[Congressional Record (Bound Edition), Volume 149 (2003), Part 19]
[House]
[Pages 26337-26346]
[From the U.S. 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'';
       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

[[Page 26338]]

     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 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

[[Page 26339]]

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. 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 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

[[Page 26340]]

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 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

[[Page 26341]]

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. 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 (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

[[Page 26342]]

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. 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 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

[[Page 26343]]

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 Gross Domestic Product. Yet, few people 
in

[[Page 26344]]

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

[[Page 26345]]

     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 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

[[Page 26346]]

     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 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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