[Congressional Record Volume 149, Number 154 (Wednesday, October 29, 2003)]
[House]
[Pages H10062-H10071]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ENCOURAGING PEOPLE'S REPUBLIC OF CHINA TO FULFILL COMMITMENTS UNDER
INTERNATIONAL TRADE AGREEMENTS, SUPPORT UNITED STATES MANUFACTURING
SECTOR, AND ESTABLISH MONETARY AND FINANCIAL MARKET REFORMS
Mr. ENGLISH. Mr. Speaker, I move to suspend the rules and agree to
the resolution (H. Res. 414) to encourage the People's Republic of
China to fulfill its commitments under international trade agreements,
support the United States manufacturing sector, and establish monetary
and financial market reforms.
The Clerk read as follows:
H. Res. 414
Whereas United States investors and exporters to the
People's Republic of China recognize the opportunity of doing
business with China but have raised serious concerns that
many of the commitments China made upon joining the World
Trade Organization have not yet been implemented or
implementation has been inadequate;
Whereas market barriers and unfair trade practices continue
to exist, including high tariffs, subsidies, technical trade
restrictions, counterfeiting, tied trade, violations of
intellectual property rights, and nonmarket-based industrial
policies that limit United States exports;
Whereas increases in global trade will lead to faster
growth of the United States economy and an improved quality
of life for workers in the People's Republic of China;
Whereas China is one of the fastest-growing economies in
the world and an important expanding market for United States
exports;
Whereas China has made progress in implementing the
commitments that it made upon joining the World Trade
Organization, including the required reduction of its tariffs
on many industrial goods of importance to United States
manufacturers;
Whereas China must move more quickly to implement its World
Trade Organization commitments fully and to remove many
market access barriers;
Whereas the currency of the People's Republic of China, the
renminbi, has been fixed relative to the United States dollar
since 1994;
Whereas a systemically misvalued currency by any large
country can have damaging trade-distorting effects on both
that country and its trading partners by decreasing the price
of exports of products of that country and increasing the
price of imports to that country;
Whereas China's trade liberalization will cause economic
imbalances in its market and world markets unless China also
implements capital account liberalization;
Whereas the market-based valuation of currencies is a key
component to resilient global trading systems by enabling
smoother transitions to reflect underlying economic
fundamentals in a country;
Whereas China's substantial foreign reserves reduce China's
susceptibility to currency crises and, therefore, the need
for continued use of a fixed currency;
Whereas the International Monetary Fund (IMF) has advised
China to adopt a more flexible exchange rate policy, and has
indicated that such a change would not have serious adverse
consequences for that country, although IMF officials have
expressed concern about the weakness of China's banking
system and that it may not have the ability to move quickly
towards a floating rate;
Whereas the Joint Ministerial Statement in September 2003
of the Asia-Pacific Economic Cooperation Finance Ministerial
Meeting ``emphasized the importance of accelerating
structural reform, adopting macroeconomic policies that
promote sustainable growth, supported by appropriate exchange
rate policies that facilitate orderly and balanced external
adjustment . . . [and] noted a view expressed at the meeting
that more flexible exchange rate management, in some cases,
would promote this objective'';
[[Page H10063]]
Whereas the Group of Seven Finance Ministers and Central
Bank Governors in their September 2003 Communique have
emphasized that ``more flexibility in exchange rates is
desirable for major countries or economic areas to promote
smooth and widespread adjustments in the international
financial system, based on market mechanisms'';
Whereas China's central bank governor has stated that the
value of the renminbi will eventually be determined by market
forces rather than be fixed to the dollar but has not given
any indication of when this change in policy will occur;
Whereas China recognizes that it is in its own interest to
reform its exchange rate regime and its banking system in
order to establish a resilient economy and control its rate
of economic expansion;
Whereas China is taking concrete steps to move to a more
flexible exchange rate regime by increasing private ownership
of its banking system and by establishing a technical working
group on a range of financial sector issues, including
exchange rate policy;
Whereas manufacturing is important to the health of the
United States economy, generating high quality products,
personal opportunity, productive careers, wealth, high
standards of living, and economic growth;
Whereas the manufacturing sector is the leading source of
new patents and innovation in the United States economy,
which helps drive economic growth at home and abroad;
Whereas the manufacturing sector faces the most intense
global competition in United States history, making it
difficult for many firms to operate profitably and earn a
sufficient return on capital invested, and manufacturing
costs continue to increase for many reasons, including
governmental actions; and
Whereas the manufacturing sector in the United States seeks
a global level playing field for competition and markets:
Now, therefore, be it
Resolved, That--
(1) the House of Representatives commends the President and
his Administration for continued efforts to engage the
Government of the People's Republic of China directly and to
encourage China to fulfill its commitments as a member of the
World Trade Organization;
(2) the House of Representatives encourages the People's
Republic of China to meet its commitments to the trade rules
and principles of the international community of which it is
now a member;
(3) the Chinese economy would benefit from an exchange rate
determined by the market in order to avoid artificial rates
that can lead to market and trade distortions;
(4) the House of Representatives will continue to monitor
closely and work with the Administration to encourage China's
efforts to modernize its financial system, establish a more
flexible exchange rate, and comply with its trade agreement
obligations;
(5) the House of Representatives urges the Administration
to continue its intensive discussions with officials from the
Government of the People's Republic of China to facilitate
moves towards a market-based valuation of the renminbi,
relaxation of capital controls, and reform of its banking
sector; and
(6) manufacturing is an important sector to the United
States economy and, therefore, the United States Government
should intensify efforts to promote innovation, reduce costs,
and level the international playing field for this sector.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Pennsylvania (Mr. English) and the gentleman from Michigan (Mr. Levin)
each will control 20 minutes.
The Chair recognizes the gentleman from Pennsylvania (Mr. English).
Mr. ENGLISH. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, currently before the House is House Resolution 414, to
urge China to live up to its international obligations which it has
agreed to undertake upon joining the World Trade Organization in 2001.
We consider this with a sense of urgency as we are running an
historically large trade deficit and an enormous bilateral trade
deficit with China.
Mr. Speaker, our trade deficit with China has doubled since 1998, and
is likely to exceed $120 billion this year. It has become the single
largest bilateral trade deficit in the world. And the most conspicuous
feature of our lopsided trade partnership with China is China's state-
sponsored mercantilism which has cost this country millions of
manufacturing jobs.
When the Clinton administration embraced China's entry into the WTO,
many of us hoped that China would adopt the disciplines of the global
rules-based trading system. Unfortunately, we have been sorely
disappointed. China continues to flout global trade rules at the
expense of our manufacturers and workers. This cannot be allowed to
stand. Americans can compete with any economic power in the world,
provided there is a level playing field.
Mr. Speaker, our resolution would: One, show broad support for the
administration's efforts to get China to abide by its international
trade obligations; two, put Congress on record urging China to follow
global trade rules; three, commit to working with the administration to
encourage China to modernize its financial system and allow a flexible
exchange rate; four, urge the administration to continue intensive
discussions with Chinese leaders towards establishing a market-based
valuation of their currency; and, five, state that the United States
Government should intensify efforts to promote innovation, reduce
costs, and level the playing field for the manufacturing sector.
Mr. Speaker, here are the facts, the IMF, APEC, and the group of
seven finance ministers all have stressed the importance of allowing
for greater flexibility in exchange rates. In the last month, every top
official in the administration's economic and trade team, including
President Bush himself, has visited China and implored its leaders to
bring its trading practices up to global standards and allow their
currency value to be dictated by the market.
Still, China's leaders have continued to stall. Our message today is
the same as the administration's. They have told China time and time
again if they want to have a healthy trade relationship with the United
States, then they must be prepared to follow the rules. The message we
are carrying today is among the most important that Congress will
communicate this year. It is essential for the economic future of the
next generation, for the future of good paying jobs in places like my
home in northwestern Pennsylvania where we make things for a living,
that we get this right.
Mr. Speaker, I reserve the balance of my time.
Mr. LEVIN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this resolution is a weak resolution. It does not
suggest any specific actions, and this is consistent with the way that
this administration, the Bush administration, has approached trade
issues with China.
It is not as if these issues suddenly appeared. They have existed,
they have persisted for several years. And there have been some
specific tools available for the administration to use. They have not
used some of these tools, and others they have not used well.
These are the tools. First, the annual review process within WTO,
this annual review process was called for in the U.S. PNTR resolution.
It was specifically called for. It was worked for within the WTO, and
it was in the final agreement with China when they acceded to the WTO.
But the U.S., in this process, did not press China to act on major
issues. China said that they did not need to respond in writing to the
issues that were raised in the annual WTO review. This has diminished
the importance of this significant mechanism.
Secondly, the PNTR legislation that we passed also required an annual
report by the administration on China's compliance with its WTO
commitments. That report was weak, and it did not press China on the
key issues of trade.
Third, the USTR has not used, at any point, formal consultations in
any of the sectors or on any outstanding problem, either through use of
section 301 or directly in the WTO, whether the outstanding issues
related to agriculture, for example, corn or cotton or fertilizers; in
the manufacturing sector, whether it was semiconductors, heating and
air conditioning, auto or auto parts; or whether it was services,
including financial services. There was really little effort, in fact
none, in formal consultations relating to the distribution requirements
that were clearly laid out in China's WTO accession. And there has not
been use of the formal consultation process relating to China's
undervalued currency, and there has been none relating to intellectual
property.
This administration has not used the specific China safeguard that we
worked so hard to place in the China PNTR legislation. Instead, the
administration turned down the first two cases that were brought before
it. So in a word, instead of taking the lead, getting out in front of
the rising concern
[[Page H10064]]
about China, the Bush administration left a vacuum, and this vacuum has
been filled by rhetoric, including that coming from the administration.
Mr. Speaker, this resolution is essentially rhetorical. It does not
call for any specific action. It talks instead about commending the
administration when I think that there were serious omissions of
opportunity, and then it says it encourages in the second paragraph.
And then as to currency, it says the Chinese economy would benefit. In
the fourth, it says the House of Representatives will continue to
monitor. In the fifth it says the House of Representatives urges the
administration to continue intensive discussions. So as I said, this
resolution does not call for special or specific action.
Mr. Speaker, I just want to say to the gentleman from Pennsylvania
(Mr. English), and especially to the administration, that no one should
interpret a vote for this resolution as an endorsement of the way this
administration has handled the growing issues with China.
I hope there will be other resolutions. We are going to have a
hearing in the Committee on Ways and Means beginning tomorrow on China,
and I guess it will continue over to Friday. This will be an
opportunity for us to probe the places where there have been missed
opportunities, the places where there need to be specific actions, the
place where we can substitute, for rhetoric, something very specific
which will lead, I hope, to actions relating to the trade relationships
between our two large and important economies.
Mr. Speaker, I reserve the balance of my time.
Mr. ENGLISH. Mr. Speaker, I yield myself 15 seconds.
First, to respond to the gentleman, I point out that this
administration has been willing to take on China on these issues,
particularly on the currency manipulation, in a way that the last
administration certainly did not. At a time like this, when the
administration is directly involved with negotiations with the Chinese,
this is precisely the kind of resolution that is not only appropriate,
but is important to provide to show support.
Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from North
Carolina (Mr. Ballenger) who has been a leader in the fight on Chinese
trade issues.
{time} 1430
Mr. BALLENGER. I thank the gentleman for yielding me this time.
Mr. Speaker, I believe that the Chinese currency is undervalued by
some 40 to 50 percent and has been for years. A 40 percent discount for
China is unacceptable. American companies deserve a chance to fairly
compete on a level playing field. Chinese companies do not have
governmental regulations like EPA or OSHA, they do not have minimum
wage laws or workplace safety mandates, and they do not have to make a
profit.
It goes without saying that China has emerged as the biggest threat
to our manufacturing base, and it is not because they make things
better than we can, because they cannot. It is because China is
cheating the system. China ships textile and apparel goods through
Vietnam to avoid textile quotas. That is cheating. China's cheating is
scaring all textile producing countries. In 2005, textile quotas
disappear. Central American nations are worried. The South Korean
hosiery industry is worried. Everybody is worried because we all know
about China's cheating and predatory pricing practices.
This cannot continue. That is why we are standing up for our textile
workers against China. The Chinese are ignoring international rules and
putting millions of hardworking Americans out of jobs. We are standing
up for U.S. workers by calling on China to fulfill its commitments
under international trade agreements and to establish monetary and
financial market reforms. Other countries and international
institutions are calling on China to adopt a more flexible exchange
rate policy. The market-based valuation of currencies is a key
component in the global trading system.
As Secretary Evans said earlier this week on his travels in China,
``We expect the markets to reflect the true value of currency.'' I
applaud the administration for their efforts to help U.S. companies
better compete, for calling on China to quicken the relatively slow
pace of reforms thus far. Further action must follow.
In closing, I urge my colleagues to support H. Res. 414 as a means of
putting the Chinese on notice that the Congress is tired of the $103
billion trade surplus. We will expect them to live up to their
commitments and to open their markets to U.S. goods and services.
Mr. LEVIN. Mr. Speaker, I yield 1 minute to the gentleman from
Michigan (Mr. Kildee).
Mr. KILDEE. Mr. Speaker, working families in my home State of
Michigan and our Nation continue to face mounting job losses and a
sagging economy. Our international trade deals have left our workers
behind. Nowhere is this more obvious than with China. Since March of
2000, we have lost 2.6 million manufacturing jobs while at the same
time our trade deficit with China has ballooned.
While House Resolution 414 is a step, we need real action from
Congress and this administration. We need to revoke PNTR with China and
start over. We need legislation encouraging American companies to keep
jobs here rather than sending them overseas. We are at the crossroads
to determine our Nation's place in the world. Do we stand by and watch
while our jobs go overseas, while our families suffer at home and while
our trade deficits rise? Or do we support our working families' needs,
keep good manufacturing jobs in our industrial heartland, and get our
economy back on its feet? I think the answer is very clear, Mr.
Speaker.
Mr. ENGLISH. Mr. Speaker, I yield 1\1/4\ minutes to the gentleman
from Georgia (Mr. Gingrey), a distinguished advocate of the interest of
American workers.
(Mr. GINGREY asked and was given permission to revise and extend his
remarks.)
Mr. GINGREY. Mr. Speaker, I want to thank my colleague from
Pennsylvania for introducing H. Res. 414. I think it is a positive step
in addressing our trade discrepancies with the People's Republic of
China.
My district of western Georgia has a rich history of manufacturing
textiles, from Milliken and Company, Incorporated, and Bon L.
Manufacturing in LaGrange, Georgia, to Mount Vernon Mills in Trion,
Georgia, which has been in business since the 1840s. The textile
industry has provided good-quality jobs for the citizens of Georgia's
11th Congressional District, with good health care benefits and good
retirement. I make this point because people in my district have
established a culture and a community around the textile industry.
I am deeply concerned that our country is not properly enforcing our
trade policies which are slowly eliminating an entire way of life. When
ratifying trade agreements, it is important to encourage both free and
fair trade. China is not playing fair because they are manipulating
their currency in order to gain an unfair advantage. This currency
manipulation is costing people jobs. Between March 2002 and March 2003,
50 textile plants have closed and 40,000 people have lost their jobs,
including 100 jobs just last week in Trion, Georgia.
We cannot afford to lose jobs, especially due to the unfair practices
of currency manipulation by the Chinese Government. Mr. Speaker, I
encourage the passage of House Resolution 414 to encourage China to
comply with their trade obligations.
Mr. LEVIN. Mr. Speaker, I yield 4 minutes to the distinguished
gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. I thank my friend from Michigan for yielding me this
time.
Mr. Speaker, I rise in support of this legislation, but I have to say
that I think it will not do much good and that I think in many ways it
deflects attention from the most important issue, which is not asking
the Chinese to make changes in their currency but in fact asking the
United States Congress and the President of the United States to make
changes in our disastrous trade policies.
The bottom line is that right now in America, manufacturing is in a
state of collapse. We have lost almost 3 million manufacturing jobs in
the last 3 years. We are seeing our economy move from a General Motors
economy to a Wal-Mart economy where workers are now earning poverty
wages with minimal
[[Page H10065]]
benefits. There are a number of reasons for that, but one of the
reasons is that our trade policy with China, with Mexico and other
countries has failed. It is time to understand that and it is time to
redo that.
The bottom line is that American workers should not and cannot be
asked to compete against desperate people in China who work for pennies
an hour. Does anyone here think that it makes sense to tell a
manufacturing worker in America who earns $16 an hour, who has decent
benefits, that he has got to compete against someone in China who makes
30 or 40 cents an hour, who if that person stands up and tries to form
a union might get thrown in jail?
Is it fair to ask American manufacturers to compete against companies
in China where there are virtually no environmental regulations and in
a country which is becoming one of the most polluted countries in the
world?
The reality now is that in the midst of a $435 billion overall trade
deficit, we have a $120 billion trade deficit with China alone. The
National Association of Manufacturers tells us that in the next 5 years
that trade deficit could well grow to over $300 billion. Yes, we make
exports to China but for every $1 that we export, we import $6.
The reality now is that we are hemorrhaging decent-paying jobs
because, to a large degree, of a failed trade policy. The Republican
leadership and many Democrats are going to have to own up to it. You
have got to come forward and say to the American people, yeah, you
think it is great for American workers to compete against people who
make 30 cents an hour. You are going to have to tell small American
manufacturers who want to do business in this country, who are
patriotic, who want to employ American workers, that they are no longer
going to have to compete against those companies who sell their
products back in this country for a fraction of the price that American
manufacturers can produce that product for.
So I say to my friend from Pennsylvania, your idea has some merit,
but you are not getting to the root of the problem. The root of the
problem is that one of the reasons that we are hemorrhaging decent-
paying jobs is because of a failed trade policy, and that is why I have
introduced legislation, H.R. 3228, which is winning bipartisan support,
which says once and for all let us repeal permanent normal trade
relations with China, let us develop a new trade relationship with that
country which works not just for the large multinationals but works for
the average American workers.
I very well remember the debate, as many of you do, about all of the
advantages that PNTR with China would bring. We are going to bring some
of those quotes back onto the floor of the House, because they were
wrong. All of those people who told us about the jobs that were created
were wrong. We are losing jobs. We have got to repeal PNTR with China.
Mr. ENGLISH. Mr. Speaker, it is a privilege for me to yield 2 minutes
to the gentleman from Michigan (Mr. Rogers).
Mr. ROGERS of Michigan. Mr. Speaker, I thank the gentleman from
Pennsylvania (Mr. English) for his efforts on this.
Coming from a State that depends on manufacturing, and we have lots
of small manufacturing in our great State, this is one hurdle that they
cannot get over. They are frequently talkers. When I get these small
manufacturers, 50, 75, 100 folks in these small manufacturing
facilities who talk about and embrace the ideas of free trade, they do
not want to back away from that. They think it is good and it is
helpful and it will produce jobs in America. But it has to be fair.
One of the things that we have seen is that China is not willing to
embrace the tenets of fair trade. Currency manipulation is the greatest
of all of its evils standing up front. What it does is it artificially
leaches off the value of the dollar, automatically making any deal put
together by an American manufacturer uncompetitive. That is unfair.
What they are saying is, hey, don't do away with free trade, but let's
embrace the tenets of fair trade and help us eliminate those artificial
barriers, and we will compete with our great labor force.
Mr. SANDERS. Mr. Speaker, will the gentleman yield?
Mr. ROGERS of Michigan. I yield to the gentleman from Vermont.
Mr. SANDERS. Mr. Speaker, the gentleman talks about the advantages of
free trade. Does he think American workers can and should compete
against people who make 40 cents an hour and go to jail when they try
to form a union?
Mr. ROGERS of Michigan. As the gentleman may understand, there is a
greater circumference of competition in every business and it means
more than just labor costs. It is all of the costs that go in,
including the quality of the production. When you talk to American
manufacturers, they will tell you they can compete if these artificial
barriers are gone. We ought to stand tall. I appreciate the
administration's efforts to this point. We appreciate the things that
they are doing. This resolution is an important step, by saying, we are
going to give you every tool in the tool box. We are not going to tell
you which one, but we are going to give you all of the tools to go
after unfair barriers, just like currency manipulation.
Let us stand tall for what the administration is doing and what we
can do when we stand together for embracing jobs and competitiveness in
American manufacturing.
Mr. LEVIN. Mr. Speaker, I reserve the balance of my time.
Mr. ENGLISH. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from North Carolina (Mr. Hayes), a distinguished advocate of fair
trade.
Mr. HAYES. I thank the gentleman from Pennsylvania for his excellent
leadership and guidance here.
Mr. Speaker, today I rise in strong support of this resolution. This
legislation is going to send a much-needed and unmistakable signal to
China that we expect to see trade and monetary reforms and that we
expect them now. This will make it clear that there will be retribution
and retaliation if China does not abide by the rules. We have lost too
many jobs and too many companies have been hurt because of unfair
Chinese trade practices and China's fixed currency structure.
Since 1994, China has devalued its currency 30 percent despite
enormous economic growth. It is clear they continue to peg their
currency to the U.S. dollar to create an unfair advantage for China at
the expense of our American manufacturers and our own workforce. This
Congress and the administration must continue to stress to China that
their economy will benefit from a market-based exchange rate. It is in
China's best interest to create a more flexible currency in order to
create a strong and stable economy for the future.
Specifically, this resolution states that this body urges the
administration to require that China honor the commitments they made
upon joining the WTO, move toward a more flexible rate of exchange, and
the U.S. Government should focus on efforts to create fairness and
equity in the manufacturing sector. Manufacturing and textile jobs
specifically have taken a massive hit in both loss of jobs and
businesses due to unfair trade practices by China and their fixed
currency. In fact, during the past decade, the U.S. textile sector has
been particularly hard hit, losing 700,000 jobs. Without fairness for
our workers, businesses, textiles and manufacturing, the demise of our
manufacturing sector will continue to take place all over the country.
I am pleased to see that Secretary Snow has brought up the issue
during his recent visit to China. I am also encouraged by reading that
Secretary Evans has gone to China and made a speech there saying the
American market will not remain open to Chinese exports unless China's
markets are equally open to our markets.
Mr. Speaker, I urge the passage of the resolution.
Mr. LEVIN. Mr. Speaker, I yield 4 minutes to the gentleman from
California (Mr. Becerra), a gentleman who is very active on these
issues as a member of the Committee on Ways and Means and its
Subcommittee on Trade.
{time} 1445
Mr. BECERRA. Mr. Speaker, I thank the gentleman for yielding me time.
Mr. Speaker, House Resolution 414 sends a message to China. But if
this is as strong a message that we can send to China, we are in
trouble. We could
[[Page H10066]]
do much better than this. We can send a message that is very clear and
very responsible about what we would expect of any trading partner, of
anyone who wishes to be treated with dignity when it comes to trade
with us as well.
In the last 3 years, Mr. Speaker, Americans have lost 3.2 million
jobs; 2.5 million of those 3.2 million jobs have come from the
manufacturing sector.
Now, if it does not hurt enough, let me just give you some numbers.
California, almost 300,000 Americans without jobs as a result of the
manufacturing sector losing them; Illinois, 125,800 jobs lost in the
last 3 years, according to the September 2003 job numbers; Indiana,
67,000; Michigan, 127,000 Americans who have lost their jobs; New York,
132,000; North Carolina, 145,000 Americans without jobs in the
manufacturing sector; Ohio, 151,000 jobs lost for Americans;
Pennsylvania, 132,000 jobs lost; Wisconsin, 73,000 jobs lost to
Americans in the manufacturing area, many of these going to countries
like China.
On top of that, today we are saddled with a national debt of more
than $3.3 trillion. This year's budget deficit alone, $370 billion.
Next year, we are told our budget deficit will probably reach $500
billion. In each case, these are record deficits for this country.
Our trade deficit, just in what we do globally in trade with other
countries, $482 billion in 2002. That is how much we were spending more
by buying goods from other countries than they were buying from us. And
if we keep on that same pace in 2003, we are going to have an even
larger trade deficit with the world.
How much of that comes from China? Well, this past year alone, $103
billion in deficit trading with China, and at the end of this year it
will probably be at about $115 billion that we will have spent more in
purchasing goods from them than they will have spent in purchasing
goods from us.
This week Warren Buffet, one of the wealthiest men in America, said
our country is like a rich family that possesses an immense farm. ``In
order to consume 4 percent more than we produce,'' which is in essence
what our trade deficit means, we are consuming more than we are
producing, ``we have been both selling pieces of the farm and
increasing the mortgage on what we still own.''
Mr. Buffet said that our trade deficit has worsened to the point that
our country's net worth is being transferred abroad at an alarming
rate. He predicts that foreign ownership of America's assets will grow
by about $500 billion a year. That translates to about 1 percent
annually of our wealth being placed in foreign hands.
Mr. Speaker, something needs to be done, and H. Res. 414 is not
enough. It is time for us to investigate what the Chinese are doing, it
is time for us to take safeguards to protect American industries and
American jobs, and it is time for us to use the powers that we have
under the Trade Act to investigate whether China is complying with its
obligations under the World Trade Organization's regime. It is time to
do it. Just talking about it will not make it happen. Let us take some
action. House Resolution 414 may be a start, but it certainly is not
enough.
Mr. ENGLISH. Mr. Speaker, I yield 3 minutes to the gentleman from
California (Mr. Dreier), the chairman of the Committee on Rules and one
of the most distinguished advocates of free trade in the Chamber.
Mr. LEVIN. Mr. Speaker, I yield 1 minutes to the gentleman from
California.
The SPEAKER pro tempore (Mr. Terry). The gentleman from California
(Mr. Dreier) is recognized for 4 minutes.
(Mr. DREIER asked and was given permission to revise and extend his
remarks.)
Mr. DREIER. Mr. Speaker, I rise in strong support of H. Res. 414. I
want to congratulate my good friend, the gentleman from Pennsylvania
(Mr. English), with whom I have had the privilege of working for nearly
a decade on the very important relationship between the United States
and the People's Republic of China.
Now, I have heard a lot of things said, and my friend from Vermont
says that he is going to take the opportunity to bring back some
comments about our debate on PNTR. You do not have to do it, because I
am going to talk about them right now and the benefits that has
created, Mr. Speaker.
I believe that it is very important for us to realize again that the
single most powerful force for positive change in the 5,000 year
history of Chinese civilization has been economic reform, and I believe
that we need to do everything that we possibly can to continue to
encourage that kind of economic reform, and this resolution does help
us down that road.
Passage of permanent normal trade relations did, in fact, allow the
People's Republic of China to move into a rules-based trading system by
becoming a member of the World Trade Organization. It is obvious we
still have very serious challenges as we continue down that road. But,
Mr. Speaker, I am a glass-half-full sort of guy, and I happen to
believe that what we need to do is realize that encouraging these
reforms, as this resolution offered by my friend from Pennsylvania will
do, is the right thing for us to do.
We also need, Mr. Speaker, to realize the benefits of imports. We
obviously can talk about stuffed animals and furniture, and we are on
the verge of Halloween, Halloween costumes, a wide range of very
important consumer products that are available to children in this
country.
The fact that products come from China in fact play a role in
enhancing the economic standing of the 1.3 billion people of China. And
what does that create? It creates for them an opportunity to become
consumers of U.S. goods and services.
Mr. Speaker, I think it is very important for us to note that as we
look at the challenges that exist for us today, anything that would
undermine that route that is being taken toward greater economic reform
would be wrong. That is why, Mr. Speaker, I encourage my colleagues to
support this resolution, and to do everything that we possibly can to
make sure that even greater reform does take place in the future.
Mr. SANDERS. Mr. Speaker, will the gentleman yield?
Mr. DREIER. I am happy to yield to my friend, the gentleman from
Vermont.
Mr. SANDERS. Mr. Speaker, I thank my friend very much.
My friend talks about the importance of economic reform in China, and
I agree with him. But do you not think we also should be talking about
the loss of millions of decent paying jobs?
Mr. DREIER. Mr. Speaker, if I might reclaim my time, I will answer by
saying yes, I do believe it is very important for us to focus on the
manufacturing base in this country, and that is why with the tax and
regulatory legislation that we are looking at here, we will play a role
in encouraging that.
My view, Mr. Speaker, is that rather than simply pointing the finger
at economies that are growing to the point where they can consume U.S.
goods and services, we need to encourage reform right here at home, as
well as encouraging reform there.
Mr. SANDERS. Mr. Speaker, if the gentleman will yield further, my
friend ignores the fact that all of the projections are that the trade
deficit with China is going to grow wider and wider, which means more
and more job loss in the United States.
I ask my friend, what do you say to your corporate buddies, who throw
American workers out on the street, move to China and hire people
there, for 30 cents an hour?
Mr. DREIER. Mr. Speaker, reclaiming my time, that kind of hyperbole,
``corporate buddies,'' that is absolutely ridiculous. I am as concerned
about American workers as anyone, and I know the corporate leaders in
this country are concerned about American workers.
Mr. Speaker, let me say in response to my friend that we need to do
everything that we can to realize that we are in a global economy. If
we, as the United States of America, do not shape the global economy,
we will be shaped by the global economy. That is why it is correct for
us to pursue these reforms, do everything that we possibly can to make
sure that it happens, and, at the same time, to look at policies which
can encourage the expansion of our manufacturing base right here at
home.
Mr. ENGLISH. Mr. Speaker, it is a great privilege for me to yield 2
minutes to the gentleman from Wisconsin
[[Page H10067]]
(Mr. Ryan), a distinguished member of the Committee on Ways and Means.
Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman from
Pennsylvania for his leadership on this issue and for bringing this
resolution, to which I am a cosponsor, to the floor.
Mr. Speaker, this is a dire issue for America. I come from Wisconsin,
which arguably has the most manufacturing jobs lost per capita to any
other State in the country.
There is a fact that the economic recovery that is under way in
America is not necessarily going through manufacturing. We have bled
manufacturing jobs, especially over the last couple of years. And when
you boil it down and look at what is going on in manufacturing, there
are two areas we have to focus on.
Number one, we have to stop pushing jobs overseas. We have to lower
health care costs, lower the tax rates on American manufacturers, cut
down the regulatory and lawsuit costs, make energy costs cheaper and
more affordable and more reliable. But we also have to work at stopping
countries from unfairly taking jobs overseas. That is what this
resolution is all about.
What this resolution does is express what we in Congress think needs
to happen, and what we believe needs to happen is, number one, I am
glad that China is in the WTO, because before a year-and-a-half ago, we
did not have China signing up to a treaty to play by fair trade rules,
we did not have the means to hold China accountable.
Now that China is in the WTO, they have signed on the dotted line,
they have said they would play fairly, they would obey international
fair trade standards, and they are not doing that. What this resolution
does is it says enough. Congress is serious. China needs to obey and
play by the rules that they themselves signed up to play by just a
year-and-a-half ago.
Now, in Congress, we cannot change China's laws; only they can do
that. But we can speak with unity here in this body, Republicans and
Democrats, saying that we need to make sure that China upholds their
commitments, that they need to play by the rules they themselves signed
up to, that we urge and encourage our administration to hold them
accountable with our trading partners who are similarly affected by
devaluing their currency, pegging their currency at a discount,
stealing our intellectual property rights, subsidizing their business
sectors.
This is an opportunity for Congress to speak with one voice against
these abuses that need to change, and change today.
Mr. Speaker, I thank the gentleman from Pennsylvania for his
leadership on this issue.
Mr. LEVIN. Mr. Speaker, I reserve the balance of my time.
Mr. ENGLISH. Mr. Speaker, I yield 2 minutes to the gentleman from
Wisconsin (Mr. Green), a very distinguished advocate of American
workers.
(Mr. GREEN of Wisconsin asked and was given permission to revise and
extend his remarks.)
Mr. GREEN of Wisconsin. Mr. Speaker, I thank the gentleman for
yielding me time.
I stand in strong support of this resolution, H.R. 414 and urge its
immediate passage.
The previous speaker, my good friend and colleague the gentleman from
Wisconsin (Mr. Ryan), said in Wisconsin we have lost over 77,000
manufacturing jobs in just the last 3 years. We have suffered the loss
of some of our most distinguished, some of our oldest companies. We
have thrown small communities into turmoil. We have created an
uncertain future for too many families. I think it is time for us to
fight back.
There are a lot of factors that have led to the loss of manufacturing
jobs, anticompetitive tax policies, burden of regulation. We have to
address all of those. But better trade policies, more fair trade
policies, are clearly something we need to do.
Let us make no mistake, the passage of this resolution is not a
substitute for taking definitive steps to level the playing field on
trade. However, this resolution is a growing sign, a growing
recognition, that there is a problem. I think it does create a higher
profile for this issue. I think it lets the Chinese know that we are
serious in protecting our economy and protecting manufacturing jobs;
that we will not sit by as they ignore their long-term obligations. It
is long past time, long past time, for China to follow through on its
commitments.
Getting China to reform its currency and trade policies is going to
require a full court press that includes more than just Congress. That
is why I want to commend the Bush administration for the efforts they
have made recently. I know that President Bush has taken this message
to China. I know that Secretary Evans is currently in China further
driving home this point. I hope the Secretary will use this vote today
as leverage in his negotiations. It shows that our Congress is unified
in saying that we will take steps to protect our economy.
{time} 1500
This is only a first step, though. If China does not comply with its
WTO obligations, we need to do much more. I will call on this body, if
they do not follow through, I will call on this body to consider
legislative efforts like those that I have authored with my good friend
and colleague, the gentleman from Pennsylvania (Mr. English), called
the China Act. We do need to take steps. Today is a good start.
Mr. LEVIN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
California (Mr. Becerra).
Mr. BECERRA. Mr. Speaker, I thank the gentleman for yielding me this
time. I think we have to make sure we clarify a couple of things.
First, I do not think anyone would propose that our country become
China when it comes to its manufacturing base and how we treat our
workers and the type of product we put out. Certainly we have to do a
number of things to continue our competitiveness with countries abroad,
but there is no way that America will ever get to compete with
countries that are paying 50 cents an hour for wages. And I hope that
no one is recommending here that we spiral downward to try to compete;
in other words, this become a race to the bottom in order to be able to
compete and manufacture products abroad.
My good friend, the gentleman from California (Mr. Dreier), mentioned
that we are about to celebrate Halloween and all of those costumes that
our kids are going to be wearing, if you take a look at the label, most
have been made in places like China. They were made in America before.
But I do not believe anyone is suggesting that we now pay Americans 50
cents an hour to manufacture and fabricate garments like that in order
to be able to compete with China.
At the same time, look at the bill. The only thing it calls for,
well, first it commends the President and his administration for
continued efforts to engage the government of the People's Republic of
China and to encourage China to fulfill its commitments. Encourage. And
then it continues to say the House of Representatives encourages the
People's Republic of China to meet its commitments. We encourage. We
encourage. We closely monitor. There is nothing this does.
We should investigate. We have the power under statute to investigate
the trade violations committed by countries like China. That is what
this bill should say, not that just we encourage the Chinese to do
something better.
Mr. ENGLISH. Mr. Speaker, I have no further speakers beyond reserving
the right to close.
Mr. LEVIN. Mr. Speaker, I yield myself the remaining time.
Mr. Speaker, it is interesting. I listened to the two gentlemen from
Wisconsin, and one said it is a dire situation, and the other said that
rhetoric is not a substitute for specific steps. And that is the
shortcoming in this resolution. It is a weak one.
I want to emphasize, there are specific steps that the administration
should have taken and some that it can still take. I want to be very
clear about that. First, the annual review, WTO, I believe it is now
going on. The administration should use that as an opportunity to press
China on its shortcomings as to its commitments when it went into the
WTO. It did not press last time. It needs to this time.
Secondly, the annual report. It was weak. It should have been much
stronger.
And there are also specific steps under our statutes that can be
taken and under WTO regulations when China does not live up to its
obligations. We
[[Page H10068]]
can use section 301 to start an inquiry, or we can go directly into the
WTO.
So there are these specific steps and they have not been taken, for
example, article 15 of WTO relating to currency. So what I am saying
is, and I hope this message also goes out in addition to the message in
the English resolution. His message is essentially more rhetoric, more
jaw-boning. The message I hope that also goes when we vote for this is,
go beyond this. Use the specific provisions in our law and in the WTO
regulations and in those provisions. We need to press China to live up
to its obligations that were so clearly laid out, and we have to do
more than send a Secretary over to China to give speeches. We need to
use the mechanisms that exist so that we have a certainty that as we
trade with China, and it is more than Halloween costumes, it is
increasingly in electronics, that they live up to the obligations they
promised to abide by when they joined the WTO.
Mr. ENGLISH. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, this has been an edifying debate. I particularly want to
salute my colleague, the gentleman from Michigan on the other side of
the aisle, who has been attentive to the issue of China trade for a
long time and has been an example to many of us, including many of us
on my side of the aisle.
I must say, though, I think the record needs to be made clear and
this resolution needs to be put in context. It is more than a weak
exhortation; it is an expression of support for the administration's
efforts at a very critical time to challenge China and encourage them
to float their currency and liberalize their trading regime. We sent
Secretaries over to China to do more than give speeches. They have
delivered a very powerful message, and it appears that the Chinese are
beginning to listen. But I agree with the people on the other side:
more needs to be done.
Our message today, Mr. Speaker, is that Congress will not stand on
the sidelines while our industrial base is eroded and manufacturing
jobs are lost forever.
Some adopt the rhetorical convention that criticism of China's trade
policies amounts to protectionism. But Adam Smith himself would not
have recognized China as a free market bulwark. The term that he would
have used to describe China's economic policies is mercantilistic, and
mercantilism has no place in today's global marketplace which is guided
by a rules-based system where ``beggar thy neighbor'' is not part of
the equation.
The goal of this resolution today is to encourage the leveling of the
playing field in our trade relationship and create fair opportunities
for both our employers and our employees.
This is a resolution that should ultimately unite Members with
diverse districts and diverse philosophical backgrounds. It has drawn
support from the National Association of Manufacturers, the U.S.
Chamber of Commerce, the United Steelworkers of America, and the
American Iron and Steel Institute.
Mr. Speaker, this is precisely why I strongly encourage all of my
colleagues to send a message to the administration, send a message to
China, and send a message to the world that we are watching and we are
proceeding from here, starting with this resolution, proceeding with
hearings in the Committee on Ways and Means later this week, and
proceeding from here with a much stronger trade policy that is
determined to fight for our industrial base.
Mr. THOMAS. Mr. Speaker, China is now a member of the World Trade
Organization (WTO). The WTO is not a club that just anyone can join--a
country must be deemed ready and economically mature. China's accession
signifies that it is expected to meet the obligations that come with
its stronger presence within the global economy. It is our role, as one
of China's major trading partners, to make sure that china fulfills its
WTO commitments. However, I am concerned that many of China's
commitments have not yet been implemented or implementation has been
inadequate. I join the many cosponsors of this resolution in urging the
Administration to continue to engage China on compliance, as well as
use the dispute settlement mechanism where necessary to enforce our
rights.
In addition to seeking WTO compliance, I support the Administration's
efforts to encourage China to establish a more flexible exchange rate.
At the same time, China's financial system is in desperate need of
modernization. I urge the Administration to continue to work with China
to modernize its fiscal structure and relax its capital controls.
On Thursday and Friday of this week, the Committee on Ways and Means
is holding a hearing to explore China's expanding role in the global
economy, its currency management and its progress in meeting its new
trade commitments. The insights we will gain in this hearing will give
us more guidance as we develop a tough policy to promote a healthy and
strong trade relationship with China.
Finally, today's resolution is yet another foray in the battle to
support U.S. manufacturers. We must create more jobs at home and
preserve existing jobs by promoting innovation, reducing costs and
making U.S. companies more competitive. Yesterday, the Ways and Means
Committee approved the American Jobs Creation Act, legislation to
foster job creation through comprehensive tax relief for domestic
manufacturers, small businesses and other employers. It is my hope that
the House will take swift action on this legislation. American workers
need help now.
Mr. SMITH of Michigan. Mr. Speaker, I rise to support H. Res. 414.
Recently, I met with a delegation of Chinese parliamentarians. China is
undergoing huge changes that will alter relations between the United
States and the People's Republic of China for decades to come.
Trade was high on our agenda. Total U.S.-China trade rose from $5
billion in 1980 to $147 billion in 2002. China is a huge potential
market for U.S. goods and services. However, last year China sold us
$103 billion more in goods than we sold to them. This trade deficit is
caused by the political and social difficulties of doing business in
China, by China's restrictive trade and investment practices and by the
enormous American appetite for low-priced Chinese goods. In seemingly
good news for farmers, China has been dramatically increasing its
protein consumption, which means our agricultural trade should improve.
Many, including Treasury Secretary John Snow, contend that China also
tilts the playing field by manipulating the value of its currency to
keep it low. This lowers the price of Chinese goods in the United
States and raises the price of our exports to China. Depending on
whether you buy or sell, this makes Americans better or worse off in
the short run. For the long run, such a large trade deficit makes
America vulnerable. We presented our concerns to the parliamentarians
about agricultural and industrial quotas and arbitrary Chinese
biotechnology standards. We will press for a market in China that is
fair.
China's large potential market should not blind us to the oppressive
and aggressive nature of the regime. It remains a Communist system with
dictatorial control over politics and business. Communist party
leadership fills the top positions, but the military, with the world's
largest standing army, also wields great influence in state industries
and politics. China still represses Tibetan and Muslim minorities, and
has been working to reduce free political expression in Hong Kong,
sparking huge rallies in defiance of proposed anti-sedition laws. While
enterprise flourishes in certain zones, it is a privileged capitalism
operating under government favor. China still tries to dictate the
terms of Taiwan's existence and has traditionally backed North Korea's
reprehensible regime.
Yet, China is changing. Economic growth and competition in the free
world economy will tend to bring social and political change, though
probably not as quickly as we would like. Experts on China like Ross
Terrill (author of The New Chinese Empire--and What it Means for the
United States) predict that the Communist party-state will crumble
under the pressures of foreign trade and international obligations for
transparent trade laws. Encouraging this transparency will be to our
advantage.
We need to welcome Chinese participation in the society of nations
when it chooses to play a constructive role. However, we must be firm
when we disagree. We should not soft-pedal our commitment to
fundamental human rights or our demands for trade agreements that don't
put us at a disadvantage. We must recognize China's ambitions to
challenge U.S. interests at the United Nations, in Asia and around the
world. We have to be aware of and resist Chinese encroachments on our
national security and that of our allies. Firm discussions of
differences, like those we had with the parliamentarians, are one way
to push forward U.S. engagement with this great nation in pursuit of
interests we have in common. I commend the gentleman from Pennsylvania,
Mr. English, for his leadership.
Mr. MANZULLO. Mr. Speaker, our manufacturing base is slowly
evaporating before our very eyes. Just last week, Rockford, Illinois--
the main city I represent--lost 3 facilities. Over 1,200 workers in a
town of 150,000 lost their job last week. Over 2.8 million
manufacturing jobs have been lost since July 2000. Manufacturing now
just makes up 14 percent of our
[[Page H10069]]
Gross Domestic Product. Yet, few people in Washington, D.C. are truly
aware of this problem because this town doesn't produce much except
paper.
There are many causes to the problems facing manufacturing: high
health care and energy costs; legal liabilities; a staggering tax and
regulatory burden; an outdated export control system; a government
procurement system that thinks that it is OK to buy abroad; and an
unfair global trading system.
I am proud to stand with Representative Phil English today in trying
to bring about some relief in the trade area. The United States faces
huge challenges with China. We all recognize and appreciate the
difficulties the Chinese face as they integrate into the world economy.
China is to be commended for going down a path towards more free
markets and away from a planned economy. They have over 1.2 billion
people and tens of millions of people enter their workforce each year.
China must grow about eight percent a year just to keep even as they
try to integrate new workers into the economy and also provide real
employment for former workers at failed state-owned enterprises.
However, while acknowledging these challenges, we also must not allow
the nations of the world to expect the United States to be the only
global economic growth engine. It is in China's long-term best interest
to address the real problems contained in this resolution. It is time
for China to promote economic growth within their country mainly by
selling the products made in their nation to their own people--not
using the United States as a pressure relief valve.
Plus, China should take a cue from one of our great industrialists--
Henry Ford--and pay their workers sufficient wages so that they can
afford the products they are making for U.S. consumers.
Yes, China has honored many of its WTO commitments. But it has also
not lived up to all of its commitments to the WTO. We have given China
the benefit of the doubt for too long. While we are grateful for
China's willingness to buy more U.S. products, this is not enough. Now
is the time to ratchet up the pressures and if necessary bring a trade
case through the WTO process to force full compliance of China's
commitments. Our manufacturers have taken it on the chin for too long
now.
For example, having very low taxes imposed on Chinese semi-conductor
manufactures but taxing imported semi-conductors at a much higher rate
is outrageous. We're struggling to replace our Foreign Sales
Corporation/Extraterritorial Income tax regime due to a WTO challenge
from Europe; however, this Chinese tax discrimination policy hasn't
been challenged in the WTO system yet. Does that make any sense? The
National Association of Manufacturers has many more examples, which I
ask unanimous consent to include in the Record.
I'm also grateful to Representative English for including a good deal
of the language in H. Res. 414 dealing with Chinese currency
manipulation from the legislation I authored along with my good friends
and colleagues Representatives Mike Rogers, of Michigan, Charlie
Stenholm of Texas, and Baron Hill of Indiana. I am especially pleased
that the House of Representatives will go on record today in opposition
to these policies that place up to a 40 percent tax on U.S. exports to
China and up to a 40 percent discount on Chinese imports into the
United States. Is it any wonder why our manufacturers are crying out
for relief? This resolution is a good first step towards final action
on H. Con. Res. 285, which, if diplomacy fails, calls for initiating a
Section 301 trade case to impose trade sanctions against nations that
manipulate their currencies for a trade advantage.
Let me also remind my colleagues that China is not the only nation
that deliberately undervalues its currency. Japan, Korea, and Taiwan
also vigorously intervene in currency markets to prevent their currency
from strengthening against the U.S. dollar. Passage of this resolution
today should not undermine our resolve to combat the problem of unfair
foreign currency manipulation of other nations.
Prior to his departure for the Asia Pacific Economic Council
conference, President Bush said we must make sure that ``currency
policies of a government don't disadvantage America. Fair trade means
currency policies [are] fair.'' We should strongly support passage of
H. Res. 414 today. But we should also work towards ensuring passage of
H. Con. Res. 285 if timely progress is not made towards accomplishing
the goals set out in this resolution and if countries including Japan,
Korea, and Taiwan do not halt the practice of undermining the value of
their currency to boost their export potential.
Again, Mr. Speaker, I urge my colleagues to support H. Res. 414.
National Association
of Manufacturers,
September 10, 2003.
Review of China's Compliance With Its WTO Accession Commitments
Areas of Concern
Currency undervaluation;
Subsidized exports;
Counterfeiting and IPR violations;
Discriminatory VAT taxes;
Unjustified product labeling requirements;
Inappropriate standards and concerns about CCC mark
procedures;
Restrictions on trading rights;
Lack of action on auto financing regulations;
Problems with Tariff Rate Quotas; and
Slow progress on transparency.
Overview
The National Association of Manufacturers (NAM) welcomes
the opportunity to comment on China's compliance with
obligations accepted as a WTO member and commitments made in
conjunction with accession to open its internal market to
foreign products and services. The NAM supported China's
membership on the condition that it would take meaningful
steps to adhere to these obligations and commitments and
become a responsible participant in the international trading
system.
Trade with China is of immense importance to many U.S.
manufacturers. The Chinese market is set to become one of the
largest in the world within the next several years. Chinese
imports are expected to exceed $380 billion in 2003, making
China the world's third largest importer after the United
States and Germany. At the same time, China is rapidly
becoming a major exporter of industrial goods, and the range
of industrial products exported has continued to grow at a
rapid pace. China's expanded participation in the global
marketplace, then, offers both important new commercial
opportunities as well as challenges resulting from increased
competition in the U.S. and foreign markets.
NAM members want the United States to have a positive trade
relationship with China. However, they also want a level
playing field for competition. In that regard, we are hearing
increasing concerns about unfair Chinese trade and currency
practices and China's failure to provide the same kind of
access to U.S. goods and services in the Chinese market that
Chinese goods and services enjoy in the U.S. market.
As China concludes its second year as a WTO member, its
compliance record is decidedly mixed. While U.S. exports to
China continue to increase (by 24 percent in the Jan.-June
2003) and a growing number of U.S. companies are trading and
investing there, the NAM has also received far more
complaints about unfair Chinese practices than in the
previous year.
NAM members recognize that China is still in transition to
a market economy and in the process of phasing in certain WTO
market-opening commitments. However, because China has
quickly becomes such an important global importer and
exporter, it is vital that the United States work to ensure
that China complies as fully as possible with all WTO
obligations and particularly those that have a significant
impact on U.S. economic interests.
NAM member companies and affiliated organizations have
reported the following concerns regarding China's WTO
compliance.
currency manipulation
By far, the NAM has received the greater number of
complaints about China's deliberate policy of undervaluing
its currency to gain unfair competitive advantage over U.S.
producers and those of other WTO member countries. Economists
have estimated that China's currency could be undervalued by
40 percent or more. The Chinese yuan has remained pegged to
the dollar at 8.28 for the past eight years despite an
extended period of robust economic growth, continuing trade
surpluses and a large build-up in foreign exchange reserves,
which exceeded $350 billion in July 2003.
Chinese officials have acknowledged that the pegging of the
yuan to the dollar is part of a deliberate strategy to
support Chinese industry and boost exports. This kind of
currency undervaluation for commercial gain goes against the
intent of the General Agreement on Tariffs and Trade (GATT),
which seeks to remove trade barriers and allow markets to
determine trade flows. Article IV, for examples, states that
``Contracting Parties shall not, by exchange action,
frustrate the intent of the provisions of this Agreement . .
.'' China's undervalued currency, in effect, acts as an
additional trade barrier to U.S. exports and an unfair
subsidy for all Chinese exports. We believe that Chinese
exchange rate policies do not comply with WTO obligations.
subsidized exports
We continue to receive reports from different industries
(e.g., tool-and-die, metal forming, steel and chlorinated
isocyanurates) that Chinese products are being sold in the
United States at prices so low that they could not even cover
the cost of raw materials and shipping much less full
production and marketing costs. A tool-and-dye company, for
example, reports that a Chinese competitor was selling a
product similar to one made in the United States for $40,000,
compared to the U.S. producer's price of $100,000. The U.S.
company maintains that the cost of the raw materials alone
would amount to $40,000, not including shipping, duties and
other costs. A U.S. producer of chlorinated isocyanuratrs,
which is used as a cleaning agent in swimming pools,
reports a similar situation. As a result of pricing which
appears to be below cost, Chinese exporters are expected
to increase exports of
[[Page H10070]]
this product by 400 percent in 2003 over 2002 levels.
These reports suggest the likelihood of widespread use of
subsidies, either direct or indirect, to help Chinese
exporters gain unfair competitive advantage in the U.S.
market. They merit further investigation by USTR and the
Department of Commerce. One source of indirect subsidy is
continued bank leading to money-losing and insolvent Chinese
manufacturers, often state-owned or state-controlled
enterprises. Since the Chinese banks providing these loans
are either state-owned or state-controlled, the Chinese
government bears responsibility for their lending practices.
U.S. steel producers note that the Chinese steel industry is
the largest-recipient of interest-rate subsidies authorized
by the national government. Since many of the companies that
benefit from either directed bank lending or subsidized
interest rates are engaged in international trade, they have
an unfair competitive advantage vis-a-vis U.S. based
companies, which must rely on private financing at market
rates.
counterfeiting and ineffective enforcement of ipr protection
While Chinese laws on intellectual property rights (IPR)
have improved considerably, the lack of effective enforcement
of the IPR protection remains a serious problem. Violations
of trademarks through product counterfeiting is rampant and
on a massive scale. The violations involve a wide range of
products, including consumer hygiene and health care
products, athletic footwear, pharmaceuticals, food and
beverages, motorized vehicles and even entire automobiles.
Pharmaceutical counterfeiting is now, according to U.S.
industry representatives, a serious public health concern in
China. We believe that the lack of criminal penalties for
counterfeiting, including jailing, prevents effective
enforcement of trademark and labeling violations.
We are also concerned about reports that local government
authorities are actually promoting the expansion of local
industry dedicated principally to counterfeiting. At a
minimum, local authorities are knowledgeable of counterfeit
production and taking no action to halt it. There appears to
be no mechanism for the national government to prevent local
governments from aiding and abetting counterfeiting by local
industry. In addition, the Chinese customs service has not
cooperated in blocking exports of counterfeit products even
when solid evidence of counterfeiting was provided. It is
claimed that, since the ``exporting'' of counterfeit products
does not constitute a ``sale'' of the products, the relevant
Chinese law did not apply.
Other IPR violations are also common. They include
unauthorized duplication of computer software, music films;
copying of designs; unauthorized use of patented technology;
and unauthorized use of U.S. product certification logos. The
makers of air conditioning and refrigeration equipment note
that the ARI (Air-Conditioning and Refrigeration Institute)
certification symbol was being used without authorization by
a Chines company. Efforts to have the Chinese government stop
this unauthorized use proved ineffective.
The pharmaceutical industry does, however, also report
improvements in intellectual property protection, notably by
the promulgation of a new regulation on data exclusivity for
clinical trials, as required in TRIPS and committed in
China's accession package.
Manipulation of VAT and Other Taxes
We have reports that China is manipulating the application
of taxes, notably the Value-Added Tax (VAT), to both restrict
imports and indirectly subsidize exports. For example, the
scrap recycling industry has told us that Chinese users of
imported copper and other scrap metals are deliberating
undervaluing their invoices to pay less VAT on the imported
metal. When the finished metal products are exported,
however, Chinese producers claim a rebate of the VAT based on
the metals' real import price. This results in a substantial
subsidy for the exported product that translates into lower
prices in the U.S. market. It also enables Chinese scrap
metal users to pay higher prices for scrap metal than their
U.S. competitors. Chinese customs and tax authorities have
not taken action to investigate these practices.
A major U.S. producer of semiconductors has also expressed
concern about continuing Chinese discrimination in the
application of the VAT on imported and domestically produced
semiconductors. China levies a 17 percent VAT on imported
integrated circuits. Domestically designed and produced
integrated circuits are taxed at VAT rates ranging from 3-6
percent. Integrated circuits produced in China but designed
abroad are taxed at 11 percent. This discriminatory treatment
of domestic and foreign ``like'' products violates Article 3
of the GATT.
Unjustified Labeling Requirements
In 2002 the Chinese Ministry of Health promulgated a new
regulation mandating the labeling of all genetically modified
(GM) food products. While the implementation of the
regulation was subsequently suspended indefinitely, the fact
that it remains on the books is already having significant
adverse economic effects and creating barriers to trade. Some
producers have ceased shipping these products in anticipation
of the regulation going into effect.
U.S. food producers have questioned whether the Health
Ministry's action was in conformity with China's WTO
obligations. The ministry did not provide a justification for
the labeling requirement based on an assessment of health
risks, which is a requirement of the Agreement on Sanitary
and Phytosanitary Measures. The Technical Barriers to Trade
Agreement (TBT) also suggests inadequate attention to the
treatment of ``like products,'' the question of whether the
labeling requirement addresses a ``legitimate objective'' and
the requirement to base technical regulations on
``performance'' rather than ``design'' characteristics.
Inappropriate standards and concerns about CCC mark system
Several NAM members have raised concerns about application
of technical standards and the CCC Mark system. With regard
to standards, China is requiring that certain products (e.g.,
electrical products) be manufactured only to ``international
standards'' as determined in the ISO or IEC. Other
``international standards,'' notably those developed in the
United States and widely used in the global marketplace, are
not allowed. This does not conform with the WTO TBT Committee
interpretation that ``international standards'' need not be
limited to ISO or IEC standards.
A second set of standards concerns relates to the CCC mark
system. China introduced the CCC mark system to comply with
WTO requirements for a single mark for like domestic and
imported products. It is, in that sense, a step forward on
standards and mark requirements. However, the inconsistent,
non-transparent and inflexible application of the CCC Mark on
a variety of products (e.g., electrical products, air
conditioning and refigeration equipment, and tires) has
created market access barriers and needlessly raised the cost
of importing products into China.
Generic problems include: the high cost of having Chinese
inspectors audit factories in the United States and other
foreign countries on compliance with the standards; continued
delays in allowing U.S. testing and certifying bodies to
certify compliance for the CCC mark; and lengthy delays and
relatively high cost of obtaining testing and certification
for the CCC mark in China.
Several other specific problems were noted. A major tire
company reported that several types of its bus tires that are
standard sizes in countries around the world cannot obtain
the required CCC mark because these sizes are not listed in
the Chinese National Standards. Another type of tire widely
on Chinese trucks is also not on the list and thus cannot be
sold by the U.S. company in China. Efforts to resolve this
problem with Chinese standards authorities and Chinese
customs have thus far been unsuccessful. In addition, the
company reports that local inspection offices appear to be
abusing their authority by requiring the re-inspection of the
company's Chinese-produced tires and confiscating tires which
they determine to be ``non-complaint'' with the CCC mark
standards.
Restrictions on Trade Rights of Joint Ventures
China is not fulfilling its commitment to allow foreign
joint ventures to import and sell products (e.g., tires,
automobiles, auto parts and industrial equipment) in China,
which was to have gone into effect on Dec. 10, 2002. A major
tire company, for example, reports that the Chinese
government has imposed additional restrictions on its trading
rights that were not anticipated when this concession was
negotiated. They include allowing only new joint ventures to
have this right and requiring the Chinese and foreign
partners to have separately done U.S. $30 million in trade
with China over each of the three preceding years.
lack of action on auto financing regulations
The Chinese government has committed to publish new
regulations governing the financing of automobile purchases.
Several NAM member companies have expressed concern about
slow progress on the regulations that were explicitly
promised in China's accession agreement. The U.S. government
should press for their prompt issuance to comply with WTO
obligations.
problems with tariff rate quotas and import certificates
Complications in implementing tariff rate quotas (TRQs) are
creating non-tariff trade barriers to U.S. feed products,
notably corn and wheat. Chinese authorities have delayed
issuance of regulations on the administration of the TRQ
system and introduced unreasonable licensing procedures.
There has also been a lack of transparency in the process
which makes it difficult to know which companies are granted
quotas. China has also violated its accession agreement by
redirecting quotas reserved for non-state companies to state-
owned companies.
A related problem that has affected soybean exporters is
the narrow window for using import permits under the AQSIQ
permit system. U.S. exporters have only 90 days to purchase,
transport and unload their products in China. These
restrictions are not only limiting U.S. commodity exports
sales but also restricting the operation of soybean
processing plants in China.
lack of transparency in trade regulatory process
Many companies complain about the lack of transparency in
the trade regulatory process and the difficulty in obtaining
current laws and regulations governing trade and
[[Page H10071]]
business operations. This is a continuing problem that should
lend itself to solutions in a relatively short time frame.
The U.S. government should press for concrete steps that
improve transparency at all levels.
William Primosch,
Director, International Business Policy,
National Association of Manufacturers.
Mr. OXLEY. Mr. Speaker, I am pleased to rise today in support of H.
Res. 414, a resolution which I am co-sponsoring and which encourages
China to move to a more flexible exchange rate. As Chairman of the
Financial Services Committee, which has jurisdiction over domestic and
international monetary policy as well as economic growth and
stabilization, I believe that this is an important measure which
deserves the support of the House.
I commend Mr. English for his leadership in introducing this
important resolution, which seeks to encourage China to continue taking
concrete steps to reform its economy and move towards a more flexible
exchange rate mechanism. I note that the U.S. Chamber of Commerce, the
National Association of Manufacturers, the United Steelworkers of
America, and the American Iron and Steel Institute all support this
resolution.
I also want to commend the gentleman from New York (Mr. King) who
chairs the Subcommittee on Domestic and International Monetary Policy,
Trade, and Technology, which held the first House hearing on this
subject.
I support this resolution because it helps signal to the Chinese
government that this House is monitoring closely the efforts of both
the Chinese and U.S. governments to position China to develop a more
appropriate exchange rate and infrastructure to support that exchange
rate. The goal is to ensure that serious progress continues to be made.
For some time now, our own dynamic economy has been undergoing a
dramatic shift towards services sector jobs. It is unclear how the
Chinese exchange rate regime contributes to, or accelerates, this
trend. However, the trend should not be confused with the notion that
the U.S. economy will someday outsource all production of physical
goods.
The manufacturing sector in this country is a significant source of
innovation, patent development and, therefore, economic growth. We
cannot permit potentially unfair competition to undercut this important
activity. We should not accept that possibly unfair competition will
require hard-working Americans doing a good job to be unemployed.
China is the world's most populous country. It is becoming one of the
United States' most important trading partners. It has recently served
as a source of strength in Asia, as well as an engine of economic
growth globally. U.S. companies and consumers benefit from a strong and
growing China, but only if that growth is based on a fair system.
China's economic growth and potential should lead it to adopt 21st
Century exchange rate policies as well. If China is going to be serious
about its WTO commitments, it must also recognize that fair competition
requires market-determined exchange rates in addition to opening its
markets to foreign companies.
It is true that such large changes cannot occur overnight, especially
in a command economy. It is also true that a financial system must be
strong and resilient in order to absorb the kind of capital market
volatility that accompanies floating exchange rates. Finally, it is
true that China's fragile banking system needs to be strengthened if a
floating rate system is to be launched successfully. Change is needed
for the good of China's own economy.
Mr. Speaker, these facts should underscore the importance of China
moving clearly and unambiguously towards banking sector reform. They
cannot serve as an excuse for delaying these necessary reforms.
I urge all of my colleagues to support the resolution.
Mr. ENGLISH. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Terry). The question is on the motion
offered by the gentleman from Pennsylvania (Mr. English) that the House
suspend the rules and agree to the resolution, H. Res. 414.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. ENGLISH. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
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