2007
Press Release

Washington, D.C. – Ways and Means Trade Subcommittee Chairman Sander M. Levin (D-MI) issued the following statement (as prepared for delivery) during today’s hearing on China trade legislation:

 

"China has quickly become a major force in the global economy. When China entered the WTO, we expected that it would change the dynamics within the WTO system of trade and that system would change China. The changes have been even more profound than we expected, in part because of China¡¯s size, its natural and human resources and its major combination of individual enterprise and State involvement in its economy.

"This hearing represents an effort at an open, candid House consideration of our huge economic and trade relationship with China¨Cits major benefits and its major problems.

The nature and extent of these problems mandate that we go beyond the automatic polarization that often grips discussions of trade issues. One of the issues being discussed today is the impact of a major imbalance in the currencies of the U.S. and China. Yesterday, after two Senate Committees acted on this issue, Secretaries Paulsen and Gutierrez and Ambassador Schwab wrote a letter to Majority Leader Reid opposing the currency bills. After extolling the benefits of open trade, the letter urged that when another nation has policies less open, "there is a temptation to respond by raising barriers to trade. This is the wrong approach. Protectionism and economic isolationism undermine our ability to promote reform abroad and weaken our economy at home:"

"Invoking such rhetoric is totally misguided. It undermines the chance of bridging differences among people who have worked actively to expand trade, including the leadership of the Ways and Means Committee. There are legitimate differences as to whether and how to address our economic relationship with China, but invoking "protectionism" or "economic isolationism" and the ghosts of Smoot-Hawley only jeopardizes intelligent discussion and effective decisions.

"So I hope that today¡¯s hearing is a further step in serious Congressional consideration of our relationship with China.

"When "Permanent Normal Trade Relations" (PNTR) to China, and its accession to the World Trade Organization (WTO) was approved seven years ago there were expectations that the United States would take an active role in ensuring the full implementation and enforcement of China¡¯s WTO commitments; that the United States would exercise its rights and enforce and defend its trade remedy laws; and, ultimately, that China would honor the commitments it made.

"Unfortunately, those expectations have not been realized under this Administration.

"This increases the relevance of a common thread in the issues in this hearing: the extent to which Congress should delegate to the Executive the power to decide for itself, and by itself, whether and how to take action to address serious and legitimate concerns over the Government of China¡¯s trade-distorting practices. For example:

¡ñ On currency, should Congress grant the President the authority to waive action necessary to address foreign government intervention in the currency markets?

¡ñ Under U.S. antidumping laws, should Congress continue to let the Administration decide for itself if and when a country such as China should "graduate" from the status of a non-market economy to a market economy ¨C or does the bill introduced by Representatives Davis and English provide a better approach?

¡ñ Under the special China safeguard mechanism (section 421), should Congress continue to allow the President to deny relief envisioned under WTO rules to a U.S. industry that is being materially injured by a surge in Chinese imports ¨C or has Senator Rockefeller offered a better approach?

¡ñ Should Congress allow the Administration to acquiesce in the way dumping margins have been calculated for more than 80 years, as the U.S. faces recent WTO Appellate Body decisions that the Administration itself describes as "devoid of legal merit"? Or should it consider the bill sponsored by Representatives Barrett, Neal, Regula, and Spratt?

"History can serve as a guide in answering these questions:

1. Special China Safeguard (Section 421)

"PNTR for China included a safeguard mechanism to address surges in Chinese imports, section 421. Since that mechanism was incorporated into law, an independent agency (the International Trade Commission) has found that imports from China were causing material injury in four cases. But in all four cases the President refused to provide relief. He found that relief would have an "adverse impact on the United States economy" every time. This "adverse impact" exception in section 421 has swallowed the rule ¨C and section 421 is now a dead letter. In fact, no U.S. industry has petitioned for relief under section 421 in the past two years.

"An executive from an Indiana steel company recently described this problem to the Senate Banking Committee:

"The last Section 421 case ¨C and I emphasize ¨C it will be the last ever 421 case unless Congress changes the law, was near and dear to Steel Dynamics. That case involved circular welded non-alloy steel pipe. ... At the time the case was brought, imports from China had increased from 10,000 tons in 2002 to 290,000 tons in 2004. After the President said no to relief in late 2005, these imports soared to 680,000 tons in 2006 and are on page for nearly a million tons in 2007. ... There have already been three major plant shutdowns by U.S. pipe producers and it is our understanding that many more will occur in the near future. What amazes and frustrates me is that when I bring these issues up to USTR and ask them why they do not use their power to self-initiate 421 cases ... all I get back is a blank stare and then the general political pablum about how the Administration is always committed to enforcing laws. How can they be committed to enforcing the law by denying relief and then in the face of import surges of 300%, 400%, 800% and the total and complete devastation of an industry[?] (Emphasis supplied.)

"In the debate on PNTR for China, I described section 421 as "the strongest anti-surge provision that will be in U.S. law." The Administration has used the discretion Congress gave it to eviscerate section 421 in its implementation.

"Unfortunately, I must note that the currency bill that the Senate Finance Committee approved last week, S. 1607, contains almost the same "adverse impact" language that the President has relied upon under section 421.

2. Currency Manipulation under the Omnibus Trade and Competitiveness Act of 1988

"Current U.S. law requires the Secretary of the Treasury to determine whether a country is manipulating its currency for the purpose of "gaining an unfair competitive advantage in international trade." Since 2003, Treasury has been sharply critical of China¡¯s exchange rate practices ¨C but it has repeatedly refused to designate China as a currency manipulator. Treasury complains that the current law includes some "technical requirements" that can be difficult to satisfy.

"Treasury is hiding behind technicalities ¨C and the discretion Congress has given to it. Treasury has not always found it so difficult to satisfy the "technical requirements" of the 1988 Act. It has designated countries to be currency manipulators twelve times since 1988 (all before the Bush Administration entered office in 2001). China has been designated a manipulator in five Treasury reports (according to the GAO), even though, by any economic benchmark, the situation is far more troubling today.

"Senator Grassley stated last week that the Administration has been "pussyfooting" for far too long. And the significance of the currency issue cannot be denied. In fact, just yesterday, a conservative think tank that opposes currency legislation noted an estimate that the undervalued Chinese currency, coupled with other undervalued currencies in Asia, may account for "only" 20% of the global current account deficit of the United States. That¡¯s more than $150 billion dollars per year.

3. USTR¡¯s Unwillingness to Use WTO Dispute Resolution

"This Administration has brought less than three WTO disputes per year over the past seven years (20 cases total) ¨C and you can count on one hand the number of cases it has filed against China. (By contrast, the Clinton Administration brought 68 cases in six years.) And USTR has repeatedly refused to investigate China¡¯s currency regime under section 301 ¨C despite repeated requests from Members of Congress, including, most recently, a bipartisan request by 42 members several months ago.

"In this regard, I must note that Congress is being told to be "patient" with China (on currency, subsidies, and other practices); that only dialogue will work with China; that China responds negatively to outside pressure. The record shows, however, that on several occasions dialogue has not worked ¨C but filing a WTO case against China has.

"Recently, the Administration has indicated that many trade bills to address China¡¯s trade-distorting practices, including the pending currency legislation, are "WTO inconsistent." I am skeptical of those claims which are often used without much thought or analysis, whenever someone simply doesn¡¯t like a particular proposal. I would welcome the opportunity to work with the Administration to ensure the passage of strong and WTO-consistent legislation to address our heavily imbalanced relationship with China. But the Administration has shown no interest in such legislation ¨C indeed, as I have already explained, the Administration has been part of the problem.

"There are several reasons for the insecurity felt by hard-working people and businesses in our nation. One reason for this insecurity is that, for years, too often there has been a "hands off" approach to trade policy, while some of our trading partners have taken a "gloves off" approach ¨C intervening in the markets to give their producers an unfair advantage over ours.

"This must change. It requires addressing the Government of China¡¯s trade-distorting policies, which have contributed to the growing imbalance in our trading relationship with China."

 

 

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