[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                  THE U.S.-CHINA ECONOMIC RELATIONSHIP
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 25, 2011

                               __________

                           Serial No. 112-17

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                       Jon Traub, Staff Director

                  Janice Mays, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also, published 
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                            C O N T E N T S

                               __________
                                                                   Page

Advisory of October 25, 2011, announcing the hearing.............     2

                               WITNESSES

Under Secretary Lael Brainard, Under Secretary of International 
  Affairs, U.S. Department of Treasury...........................    41
Ambassador Demetrios Marantis, Deputy U.S. Trade Representative..    48


                  THE U.S.-CHINA ECONOMIC RELATIONSHIP

                              ----------                              


                       TUESDAY, OCTOBER 25, 2011

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m., in Room 
1100, Longworth House Office Building, the Honorable Dave Camp 
[chairman of the committee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                 Chairman Camp Announces Hearing on the

                    U.S.-China Economic Relationship

Tuesday, October 25, 2011

    House Ways and Means Committee Chairman Dave Camp (R-MI) today 
announced that the Committee on Ways and Means will hold a hearing on 
the U.S.-China economic relationship. The hearing will take place on 
Tuesday, October 25, 2011, in 1100 Longworth House Office Building, 
beginning at 10:00 A.M.
      
    In view of the limited time available to hear the witnesses, oral 
testimony at this hearing will be from the invited Administration 
witnesses only. However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee and for inclusion in the printed record of the 
hearing.
      

BACKGROUND:

      
    The United States and China both have a significant stake in 
restoring global economic health. Both countries have stressed the need 
to maintain positive economic and financial relations and to fight 
against trade protectionism. China's economic growth, and the resulting 
increase in domestic consumption in China, has created a large market 
for U.S. exports and created important opportunities for U.S. 
companies, farmers, and workers.
    However, there are a number of longstanding issues that have caused 
friction between the United States and China. American companies, 
farmers, and workers still face many barriers in China. These 
longstanding problems include subsidies that distort competition; lack 
of regulatory transparency; currency misalignment and a closed capital 
account; harmful ``indigenous innovation'' policies; failure to 
adequately protect intellectual property; and many other barriers to 
U.S. exports and investment. These issues have been central themes in 
bilateral dialogues, such as the Strategic & Economic Dialogue and the 
Joint Committee on Commerce and Trade (JCCT), as well as multilateral 
negotiations in the G20 and World Trade Organization.
    The hearing will provide an opportunity for the Administration to 
explain its response to China's trade-distorting practices and non-
tariff barriers that prevent U.S. companies from competing on a level 
playing field.
    In announcing this hearing, Chairman Camp said, ``The Chinese 
market presents enormous potential for growing U.S. exports, which 
support American jobs. But China purposefully makes it harder to sell 
our goods and services, unfairly subsidizes its own companies, and 
blatantly steals the intellectual property of American businesses. 
China's distorting trade policies are deeply troubling and cannot be 
allowed to stand. Its practices are costing U.S. jobs. China has 
benefited greatly from globalization, and it must abide by the same 
rules that afforded it that prosperity. The President and his 
Administration should continue to press China to open its markets 
through every available avenue. And when China has violated its 
international obligations, the United States must aggressively enforce 
its rights. I look forward to hearing the Administration's plan for 
addressing China's persistent barriers to U.S. exports and investment 
and exploring what should be done to ensure American employers and 
workers are treated fairly.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the significant opportunities presented 
by the Chinese market as well as the barriers that U.S. companies, 
farmers, and workers continue to face. The hearing will explore the 
Administration's plans to address China's persistent barriers to trade 
and investment.
      

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    Chairman CAMP. The committee will come to order. China is 
both an opportunity and obstacle when it comes to our economy 
and American jobs. While the Chinese market is a large and 
rapidly growing destination for U.S. exports, China willfully 
disregards its international obligations and impedes fair 
commerce. Despite benefiting significantly from globalization 
and a more integrated global economy, China remains stubbornly 
closed to U.S. companies, farmers, ranchers, and workers.
    The list of China's trade abuses is long. The record shows 
that China blatantly steals the intellectual property of 
American businesses, grossly subsidizes domestic industries, 
prevents U.S. farmers and ranchers from exporting through 
discriminatory regulations and practices that are not based on 
science or international standards, blocks exports of rare 
earth minerals, and intervenes in its currency market, 
resulting in misalignment.
    China has an important role to play in restoring global 
economic growth. To do so, China must more rapidly rebalance 
its economy away from export-led growth; this means sustaining 
meaningful RMB appreciation of its currency and complying with 
its obligations and commitments to open its Chinese markets to 
U.S. exports of goods and services.
    Yet some in Congress focus on legislation to address 
currency manipulation as if it were a silver bullet. In doing 
so, they miss the many issues we have with China. I look 
forward to hearing from our two administration witnesses today 
about the full set of economic issues we face in dealing with 
China, including currency, and what the administration is doing 
and what Congress should and should not do with regard to our 
economic relationship with China. There is widespread agreement 
that part of our China strategy must include resumption of our 
bilateral investment treaty negotiations. Last year, Secretary 
Geithner testified before this committee that he was ``very 
much in favor of moving forward, and I think these agreements 
have a very good record of protecting the interests of U.S. 
companies and workers, and it would be good to put one in place 
with China.''
    A year later, the administration's lack of action is 
perplexing. China has more than 70 BITs in place, bilateral 
investment treaties in place, including with many of our 
competitors. The EU recently announced that it would negotiate 
its own investment agreement with China. But the administration 
has been unable to form its negotiating position, allowing 
special interests to hamstring our ability to create jobs. I 
expect to hear from the administration today about when it 
intends to resume negotiations.
    At the same time, I applaud USTR for its recent actions. 
Two weeks ago, the United States availed itself of WTO 
procedures to counternotify over 200 Chinese subsidies to the 
WTO, an important action that calls China out for its 
malfeasance.
    I hope this is just the beginning of USTR's actions on such 
subsidies. Furthermore, last week, USTR again utilized the WTO 
to publicly press China on its Internet censorship and 
restrictions, which creates significant barriers to U.S. 
services trade. And last month, the administration filed 
another dispute settlement case at the WTO.
    I look forward to hearing from the administration about its 
efforts and the strategic and economic dialogue, the S&ED, and 
the Joint Commission on Commerce and Trade. Those forums have 
been important avenues for addressing Chinese practices. In 
fact, in conjunction with last May's S&ED, I hosted a meeting 
between Ways and Means Committee members and a delegation of 
senior Chinese officials, led by Vice Premier Wang, China's 
chief international economic official. Our Members raised many 
of these important issues directly with the Chinese officials, 
and we will continue to raise them at every juncture.
    As the administration continues to engage with China 
through the S&ED and the JCCT, it must pay more attention to 
tracking China's commitments and ensuring proper follow-through 
to implement them. In addition, I remain concerned that the 
administration is using the wrong metrics to measure progress. 
We must measure success not just in the number of laws and 
regulations overturned, but whether removing these policies 
will actually be effective and create U.S. sales and jobs. And 
I know this is a bipartisan concern.
    Looking forward, the administration must aggressively 
pursue WTO violations when they occur. While we should not 
hesitate to confront China directly, the administration should 
also build strong coalitions to ensure maximum pressure and 
meaningful change. Promptly implementing the trade agreements 
with South Korea, Colombia, and Panama will provide us with an 
important counterbalance in critical regions. China's influence 
has grown beyond Asia, with significant Chinese investment in 
Latin America, Africa, and around the world. The United States 
must be globally engaged to counter this influence and ensure 
that China's destructive practices are not exported.
    I look forward to the testimony. Before yielding to the 
ranking member, without objection, the opening statements of 
all members will be included in the record.
    At this time, I yield to Mr. Levin for his opening 
statement.
    Mr. LEVIN. Thank you very much.
    American exports to China have been growing, and we need 
that export growth to help create American jobs. But at the 
same time, China exports four times as much as the U.S. exports 
to China. China's exports increasingly compete in key areas 
with American products, and China continues to erect barriers 
to our exports. The current relationship is imbalanced, unfair, 
and unsustainable. This trade deficit contributes to the jobs 
deficit in America, and the American people want Congress to 
take action to address it.
    For many years now, the economic relationship between our 
two large economies was built on a Chinese economy, structured 
on its export platform, overwhelming the role and importance of 
domestic Chinese consumption, with the U.S. economy 
significantly built on its role as the major consumption market 
for Chinese products. Sensing some of the perils in that 
economic structure, a decade ago, when China entered the WTO, 
some of us in Congress understood that inclusion of a major 
nonmarket economy into a rules-based trading system presented 
unprecedented challenges. To meet those challenges, we fought 
for inclusion of tools to strengthen our hand in ensuring that 
China played by the rules.
    Unfortunately, the Bush administration and the Republican 
Congress made clear early on they preferred a hands-off 
approach to China. That was reflected in acquiescing and 
China's making a mockery out of the special provision provided 
for in China's WTO accession for an annual review of whether 
China was meeting its obligations. Another vivid example was 
the failure to use the safeguard against surges in Chinese 
exports that harm U.S. industries and workers.
    On four occasions, the ITC recommended relief. On all four 
occasions, the Bush administration refused. Thousands of 
American jobs were lost. Knowing the Bush administration 
preferred a hands-off approach helped embolden China to 
continue trade-distorting practices that target our market, our 
companies, and our workers. Thankfully, the Obama 
administration resurrected the 421 safeguard in the tires case. 
The administration is trying to turn the ship in the right 
direction. But the process is too slow and there still is too 
much resistance in Congress and elsewhere.
    The American people expect their representatives to 
actively manage this trading relationship. They expect us to 
fight for a level playing field for American companies and 
workers. So I appreciate holding this hearing, asking the 
administration its plans at today's hearing. But let us 
remember that the Constitution gives Congress exclusive power 
over foreign trade. That means Congress must act to help end a 
variety of China's predatory trade practices. One of them is 
China's currency manipulation. House Democrats insist on action 
because it matters. Fred Bergsten recently described China's 
currency policy as, ``by far the largest protectionist measure 
adopted by any country since the Second World War, and probably 
in all of history.'' He estimated that eliminating the 
misalignment would, ``produce at least a million goods jobs, 
mainly manufacturing.''
    In recent years, some of our Republican colleagues have 
come to agree about the seriousness of this problem. And last 
fall, the House passed its currency bill with strong majorities 
of both parties voting in favor, including myself and Chairman 
Camp. Chairman Camp and other committee Republicans agreed with 
us that substantial amendments made the bill, on its face, 
consistent with our international obligations. The Senate has 
now followed the House by passing legislation to address this 
problem. Now it is the House's turn to act by once again 
passing its bill, the Currency Reform for Fair Trade Act, which 
is cosponsored by a majority of this Chamber, 230 Members.
    Because currency is not China's only predatory and trade-
distorting policy, that cannot be an excuse for a refusal to 
act on it. The House leadership must stop using that excuse. 
Nor does acting on it mean not acting on other key issues, 
intellectual property rights, indigenous innovation, trade-
distorting subsidies, discriminatory product standards, among 
others. But it is alarming how difficult it is to move beyond 
rhetorical support to bipartisan action. That is why I and 34 
other Democratic Members this year sought an additional $3.2 
million for USTR's China enforcement. Unfortunately, my 
Republican colleagues were unwilling to join that request.
    Last week, one industry, solar panel producers, decided 
they could no longer wait for us to stand up for them and took 
action on their own. Some will decry that action as 
protectionist, feudal, or anti-consumer. I call it ``anti-
protectionist,'' standing up for American workers and for our 
future.
    This committee should consider other trade-relating 
legislation. And for the record, there has been filed a package 
of such bills. In short, the American people expect us to stand 
up and to fight for them. They don't want us to take a hands-
off approach to American competitiveness on currency or other 
issues. It is time to act.
    [The information follows The Honorable Mr. Levin: Letter, 
H.R. 639, H.R. 1518, H.R. 2722, H.R. 3057]
    Letter

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    H.R. 639

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    H.R. 1518

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    H.R. 2722

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    H.R. 3057

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    Chairman CAMP. Thank you. We will now turn to our panel of 
administration witnesses. And I want to welcome Under Secretary 
Lael Brainard, Treasury Under Secretary for International 
Affairs, and Ambassador Demetrios Marantis, Deputy United 
States trade representative. Thank you both for being with us 
today.
    You will each have 5 minutes to present your testimony with 
your full written testimony being part of the record. Ms. 
Brainard, we will begin with you. You have 5 minutes.

 STATEMENT OF LAEL BRAINARD, UNDER SECRETARY FOR INTERNATIONAL 
       AFFAIRS, UNITED STATES DEPARTMENT OF THE TREASURY

    Ms. BRAINARD. Chairman Camp, Ranking Member Levin, 
distinguished Members of the Committee, thank you for the 
opportunity to testify today on our economic relationship with 
China.
    Since the outset, President Obama has placed a high 
priority on actively pursuing a more balanced and fair economic 
relationship with China. With American households saving more 
and with demand weak in Europe and Japan, our exports 
increasingly will be directed at fast growing emerging markets 
if we are to achieve the President's goal of doubling exports 
in 5 years in order to create good jobs with good wages.
    Indeed, over the next decade, China is expected to be the 
single biggest source of demand growth in the global economy. 
Since 2009, U.S. exports to China have grown nearly twice as 
fast as our exports to the rest of the world and it is now our 
third largest export market. We are seeing double-digit gains 
in sectors ranging from agriculture to machinery to chemicals.
    Yet despite this progress, the playing field is still 
uneven. In order to derive a better balance of benefits from 
trade and investment opportunities with China, we need to see 
progress on three key challenges: First, China must shift to a 
pattern of growth that can be sustained, drawing on homegrown 
consumption rather than excessive dependence on exports.
    This requires that China bring its exchange rate into 
alignment with market fundamentals. Second, in many sectors in 
which the United States is competitive globally, China must 
address a range of discriminatory policies, including those 
that favor domestic state-owned enterprises.
    Third, China must address the rampant theft of intellectual 
property that stymies innovation. On these issues, the 
administration has worked tirelessly to make progress with 
China, through fora such as the Strategic and Economic Dialogue 
and the Joint Commission on Commerce and Trade, and we have 
worked with international partners who share our concerns. When 
engagement has proven insufficient, the administration has and 
will continue to be aggressive in using safeguards, enforcement 
actions, and trade remedies to address the particular problem, 
consistent with our international obligations.
    On the exchange rate, a faster rate of appreciation on its 
own will not erase the trade deficit, but allowing the exchange 
rate to fully adjust is the most powerful near-term tool 
available to the Chinese Government to achieve two of its top 
economic goals: Combating inflation and shifting the 
composition of its demand towards domestic consumption.
    At the G-20, surplus-emerging markets, such as China, have 
committed to accelerate the rebalancing of demand and to move 
towards more market-determined exchange rates through exchange 
rate flexibility. There has been progress. China's trade 
surplus has declined from 7.7 percent of GDP in 2008 to below 4 
percent in 2010, and even further in the first half of this 
year.
    Since China resumed exchange rate adjustment in June of 
last year, the currency has appreciated nearly 7.5 percent 
against the U.S. dollar and closer to 10 percent in real terms, 
adjusting for inflation. China's currency has appreciated 
nearly 40 percent against the dollar over the past 5 years in 
real terms. But the real exchange rate remains misaligned and a 
faster appreciation rate is needed.
    Second, at the most recent S&ED, after commitments made 
during the January state visit of President Hu and the JCCT, 
China pledged to rescind all of its government procurement, 
indigenous innovation catalogs, including by provincial and 
municipal governments. So far, the central government has 
repealed four key measures that underpinned the indigenous 
innovation product accreditation system and a number of local 
governments have taken positive steps. Third, China has pledged 
to increase inspections of government computers to ensure that 
agencies use legitimate software and to improve its high level 
government coordination and leadership mechanisms to enhance 
long-term enforcement of intellectual property.
    Opening up China's financial sector remains a key priority. 
China now allows foreign banks to underwrite corporate bonds 
and is creating more opportunities for financial services firms 
to manage investments in China as well as to manage Chinese 
investments abroad. And at the most recent S&ED China committed 
to allow foreign firms to sell mutual funds, provide custody 
service, and sell mandatory auto liability insurance. China's 
current headline growth rate may look enviable right now, but 
China faces daunting challenges in coming years. The way China 
grew in the last two decades will not get them to the next 
stage of development. With slowing labor force growth, massive 
capital investment, with a misaligned exchange rate and 
distortions in credit allocations and without improving the 
environment for innovation, China could face what economists 
call the middle income trap. We have a tremendous stake in 
ensuring that China deals with those challenges in a way that 
fundamentally reorients its growth pattern through greater 
balance and fairer competition. I look forward to working with 
members of this committee on those challenges.
    Chairman CAMP. Thank you very much.
    [The prepared statement of Ms. Brainard follows:]

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    Chairman CAMP. Ambassador Marantis, I will now recognize 
you for 5 minutes.

  STATEMENT OF AMBASSADOR DEMETRIOS MARANTIS, DEPUTY, UNITED 
                  STATES TRADE REPRESENTATIVE

    Mr. MARANTIS. Thank you Chairman Camp, Ranking Member 
Levin, and members of this committee. I appreciate the 
opportunity to testify today.
    Since China joined the WTO in 2001, U.S. goods exports, 
including semiconductors, aircraft, and chemicals, have 
quadrupled. Agriculture exports are up 800 percent, led by 
soybeans and cotton. Services exports are up nearly 300 percent 
on growing sales of business, education, and financial 
services. And American job-creating investment in China has 
grown 400 percent. America's trade relationship with China has 
tangible benefits, but just as real are the persistent concerns 
that threaten to undermine the potential of this relationship. 
Intellectual property theft in China costs U.S. companies $48 
billion every year. China's industrial policies, like 
indigenous innovation, discriminate against U.S. products, 
services, innovators, and investors. China's subsidies raise 
deep concerns and can lead to unfairly traded imports that 
affect our trade deficit. Investment restrictions limit the 
ability of U.S. companies to compete effectively in China and 
to create jobs here at home. Unfair barriers to U.S. 
agricultural imports hurt our beef, poultry, and pork 
producers; and weak enforcement and lack of transparency 
undermine U.S. exporters and investors. President Obama is 
determined to make our relationship with China work better for 
working Americans, to tap its potential to support American 
jobs, and to grow our economy. This administration's 
coordinated approach is focused on vigorous enforcement, 
results-oriented dialogue, and strengthening global trade 
roles.
    First, enforcement. In the WTO, the Obama administration 
has initiated five strategic and systemic disputes against 
China. We challenged China's exports restraints on industrial 
raw materials in a case unprecedented in size and importance. 
For the first time since China joined the WTO, we accepted a 
Section 301 petition which brought China to the WTO to answer 
for prohibited subsidies in the wind sector. We have challenged 
China's regulation of electronic payment services to address 
the apparent creation of a homegrown monopoly that blocks 
competition. We brought two WTO cases to address the apparent 
misuse of trade remedy investigation to restrict U.S. exports 
to China. And for the first time ever, we brought a Section 421 
case and imposed duties to combat a surge of Chinese tire 
imports.
    The Obama administration will not hesitate to bring 
additional enforcement actions as appropriate. But litigation 
alone isn't enough. Results-oriented dialogue, like the Joint 
Commission on Commerce and Trade and the Strategic and Economic 
Dialogue, also yield swift and lasting benefits. Last year, as 
Under Secretary Brainard mentioned, our engagement led to new 
measures to increase legal use of software in China. We also 
obtained China's agreement not to discriminate against foreign 
intellectual property in its procurement policies and to 
address agriculture concerns by eliminating unfair bans on our 
poultry exports and some key restrictions on our pork. For this 
year's JCCT, USTR continues to work intensively together with 
the Commerce Department to secure results, focusing on 
intellectual property rights, indigenous innovation, investment 
restraints, industrial policy, and other issues. Aside from the 
structured dialogue, we are also engaging China directly on its 
adherence to trade rules regionally and globally. This month, 
for the first time, as Chairman Camp mentioned, the United 
States submitted in the WTO a subsidy counter-notification to 
call China out on over 200 subsidies that it had not notified 
as required.
    Similarly, we have called on China to share detailed 
information on measures that limit the supply of services over 
the Internet and hinder the ability of our companies to 
effectively compete. Outside the WTO, we are working to 
strengthen trade rules across the global trading system through 
efforts including the Trans-Pacific Partnership and Anti-
Counterfeiting Trade Agreement. The Obama Administration is 
working hard so that the United States can compete with China 
on a level playing field and so American businesses and workers 
can prosper. Progress will occur if we recognize the value of 
this relationship and address the challenges of the work ahead. 
Thank you.
    Chairman CAMP. Thank you very much for your testimony.
    [The prepared statement of Mr. Marantis follows:]

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    Chairman CAMP. I will start out with a question that I 
would like both of you to address.
    It is clear that for a long time, China has allowed 
unacceptably high rates of piracy across all technologies. For 
example, U.S. copyright industries estimate that 85 to 95 
percent of members' copyrighted works in China are pirated. And 
despite repeated assurances and promises from the Chinese that 
they will step up enforcement, there still is a huge problem 
there. And many members of this committee have heard from 
employers that the losses to the U.S. are in the billion of 
dollars. And they are not limited just to software and music 
and movies, but other intellectual property as well. So when 
those products are then exported to the U.S., they have an 
unfair advantage over U.S.-made goods that follow the law. So 
there is this sense that the Chinese are simply ignoring the 
rules to their advantage.
    What is the administration doing to address this major 
barrier to trade between our countries? And does the 
administration have the tools it needs to continue to do that? 
So, Ambassador, if you want to start; and then Under Secretary 
Brainard can respond.
    Mr. MARANTIS. Thank you, Chairman Camp. This is a huge 
problem. I.P. infringement, as you mentioned, causes 
significant losses to the U.S. economy. In the copyright 
industry alone, the ITC estimates that we lose $23 billion to 
copyright piracy. This is a huge problem and this is a huge 
priority. We are taking action on all fronts, through the JCCT, 
through the S&ED, and we have actually made significant 
progress over the past year. We have made progress on software 
legalization. We have made progress in rolling back some very 
problematic indigenous innovation measures. We have made 
progress in securing commitments from China to step up its 
enforcement of electronic journals, and to hold landlords 
liable when their tenants sell counterfeit products. These 
issues continue.
    And as you point out, what is critically important is to 
make sure that China is enforcing the good commitments that it 
made over the past year. We are seeing in certain respects 
implementation of these commitments, and where we are not, we 
are pushing very hard to ensure that China does.
    Chairman CAMP. And even the government is using pirated 
software and pirated technologies. What progress are you making 
on a government-to-government basis?
    Mr. MARANTIS. Sure. So as part of the S&ED and the JCCT, we 
focused on software legalization to address the issue that you 
raise, the use of pirated software both in government agencies 
as well as pirated software in state-owned enterprises. As part 
of the various dialogues, China made commitments to institute 
of software asset management program to budget for purchases of 
legal software, to institute a pilot program for state-owned 
enterprises, to ensure that these enterprises are using legal 
software. We are making progress. We are beginning to notice a 
small uptick in sales. But again, it is a real problem, and we 
don't think China is doing enough. And this is a priority area 
of work for us in this year's JCCT and S&ED.
    Chairman CAMP. Do you feel you have the tools you need to 
continue to address this problem?
    Mr. MARANTIS. We have worked very hard to leverage our 
resources across the U.S. Government in close cooperation and 
coordination with the Department of Treasury, with the 
Department of Commerce, and with our other agencies to make 
sure that we use our resources in the most effective way 
possible.
    Chairman CAMP. Under Secretary Brainard, if you could 
comment as well.
    Ms. BRAINARD. I want to underscore the importance of this 
issue.
    Intellectual property really goes to the heart of America's 
competitive advantage. And for us to be able to grow and to 
continue to make sure that Americans have good jobs at good 
wages, we need to be able to earn returns on those investments 
and innovations around the world and importantly in one of our 
fastest growing markets, in China.
    We are working very tightly across the administration. We 
have a very tight list of priorities that are developed in 
consultation with you, in consultation with the business 
community, with the labor community, and intellectual property 
has been right at the top of the list alongside currency and 
distortionary practices. And we have, as Ambassador Marantis 
said, made some progress, very important progress in 
dismantling the indigenous innovation preferences that were 
being built into China's system, very important progress 
initially in getting a high-level mechanism in place so that 
the State council would be responsible for monitoring 
enforcement at the local level. We need to get that renewed 
because our business community thinks that has been helpful to 
them. And some progress on the software legalization issue, 
where we are just going to have to keep at it.
    But the other thing I think ultimately that we have 
emphasized in our discussions with the Chinese and in pushing 
forward on these priorities, is that if they don't get this 
right, they are not going to make it to the next level of 
development. And I think increasingly, there is recognition 
within China that they have to get a handle on their own lack 
of enforcement and inability to achieve enforcement at the 
local level in order for them to move away from a model that 
has been very resource-intensive, very focused on labor force 
and massive capital investment to a growth model that is more 
like ours, very focused on innovation, on high value-added.
    So we have I think a moment where their own growth 
objectives and the key priorities we have for U.S. businesses 
are going to move increasingly in the same direction. So we 
think we need to work very closely with them to improve their 
intellectual property protection.
    Chairman CAMP. All right. Thank you.
    Moving on to another issue. There is no doubt that China's 
currency policy is a significant problem. And the real question 
is, what should Congress do or not do about it? And last year, 
when Secretary Geithner was here before the committee, he set 
forth a two-part test and said that any legislation needed to 
be, one, effective, and, two, consistent with our international 
obligations. And in light of this test, Ms. Brainard, what is 
the administration's view of the Senate bill, S. 1619, the 
legislation that recently passed the Senate, as well as H.R. 
639, Ranking Member Levin's bill?
    Ms. BRAINARD. Let me just say first that the President 
shares very strongly Congress' objective of taking aggressive 
action to provide a level playing field with China for our 
workers and our companies. We know they can compete 
successfully with anyone in the world if the competition is 
fair. The President shares very much the frustration of many 
Americans with China's exchange rate. Despite recent progress, 
China's exchange rate has been, will be among our very top 
economic priorities, and we are going to continue to press 
China to appreciate faster, consistent with market forces.
    Aspects of pending legislation do, however, raise concerns 
about consistency with our international obligations, and we 
are discussing these issues with Members. Obviously if 
legislation were to advance, those concerns should be 
addressed.
    Chairman CAMP. Is there any chance you could highlight for 
this committee what those concerns are?
    Ms. BRAINARD. I think we are very willing to engage and 
have been engaging with Members on particular aspects of 
legislation. We have been--and will remain, I think, reluctant 
to discuss particular aspects of legislation because, of 
course, at the end of the day, we want to make sure that we are 
in a strong capacity to defend whatever legislation becomes 
law. But again, I think, as you said earlier, you know, the 
test for us, the simple test is, will we be able to have 
something that is both effective and consistent with our 
international obligations? And we are very willing to work with 
Members of Congress on that front.
    Chairman CAMP. All right. Mr. Levin may inquire.
    Mr. LEVIN. Well, first of all, I think we need to provide a 
sense of urgency to this issue. I think there is a tendency to 
avoid that, to talk about progress and not to emphasize the 
extent of the problem.
    I remember when the predecessor USTR would come here with 
charts showing how our exports were growing. There were never 
any charts on the extent of imports that were coming in from 
China that were so much larger than the number and the amount 
of our exports there. We have a historically high trade deficit 
with China. And I think to simply either shrug shoulders or 
find excuses for inaction, neither is satisfactory for the 
people of this country.
    I will ask either of you, is there today a level playing 
field with China? I think you can probably say ``yes'' or 
``no.''
    Mr. MARANTIS. Mr. Levin, you raised an urgent point. We 
have an incredibly large trade deficit with China and there is 
no one cause to that deficit and there is no one solution. But 
we need to take action on a variety of fronts, imports as well 
as exports. We have our trade remedy laws to deal with imports. 
However, as you have pointed out, and as others have pointed 
out to us, trade remedy laws kick in only after there is 
injury. That is why it is incumbent upon us to address the 
types of trade distorted policies inside of China, like 
subsidies, that give rise to unfairly traded imports. We are 
working on all fronts to do that. We filed a WTO case last year 
on wind subsidies. The counter-notification that we filed just 
earlier this month in the WTO is designed specifically to give 
us more information so that we are able to assess the types of 
trade distorted subsidies that give rise to unfairly traded 
imports.
    Mr. LEVIN. So I think your answer is, today there is not a 
level playing field?
    Mr. MARANTIS. We need to work to ensure that we have a 
level playing field for our workers, our exporters; and working 
on the issues that you have just mentioned is a critical aspect 
of that.
    Mr. LEVIN. Secretary Brainard.
    Ms. BRAINARD. I think, Mr. Levin, we share very much your 
sense of urgency, your sense that there is not a level playing 
field, and that we need to work with China to accelerate the 
pace of reform, accelerate the pace of appreciation, accelerate 
the pace at which they tackle their inadequate protection of 
intellectual property, their uneven market access.
    Mr. LEVIN. Well, I really think we need to just say ``yes'' 
or ``no.'' I mean, there isn't a level playing field, and we 
are endeavoring to bring it about, isn't that true? Yes?
    Ms. BRAINARD. Yes.
    Mr. MARANTIS. Yes, Mr. Levin.
    Mr. LEVIN. The solar industry filed a petition recently, 
and I think everybody in this country had better--we all need 
to face up to it, including my colleagues on the Republican 
side. Essentially that petition says, with this new energy 
technology, that if we allow China to rig the playing field, we 
are going to lose that industry. It was our technology. It was 
our technology. And if we don't act, if we don't use our laws, 
if we don't stand up for our producers, we are going to lose 
them. And it is one example and it is why there is such 
sensitivity in this country. It isn't bashing China. It is 
essentially saying, play by the rules. Don't rig the playing 
field. And I think everybody needs to start in our questions, 
if I might say so today, understanding that there is not a 
level playing field. It isn't the only cause of the deficit but 
it is one of the causes. There isn't any single cause, whether 
it is currency or others. But to say we don't act on any single 
one because there are others is totally unacceptable.
    Chairman CAMP. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. Thank you both for 
being here. We appreciate your presence.
    And while I agree that the currency issue and IPR are two 
items of great importance, I think there is another elephant in 
the room that we need to talk about. I find it alarming our 
deficit is being financed by countries such as China, our 
biggest holder of U.S. Government debt. Equally important, a 
former Chinese military official suggested the Chinese should 
consider dumping U.S. treasuries in response to some of our 
recent military decisions regarding Taiwan. While I believe 
foreign investment in America shows that outsiders view our 
country as a safe and solid investment, I have serious concerns 
about the full implications of overleveraging our debt to 
outside forces. I also feel the current level of transparency 
regarding China's holding of U.S. Government debt is 
inadequate.
    To raise awareness of the threat to our economy and 
national security from our exploding deficit and debt, I have 
introduced the Foreign-Held Debt Transparency and Threat 
Assessment Act. That bill will require a better accounting of 
debt held by foreign countries and, more importantly, will 
require the President to submit a plan to cut spending should 
either a particular foreign creditor or the overall debt pose a 
risk to the security interests of America. I feel we must not 
let any other country hold our national and economic interests 
hostage.
    That being said, let me ask you two this simple question: 
How big of a problem do you think it is that China holds so 
much of our debt? And what steps do you think we should take to 
address it? Either one of you first.
    Ms. BRAINARD. Let me just say, as you mentioned, obviously 
we have the deepest, most liquid government security markets in 
the world, the deepest, most liquid financial markets in the 
world; and I think for all those reasons, it is no surprise 
that there is strong demand for U.S. securities both here and 
around the world. That said, over time, we do have, as a 
Nation, a big challenge in addressing our medium-term deficit 
and debt path, and that is why the President has put on the 
table additional measures, $4 trillion of measures over the 
next 10 years that would help to put the debt on a declining 
path relative the size of GDP, why the Budget Control Act was 
so important. But of course, all of that is premised on the 
very important near-term challenge of getting people back to 
work and growing the economy, which is why so many provisions 
in the Jobs Act are important.
    So I could not agree with you more that, as a Nation, we 
need to get on a path of declining debt, declining deficits 
once our recovery is well secured. And we all, I think, want to 
work together to accomplish that important goal.
    Mr. JOHNSON. Thank you. Ambassador, do you have a comment?
    Mr. MARANTIS. The only thing I would add is, on the trade 
side, one of the fundamental aspects that we are working on is 
how do we continue to boost our exports to China? It is 
important to note that our export growth to China is faster 
than any other region of the world. Our exports to China grew 
32 percent last year versus to the rest of the world where it 
has grown by 16.7 percent. So what we are doing with respect to 
exports, both with respect to China and elsewhere, is a 
fundamental part of the President's efforts to continue to 
bring jobs to the American economy.
    Mr. JOHNSON. Thank you. Let me ask you another question, 
Ambassador. I understand China is in the process of instituting 
an environmental certification program known as China Ross. 
There are concerns that the program could become a barrier to 
U.S. goods entering the market. What steps is USTR taking to 
address these concerns?
    Mr. MARANTIS. Mr. Johnson, I am not familiar with that 
particular measure. We have an active environmental dialogue 
with China in the JCCT and as part of the S&ED. And I will 
follow up to get information on that particular measure that 
you raised.
    Mr. JOHNSON. I appreciate that. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Mr. Rangel is recognized for 5 
minutes.
    Mr. RANGEL. Thank you, Mr. Chairman. I have been on this 
committee for so long that every time one of our 
Representatives talk with the people in China, I can almost 
write the press release myself: That they are cooperating, that 
progress has been made; that we appreciate that the legislative 
body is an independent agency. We don't encourage you to 
legislate, but we are not opposed to anything that you might do 
that could give us leverage. And whatever you want to do, it 
can't hurt us because, after all, the Constitution does provide 
for a separation of powers.
    Having said all of that, if, indeed, as Congressman Levin 
has said, that we can identify the technology that they are 
stealing, that this is having a severe impact on our ability to 
compete, why don't we just identify what it is and put a tariff 
on that? The best they can do is take us to the WTO, where we 
want to go anyway. Why can't we do that? Ambassador?
    Mr. MARANTIS. Mr. Rangel, we have a whole variety of tools 
at our disposal to make progress. And I don't dispute at all 
with you that we have severe challenges in China that we need 
to continue to work to address.
    Mr. RANGEL. That is the speech I just gave. I am just 
saying that, suppose we know that there is a technology that 
they just put their finger up their nose and say, Hey, that is 
pretty good. I am going to use it, and I am going to include it 
in something that your people want to buy cheaper. And we say, 
No, you don't. We are not going to buy back our technology. You 
have got to pay for our research and development. And zap. And 
it is going to be outrageous. They are going to be angry. And 
if they are not angry, we score in the tariff. If they do get 
angry, we are in the WTO. Now that is the same question I asked 
just a minute ago. So you are not going to give me a chance to 
ask the same question a third time.
    Why can't we do it? I accept that you are a diplomat and we 
are legislators. But you would not get angry with us if we 
mandated it, right?
    Mr. MARANTIS. Mr. Rangel, we have imposed duties, for 
instance, in the Section 421 case.
    Mr. RANGEL. Why can't we do more of it? Why can't we get 
their attention? Why can't we cause a fight and not threaten a 
trade war, but threaten to bring honesty, sincerity, and 
equality to the World Trade Organization, where a lot of us 
voted to allow them to get in because they promised to do these 
things. Now, is the answer to that, you don't want to offend 
them at the executive level? What is the answer? It just seems 
so easy to do.
    Name something that our manufacturers are particularly 
concerned about. What technology does the whole world know that 
they stole from us? Could you help me?
    Mr. MARANTIS. Yes. On this very issue, Mr. Rangel, with 
respect to electric cars right now----
    Mr. RANGEL. Electric cars is good. They want partnerships 
with it. We are afraid they are going to steal our technology. 
If they did do that, then we put a ban on anything that looks 
like our technology and a high tariff, ridiculously high. Then 
what can they do about it? They either pay the tariff or go to 
the WTO. Now there is something wrong with my argument. But I 
am trying to find out, what is it?
    Mr. MARANTIS. Mr. Rangel, we have our own international 
obligations that we have to abide by. But we take action on 
every front to counter whatever issue China puts in front of 
us, whether it is in the area of green technology, whether it 
is in the area of subsidies--and we have done, I think, a, 
pretty good job, particularly over the past 2\1/2\ years, of 
using our enforcement tools, like the 421----
    Mr. RANGEL. We don't need any legislation. You are pretty 
proud of the job you are doing diplomatically with China. And 
so you are just listening to us rant and rave. But quite 
frankly, you have got a handle on this thing, right?
    Mr. MARANTIS. This is a cooperative endeavor between you 
and us, and the concerns that you raise are the concerns that 
we push with our Chinese counterparts.
    Mr. RANGEL. So we don't need the Congress' input into this. 
You are satisfied as every official, Republican and Democrat, 
when they come back, that they have got a long way to go, but 
they are making progress. And they do owe them a lot of money.
    Mr. MARANTIS. Our consultations with you sets our agenda. 
So this hearing today is an integral part of helping us inform 
ourselves----
    Mr. RANGEL. What do you think our attitude is bipartisanly 
here, as it relates to Chinese currency and intellectual 
property? What do you think it is?
    Mr. MARANTIS. Very serious concern.
    Mr. RANGEL. No. It is outrage.
    Mr. MARANTIS. We share that. And that is why we are doing 
everything we can and are using all of our tools on all issues 
to make progress.
    Chairman CAMP. The gentleman's time has expired. Mr. Brady 
is recognized for 5 minutes.
    Mr. BRADY. Thank you, Mr. Chairman. I will submit my 
opening statement for the record.
    Chairman CAMP. Without objection.
    [The information follows: The Honorable Mr. Brady]

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    Mr. BRADY. I want to congratulate Ambassador Marantis for 
the hard work the U.S. Trade Representative Office did with the 
White House with Republicans and Democrats in Congress to pass 
the recent sales agreements with Korea, Colombia, and Panama. 
If anyone in America wonders if Republicans and Democrats can 
work with this President to pass a real jobs bill, this was the 
real proof that we can. And there is bipartisan support in 
Congress that China, and agreement that China must play by the 
rules, that their currency must appreciate. But that is not the 
only trade barrier our companies and workers face in China.
    If you listen to our agriculture, our manufacturing, our 
technology services, even the defense industries, there is a 
broad range of barriers that are as important, or perhaps to 
them more important that we tear down. On the agriculture 
silos, sanitary standards, manufacturing, IPR-directed 
subsidies, Earth subsidies, directed lending technology, 
indigenous innovation services, regulatory barriers, defense, 
rare and raw earth materials, on and on and on, our companies 
tell us they can't get through those trade barriers.
    I think it is a mistake to have a currency-only focus from 
Congress, that we need to tear down all those trade barriers. 
And I would think we need to be smart about addressing the 
currency issue. We want to make sure we follow our own 
obligations. Second, we make sure it doesn't undermine our 
efforts to tear down the full range of barriers that we face in 
China.
    And then finally, to make sure legislative efforts don't 
boomerang back and actually cost American jobs. So we need to 
be smart about the approach. And I am not sure every problem 
has a legislative solution.
    Under Secretary Brainard, implicit in the criticism you are 
hearing today is the belief that the White House is not doing 
enough; that in effect, Congress is saying, we can't wait for 
the White House on China. Do you think, given your testimony on 
the broad range of issues you tried to address in a number of 
different forms--and as you said, you have made real progress 
on some of these issues--do you think that criticism of the 
White House is fair?
    Ms. BRAINARD. Let me just say Mr. Brady that since day one, 
making the U.S.-China economic relationship work better for 
American workers, for American companies, for American farmers 
has been a top priority for the President, and it has been a 
top priority across the entire administration. I would say that 
we have a more coordinated effort than I think we have ever 
seen before. We, at every moment, have a very tight list of 
priorities because we know that if we go after 20 things, we 
probably won't get one. If we go after four at a time, we will 
get them done and move to the next. And we work very 
consistently with the White House.
    When the President meets with President Hu, he goes through 
the list of issues. When we meet with our counterparts, we are 
always synched up with USTR, with Commerce, with the State 
Department, we work very closely, and we have made progress. We 
are as frustrated as Members here are, and as many Americans 
that we hear from about, concerns as we travel the country. But 
as you said, we are also making progress. We have very 
important stakes in terms of the export markets that we have 
penetrated effectively in China.
    China is our third-largest export market. That would not 
have happened without an aggressive enforcement approach, 
without fully using the trade remedies, the safeguards. As Mr. 
Levin said earlier, the first time ever use of 421. So we use 
the tools we have available to us very aggressively. We plan to 
continue to do that. We want to continue to work in a way that 
is effective, that is consistent with our international 
obligations.
    Mr. BRADY. Under Secretary, may I ask that--and thank you 
for that summary. It was very clear in your testimony as well. 
Does the White House support the Senate currency legislation as 
it stands today?
    Ms. BRAINARD. The White House supports very strongly the 
goal of the legislation, which is to create a more level 
playing field for our workers and our firms. The White House 
shares very strongly, as do I, the frustration with the pace of 
currency appreciation has not been sufficient to bring China's 
currency into full alignment with market fundamentals. Aspects 
of the legislation that do, however, raise concerns about 
consistency with our international obligations. And as I said 
earlier, we are working with Members of Congress. If the 
legislation were to advance, we would want to see those 
addressed.
    Mr. BRADY. I am not trying to push. But respectfully, as 
the legislation stands today, as it came out of the Senate, is 
the White House supporting that legislation?
    Ms. BRAINARD. The White House is very much supporting the 
goal of the legislation. There are aspects of the legislation 
that raise concerns about international consistency.
    Chairman CAMP. The gentleman's time has expired. Mr. Stark 
is recognized.
    Mr. STARK. Thank you, Mr. Chairman. Secretary Brainard, 
have you heard about the Bridge to Nowhere? No? Ambassador, 
have you ever heard about the Bridge to Nowhere?
    Ms. BRAINARD. Yes.
    Mr. STARK. Yes, you have? He is nodding yes. Well, have you 
ever heard about the bridge from Nancy Pelosi's congressional 
district to my congressional district? It is a $6.4 billion 
bridge that replaces the San Francisco Bay Bridge. Have you 
ever been to San Francisco? Have you seen the Bay Bridge? It is 
a monument, right? Well, there is a new one, plopped right down 
there, coming into my district. It has used 43,000 tons of 
steel. It had a 525-foot tower, 28 steel deck sections. And 
that was made in Shanghai. And another Shanghai company made a 
mile-long cable for the bridge. All of this work was done in 
China, using Chinese engineers, Chinese welders, Chinese steel. 
And some of those laborers earned as much as a couple dollars a 
day. They outsourced the project to China. Outsourcing it 
reportedly saved us Californians $400 million. That is kind of 
nice. But doesn't the President's job bill include spending for 
our Nation's highways and bridges? Yes? Speak up. Is that 
correct?
    Mr. MARANTIS. Yes, sir. Yes.
    Mr. STARK. Secretary, we do plan to spend money, do we not? 
Isn't that in the plan of the administration, to put people to 
work? Yes? You don't know?
    Ms. BRAINARD. Of course. Yes.
    Mr. STARK. You are saying yes. Okay. Thank you. Well, does 
the President intend then to insist on a ``buy American'' 
clause? Could I hear the administration or the Treasury's 
position on that?
    Ms. BRAINARD. I actually--I am very familiar with the 
President's plans to--and proposals to move forward with much 
stronger infrastructure spending. I think the Buy America 
issues are still ones that would be addressed in consultation 
with Congress. Obviously, we have had Buy America provisions in 
the American Recovery Act in ways that were consistent with our 
international obligations. So there is precedent there.
    Mr. STARK. Well, what do our international obligations have 
to do with this darn bridge being built in my district and 
putting all of these Americans out of work?
    Ms. BRAINARD. Obviously, we are signatories and huge 
beneficiaries of the Government Procurement Agreement under the 
WTO. So, of course, our previous Buy American provisions in the 
American Recovery Act were consistent with that.
    Mr. STARK. If China were in the WTO, could they still sell 
us bridges under the government procurement agreement?
    Ms. BRAINARD. One of the key priorities with China is 
actually to bring them into the Government Procurement 
Agreement. But they are not currently protected by it because 
they are not signatories.
    Mr. STARK. They don't seem to need any protection in San 
Francisco. They are doing quite well by all by themselves, 
thank you very much, without much interference from the 
administration. And I guess, I go back to my question, you 
know, I hear a lot of talk from the President about this, that 
and the other thing, but no action. No action. And the labor 
unions in my district are disappointed in the President's lack 
of action. A lot of talk. No action.
    What about insisting on Buy American? Would that be a good 
thing for the administration to do, in your opinion?
    Ms. BRAINARD. Let me just reiterate that I can't speak to 
the particular path forward, but I will say that there are 
mechanisms that Congress has passed with strong support from 
the President that provided for Buy American in the context of 
the American Recovery Act that were consistent with our 
international obligations.
    Mr. STARK. But they are not being enforced, are they?
    Ms. BRAINARD. Yes.
    Mr. STARK. Where? What Buy American have we ever in the 
last month or two insisted on?
    Ms. BRAINARD. I don't know whether there is a particular 
provision in the last month or two, but I am happy to check and 
come back to you on that.
    Chairman CAMP. The time has expired. Mr. Tiberi is 
recognized.
    Mr. TIBERI. Thank you very much, Mr. Chairman, and thank 
you both for being here today. I think the chairman did a 
really good job of outlining the concern and frustration in a 
bipartisan way that members of this committee have and this 
Congress have regarding the overall issue of our relationship 
with China, and I look forward to one day to the Secretary and 
the Ambassador coming to talk to us as well.
    Let me just kind of, I guess, dovetail on what Mr. Brady 
and Mr. Rangel were saying with both of you. Under Secretary, 
you mentioned sharing that frustration, and you also mentioned 
that the administration supports the goal of the legislation 
and that we are as a country making progress.
    That part, I think, there is not a lot of belief up here 
that we are actually making progress. In fact, in my district 
in central Ohio, a manufacturer who has been doing business 
with China for over a decade is so frustrated, not with just 
currency, by the way, that is probably actually kind of down 
the line, so frustrated with China that they are actually 
taking their investment out of China and moving to another 
Asian country because of their frustration. Some of that is 
occurring as well.
    So, my question to you is, you in response to Mr. Rangel 
and in response to Mr. Brady mentioned, Under Secretary, that 
you share the goals of the legislation. You believe that you 
all have the tools necessary to deal with this administratively 
with the international community, with the WTO. Why aren't we 
moving quicker? Is there a concern of retaliation?
    Ms. BRAINARD. Well, let me just say, Congressman, first of 
all, that the phenomenon you mentioned with companies 
reconsidering their investment in China is more widespread than 
just companies from your district. That increasingly, I think, 
we are going to find China, and this has been the finding both 
of the recent Boston Consulting Group study and a KPMG study, 
China is going to face challenges of its own. It has got a 
slowing labor force growth and ultimately very soon a declining 
labor force, a very rapidly rising wage cost, passive capital 
over investment, a very poor environment for innovation, for 
entrepreneurship, a very distorted credit allocation system, 
and a misaligned exchange rate that is preventing them from 
fundamentally reorienting their economy towards unleashing the 
very substantial potential of domestic consumption that they 
have in China.
    Mr. TIBERI. Does the administration have the tools 
necessary to deal with these concerns?
    Ms. BRAINARD. We, I think, are doing what we can. We are 
working with those within China who can see that they need to 
move, that they need to move faster. There are, within the 
Chinese system, obviously, those that fundamentally understand 
how market exchange rates should work and want to move in that 
direction. So we are directing our engagement with them to try 
to help strengthen those who want to push for faster 
appreciation, faster rebalancing of the economy, a more level 
playing field.
    Mr. TIERNEY. Do you need more tools from us?
    Ms. BRAINARD. And so we are using the tools that we have. 
Again, you know, to the extent that there are mechanisms that 
would be effective, that would be consistent with our 
international obligations, obviously we would be very 
interested in consulting with you on those and those will 
remain the kind of key tests.
    Mr. TIERNEY. Can you deal with this legislation that passed 
the Senate? Can you deal with that without legislation in an 
administrative way?
    Ms. BRAINARD. We are working very hard to try to push 
forward on the exchange rate front. Obviously, the legislation 
that has been pending does, I think, articulate, try to advance 
a very important goal.
    Mr. TIBERI. Thank you.
    Ambassador, a quick question. So if this legislation 
passes, is there a concern from the administration that there 
will be retaliation, that when my constituents visit a toy 
store, a department store, an electronics store, that the cost 
of goods to them in this tough economy will go up?
    Mr. MARANTIS. I think, as Under Secretary Brainard said, 
there are aspects of the legislation that raise concerns about 
consistency with our international obligations, and if it were 
to move forward, we would want to address those.
    Mr. TIBERI. Would it cause that concern from the 
administration, products going up to our constituents, costs of 
products because of tariffs or a trade war?
    Mr. MARANTIS. I think there are always concerns regardless 
of what action we take, whether it is on this front or whether 
it is IP or whether it is with respect to our 421, concerns 
have always been raised that the Chinese may retaliate. But we 
need to use the tools that we have to address concerns so that 
we make progress.
    Mr. TIBERI. Thank you.
    Chairman CAMP. The time has expired. Thank you.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I come from Seattle, and we are the fourth largest exporter 
in the United States. We are the closest port to Asia. Half our 
exports go to China. And one of our little companies is 
Microsoft. The CEO, Mr. Ballmer, noted that Microsoft revenues 
from China are about 5 percent as compared to the revenues from 
the United States, even though we have an equal number of 
computers. That means that 95 percent of those PCs that are 
going to China, they are not putting any software on them or 
else they are stealing it. That is the only way you explain 
what is going on. The Software Alliance says that 78 percent of 
all PC software in China is pirated. That is a polite word for 
steal, stolen, okay?
    Now, I listened to your testimony, and, you know, by the 
way, when Mr. Brady tries to nail you in the corner about 
whether the President will sign this bill before we pass it out 
of the House, that is the Speaker's hiding behind that. The 
Speaker isn't asking the President about all these EPA changes, 
will the President sign those bills before he passes them out 
of here. He does what the Constitution says, is the Congress 
acts and the President decides how he is going to respond to 
it. He can veto it.
    The same is true on currency. The House is sitting and 
hiding behind the fact they can't get the President to say, oh, 
yeah, I am eager to sign it. He doesn't have to say that. He 
votes last. Remember that.
    But when you sit here and talk, I listened to all the 
things you have said. You said it is our highest priority, this 
trade problem with China. It is only after injury can we act. 
Ha. When will you notice the injury? Well, I guess you have 
noticed it. Then you said, we are using all our tools and we 
have to be consistent with our international obligations. That 
sounds like fancy words for we don't want to do it.
    Now, what you are getting from this committee on both ends 
of the dais is where is the enforcement? You say, well, there 
is a little up-tick. I heard that. There is a little up-tick in 
the amount of currency or whatever. When are you going to 
start--you don't think there is a war? Are you afraid to start 
a war?
    They have declared war on our software industry and you are 
sitting back--I feel, I mean, maybe you don't see Chinese 
celebrations like I do in Seattle all the time. They have a 
dragon that comes out made out of paper and everybody waves it 
around and it jumps around and firecrackers go off. You remind 
me of that tiger, jumping around, meaning nothing. There is a 
brunch of firecrackers over in the bushes, but nothing is going 
on. And you say you don't need anything from us. When is this 
piracy going to stop? When is it going to get down to 75 
percent is pirated, or 50 percent, or 40, or 30? Or is all hope 
lost? It sounds to me what you are saying, we are doing 
everything we can and nothing is happening. So what do we do?
    I would like to hear you tell me how it is going to get 
better with all these tools you said we have, and we are doing 
everything we can, and there has been an injury. So when?
    Mr. MARANTIS. Mr. McDermott, this administration has been 
vigorous in terms of enforcement. We filed five WTO cases. We 
have done a 421. We have accepted a 301 case. On the issue that 
you raise on software, it is a huge concern. And what I have 
outlined in my testimony is that we have made progress with 
China. Is it enough? No, not by any stretch of the imagination.
    Mr. MCDERMOTT. Tell me how much progress you have made if 
78 percent is still being pirated?
    Mr. MARANTIS. Mr. McDermott, the changes in China are not 
going to happen overnight, and we have to make progress on a 
step-by-step basis and we are doing that.
    Mr. MCDERMOTT. The industry has been around for 15 years. 
Come on. What is ``overnight?''
    Mr. MARANTIS. And in the last year, China has made more 
substantial commitments in this area than they have ever 
before. But you are absolutely right. The proof is in the 
pudding, and it is all about enforcement. And has China done 
everything it promised us to do? No, they haven't fully 
implemented their 2010 JCCT commitments, and we are on them and 
we are working in close cooperation with the industry to make 
sure that they do implement their commitments.
    We keep pushing and we are going to use all the tools that 
we have. It is an urgent priority. Piracy rates are 
unacceptable. The losses to our industry are unacceptable.
    Chairman CAMP. Time is expired. Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman.
    I would like to move into the strategic realm if we could 
for a moment and then get your insight, first Ambassador 
Marantis.
    I wonder if you could speak to China's bilateral and 
regional trade agenda. I am particularly interested with the 
geopolitics. China is doing some very, obviously important 
things for their own strategic priorities in terms of growing 
to protect trade relationships, their access to routes on the 
ocean, what they are doing with Navy, investing in countries 
that are resource rich, anticipating some of these demographic 
and environmental inevitabilities that are going to take place.
    I was wondering if you could comment on their influence and 
impact in the region based on these agreements, and also if you 
could compare China's trade relationships in the region to 
ours, just to highlight the differences and where you think 
they are going to ultimately end up.
    Mr. MARANTIS. Thanks, Mr. Davis. China has been 
extraordinarily active in the region, including trade and 
investment agreements, and that is why it is incumbent upon us 
to do what we are doing--which is to increase our engagement in 
the Asia Pacific region.
    We are doing this through a whole variety of fronts. We are 
doing it in the context of APEC. We are doing it in the context 
of the Trans-Pacific Partnership. We are doing it in the 
context of our bilateral trade and investment work that we do 
with our partners. It is a real challenge.
    Our competitive share in the Asia Pacific has declined as 
China's competitive share in the region has increased. When I 
was testifying before this committee with respect to Korea, we 
used to be the number one--we used to have the number one share 
of Korea's market. We now are number three.
    As our rates in Korea's market went from 21 percent to 9 
percent, China's went from 7 to 17. We have got to reverse that 
trend. And that is why it was so important for Congress to 
pass, and the President to sign, the U.S.-Korea Trade Agreement 
last week, and that is why the initiatives we are pursuing, for 
instance, in the Trans-Pacific Partnership, are really vital to 
maintaining our economic competitiveness in the region as China 
continues to conclude more and more agreements with partners in 
the region.
    Mr. DAVIS. Secretary?
    Ms. BRAINARD. Well, I think that the dynamic that you are 
pointing to is very real. I think the passage of the U.S. Korea 
Free Trade Agreement puts us in a much stronger position in the 
region because we are now in a position where many potential 
trade partners with much stronger disciplines in areas like 
intellectual property, investment, exchange rates, now will see 
us as a potential free trade partner. The Trans-Pacific 
Partnership discussions that are underway I think are 
critically important for that reason.
    As we move to build stronger disciplines and stronger trade 
relationships with surrounding countries, that is part of the 
overall strategy to pull China to where we want to be in terms 
of intellectual property, market-based exchange rates, a level 
playing field. So it is a critically important part of the 
overall U.S. strategy in the region.
    Mr. DAVIS. I would ask just a follow-up from your perch at 
Treasury. You mentioned the challenges that China will be 
facing due to demographics, environment, a number of other 
issues. Let's fast-forward to 2030. And I know it is always 
dangerous to ask people to make predictions, but just from a 
standpoint of we have plenty in the United States that are 
pronouncing again the doom of America, as was happening in 
regards to our relationship with Japan competitively back in 
the 1980s.
    If you would fast-forward 15 or 20 years, what do you think 
the relationship looks like if we stay generally on the current 
paths of policy?
    Ms. BRAINARD. It is, as you said, very risky to project 
into the future, but I will say we have our challenges. China 
has some challenges. I would far rather have our challenges. I 
have huge confidence in the resilience of this economy, in the 
strength of our entrepreneurial culture, our innovative 
capacity, our dynamism, our ability to adapt.
    China, again, while their current growth rate looks 
enviable, it is going to need to move to where we want them to 
be on intellectual property, on market-based exchange rates, on 
level playing fields, in order to overcome the very substantial 
challenges they face in the coming years.
    Mr. DAVIS. Thank you. I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Neal is recognized.
    Mr. NEAL. Thank you very much, Mr. Chairman.
    For our panelists, for those of us, as Mr. Rangel noted, 
who have been on focus with this issue for a long time, the 
question would be what does Nick Brady, Lloyd Bentsen, Bob 
Rubin, Paul O'Neill and Tim Geithner, all have in common? And 
that is that they have assured this committee that they could 
manage the Chinese currency issue without congressional 
intervention.
    Now, the medical technology industry, they are very 
concerned about price controls that the Chinese government has 
proposed. It reduces market access for small and medium-sized 
companies. China pledged to open its mandatory third-party 
liability auto insurance market to foreign insurers. It talked 
about it, but haven't really made much progress on it. And the 
United States International Trade Commission recently published 
an important report on the effects of intellectual property 
theft on the U.S. economy.
    Those numbers are pretty staggering across-the-board in 
terms of job loss. In the financial sector, as you know, 
because of forced partnerships, they have diminished the 
enthusiasm that they once impelled in front of this committee 
for a normal trading relationship. That enthusiasm that was 
previously there has caused some of them to not only retreat, 
but to leave, because they have found that the impediments to 
growth have been so limited.
    Actually, I have offered four quick questions there, but I 
want to revert to the frustration that my friend, Mr. Tiberi, 
mentioned a few moments ago until suggesting that the 
frustration is really bipartisan in nature, and it has been the 
repeated assurances of successive administrations, Democrat and 
Republican, who have suggested just leave it alone, which 
raises the suspicion here that the reason that we have been 
fairly tepid in our response has been because they hold an 
awful lot of American debt.
    Would you like to hold forth on those questions?
    Mr. MARANTIS. On the trade and investment front, Mr. Neal, 
we share the frustration that you have expressed, the 
bipartisan frustration. We have got to make more progress in 
our relationship with China. It is clear. There are issues that 
you raise with respect to IP, with respect to investment 
restrictions, with respect to slow liberalization of the 
financial services sector, and it is our job to keep China's 
feet to the fire on this, and as Congress is doing, keeping our 
feet to the fire to ensure that the commitments that we tell 
you we are securing from China we are actually securing 
implementation of.
    I am not going to sit here and pretend that everything is 
great and rosy. It is not. But we are making progress and 
working with you. We will continue to do so.
    Mr. NEAL. The problem with sovereign capitalism is that if 
you suggest that you can only accept a partnership up to 49 
percent of the corporation, the difficulty is that it allows 
our trading relationship to be diminished because they get all 
of the best technology advancements, research and development, 
and then they control the outcome. And it causes not only great 
consternation for American companies, but at the same time, it 
also limits their ability to grow in a market that they once 
believed was the panacea for many of their opportunities. Would 
you care to comment, either one of you?
    Mr. MARANTIS. Yes. And at the same time, though, I don't 
want to diminish the fact that we are deriving benefit from 
this relationship, as well, in terms of our exports across the 
board.
    Mr. NEAL. No question. That is not in dispute. But what I 
heard Ms. Brainard say that they have allowed their currency to 
appreciate by seven percent over the last 5 years, a decade, 
not really a note of accomplishment, is it?
    Ms. BRAINARD. No. Let me just state that China's currency 
has appreciated against the dollar 40 percent over five years, 
10 percent----
    Mr. NEAL. You used the number 7 percent, I thought.
    Ms. BRAINARD. Seven percent in nominal terms over the last 
15 months; 10 percent adjusted for inflation, which, of course, 
is the meaningful measurement. They are moving. Our exports are 
growing faster to China than to anywhere else in the world, 
nearly twice as fast. The third largest export market. We are 
seeing progress. It is not adequate, but we are seeing 
progress.
    And I just have to say, we are up here with you, with your 
staff, with your constituents, every day, working on what our 
priorities are together as Americans, vis-a-vis our trade 
partners, in particular China. We have been working 
aggressively. We have taken more enforcement cases. We have 
taken a 421, which the previous administration chose not to do. 
We have a host of trade remedies across a variety of products 
that are imported from China, and we will continue to work very 
aggressively with you to pursue American interests. We are very 
committed to doing that.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman, and thank you both 
for being here today.
    My home State of Louisiana is a maritime state and we 
depend very heavily on trade and exports. In fact, we have gone 
from eighth among the 50 States to fourth just in the past 
year, and over the past 2 years, we have seen annual growth in 
exports to China ranging around 50 to 55 percent. Significant 
growth. And China now is our number one export market and 
increasingly we are seeing small businesses, mid-sized firms 
involved in this.
    There has been discussion about whether or not we have the 
necessary tools in place during the course of this discussion 
today. One thing that has not come up except for the chairman's 
mention of it in his opening comments is that of the Bilateral 
Investment Treaty and getting a status report on what is going 
on with this now. This is clearly an important tool. We know 
that the EU is, at least, approaching or in negotiations now 
with China. China has some 70 BITs in place now.
    What is going on on our end? Secretary Geithner, at the 
very beginning of the year, testified in front of this 
committee and emphasized that it is a very important piece we 
need to put in place, and yet we haven't heard much back from 
the administration on this issue. So could you bring us up-to-
date?
    Mr. MARANTIS. Sure. As you point out, a high standard BIT 
can very much help level the playing field for our investors. 
President Obama and President Hu, at the summit earlier this 
year, reaffirmed their commitment to negotiating a BIT. We have 
engaged in six rounds of technical consultations with them. We 
have not yet completed our BIT review, and I know that there is 
frustration amongst some that----
    Mr. BOUSTANY. What is the holdup there?
    Mr. MARANTIS. There are a variety of things that we are 
looking at. We want to make sure that the BIT is able to 
address the challenges, new challenges that our investors face, 
including in markets like China that are dominated by state-
owned enterprises. We are working hard on it and we hope to 
complete it.
    Mr. BOUSTANY. Thank you. Secretary Brainard, do you want to 
comment on this?
    Ms. BRAINARD. No. I would just say that we have a history 
of bilateral investment treaties, advancing the interests of 
American workers and companies. Obviously we have enormous 
interest in getting high standard protections for Americans in 
China. The question, of course, is whether and when China going 
to be able to come to the high level of standards that we would 
want to pursue. That is, I think, what we have to ascertain 
before we can really move forward in a more accelerated pace on 
the Bilateral Investment Treaty. We want to make sure it is a 
good deal for our workers and companies.
    Mr. BOUSTANY. Shifting gears, when President Hu was in 
Washington, there was a discussion about delinking indigenous 
innovation from government procurement. And I was in China in 
April, had conversations with the vice premier there about that 
same issue. He said done. We have taken care of it. But my 
understanding is that there has been uneven application of this 
into the provinces and so forth.
    What kind of progress are we really making with this and 
what are our metrics? How are we monitoring it?
    Mr. MARANTIS. We are not done, but we are making progress. 
The Chinese side made a number of commitments on indigenous 
innovation last year, including the one that you mentioned at 
the summit last January.
    As Under Secretary Brainard mentioned in her opening 
testimony, China has repealed already four measures with 
respect to its product accreditation system. At the state and 
the local level, in some provinces and in some municipalities, 
they have stopped implementation of measures that are on the 
books. This is a huge priority for us in this year's JCCT to 
ensure that the commitments that they made, i.e., getting rid 
of these measures, are actually implemented.
    Mr. BOUSTANY. So looking at the WTO government procurement 
agreement progress, clearly China is dragging its feet, and I 
know that has been a top priority in these discussions. So work 
continues, I suppose.
    Mr. MARANTIS. Yes. And again, as Under Secretary Brainard 
mentioned, this was a big priority for us in the S&ED and in 
the JCCT. We expect by the end of this year, as President Hu 
committed to President Obama, that China will submit a revised 
offer that will include, for the first time, coverage of sub-
central entities, which will be an important advance.
    Mr. BOUSTANY. Do we expect that by the end of the year from 
China?
    Mr. MARANTIS. We do.
    Mr. BOUSTANY. Thank you. I yield back.
    Chairman CAMP. Thank you.
    Mr. Becerra is mention recognized.
    Mr. BECERRA. Thank you, Mr. Chairman. Thank you very much 
for being here.
    Let me make sure we are clear on what we are talking about 
with regard to currency manipulation. There are three major 
issues that I can tell from a country manipulating its currency 
to its advantage. One, it artificially raises the prices of our 
exports to that market, in this case, we are talking China; 
two, it suppresses the prices of Chinese imports into the 
United States; and, three, that manipulation of their currency 
places U.S. exporters at a very competitive disadvantage vis-a-
vis Chinese exporters into other country markets.
    So, whether it is unfair competition of Chinese imports 
coming in looking like a cheaper product because of the 
currency downgrade, or whether it is our products to China 
costing more because the currency in China is valued at less, 
or whether it is our American companies trying to compete with 
Chinese exporters in another country, in either case we lose.
    So would either of you disagree with those three points 
that I just raised with regard to the issue of currency 
manipulation?
    Ms. BRAINARD. Let me just----
    Mr. BECERRA. And I don't want a treatise. I just want to 
know if you agree that those are three distorting effects of 
currency manipulation?
    Ms. BRAINARD. Let me just say that China's exchange rate 
has appreciated against the dollar over the last 15 months more 
much rapidly than it has against any other country in the 
world, I think in part, because----
    Mr. BECERRA. Ms. Brainard, I understand that point. I am 
just trying to find out if the problems with currency 
manipulation are as I have just stated. Maybe there are others, 
but I have noted three----
    Ms. BRAINARD. I think when we look at misalignment of the 
exchange rate, failure to----
    Mr. BECERRA. Let me move on to a different question if you 
are not going to answer that one. I am just trying to find out 
if you disagree that the problems with manipulating currency 
causes us issues because the country that is doing the 
manipulation is taking advantage of an artificially suppressed 
currency value. Okay.
    The issue becomes one of whether we are willing to take 
action. Some have raised the specter of a trade war, that, oh 
my goodness, if we were to try to take some concerted steps to 
stop China from manipulating its currency, which, by the way, a 
recent survey of economists said, 96 percent of them said that 
they believe that China was indeed suppressing its currency's 
value, but that this trade war might damage us. On the other 
hand, there is some, and I agree with these folks, who say we 
already see a trade war underway, and it is a one-sided trade 
war where only one side is fighting, and that is the Chinese.
    I don't blame the Chinese. They are doing everything they 
can as aggressively as they can to help make their country 
prosperous, and to the degree that any country lets them, that 
is that other country's fault. I don't blame the Chinese for 
trying to lift themselves up. They should go to it as best they 
think. But if there are rules out there in the world, and if we 
are abiding by those rules, we should try to make sure that we 
fight on the same terms, to make them abide by those rules.
    Another point. If an American wishes to buy a toy for his 
or her child in this country and it cost a few extra cents more 
to buy that toy because we have asked China to live by the 
rules, or we forced China to live by the rules, I think that is 
actually pretty good, because the chances are we may see a few 
more of those toys or cups or whatever else it might be with a 
label that says ``made in America,'' because these days, most 
of those things aren't made in America, and unfortunately, some 
1 to 2 million Americans the estimates will tell us that don't 
have their jobs today because of China's currency manipulation.
    Now, is it true that China exports four times as much to us 
as we export to them, Ambassador?
    Mr. MARANTIS. Our trade deficit with China is $273 billion. 
Last year we exported roughly $92 billion, and I don't have the 
number in front of me of what China--I think they exported $65 
billion to us.
    Mr. BECERRA. So almost a four to one advantage that the 
Chinese have over the U.S. when it comes to exports. Now, if 
the Chinese were to say if you want to engage in a trade war, 
we are going to go at it, they stand to lose four times as much 
as we do, because they send four times as much to us as we send 
to them. I doubt that they are going to want to engage in a war 
when they stand to lose four times as much as we do.
    So the bottom line is, we have got the Senate which took a 
63-35 vote to support legislation to deal with currency 
manipulation, we have a House where a majority of the members 
have supported the legislation that can't get through the 
House, and it is time that we do something. So it is either do 
nothing or do something, and I think members here are saying 
let's do something. So we appreciate your being here and look 
forward to having something passed through.
    Chairman CAMP. Before I go to Mr. Roskam, I just have one 
question, Mrs. Brainard. On October 15, the Treasury Department 
was scheduled to submit its biennial report on China's currency 
to the Congress, but it did not. When can we expect that 
report?
    Ms. BRAINARD. We issued the last report mid-May, and we 
postponed the report, as you know, because we are engaged in a 
series of very important summits where we will have an 
opportunity, the President will have an opportunity to continue 
to press this issue with President Hu. So we want to give those 
processes a chance to move forward, in particular, G-20, APEC 
and East Asia Summit, which go through the middle of November.
    Chairman CAMP. The middle of November. Thank you. Mr. 
Roskam is recognized for 5 minutes.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    Mr. Chairman, I am going to resist the temptation to yield 
my time to Mr. Rangel, although I think he was pretty well 
articulating the frustrations that members on both sides of the 
aisle are feeling that issue. I don't know if I am going to get 
to a question, so relax, and if my voice goes up at end it will 
be a question, but maybe more of a statement.
    But it seems to me that we are really dealing with a 
nation, China, that from an economic point of view, is 
predatory and they are operating in their interests. Mr. 
Becerra a minute ago said that he understood their motivations. 
But it is predatory and it is game-on in terms of how they are 
approaching this.
    I have got a situation--we have talked at length so far 
about currency manipulation. I have a manufacturer in suburban 
Chicago, Fellowes Manufacturer, the manufacturer of bankers 
boxes and shredding equipment and so forth, that has been 
through a shameful nightmare. It is like the wild west from an 
intellectual property point of view, highly manipulated. The 
Chinese officials have been yea-yeaing American official also 
for months and months and months, and Fellowes Manufacturing is 
really no better off than it was today.
    I was with Congressman Smith earlier this year, along with 
Congressman Sensenbrenner and Congressman Rush, and we were in 
West Africa, and one of the things that became clear to us, and 
particularly to me, was the way in which the Chinese are 
pursuing natural resources around the world. Not going in with 
the best interests of other nations oftentimes the way the West 
does. Instead, going in to grab hold and to control and to 
manipulate natural resources in complicity with governments 
that are doing shameful things in some cases, not in West 
Africa, but in other venues around the world.
    So I think that there is a couple of things that we need to 
do. One is we need to have clear relationships with our allies. 
One would be to move forward, and we have not talked about this 
today, but the nature of the security relationship with Taiwan, 
for example. We need to be sending a very strong signal that 
the F-16-CD sales should move forward. The administration 
hasn't agreed on that. But I think that this is an area where 
we send a very clear, strong message that tells China what? It 
tells China we going to stand with our friends. We are not 
going to create ambiguity with long-time strategic allies in 
the region.
    I think another thing that we can do, and you alluded to 
this a minute ago and we have different views on how to do 
this, but the deficit issue is massive. Mr. Johnson mentioned 
this in his opening remarks. I sat last year with a South 
Korean official, one of their legislative leaders. I had a very 
lengthy conversation. At the end of the conversation I said, 
what advice would you give to the United States as we interact 
with China? You have been living in a relationship with China 
on the Korean peninsula for centuries and centuries and 
centuries. What advice would you give? And with no sense of 
irony, this South Korean official said, and I am paraphrasing, 
well, Congressman, the first thing I would do is I would stop 
borrowing their money. That is for sure.
    So I think we create this vulnerability where 47 percent of 
our debt is held by foreign interests, and the Chinese are 
playing a very, very big role there. And I think there is 
things that we can do proactively to take on this threat.
    So, getting towards a question, I suppose, and that is 
this: Chairman Camp mentioned earlier some of the economic 
components to the intellectual property issues, and Mr. 
McDermott alluded to this a minute ago when he talked about 
Microsoft.
    Microsoft's CEO came in to see me several months ago 
basically laying out the same thing, and these numbers are 
staggering. The U.S. International Trade Commission recently 
conducted an analysis that would determine the economic impact 
of IP protection in China if it were done the same as we do it 
in the U.S. It would increase sales by $21 billion and it would 
create 2.1 million jobs. Now, think about that. 2.1 million 
jobs in the U.S. created if China simply honored the same 
commitments that we have.
    What is the metric by which the administration is figuring 
whether it is succeeding or failing? Well, you can't answer 
that, because I used up all of your time. Maybe we could 
continue this exchange, because I think it is very important.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman. Thank you for having 
the hearing and thank you to both witnesses for being here.
    I am interested, Ambassador, specifically on some 
agricultural issues that are happening in this unlevel playing 
field relationship we have with the Chinese. A lot of ag goods 
face some pretty stiff barriers, arbitrary bans, ever-changing 
safety measures. Wine, in particular, which is very important 
to my State and my district, they face a 14 percent tariff for 
bottled wine, a 20 percent tariff on bulk, and that is on top 
of a 10 percent consumption tax and a 17 percent value added 
tax. So you add this all up, and it is about a 50 to 60 percent 
hit to the wine industry.
    In addition to that, these guys are still involved in some 
pretty dishonest practices. They continue to use this ``Nava 
Valley'' label. About every week I get complaints from people 
where they have some sort of California designation on their 
wine labels. They drain California wine bottles and refill them 
with their wine. They take our bulk wine and water it down with 
wine that they have.
    Now, I know you just got back from a round of trying to 
negotiate some better dealings with the beef guys. And I want 
to know what you are going to do to help improve all of the ag 
trade issues, specifically wine, and what are you going to do 
to get them to quit violating the law and ignoring of the rules 
that are in place. And I am talking about this wine stuff that 
I have talked to you guys about, I have talked to the past 
administration about, and it just seems to be getting worse all 
the time.
    Mr. MARANTIS. Thanks, Mr. Thompson. Agriculture is an 
interesting story. On the one hand, our exports are growing 
phenomenally. China has just become our number one export 
market.
    Mr. THOMPSON. I am not interested. We can stipulate all 
that. We covered it in the past. I am talking about 
specifically these issues.
    Mr. MARANTIS. We have serious problems with China on 
agriculture, on sanitary and phytosanitary measures, and on 
opaque, non-transparent measures put in place that either block 
our exports or somehow tamper with them.
    Ambassador Siddiqui, who is my colleague at USTR, the chief 
agriculture negotiator, and USDA's Acting Under Secretary 
Michael Scuse were in Beijing last week to go through the range 
of issues that we have with China on the agriculture front. I 
will get back to you to let you know on the wine issues 
specifically that you raised on where we are with them.
    Mr. THOMPSON. Please do. I would like to know specifically 
about those two issues. One of them is just a blatant violation 
of the rules and the law, and I would like to know how we are 
going to monitor this and make sure it stops, because it has 
been an ongoing issue. It is not just with this administration, 
but with the past administration as well.
    The other question I have is the solar industry in this 
country has just filed an illegal subsidies case against China. 
They are selling solar cells here at below market prices, and I 
am told it is because of very, very lucrative Chinese grants, 
discounted raw materials, discounted costs on prices on land, 
power, water and export assistance levels that are far beyond 
what the WTO allows. And this is technology that we developed 
and invented here in our country, and yet we are just getting 
overrun by Chinese imports. Our American businesses and our 
renewable energy industry is going to do nothing but suffer 
under the weight of this very unfair and weighted practice.
    What can we do to deal with this and what are the pro specs 
of this case moving forward?
    Mr. MARANTIS. On green subsidies specifically, I think one 
of the problems we are having is lack of transparency in being 
able to actually know what specific kinds of subsidies China is 
providing. That is why at the WTO, earlier this month, we filed 
a counter-notification to basically call China out on over 200 
subsidies that it is providing, many of which are in the green 
technology sector. That will help us to be able to assess the 
legality, the WTO consistency, of these measures, and help 
determine what steps we should take to address these very real 
problems.
    Mr. THOMPSON. And you will keep the committee posted so we 
know what we can do, because this is an emerging technology 
that is really important in getting our economy going and we 
really need to take whatever efforts we can to make sure this 
is resolved.
    Mr. MARANTIS. Absolutely, Mr. Thompson.
    Chairman CAMP. Thank you. Mr. Gerlach is recognized.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Ambassador, going through your testimony, I wanted to 
really ask you a few more specific questions based on what you 
have in here, and you were very good about outlining what you 
call five key challenges to our trade relationship with China, 
including intellectual property theft, indigenous innovation 
policy problems, China's subsidies of their industries, the 
Chinese ban on foreign investment for state-owned enterprises, 
and barriers to ag imports. All of those are very important 
problems we have.
    How are you measuring the frequency or the quantity or the 
number of unfair trading activities in those various areas over 
a specific period of time? How are you measuring that in all of 
those areas?
    Mr. MARANTIS. The way we measure it is really in 
consultation with you all as well as our stakeholders, who will 
help us identify and prioritize the problems that they are 
facing in the variety of baskets.
    Mr. GERLACH. Do you get individual complaints? Can a 
company that faces some problem or some barrier fill out a form 
at your office complaining about a certain problem they have 
experienced, and do you collect those complaints, and if so, 
how do you investigate the validity of those complaints?
    Mr. MARANTIS. It is done in close cooperation with other 
agencies. Companies, SMEs, labor unions, business associations 
will raise problems with us, with the Commerce Department, with 
the Treasury Department, and we will work together on an 
interagency basis to be able to identify the specific issue and 
then determine what are our best steps to do so.
    Mr. GERLACH. How many complaints or problems have been 
identified to date relative to intellectual property?
    Mr. MARANTIS. There are a lot.
    Mr. GERLACH. How many? 100? 1,000?
    Mr. MARANTIS. I would say they would fall into five 
categories: software legalization, Internet piracy, 
counterfeiting, trade secrets, and then there is sort of the 
basket of other--that mainly our IP complaints will fit into.
    Mr. GERLACH. And how many of those would you estimate exist 
in terms of complaints, all those total?
    Mr. MARANTIS. How many specifically?
    Mr. GERLACH. Yes.
    Mr. MARANTIS. I don't know, Mr. Gerlach. A lot. There are 
really serious concerns in each one of those areas. On trade 
secrets----
    Mr. GERLACH. You certainly may not be prepared with a 
specific number and I appreciate that. Can you give me a 
ballpark estimate? More than five, more than 100, more than 
1,000? How many of those kind of complaints, intellectual 
property, are out there?
    Mr. MARANTIS. Oh, I think again it will range, as for the 
different problem, on the software side, there are huge 
problems with respect to piracy. On the trade secret side, we 
have heard----
    Mr. GERLACH. How about how many? Can you estimate how many?
    Mr. MARANTIS. I would say upwards of 50.
    Mr. GERLACH. How about in the indigenous innovation policy 
category?
    Mr. MARANTIS. The indigenous innovation policy category, 
the good news there is that we have rolled back a lot of the 
new problems, and the new problem that is coming up in 
indigenous innovation that we really need to address this year 
is with respect to electric cars.
    Mr. GERLACH. Okay. How about in their subsidy policies and 
in their ban of foreign investment and in the agricultural 
import area. How many problems are existing that you are 
investigating and trying to get a handle on?
    Mr. MARANTIS. Sure. On subsidies, our counter-notification 
identified 200-plus subsidies that we want more information on 
from the Chinese to determine what our next step should be. On 
agriculture, the key problems that we face are in the area, I 
would say, of beef, pork, poultry----
    Mr. GERLACH. California wine.
    Mr. MARANTIS. Apples, strawberries, wine.
    Mr. GERLACH. The reason I asked for some broad estimate of 
all this, because I also notice in your testimony that to date 
we have only, as a country, brought 12 complaints, WTO 
complaints against China, and all of these complaints being 
raised, from Members of Congress to those in the private 
sector, to all the work you are doing in your agency and all 
the other agencies, a total of 12, total?
    Mr. MARANTIS. The WTO is one way that we resolve problems. 
We also resolve a vast amount of problems through the JCCT and 
the S&ED. So there are different tools that we use depending on 
what the problem is. In the WTO, our disputes that we have 
filed usually go at strategic and systemic issues, but we also 
try to solve the nitty-gritty problems that our businesses will 
have through the JCCT.
    Mr. GERLACH. Well, you are making efforts obviously to do 
that, but it sounds as if those efforts may not be as 
productive as they ought to be when you continue to get the 
number of complains that you get. And then ultimately to really 
bring this to a high level of adjudication in the WTO, our 
country has only filed 12 complaints since that organization 
was founded. It doesn't seem like a lot of aggressive action on 
our part.
    Chairman CAMP. Thank you.
    Mr. Pascrell is recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. Chairman, it has become quite obvious if you listen to 
both sides of the aisle that we are pretty much in agreement. 
Just check the questions that have been asked. I want to 
identify myself and associate myself with the gentleman from 
Pennsylvania who just asked his questions. It is pretty 
difficult to get answers. But it was no different 10 years ago, 
8 years ago, 6 years ago on these issues. So if you keep it up 
in the air, you don't know the specific answer, nobody knows 
what is really going on.
    But I think we can conclude, I don't think this is 
hyperbole, and I want to thank the panelists for being here 
today, that we have become China apologists. And I remember the 
issue when I first came into the Congress when Chris Smith, my 
brother from New Jersey, a Republican, was pursuing the path of 
intolerance of religious differences in China. Some people paid 
attention. Some people did not. Administrations on both sides 
were a little reluctant to be difficult or tough, say a lot of 
tough words. But as you pointed out in your questioning, action 
is more important.
    Secondly, I think that both sides of the aisle also, and 
correct me if I am wrong, believe that we need to reestablish 
Article I, Section 8. The rush to get into free trade 
agreements has minimized the power of the House of 
Representatives, not only the Ways and Means Committee, but it 
has minimized our power in trade deals. It is interesting when 
you see people who want to be fundamentalists about the 
Constitution of the United States, when it comes to trade, all 
of a sudden they have amnesia, or maybe something else.
    So this is serious. This is a very important problem. We 
are dealing with a county that subsidizes many of its 
industries.
    Last evening, last evening, Mr. Marantis, a friend of mine 
who is in the marble business in New Jersey, Paterson, New 
Jersey, one T, called me and said something that he had told me 
at least 10 times in the last 6 or 7 years, and that is that he 
can no longer survive in his business. He can no longer compete 
with China. He has a good product. He tried everything 
possible. So what I have concluded, and maybe I am wrong, maybe 
I am right, it doesn't matter who the President is, not only 
doesn't the Congress control trade agreements, the President 
doesn't control trade agreements.
    It is very interesting in the Chamber of Commerce, and my 
Chambers of Commerce and I get along very well, they are making 
the decisions about the big cats, and those small businesses 
which are across the landscape of the greatest country of the 
world have suffered the consequences. Suffered.
    In fact, the trade deficit, I have heard you both say, 
things are getting better. Well, we had, in August, a $29 
billion trade deficit, the highest we have ever had. And if you 
go back to testimony in the past, you will hear the same kind 
of things, things are getting better. Things are getting 
wonderful. We are making changes. That is all we have heard. 
Our trade deficit with China has ballooned from $84 billion in 
2001 to $278 billion, and we are losing jobs continually.
    Now, this idea about getting our product into China sounds 
wonderful, but if you don't change the currency and keep up 
with the times, it means nothing. And you were asked 
specifically from people from both sides of the aisle specific 
questions, and all I heard was ``I share your frustration.''
    I am not frustrated, I want you to know that, and you are 
not going to get me frustrated. We are out of excuses. We 
haven't sent this legislation, we haven't sent that legislation 
to the President.
    Let me ask you this question, Ms. Brainard--Dr. Brainard--I 
am sorry. How fast do you believe our exports to China could 
have grown had Chinese consumers, Chinese consumers, had the 
increased international purchasing power that would come with 
an accurately valued currency? I want to hear this. Or do you 
simply want to say you share my frustration? I don't have any 
frustration. I asked a question.
    Mr. HERGER [presiding]. The gentleman's time has expired, 
but I would request if the Under Secretary could respond in 
writing to the gentleman?
    Ms. BERKLEY. Mr. Chairman, are we down to 3 minutes apiece?
    Mr. HERGER. No, we are at 5 minutes, and I think the 
gentleman's time went about 25 seconds over.
    Mr. PASCRELL. I was just asking could I get a response?
    Mr. HERGER. Could you respond in writing to the gentleman 
and to the committee, please.
    Mr. PASCRELL. She can't tell us verbally?
    Mr. HERGER. Pardon?
    Mr. PASCRELL. She can't respond now?
    Mr. HERGER. Each one of us has 5 minutes, and you went 
about 5 minutes and 20 seconds. So we are trying to hold it 
down so each member having the same amount of time.
    The gentleman, Mr. Buchanan, is recognized for 5 minutes.
    Mr. BUCHANAN. I want to thank Chairman Camp and our 
witnesses for being here today.
    I represent Florida, and we are very, very excited in 
Florida about the past three trade agreements. There might be 
some question--it was bipartisan, but there might be some 
people that feel it was fair. In general, looking at it myself 
and obviously in Florida, a lot of people thought they were 
pretty fair in terms of what each country exported to each 
other. I think there is just a general feeling, I have seen it 
for a lot of years. I was in China back 6-7 years ago, in 
Beijing, but there is just a general feeling, that sense of 
free trade, but it is not fair. It is not just here on the 
panel.
    I have been in business 30 years. I have heard it from a 
lot of businesses all over the country. I did a town hall, my 
last town hall a couple of days ago, and it gets brought up. 
This sense of there is not the fairness, that we are being 
played as a country, a lot of people feel that strong about it, 
and I think it is something we have to get a lot tougher on.
    We touched on the idea of intellectual properties, and 
someone made that point, and that is what I was going to say. I 
was there with the U.S. Chamber, the CEO at the time, he is 
still CEO today, and we were there 7 or 8 years ago. We were 
talking about intellectual property back then and it was 
gigantic problem. So this isn't a Democratic administration or 
a Republican, we just have not done a very good job, in 
general, of getting this thing where it gets some sense of 
fairness.
    I can just tell you, it is not, like I said, just the 
business community or just Members of Congress. Everybody sees 
it other than we just don't seem to deal with it and take any 
action. And as I mentioned, my colleague mentioned earlier, if 
we were able to equalize that a little bit just on the 
intellectual properties, we are talking about 2 million more 
jobs in America, and I think the number is $67 billion 
additional in exports in terms of the report that came out of 
The New York Times.
    One question that got brought up, and I don't know if it 
was answered, because I remember leaving that room and as an 
American, I really didn't feel very good about when we were 
pressing them on some of the issues that got brought up today, 
intellectual property and other things. We were with the vice 
premier in China at the time, and someone looked out as we were 
walking out, we were pressing them pretty good on behalf of the 
U.S. Chamber and the business community, and he said, well, we 
are buying your debt.
    And I guess one of the questions I have is how much of a 
factor is the fact that we owe $1.6 trillion to the Chinese in 
terms of our ability to get tougher on some of these issues? I 
know you touched on it, but I would like to hear it from Madam 
Secretary, your feeling. As this debt continues to grow there 
and become a bigger concern, how much of a problem is that in 
terms of negotiating with the Chinese? We can start with you, 
Madam Secretary.
    Ms. BRAINARD. Let me just say, we are pursuing our strong 
interest in a faster rate of appreciation exchange rate in a 
very clear eyed and direct manner and will continue to do so.
    Our Treasury securities, very attractive to holders in this 
country, holders all around the world. As you know, deepest, 
most liquid financial markets in the world. And, you know, over 
the medium term, obviously as a country, we are going to face 
this challenge that we need to start grappling with now of 
living within our means and seeing our debt-to-GDP fall. And 
that is why the President has put forward some proposals. We 
have the supercommittee meeting right now to come forward with 
some proposals on a bipartisan--those are absolutely critical 
things to do.
    Mr. BUCHANAN. Let me ask you, because we are limited on 
time. Ambassador, would you like to add? How much of a factor 
is that? Does that impede our ability to get tougher on 
negotiation and get the sense of fairness? How big of a factor 
do we owe to the Chinese $1.6 trillion?
    Mr. MARANTIS. Mr. Buchanan, enforcement is our number one 
priority. The concerns are broad, and I know that there is 
tremendous frustration on this committee. We share it as well. 
We do everything that we can with the tools that we have in 
front of us to address the challenges. The challenges in IP, as 
you point out, are vast. Yes, we are making progress. No, it is 
not enough. We have got to continue pushing and pushing and 
pushing at every level, and we will continue to do so.
    Mr. BUCHANAN. And Madam Secretary, what can the Congress do 
to help you be more successful quicker? I think that a lot of 
people just feel like there is not enough progress being made. 
These deficits continue to skyrocket. Everybody is concerned 
about that. And I guess my time has expired. I yield back.
    Mr. HERGER. Mr. Blumenauer is recognized for 5 minutes.
    Mr. BLUMENAUER. Thank you very much, Mr. Chairman.
    Your words are echoing in my ears. I love the fact that 
enforcement is your number one priority. That is, in fact, why 
I supported putting China in the WTO so that we would be able 
to actually fight to have a level playing field.
    Now, I must admit that I am mystified that we are still--
your answer to my friend Mr. Stark's question about how we are 
shipping hundreds of millions of dollars of business to the 
Chinese, that they are able to use, evidently, the procurement 
regime when they are not a signatory.
    Now, can you tell me exactly why we have to give them 
special rights when they are not a signatory to the agreement? 
Which, if memory serves me correctly, they promised to promptly 
ratify. Why do we have to give reciprocity when they are not 
doing what they said they would do?
    Mr. MARANTIS. You are correct, Mr. Blumenauer. We do not 
have obligation towards China with respect to government 
procurement. And we won't until they join the government 
procurement agreement. It is in our interest that they join it 
as quickly as possible so that they don't discriminate against 
us and we have access to their huge procurement market. But no, 
we don't have obligations.
    Mr. BLUMENAUER. So we could deny them contracts like the 
Bay Bridge?
    Mr. MARANTIS. Again, we don't have obligations to China. We 
don't have a nondiscrimination obligations to China for 
government procurement.
    Mr. BLUMENAUER. I would like to just have, if I could, some 
sort of written assessment of where exactly we are in this 
drama that has been going on for years which they promised they 
would do, and then get a sense of what we could do to just deny 
them access to government projects unless and until they are a 
signatory. But since I am a little slow on the uptake on this, 
I would benefit by having that in writing.
    Mr. MARANTIS. We will get that for you, Mr. Blumenauer. 
China promised in 2001 that they would join the government 
procurement agreement as soon as possible. It is 10 years 
later. We are still waiting for China's second revised offer, 
which it promised by the end of the year. We have to get its 
accession to the government procurement agreement right, and 
that means coverage of sub-central entities and----
    Mr. BLUMENAUER. I am looking for it in writing. What I 
would like to have in there is what prevents, or how can we 
deny them access to government procurement in this country 
unless and until they do what they said they would do 10 years 
ago.
    Ms. BRAINARD. Can I just note that, as I was saying 
earlier, under the Buy American provisions in the American 
Recovery Act, in fact, they were not eligible because they are 
not signatories. I think that the bridge in question was built 
without Federal funds, and that explains the difference there. 
But we will look into that and get you specifics on that. But 
under Buy America, because they are not signatories, they are 
disadvantaged. There is no reciprocity there.
    Mr. BLUMENAUER. The bridge in question is linked to Federal 
investments. And I think we ought to look a little more broadly 
at who benefits and who loses from this so that we don't have 
some people at the local level doing things on the cheap that 
actually disadvantages American workers and ultimately 
disadvantages China because everybody is going to be better off 
if we play under the rules.
    But I would like to turn to one other area because we are 
watching an awful lot of effort--I mean, would identify very 
strongly with my friend Mr. Thompson's observations about the 
solar industry. But there is one area that I am particularly 
interested in pursuing, and that is how we give you appropriate 
resources so it doesn't fall to an individual union or business 
to do something that appears to me to be the responsibility of 
government to make sure that our trade laws are enforced. I 
noticed with interest an amendment that added a little bit of 
money to help do that. But can you give me a sense of what do 
we need to do so that you can, in fact, have the resources and 
we don't put this burden on a union for a company?
    Mr. MARANTIS. Thanks, Mr. Blumenauer. You are absolutely 
right. We need to make sure that we have adequate resources to 
address the really tough challenges that we face in China. I 
think the President's budget reflects that. And what we do, as 
you know, small little USTR is we work to leverage our 
resources with other agencies. We work very closely with the 
State Department, with the Treasury Department, with the USDA, 
with the Department of Commerce, to try to maximize our ability 
to solve problems for America's workers, service providers, 
farmers, ranchers et cetera.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. This is one area 
that I hope the committee's oversight could extend to make 
sure--you know, the notion that it is a little, tiny USTR. 
Well, the Federal Government is bigger than any company or 
union. And I think we need to make sure that the resources are 
there to make sure that these trade laws are in place.
    Mr. HERGER. I thank the gentleman. The gentlelady from 
Kansas, Ms. Jenkins, is recognized for 5 minutes.
    Ms. JENKINS. Thank you Mr. Chair. And I thank Chairman Camp 
for having you all in today. Thanks for being here.
    Currently there is a 50 percent cap on foreign ownership 
and life insurance in China. Life insurers. Though the cap is 
not inconsistent with China's WTO commitments, by lifting the 
foreign direct investment cap, companies can more easily bring 
in capital to hire workers, deploy world-class service 
platforms, and invest in Chinese capital markets. Lifting a cap 
also would allow foreign insurers to increase their capital in 
a life insurer in China, even if a Chinese partner were not in 
a position to increase its own capital.
    Has the Chinese Government shown any sign that they would 
be willing to raise the FDI cap in life insurance? And is 
lifting that cap a priority for the U.S. Government?
    Mr. MARANTIS. Thank you for raising that. We are frustrated 
with the remaining restrictions that China imposes in the 
foreign investor sector. Insurance is one important area. China 
recently issued its foreign investment catalog, and we were 
very disappointed that it didn't go farther in lifting many of 
these restrictions. We work together in the context of our 
investment forum with China. We have an insurance dialogue with 
China and we have our JCCT where we push exactly the issues, 
Ms. Jenkins, that you raised so that we can make progress.
    Ms. JENKINS. Thank you. Madam Secretary?
    Ms. BRAINARD. I would just say that life insurance is one 
particularly egregious example. Of course, you are right, that 
this is their WTO commitment. But we are pushing them across 
financial services to go beyond their WTO commitments. And you 
know, they have said that they want to open up their services 
sector, expand it. We have the strongest, most competitive 
financial services insurance providers in the world. And so we 
are going to keep pushing really hard on these equity caps.
    Ms. JENKINS. Thank you. Along that same line, at the 
conclusion of the Strategic and Economic Dialogue back in May, 
China pledged to study and push forward the opening of the 
mandatory third-party liability auto insurance market. And 
despite this public commitment, we have heard nothing about the 
issue since the S&ED. As you know, China is now the world's 
largest automobile market. Liability insurance for drivers is 
mandated, but it remains closed to non?Chinese companies. What 
steps have the Chinese taken towards fulfilling this 
commitment? And what metrics is the U.S. Government using to 
evaluate this process?
    Ms. BRAINARD. The press reporting is that the China 
Insurance Regulatory Commission has actually put forward a 
proposal to follow through on that commitment to the State 
Council. We haven't seen it yet. We are obviously going to 
follow up and try to get a copy of that as soon as we can. But 
we will continue to raise it in every bilateral discussion we 
have. And obviously, this will be prominent also in the JCCT.
    Ms. JENKINS. Okay. And China's 12th 5-year plan calls for a 
4 percent growth in services GDP over 5 years to 47 percent of 
the total GDP. Mr. Ambassador, I think you mentioned that; 
however, in China's draft foreign investment catalog, there was 
very little in the way of service investment liberalization. Of 
the 32 industries listed in that encouraged catalog, only three 
are directly related to investment in services. And a few 
aspects of those services industries included in the encouraged 
list are new to the 2011 catalog from the previous 2007 
catalog.
    Recognizing that U.S. economic growth and domestic job 
growth rely in significant measure on access to key 
international service markets, including China's, what can the 
U.S. Government do to encourage China to permit more U.S. 
investment in its domestic services industry?
    Mr. MARANTIS. One of the positives in their revised catalog 
was their lifting of ownership restrictions for hospital and 
clinics. And that was a big advance. But they have not gone 
nearly as far as we want them to go in the area of service 
sector liberalization. It is an important priority for us 
across sectors, whether it is financial services, express 
delivery, or telecom. This is one of the issues, one of the 
many issues, that we continue to press for more progress--both 
on the ability of our service suppliers to supply services from 
here to China, as well as our service suppliers to be able to 
invest in China with a majority-owned ownership structure that 
supplies services in that market.
    Ms. JENKINS. Thank you. I yield back.
    Mr. HERGER. The gentlelady from Nevada, Ms. Berkley, is 
recognized for 5 minutes.
    Ms. BERKLEY. Thank you, Mr. Chairman. And thank you both 
for being here. We appreciate it. The unemployed workers in my 
State of Nevada can't afford for Washington to continue to sit 
on its hands, especially in the face of the illegal trade 
tactics of the Chinese government. This is fairly simple to me. 
The unfair practices of the Chinese government are cheating 
American workers out of their jobs. Since 2001, just by the 
manipulation of their currency, that has cost approximately 
$2.8 million American jobs. In my home State of Nevada, who has 
been hit particularly hard by our economic recession, we have 
lost nearly 15,000 jobs due to the Chinese currency 
manipulation. That is unacceptable. My State has the highest 
unemployment rate in the Nation.
    Every day, I hear from people who say they have never 
missed a day of work in their lives, yet they have lost their 
jobs and now they are losing their homes and they are looking 
to us for help. They need our country's leaders to focus every 
day on job creation and getting the economy back on track. That 
means to me that we have to fight against policies that 
continue to shift good-paying American jobs overseas, that 
continue to harm our American workers. I call on our leadership 
in Congress to drop its opposition to closing taxpayer-funded 
loopholes that encourage corporations to ship American jobs 
overseas. That is not enough. We all need to fight the Chinese 
government's unfair tactics that are cheating American workers 
out of their jobs.
    The Chinese government is not just supporting their Chinese 
businesses. They own them. They are them. And they are 
manipulating their currency to help the companies that they 
control to the extreme disadvantage of American corporations 
and businesses. The idea that we are somehow afraid of a trade 
war with the Chinese is a joke to me. We are already in a trade 
war with the Chinese, and I am afraid that we are losing this 
war. We need to stand up on behalf of the unemployed workers in 
Nevada and the Nation as a whole and say, Enough is enough. We 
can't do this anymore. You can't do this anymore. And this is 
why I urge the Congress and our administration, who you are 
here representing, to change course, stand up to the Chinese 
government on behalf of American workers and American 
businesses. I think we need to stop worrying about what the 
Chinese government's reaction is going to be, stop standing up 
for the Chinese government, and start fighting to create jobs 
for American workers here and home.
    The U.S. has lost $23 billion, estimated, on pirated 
software and intellectual property theft on counterfeit 
products by the Chinese. We have lost countless billions more 
on their currency manipulation and countless billions more on 
trade distorting measures that are not contained in the other 
two. You said earlier that you are using all of the tools 
available to you to fight for American workers, to fight for 
our economy, to stand up to the Chinese. I think there is a 
common belief that we are not doing enough. What tools do you 
need from us that can help you, that can add to your arsenal so 
that you can protect our economy and the American workers and 
businesses from the overt illegal tactics of the Chinese 
government? What can we do to help you to help us?
    Mr. MARANTIS. Thank you. Let me give you a really concrete 
example of one of the tools that we have and how we have used 
it.
    Ms. BERKLEY. No. I want to know what we can do to give you 
more tools that you can use to actually do the job.
    Mr. MARANTIS. I think the cooperation that we have--this 
hearing is an example of something that is very important. It 
is very important for our counterparts in China to hear that 
Congress and the administration are working hand in hand to 
address the concerns, whether it is on IP, whether it is on 
subsidization. Oftentimes I think that our counterparts don't--
they don't see the fact that the Congress and the 
administration have to work in very close consultation and 
cooperation to actually make progress. And that is why we are 
here today and that is why we appreciate that you are having 
this hearing today, because it is important also for our 
Chinese counterparts to hear your concerns so that when we are 
in front of them, we are doing it on behalf of you.
    Ms. BERKLEY. With all due respect, Mr. Ambassador, I have 
been here in Congress 13 years. For a number of those years and 
in this very hearing room, they have heard us loud and clear. I 
think at this point, they think talk is cheap and that we are 
not going to enforce appropriate trade policies and rules. What 
do you need from us to make them listen and understand that we 
mean business? And that is why I like that Senate bill.
    Mr. HERGER. The gentlelady's time has expired. Mr. Paulsen 
is recognized for 5 minutes.
    Mr. PAULSEN. Thank you. And thank you for being here to 
testify and answer questions.
    I just want to follow up a little bit on the line of 
questioning we have already had. We know China is the third 
largest export market. That is where the opportunities are for 
American companies to do well. But it is pretty clear that the 
Chinese government is not taking seriously its responsibility 
of trade freely and trade fairly. And it is our hardworking 
American innovators that cannot make the most of the 
opportunities to engage in the opportunity in China to trade 
because of these regulatory obstacles, the subsidies, the IP 
protection rights that are not protected, indigenous 
innovation, the service sector restrictions, the currency 
misalignment, and on and on and on.
    I do have a question that is directed at the medical device 
industry. The medical device industry is very concerned about 
the price controls that are being proposed by the Chinese 
government. And this is an industry where we are still a net 
exporter, where there is a lot of innovation happening here in 
the United States. And what do you view the actions that we 
will take to make sure that we will stave off, I guess, the 
Chinese government's proposal in this area that is going to 
strictly control the pricing of imported medical devices? This 
includes devices that are manufactured and invented and made 
here in the United States. Especially since these same devices 
in China would be subject to less stringent price controls 
under this proposed policy. Mr. Ambassador.
    Mr. MARANTIS. Thanks, Mr. Paulsen. We have two, I think, 
serious issues on the medical device front. You raise one and 
that is price controls. Over the past number of years, China 
has been poised to impose price controls on medical devices. We 
have been successful over the past 5 years in staving them off. 
In August, China released a proposal that suggested that it 
will soon implement price controls in the sector. We are 
working very hard to encourage the Chinese government to put a 
pause on that so that they don't do so. The other issue that we 
are working on in the medical device sector has to do with 
redundant regulatory requirements. Right now, China is 
requiring that in order to get approval in China's market for a 
new medical device it has to have prior approval for from our 
own FDA. That causes unreasonable delay in our view. It is 
another priority area that we are working on in the medical 
device area.
    Mr. PAULSEN. Ms. Secretary, any further comment on that?
    Ms. BRAINARD. This is an area that the USTR takes the lead, 
but we work across the administration in support of this short 
list of priorities.
    Mr. PAULSEN. Mr. Ambassador, do you feel that you have the 
tools necessary to focus attention on those products? There has 
been a 5-year delay. Now there has been a new proposal in 
August and that you are hoping to have them pause again. But do 
you feel that you have the tools necessary to make sure that we 
are getting their attention on this?
    Mr. MARANTIS. We, together with the Commerce Department, 
have been very vigorous in terms of medical--on the medical 
device front. We just had an interaction with our counterpart 
just the other week. Under Secretary Sanchez and I both pushed 
this issue with our Chinese counterparts, and we will continue 
to do so.
    Mr. PAULSEN. Just one follow-up question. You have heard, I 
think, increasing concerns from the American business community 
that supports export opportunities. But they are concerned 
about backtracking on the past improvements that we have made 
with China opening up its economy. Do you believe that China 
has been backtracking on the improvements that it had made once 
in opening up its economy?
    Mr. MARANTIS. I think our general view is, after China 
joined the WTO, there was a real push in China to implement its 
WTO obligations. I think things have slowed down, and we are 
facing new systemic challenges in China that we haven't faced 
before. That is why we are trying to target our WTO disputes on 
key strategic and systemic issues like our export restraints 
case or like the creation of an apparent homegrown monopoly to 
provide electronic payment services. So I think the issues have 
become a lot more complex over the years. But we are again, 
moving on all cylinders to fight those.
    Mr. PAULSEN. Thank you. I yield back, Mr. Chairman.
    Mr. HERGER. The gentleman yields back.
    Mr. Berg from North Dakota is recognized for 5 minutes.
    Mr. BERG. Thank you, Mr. Chairman. I, too, want to thank 
the panel for being here. Obviously, this has been an 
interesting hearing with a lot of concerns, a lot of passion. I 
wanted to really focus in on the IP.
    Recently, the International Trade Commission had a report 
and it really provided some pretty compelling evidence. They 
found that the IP infringement in China costs as much as $100 
billion in sales and exports, as we heard earlier here, over 2 
million jobs in the U.S.
    Really, my question gets to, what action are we taking with 
this information? I guess that is my first question.
    Mr. MARANTIS. So we have been moving, using all of our 
tools to make progress. Let me give you a very concrete 
example. We have something that we issue at USTR called the 
notorious markets report which identifies problem, counterfeit, 
and pirate markets either online or physically. Following the 
release of last year's notorious markets report in February, 
which identified Baidu, which is China's big Internet search 
engine as providing links to pirated Web sites, Baidu entered 
into a licensing deal with U.S. music labels and is now 
offering legal content on its site. That was a huge advance. 
And it is an example of how we are trying to use the various 
tools that we have at our disposal creatively to address real 
problems.
    Mr. BERG. I guess, Mr. Chairman, just to follow up, do you 
have all the tools necessary to address these issues? Or having 
worked through this, there are some gaps?
    Mr. MARANTIS. I mean, I guess the way I would answer that 
is, we really need resources to address the very real problems 
we have with China. The President's budget reflects those 
priorities, and that is why we work so closely with our 
interagency colleagues and our stakeholders and the business 
community and our labor unions to make sure that we are able to 
bring all of our resources to bear and make maximum use of them 
to address the very real problems we face.
    Mr. BERG. So kind of more specifically then, you are 
feeling you have the accurate tools to address this?
    Mr. MARANTIS. I think we have a lot of important tools that 
Congress has given us over the years, and we work to make 
maximum use of them.
    Mr. BERG. Let me ask it this way: If there were one or two 
other things that you would like, what would that be?
    Mr. MARANTIS. I would like for us to be able to continue to 
make more and more progress on these issues. But I do think we 
have adequate tools to address the concerns-whether it is in 
the IP space, or whether it is in the subsidy space.
    Mr. BERG. Mr. Chairman, I will yield back.
    Mr. HERGER. I thank the gentleman. The gentleman yields 
back.
    The gentleman from New York, Mr. Crowley, is recognized for 
5 minutes.
    Mr. CROWLEY. Mr. Chairman, I yield to the gentleman from 
New Jersey.
    Mr. PASCRELL. Thank you, Mr. Crowley. Thank you, Mr. 
Chairman.
    Mr. Chairman, I want to bring to your attention as well as 
Under Secretary Brainard and Ambassador Marantis, who have been 
generous with their time today, that on November 15, a report 
will be forthcoming from an organization that was created by 
the Congress of the United States 10 years ago. That 
organization is the U.S.-China Economic and Security Review 
Commission. They report directly to the Congress of the United 
States, a creature of the Congress.
    Last year in their report, very specific about what was 
recommended to the Congress to do in responding to the currency 
problem. That is a report that re-establishes again and again 
the significance of the Congress under Article I, Section 8 of 
what our duties and responsibilities are. And we have to look 
into how currency and export subsidies are hurting the workers 
in this country. Time and time again, that report has been 
pretty specific.
    I have one other final question, if I might get this in. 
Does Customs need more tools to properly deal with the problem 
of Chinese goods being transshipped to South Korea? Pretty 
specific. 10 seconds.
    Mr. MARANTIS. We work very closely with the Department of 
Homeland Security on this issue, to make sure that the issue 
that you raised, Mr. Pascrell, that there is no opportunity for 
transshipment for goods from China through South Korea has been 
addressed.
    Mr. CROWLEY. Reclaiming my time, Mr. Chairman. That is a 
New Jersey minute.
    Mr. Chairman, I appreciate today's hearing. But you know, 
this is the first hearing we have had in 10 months on China in 
this committee. The first hearing we have had. I know we are a 
legislative mill here. We have passed and enacted into law less 
than 50 bills and we haven't had time to discuss what I think 
is probably the most critical relationship in the world today, 
the relationship between the United States and China.
    The fact is, some of our commercial relationships to China 
are beneficial to America. Our services exports to China are in 
a surplus and that is a good thing. But our overall trade 
relationship with China needs to continue to be rebalanced.
    One of the frustrations we have here on the committee is, 
we constantly hear from American companies that are getting the 
runaround from China's authorities. The previous administration 
under President Bush did not take serious action, I don't 
believe, whatsoever, to defend American industries when it came 
to China. Even when there was evidence that American companies 
weren't getting a fair shake, there just wasn't a sense of 
urgency about trade enforcement. I use the tire dumping as an 
example. And I want to thank this administration for at least 
moving in a strong way towards enforcement with China.
    Now Ambassador Kirk has mentioned to us that that they have 
already run out of funds when it comes to translative services 
with China. Is that correct, Ambassador?
    Mr. MARANTIS. I am not sure, Mr. Crowley. I would have to 
check.
    Mr. CROWLEY. Well, if you could find out for us, because I 
think that is critical for this committee to understand and for 
the Congress to understand that our USTR needs to have every 
tool in its quiver so that it can address the issues of 
challenging the Chinese when they go off?track and hold them 
accountable at the WTO. And I think that is a critical and 
very, very important point. And if we can get back from the 
administration, we need to help you help us and the American 
people by giving you the tools you need to fight this.
    Now Ambassador Marantis, I was very pleased USTR challenged 
China's prohibition on foreign suppliers for processing payment 
card transactions in China in order to create what is known as 
a national champion. Can you discuss why this case violates 
China's WTO commitments and what the status of that case is, if 
you can briefly?
    Mr. MARANTIS. This is a very important case because it is 
emblematic of concerns we see in China generally-its efforts to 
create a homegrown national champion, a monopoly to supply a 
particular service. We have worked really hard in developing 
and in bringing the electronic payments case. It is now before 
a WTO panel, and we would expect a ruling from the WTO some 
time next year.
    Mr. CROWLEY. I thank the gentleman.
    Mr. Chairman, I think it is important--coming back to the 
original point. I know my time is coming to an end--that we 
need to help this administration. They are confronting enormous 
challenges when it comes to making sure and ensuring that the 
Chinese are playing in a fair way when it comes to the WTO and 
the commitments that they have made.
    I didn't support WTO for China nor do I support PNTR for 
China. But now that we are in the situation, we need to make 
sure that our administration, regardless of party affiliation, 
has the resources and tools, including translative services, so 
that we can do this in a fair and balanced way and one that 
helps to benefit the American people. I thank you, and I yield 
back the balance of my time.
    Mr. HERGER. The gentleman yields back. And I would say that 
I agree with the gentleman from New York. I know Chairman Camp 
does. And I might mention, just as a quick response, we have 
had Ambassador Kirk here. We have had Secretary Geithner. We 
have had FTAs so trade has come up numerous times here on this 
committee.
    With that, I yield 5 minutes to the gentlelady, Mrs. Black.
    Mrs. BLACK. Thank you, Mr. Chairman. Again, I thank both of 
you for being here today. I know you have had a lot of 
conversation about currency misalignment and subsidies and 
protecting IP, all of these are very important. But I want to 
turn our attention to something that hasn't been spoken about. 
And that is that China has been restraining exports on rare 
earth minerals to the United States and Japan. Of course, this 
type of action does raise serious concerns and issues 
underneath the WTO agreements.
    Just last week, China's largest rare earth producer 
suspended production of rare earth minerals for 1 month in a 
very transparent effort to maintain artificially high prices. 
The United States has worked well with all of our allies, in 
particular, Japan and Europe, to address this issue in the 
past, but this new action, of course, is very concerning. And 
if you could provide us an update on what is currently being 
done on this issue?
    Mr. MARANTIS. Yes. And we are very concerned about China's 
export restraint policy, which affects numerous raw materials, 
including rare earths. We have been cooperating very closely 
with other trading partners on this particular issue to raise 
it with the Chinese at the highest levels. We are raising this 
in the context of the JCCT. We are working very closely with 
third parties. And we are in the process right now of 
conducting some extensive research in an effort to consider 
next steps. On a separate track, we have a WTO case that we 
filed on export restraints. These don't affect rare earth 
specifically, but they affect other raw materials. We won that 
case before the WTO panel, and it is pending before the 
appellate body right now. And that is another example of a huge 
WTO challenge that tackles systemic problems that we face in 
our relationship with China. And export restraints is an 
example of that.
    Mrs. BLACK. Ms. Brainard, do you want to comment on that as 
well?
    Ms. BRAINARD. Just to agree with the importance of this 
issue and to say that it is something that has caught our 
attention from the very start. As Ambassador Marantis said, we 
have a cross?agency working group focusing on this issue. The 
WTO challenge I think was very significant. And more broadly, I 
think USTR has taken WTO enforcement actions very strategically 
in those areas where the judgment is that it will have the 
biggest overall impact in setting precedent for other barriers. 
So the win that we had in that area, I think, is extremely 
important and hopefully that will help accelerate progress on 
rare earths issue.
    Mrs. BLACK. Well, that was the second part of my question, 
so I appreciate your answering that. And from that, I take it 
that maybe we will be able to move quickly on this and actually 
be able to bring some resolution to what is going on here with 
our rare earth minerals. Do you feel that way, Ambassador?
    Mr. MARANTIS. This is a key priority for us. And as I 
mentioned, we are in the process of actively gathering facts so 
that we can consider what our next steps will be.
    Mrs. BLACK. Thank you. I yield back my time.
    Mr. MARANTIS. Thanks.
    Mr. HERGER. The gentlelady yields back. Mr. Marchant is 
recognized for 5 minutes.
    Mr. MARCHANT. Thank you, Mr. Chairman. As I travel around 
my district, one of the big subjects that comes up among my 
constituents is our trading relationship with China. The 
perception is that trade with China is a one-way street, with 
China sending hundreds of billions of dollars of goods and 
services to the United States and with us sending very little 
back.
    The general belief among my constituents is that China has 
more control of our trading environment and our economy than we 
have. My staff has done some research in the last few days and 
found out some very interesting things about the three counties 
that I represent. We got most of these figures from the U.S.-
China trading council. In Dallas, Denton, and Tarrant Counties, 
its estimated growth in exports to China has rose 454 percent 
in the last 10 years. In these three counties, the top exports 
to China in 2010 were $513 million in chemicals; manufacturing, 
$511 million; computers and electronics, $441 million; 
machinery, $215 million; and transportation equipment was $129 
million.
    How will the efforts of Congress to intervene in the 
valuation of the Chinese currency, how will that affect these 
exports that are coming out of my district into China? I would 
like for both of you to answer, please.
    Ms. BRAINARD. Well, Mr. Marchant, I think your district is 
fairly representative of many parts of the country that have 
seen double-digit growth in exports in just the last 2 years to 
China across a very wide range of sectors. And China, by many 
estimates, is expected to be the biggest, fastest growing 
source of demand in the global system. So as we are working to 
expand jobs, as we are working to grow our economy, exports are 
going to be a bigger piece of that than has been true in any 
previous recovery, and exports to China figure permanently. 
Nonetheless, we have quite substantial challenges in terms of 
an unlevel playing field, in terms of a misaligned, 
persistently misaligned currency.
    So we are going to continue to get up every day and stand 
up to China and make sure that China moves faster in reforming 
its system, in allowing its exchange rate to move to reflect 
market forces, to put in place fairer trade practices. I think 
we can do that in a way that is smart. We can do it in part by 
working with other trade partners. And that is why consistency 
with our international obligations is helpful. We can do it by 
recognizing China is not a monolithic system. There are 
interests in China that get it, that imports from the U.S. are 
a very good thing; that giving their consumers greater 
purchasing power through an aligned exchange rate is a good 
thing. So we are going to try to work smart as we pursue these 
goals.
    Mr. MARCHANT. I don't have a lot to add other than to 
underscore the point that Under Secretary Brainard made about 
how important China is for us for our exports. As I mentioned 
earlier, our exports to China grew 32 percent last year versus 
16.7 percent to the rest of the world. So our exports to China 
are growing faster than they are to any other region of the 
world. And we face extreme challenges, as we have discussed 
today at this hearing. But our exports to China are a very 
important aspect of the President's goal of realizing, through 
the National Export Initiative, his goal of doubling exports 
over the next 4 years.
    Mr. MARCHANT. Thank you, Mr. Chairman. I yield back.
    Chairman CAMP. The gentleman yields back. Mr. Reed is 
recognized for 5 minutes.
    Mr. REED. Thank you, Mr. Chairman. And it is getting lonely 
up here. But you are at the finish line so that is the good 
news.
    I want to focus on maybe a little area that hasn't been 
given as much attention today. But I do firmly believe that the 
United States must confront China whenever it violates its 
international obligations. But I don't believe we can just play 
defense when there is a violation. We need to play offense. And 
a good way, in my opinion, to do that is to adopt free trade 
agreements and really push the trade agenda so that we have an 
open world market that is fair and operating under those 
agreements. South Korea obviously is a classic example of that. 
And right now, we are dealing with the TPP, and I believe that 
agenda and those negotiations need to go forward.
    So I am very interested, Ambassador, in knowing what you 
view or what the USTR views as the role of free trade bilateral 
agreements with China, negotiation with China, what role that 
plays in dealing with this issue.
    Mr. MARANTIS. It is very important that we are actively 
engaged on the trading and investment front throughout the Asia 
Pacific region, in part to counter the competitive erosion that 
we have experienced over the years. I am really excited about, 
as you mentioned, the TPP. Our negotiators are in Lima this 
week conducting the ninth round of TPP negotiations as we lead 
to accomplish what the trade ministers from the TPP countries 
have asked us to accomplish by the APEC leaders meeting in 
Honolulu--which is to achieve the broad outlines of a TPP 
agreement.
    We are well on track to do that. We have negotiating texts 
on a whole variety of subjects: goods, services, intellectual 
property, the environment, labor. And just for this round, we 
tabled the first ever text on state-owned enterprises, which 
goes to address some of the very concerns we were talking about 
today regarding the competitive distortions that state-owned 
enterprises put in the international marketplace.
    Mr. REED. But outside TPP and the negotiations going on 
there--and I would agree those negotiations are going down the 
right path--but what specifically are we doing in regards to 
relations with China, getting them to negotiate and a bilateral 
investment treaty, getting into the issue of Taiwan and the 
trade investment framework that those discussions have ceased, 
my understanding is, well over a year ago. Where are we going 
with it? What is the vision, from your perspective, sitting in 
the Trade Office as to where we are going with that agenda?
    Mr. MARANTIS. Sure. We are moving on multiple fronts. On 
China, President Obama and President Hu reaffirmed their 
commitment to concluding a bilateral investment treaty 
negotiation. We just had negotiations just last week with India 
with respect to a bilateral investment treaty that we are 
negotiating with them. We are moving, for example, with the 
Philippines in concluding agreements on trade facilitation. It 
depends on the different economy in the region, but there is a 
lot going on on each.
    Regionally, the United States is hosting APEC and we have 
been trying to push some very ambitious outcomes in our APEC 
hosts here. That will culminate in just a few weeks in Honolulu 
at the APEC leaders meeting, where we are focusing on promoting 
regulatory cooperation, where we are promoting initiatives in 
green growth, and where we are promoting addressing next 
generation trade unions.
    Mr. REED. Ambassador, do you see any barriers, for example, 
to the Chinese bilateral investment treaty where the President 
and President Hu have agreed to set that as an agenda? Any 
barriers there that you see?
    Mr. MARANTIS. It is going to be a tough negotiation. There 
are a lot of very difficult issues that our investors face. And 
the purpose of the BIT will be to level the playing field for 
our investors in China. And their issues, you know, regarding 
market access, with respect to transparency, performance 
requirements, they are going to be very tough to negotiate with 
the Chinese. But, it is something we are committed to doing 
because it is the right thing to do for our investors and for 
the jobs in the United States.
    Mr. REED. And how are the Chinese negotiations? Have they 
been coming to the table, acting in good faith and moving the 
agenda forward?
    Mr. MARANTIS. Both sides are committed to the negotiations.
    Mr. REED. Okay.
    Mr. MARANTIS. Thanks.
    Mr. REED. I have two seconds. Do you want to say anything?
    Ms. BRAINARD. I just think the passage of the U.S.-Korea 
free trade agreement, we are sort of back in the game in the 
region and it is extremely important that we can develop a 
trade agreement through the Trans-Pacific Partnership that is 
highest standard in that region of the world. I think, as you 
said, that is our strongest suit in terms of having a good 
offense because ultimately, China is going to want to come to 
where those disciplines are.
    Mr. REED. Amen. With that, I yield back, Chairman. Thank 
you.
    Mr. HERGER. The gentleman yields back.
    With that, I would like to close with a comment and a 
question to Ambassador Marantis. I believe our approach in 
dealing with China should focus on how we can create the most 
jobs here in the United States. The International Trade 
Commission has done numerous reports on the impact that Chinese 
trade barriers have on our exports and jobs. We have heard the 
ITC's analysis that if China were to raise their protection of 
intellectual property rights to U.S. standards, 2.1 million 
jobs would be created. Additionally, the ITC has reported that 
reducing China's tariff and nontariff barriers to U.S. 
agricultural goods would lead to an additional $3.9 billion to 
$5.2 billion in U.S. agricultural exports to China. These new 
exports would support tens of thousands of good paying American 
jobs. I believe the record is pretty clear that Americans have 
a lot to gain if we can remove China's barriers and sell more 
American goods and services in China.
    Now let's contrast that to our recent experience with 
adding tariffs to cheap imports from China. In 2009, the 
administration imposed punitive tariffs on imported low-end 
tires from China under Section 421 of the Trade Act. Part of 
the argument behind instituting this tariff is that it would 
create tire manufacturing jobs in the United States. However, 
the data from the U.S. Bureau of Labor Statistics shows that 
tire manufacturing employment is down 10 percent in the first 
half of this year compared with the same period in 2009 prior 
to the tariffs. In terms of job creation, Ambassador Marantis, 
I would like to hear your thoughts on what the better strategy 
is, playing offense and focusing on how we can increase our 
exports into China by removing their barriers, or playing 
defense and trying to keep out imports from China by slapping 
them with higher tariffs? Which strategy is more effective at 
creating jobs here in the United States?
    Mr. MARANTIS. Mr. Herger, we have got to act on all fronts. 
We have got to act in terms of breaking down market access 
barriers. But also when we see an injurious surge like we did 
in the tire case, we need to act because it actually helps to 
promote jobs. The statistics I have actually show that before 
the remedy was imposed in September 2009, there was net job 
loss in the industry. After we imposed the remedy, there has 
been net job creation in the industry. There have been 11 
announcements of new investments in the tire industry worth $2 
billion since September 2009. And I think the anticipated 
employment gains are estimated at 3,000 jobs. So we have got to 
work to--I agree. We have got to work to knock down our market 
access barriers on the export side. But when we see an 
injurious surge of imports that cause market disruption, we 
shouldn't hesitate to use the tools that we negotiated in 
China's WTO accession as the administration did in the tires 
case.
    Mr. HERGER. Well, I thank you for your comment. And again, 
I think the point that is bipartisan is that this is a serious 
issue. The American public takes it as a serious issue. We know 
we have some major discrepancies, and we urge you. And we, as a 
Congress--I believe, in a bipartisan manner--are more than 
willing to work with you very strongly. I think the point that 
I would like to make and I think many would like to make that 
it is very important that we stay on offense.
    Mr. LEVIN. Mr. Chairman, will you yield? I want to say 
something.
    Mr. HERGER. I will yield.
    Mr. LEVIN. You finish and then I will say something.
    Mr. HERGER. Well, I was just going to adjourn then.
    Mr. LEVIN. Well, then, I will say something.
    Mr. HERGER. The gentleman is recognized.
    Mr. LEVIN. This hearing is not bipartisan, to try to attack 
the effort on 421. Four times, the Bush administration failed 
to act, although the ITC recommended it. This administration 
acted on the tire inflow from China, and it has had a positive 
impact for the United States, for its companies and for its 
workers. And so for you to take some data, it is simply 
incorrect to say that the 421 action was a mistake. And there 
is no use of sitting around here and asking for more 
enforcement and then attack an effort by this administration 
to, indeed, enforce our trade policies. So I don't know where 
you got the data. I think the Ambassador has correctly set the 
record straight. It is just reckless to take out after the tire 
421 effort. It was an important decision this administration 
made.
    Mr. HERGER. I would like to conclude. Again, we need to be 
aggressive----
    Mr. LEVIN. They are being aggressive.
    Mr. HERGER [continuing]. In a positive way. And the only 
point being made is that we consider everything we are doing.
    I think this has been a very helpful hearing. I want to 
thank our witnesses for appearing. Again, I would like to thank 
both of you. Please be advised that members may have written 
questions they will submit to you. Those questions and your 
answers will be made a part of the hearing record.
    And with that, the hearing is adjourned.
    [Whereupon, at 12:50 p.m., the committee was adjourned.]

Member Opening Statements

    The Honorable Mr. Brady

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    The Honorable Mr. Levin

    Letter

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Member Questions For The Record

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