[Congressional Record (Bound Edition), Volume 150 (2004), Part 7]
[Senate]
[Pages 8745-8747]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            TRADE WITH CHINA

  Mr. GRAHAM of South Carolina. Mr. President, we have apparently 
reached an impasse on the FSC/ETI bill. I am the first one to 
acknowledge that our majority leader should be insistent we pass this 
bill. We are dealing with some changes to the tax policy of the United 
States to avoid tariffs on U.S.-manufactured products going into 
Europe. The WTO has ruled against us and we need to change our law. We 
have a lot of other things being added onto this bill that are probably 
not related to that but, as this bill is being touted as a jobs 
package, I think that is an appropriate way to describe what we are 
trying to accomplish in this bill.

[[Page 8746]]

  But I am going to be honest with you, I have an amendment I have had 
pending on this bill for a very long time, along with Senator Schumer, 
and this amendment deals with requiring the Chinese Government to float 
the currency. It basically says if within 180 days the Chinese 
Government does not take corrective action in the way they peg their 
currency to the dollar, then tariffs will be levied against any 
products coming out of China into the United States that benefit from 
that currency devaluation.
  To make a long story short: China cheats. The Chinese have a system 
of valuing their money that creates between a 15-percent and 40-percent 
discount on all products produced in China. This currency manipulation 
is putting our manufacturing community at a severe disadvantage. It is 
creating an unfair advantage for Chinese-produced products, and it is 
done by the Government.
  Free trade, fair trade, these are words people throw around. If you 
are a free trader, that code word means you don't care for the 
consequences to the worker. If you are a fair trader, the code word 
means you are a protectionist. I would like to be thought of as a 
balanced trader. You cannot have balance if your trading partner at the 
governmental level cheats.
  I don't have enough time to go into how I think the Chinese 
Government intentionally steals intellectual property rights of 
American companies and foreign companies, but 90 percent of all the 
videos and tapes sold in China are pirated. If you do business in 
China, your intellectual property is very much at risk because there is 
no rule of law protection. The Chinese Government helps companies 
transship--illegally ship goods produced in China to get the benefit of 
trade agreements to which they are not party, and it goes on and on. 
But one of the biggest abuses is to value the currency in an 
artificially low manner that pegs the Chinese currency to the dollar in 
a way that gives a 15-percent to 40-percent discount.
  Our amendment, that of myself and Senator Schumer, tries to let the 
Chinese know we are not going to take this anymore. They need to take 
corrective action. If we are going to trade with you, if you are going 
to be a member of the family of nations, you need to comply with 
international trade laws when it comes to how you value money; that you 
can't cheat without a consequence.
  If you doubt what I am saying, talk with any manufacturing entity 
that is a domestic manufacturer that competes with China and ask them 
about the money problem, the currency, the devaluing of the Chinese 
currency, and how it affects their ability to be competitive. In 
droves, they will tell you that you need to either get China to float 
their currency like every other market-based economy has done, to find 
its true value, as we do, or you need to revalue it to get a more fair 
and accurate representation of the value of the Chinese currency.
  We have had great job growth in the last 2 months. That is 
encouraging. But one thing we have not been able to accomplish yet is a 
rebounding in manufacturing jobs. I am here to say I support the 
President in every endeavor to try to grow this economy, but we--the 
administration, the Congress, the House and the Senate--need to deal 
more aggressively with Chinese abuses when it comes to trade.
  From September 2002 to September 2003, there has been a 6.6 percent 
decline in manufacturing jobs in South Carolina. One of the great 
reasons is not productivity gains; it has been a loss of market share 
to China--not because they work harder, not because they are smarter, 
but because the Government cheats.
  As a whole, the U.S. manufacturing jobs have decreased by 4.2 
percent. Only two States, Hawaii and Nevada, have seen an increase in 
manufacturing jobs. In South Carolina, 41,000 jobs in 2003 were lost in 
manufacturing and 3 million American jobs have been lost in the last 
5\1/2\ years. China's access to the U.S. textile industry and apparel 
market more than doubled in 2002, growing at 117 percent. That is in 
addition to 114 percent up in 2003.
  The bottom line to all this is there will be no economic recovery in 
manufacturing until our country aggressively deals with trade abuses of 
China in a wide variety of areas, but one of the chief abuses is the 
Chinese Government artificially devalues its money, creating a discount 
from 15 to 40 percent on every product made in China. That is not fair 
to those people who are competing with Chinese companies. It is done 
intentionally and it has a serious and dramatic effect on our ability 
to sustain manufacturing jobs in this country.
  The U.S.-China Economic and Security Review Commission was a 
commission established by the Congress to look at Chinese policies and 
how they affect our economy and whether China is playing fairly. It is 
a bipartisan group. It is a group before which I have testified. They 
have taken testimony from a variety of people in the United States 
about China and how China affects the U.S. market and whether Chinese 
practices comply with international trade regimes. Here is what they 
said:

       China, in violation of both its IMF and WTO obligations, is 
     in fact manipulating its currency for trade advantage.
       The Commission 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.

  They are telling us that, yes, the currency in China is being 
intentionally manipulated and it is costing us jobs and it has a 
detrimental impact on the American economy.
  It is being undervalued on purpose to create a trade advantage. They 
are urging us to get the administration and us as a body--the House and 
Senate as bodies--to fight back. I am here to say I accept their 
challenge. I am willing to fight back.
  We are not going to have a cloture vote with my vote until I get a 
promise we are going to address this problem this year.
  Since 1994, when China pegged its currency to the dollar, the trade 
deficit has increased dramatically. In 1994, they tied the value of 
their currency to the United States dollar in a way that the China 
Trade Commission found to be unfair and a way that Secretary of the 
Treasury Snow's office found to be manipulated, to be unfair.
  In 1994, the trade deficit with China was $30 billion. In 2003, it is 
$124 billion and it is going up. This says a lot about the problem we 
have with China. You will never convince me their markets are fairly 
open and their conduct as a government is not responsible for this 
increased trade deficit. All of it is not due to the currency 
devaluation, but a great deal of it is. The question for the Senate is: 
Are we going to sit on the sidelines and ignore this problem? Are we 
going to continue to allow the Chinese Government to continue to 
intentionally devalue its currency, creating an advantage for Chinese 
companies over American companies, and have no response? The answer of 
this Senator is, no, we are not going to sit on the sidelines. As 
Senators, we need to be held accountable about this abuse by China. If 
Members do not think it is an abuse, come to the Senate and say so, but 
speak up one way or the other. No more being silent on an issue this 
important to our economy.
  Since permanent normal trade relations have been established by 
China, there has been an explosion of Chinese exports. PNTR status used 
to be most-favored-nation status. They changed the acronym because no 
one wants to say China is the most favored nation because they are so 
abusive to their people and the world at large. We changed the acronym. 
The reason we changed the acronym is because people did not want to 
associate themselves with saying China is a most favored nation.
  We need a more ``Ronald Reagan response'' to China. It is an evil 
empire that abuses people. It does not allow freedom of speech or 
freedom of religion. It is hard to trade with people who have none of 
the values you possess. Since 2001, there has been over a 20-percent 
increase in Chinese imports. Our exports to China have basically been 
flat. They are taking us to the cleaners.

[[Page 8747]]

  China has been in clear violation of IMF and WTO commitments by 
maintaining an unfairly low exchange rate to gain competitive 
advantage. IMF article IV states that members should avoid manipulating 
exchange rates in order to gain an unfair competitive advantage over 
other members.
  That is what is going on in China. We are proposing in our amendment 
that if China does not fairly value its currency to meet international 
standards of doing business--and, yes, every country has sovereignty 
over their own currency, but countries do not have the right to 
manipulate their currency in a way to create an unfair advantage in the 
world marketplace and still consider themselves a member of the family 
of nations.
  What we are talking about is bringing about corrective action that 
international trade regimes require. That is all we are talking about. 
We are going to give the Chinese 180 days to correct this problem and 
work with them to do so, but we are not going to let them get away with 
it.
  About 3 or 4 months ago, maybe even longer now, this body unanimously 
passed a resolution I authored condemning the Chinese manipulation of 
their currency, saying it was unfair, created damage to the American 
economy, and hurt American manufacturing. That was passed by a voice 
vote, with no opposition. That has not done anything. I thought it 
might. I thought it might get their attention, but the abuse still 
continues.
  It is now time to be serious. The amendment we offer says if you do 
not peg your current currency in a more accurate way, or ``float'' as 
you should, being a major economic force in the world, we will start 
putting tariffs on your products 6 months down the road. And we have 
the right to do that under international law. A reevaluation of the 
yuan should permit other nations' currencies to go up at least partway, 
maybe 10 percent or so.
  The whole idea of trade is to help developing nations and rise all 
boats. The Chinese manipulation of their currency and their practices 
are to sink every boat around them. The Dominican Republic and other 
developing nations are having a hard time competing with China. China 
is not interested in raising the boats of other nations. They are 
interested in stealing market share and sinking every boat they can get 
hold of.
  If they change their practices, it will allow their neighbors to 
accurately value their currencies, helping American manufacturing in a 
tremendous way. What would that way be?

       If you put all these currency changes together--not just 
     China, the Asian region--the result would be a $50 billion 
     reduction in the United States current account deficit, which 
     in turn translates to something like 500,000 high-paying 
     jobs, mainly in manufacturing in this country.

  That is according to Fred Bergsten, Ph.D., Director for the 
International Institute for Economics.
  That sentiment has been echoed by people in the manufacturing 
community, economists, all over this country, all over the world. The 
European Union is having a problem with Chinese currency practices. 
Again, 500,000 high-paying jobs could come about if the Chinese only 
played fair.
  I have something to say to the Senate: Chinese are not going to play 
fair on their own. If we want the Chinese Communist dictatorship to 
play fair, we will have to push them.
  A pegged exchange rate policy is not appropriate for a major economy 
in the global system such as China. They are pegging the yuan to the 
dollar where it will always be of less value than the dollar, 
artificially low, creating a discount on any product made in China. If 
I am selling the product where dollars are involved, and you are 
selling a product in China where the yuan is involved, and you have 
lowered the value of that currency, you have created an advantage for 
yourself. That is exactly what is going on.
  Secretary Snow stressed that a flexible market-based exchange rate 
regime and reduced controls on capital flows are the best system for 
China and all major world economies. He is exactly right. He stated 
that in April of 2004.
  We have manufacturing business owners who are telling us we have a 
problem. We have Secretary Snow who has looked at it and found abuses. 
We have world class economists telling us we have a problem with China. 
We have the Congress's own commission that was chartered to investigate 
China in terms of potential abuses telling us that the currency is 
undervalued in a manipulative fashion, hurting American manufacturing 
unfairly. Now we have labor unions commenting.

       While many factors contributed to this devastating job loss 
     (in manufacturing), it is clear that the Chinese government's 
     manipulation of its currency, violation of international 
     trade rules and egregious repression of its citizens' 
     fundamental democratic and human rights are key contributors 
     to unfair competitive advantage. The Chinese government is 
     flouting its international obligations and the U.S. 
     government must act urgently to hold it accountable.

  That is from the AFL-CIO. The truth is, myself and the AFL-CIO 
probably do not agree on a lot of domestic issues. Sometimes we do. On 
this issue we see China the same. China is a dangerous, growing threat 
to this country. Their military is doubling, exponentially growing in 
terms of its capabilities. They are getting money from international 
trade regimes where they are cheap.
  The Chinese people, I am sure, are good, decent people and living 
under very oppressive conditions, something we would not stand for 5 
minutes.
  At the end of the day, the least we can do is fight back against its 
Communist dictatorship when they cheat. If we are going to trade with 
China, then we need to make China part of the family of nations. But 
this country needs to stand up to the Chinese Government when they 
cheat. They are undervaluing their currency on purpose. It is costing 
us a lot of jobs. It is not fair, and it needs to be addressed.
  I am here to say, as a U.S. Senator in his first term, I am going to 
do everything I can to bring this issue to the Senate. I want to do it 
on this bill. If I can reach an agreement with our leadership and 
friends on the other side, we will do it down the road. But we are 
going to address this problem. I hope we do something about China's 
trade abuses sooner or later before it costs us more jobs.
  I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. COLEMAN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. COLEMAN. Are we still in morning business?
  The ACTING PRESIDENT pro tempore. We are in morning business.
  The Senator from Minnesota.

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