[Congressional Record (Bound Edition), Volume 150 (2004), Part 6]
[Senate]
[Page 7227]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           CHINESE COMPETITION

   Mr. GRAHAM of South Carolina. Mr. President, one thing I have 
learned in the last couple of years is that everywhere I go the 
manufacturing community at home keeps bringing up on topic, Chinese 
competition. Due in large part to China's unfair trade practices; South 
Carolina alone lost 41,000 jobs in 2003. Most of these jobs were 
textile and related industries. In the last five and a half years, 
three million American manufacturing jobs have been lost. Since 1997, 
the U.S. textile industry has closed more than 250 textile plants in 
the country and more than 200,000 U.S. textile workers have lost their 
jobs.
   Why is this happening? Why are American manufacturers not able to 
keep up with the Chinese? It is not because our workforce is 
intellectually inferior, and I don't believe our workforce is lazy. And 
it certainly isn't because we haven't invested in the most modern 
equipment.
   It is because China cheats. China's accession agreement to enter the 
WTO consisted of numerous commitments by China to transition to a 
market and rules based economy. China has yet to live up to their 
commitments. The theory of free trade is a great theory, but it only 
works if other people buy into that theory. It is hard to have free 
trade if you do not even believe in free speech. Through its unfair 
trade practices, China continues to steal market share, and the U.S. 
manufacturing industry is at serious disadvantage.
   China's currency, the yuan or renminbi, has been tightly pegged at 
8.28 yuan to the U.S. dollar since 1994, which most economists believe 
to be a severe undervaluation of their currency. Most economists 
estimate China's currency to be undervalued by as much as 15 to 40 
percent. This undervaluation makes China's exports less expensive for 
foreigners, while making foreign products more expensive for Chinese 
consumers, resulting in an effective subsidization of Chinese exports 
and poses a virtual tariff on Chinese imports.
   Consequently, since 1994, China's economy has grown dramatically, 
averaging over 8 percent per year. The U.S. trade deficit with China in 
2003 reached a record $125 billion. In 1994, when China first began to 
peg its currency to the dollar, the United States trade deficit with 
China was $29.4 billion.
   China has been in clear violation of International Monetary Fund, 
IMF, and world Trade Organization, WTO, commitments by maintaining an 
unfairly low exchange rate to gain a competitive advantage. IMF Article 
IV states that members should ``avoid manipulating exchange rates . . . 
in order . . . to gain an unfair competitive advantage over other 
members.'' The U.S. China Economic and Security Review Commission, a 
bipartisan commission created by Congress, found in its September 25, 
2003 hearing, that: ``China, in violation of both its IMF and WTO 
obligations, is in fact manipulating its currency for trade advantage'' 
and recommends that the Treasury Department ``immediately enter into 
formal negotiations with the Chinese government'' over its undervalued 
currency. The Commission further ``urges the Congressional leadership 
to use its legislative powers to force action by the U.S. and Chinese 
Governments to address this unfair and mercantilist trade practice.''
   At this hearing, Fred Bergsten, Ph.D., Director of International 
Institute of Economics, testified that a revaluation of 20 to 25 
percent of the yuan should permit other Asian currencies, including 
Japan, Taiwan, North Korea, to go up at least partway, maybe 10 percent 
or so, because with the yuan appreciating, they would be willing to 
appreciate against the dollar since it would actually create a 
depreciation of their own currencies against the Chinese currency, 
their main competitor. If you put all those currency changes together 
the result would be a $50 billion reduction in the U.S. current account 
deficit, which in turn translates to about 500,000 high-paying jobs, 
mainly in manufacturing in this country.
   Senator Charles Schumer and I have introduced legislation that would 
require China to abide by its international trade agreements and stop 
manipulating their currency. The goal of this legislation is to remove 
China's unfair currency advantage and the detrimental impact that it is 
having in the U.S. and abroad.
   Our legislation would require the Secretary of the Treasury to 
immediately enter into formal negotiations with China to ensure that 
China initiates a process to adopt a market-based system of currency 
within 180 days of enactment of this Act. If China refuses to do so, a 
27.5 percent tariff will be imposed on all China's exports to the 
United States in order to reduce the export advantage provided by 
China's unfairly and illegally valued currency. The President of the 
United States has the authority to remove the tariff once he certifies 
to Congress that China has moved to a market-based system of currency 
valuation.
   This legislation works within the framework of international trade 
laws. Article XXI of the General Agreement on Tariffs and Trade allows 
a member of the World Trade Organization to take ``any action which is 
considers necessary for the protection of its essential security 
interests,'' particularly ``in a time of war or other emergency in 
international relations.'' The President has stated a view that many of 
us hold, that our nation's manufacturing capability is a vital national 
interest. I know I am not alone when I say that this national interest 
is threatened by China's unfair currency practices.
   Something must be done to alleviate the detrimental economic impact 
China is having on our manufacturing industry or at the very least, to 
level the playing field for future generations. I urge the Leadership 
to allow a vote on this important legislation. I believe it will 
receive overwhelming bipartisan support and give the Administration one 
more tool to get the Chinese to uphold their WTO obligations.
   As long as we sit by and allow China to maintain its unfair trade 
advantage, the United States will continue to hemorrhage jobs. Passing 
this legislation is one step further to ensuring that China abides by 
the rules.

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