[Congressional Record (Bound Edition), Volume 149 (2003), Part 20]
[Senate]
[Pages 28031-28032]
[From the U.S. Government Publishing Office, www.gpo.gov]




 SENATE RESOLUTION 262--TO ENCOURAGE THE SECRETARY OF THE TREASURY TO 
INITIATE EXPEDITED NEGOTIATIONS WITH THE PEOPLE'S REPUBLIC OF CHINA ON 
   ESTABLISHING A MARKET-BASED CURRENCY VALUATION AND TO FULFILL ITS 
            COMMITMENTS UNDER INTERNATIONAL TRADE AGREEMENTS

  Ms. SNOWE (for herself, Mrs. Dole, Mr. Baucus, Mr. Graham of South 
Carolina, and Mr. Bayh) submitted the following resolution; which was 
referred to the Committee on Finance:

                              S. Res. 262

       Whereas the currency of the People's Republic of China has 
     been tightly pegged to the United States dollar at the same 
     fixed level of 8.28 yuan to the dollar since 1994;
       Whereas the Government of the People's Republic of China 
     has significantly intervened in foreign exchange markets in 
     order to hold the value of their currency within its tight 
     and artificial trading band, resulting in enormous growth in 
     China's dollar reserves, estimated to be over 
     $346,000,000,000 as of June 2003, an increase by 43 percent 
     from June 2002;
       Whereas the People's Republic of China has seen significant 
     increases in production capability, productivity, and foreign 
     direct investment since initially pegging the yuan to the 
     dollar, which would generally lead toward upward pressure on 
     the currency value;
       Whereas this peg, in the face of growing pressure, clearly 
     represents a manipulation of China's currency;
       Whereas the undervaluation of China's currency distorts the 
     value of exports from China and the price of foreign products 
     for Chinese consumers;
       Whereas the value of China's currency has had and continues 
     to have a negative impact on the United States manufacturing 
     sector, contributing to significant job losses and business 
     closures;
       Whereas the G-7 Finance Ministers and Central Bank 
     Governors in September of this year stated 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.''; and
       Whereas the market-based valuation of currencies is a key 
     component to the health of global trade and the stability of 
     the world economy: Now, therefore, be it
       Resolved, That the Senate--
       (1) urges the Secretary of the Treasury to initiate 
     expedited negotiations with the Government of the People's 
     Republic of China, bilaterally or through the International 
     Monetary Fund, for the purpose of ensuring a market-based 
     exchange rate valuation to permit effective balance of 
     payments adjustments and to eliminate the unfair advantage; 
     and
       (2) encourages the People's Republic of China to continue 
     to act on its commitments to the trade rules and principles 
     of the international community of which it is now a member.

  Ms. SNOWE. Mr. President, I rise today to submit a Sense of the 
Senate resolution to encourage the Department of the Treasury to 
initiate expedited negotiations with the People's Republic of China on 
establishing a market-based currency valuation and to fulfill its 
commitments under international trade agreements.
  The resolution explains why China's currency policy is an unfair 
manipulation which violates international trading rules and puts 
American manufacturers at a disadvantage. We cannot continue to allow 
this exploitation to continue to the detriment of our workers. 
Therefore, this resolution sends a strong message to the administration 
that we must increase our efforts to bring about a market-based 
valuation of China's currency.
  In an open trading system, manipulation of currency--either by 
frequent intervention or by a calculated undervaluation of one's 
currency through a fixed exchange rate--undermines the concept of 
comparative advantage by creating market distortions. These disruptions 
not only affect trade but also result in the loss of real jobs for U.S. 
manufacturers. This is particularly devastating in my State, which has 
lost over 17,300 manufacturing jobs since July 2000.
  Congress granted Permanent Normal Trade Relations (PNTR) for China 
because we knew that China would become a major player in international 
markets whether we wanted them to or not. After all, China already 
enjoyed total access to our market while we did not have the same 
benefit. Perhaps most importantly, we supported PNTR because a China in 
the World Trade Organization is bound by the same international trade 
rules as the United States or any of our other trading partners. While 
many were optimistic about the increased market access to the world's 
largest population, few dared to expect this to be an easy path.
  I have heard from company after company who have had to face the 
reality that they can no longer compete with unfairly priced Chinese 
products. Some argue they were forced to close their doors because of 
China's low labor costs, and others argue it is the lack of labor and 
environmental regulations in China that makes us uncompetitive. 
However, the full extent of China's advantage is the combination of an 
artifically undervalued currency, unfair non-tariff barriers, and low 
cost of production.
  While we all want wages, labor rights, and environmental protection 
to improve in China, the biggest concern that every manufacturer brings 
to my attention is that they can't compete with a currency 
undervaluation that economists estimate could be as high as 40 percent. 
This serves as a de facto subsidy that no competitor can surmount.
  The damage manufacturing has sustained is nothing short of alarming. 
From July 2000 through July 2003, almost 2.7 million U.S. manufacturing 
jobs have been eliminated. New England alone lost more than 214,000 
manufacturing jobs between June 1993 through June 2003, with fully 78 
percent of those losses, 166,000 jobs, occurring since January of 2001. 
The job losses have been so focused on the manufacturing sector that a 
manufacturing worker had a 50 times greater chance of losing his or her 
job than did other workers.
  For these reasons, I have been among a core group in Congress that 
has called on the administration to take strong action with regards to 
the foreign manipulation of currencies. I was pleased to work with my 
colleagues to ask the Treasury Secretary to make China's currency the 
top priority of his recent trip to Asia.
  Secretary Snow took the message to China that the manipulation of its 
currency must end and that China should take steps to freely float its 
currency. I was pleased with his action and I was further encouraged by 
the fact that President Bush raised the same concern with his 
counterpart at the APEC Summit.
  The administration has placed a high priority on this issue, but I am 
concerned about the findings of Treasury's recent report on currency 
manipulation. The Secretary of the Treasury is required to determine 
yearly if foreign countries ``manipulate the rate of exchange between 
their currency and the United States dollar for purposes of preventing 
effective balance of payments adjustments or gaining unfair competitive 
advantage in international trade.'' The law then requires that Treasury 
initiate expedited negotiations with these countries.
  However, in the face of compelling evidence of the deliberate 
currency manipulation by the Chinese government to gain an unfair trade 
advantage, that report downplayed the nature of China's exchange rate 
policy, stating that ``no major trading partner of the United States 
meets the technical requirements for designation.'' I believe that the 
facts clearly illustrate that the definition has been met.
  China has seen significant increases in production capability, 
productivity, and foreign direct investment since the initial peg, 
which would generally lead towards upward pressure on the currency 
value. In response, the government of the People's Republic of China 
has had to significantly intervene in its foreign exchange markets in 
order to hold the value of their currency within its tight and 
artificial trading band. This manipulation has resulted in enormous 
growth in China's dollar reserves, estimated to be over $346 billion as 
of June 2003, an increase of 43 percent from June 2002.

[[Page 28032]]

  In addition, China's policy is clearly in violation of article IV of 
the WTO which says members ``shall not by exchange rate action 
frustrate the intent'' of the WTO, which is to create fair and open 
markets for global commerce. China has joined the world trading 
system--it must now play by its rules and adhere to these principles.
  This resolution is about restoring some sense of order to the global 
trading community which has been distorted by the policy of the Chinese 
government to unfairly subsidize every single export through the 
manipulation of its currency. It is my hope that the strong message 
sent by this Sense of the Senate will result in a renewed vigor and 
resolve to bring China's currency into the free market.

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