For years, the Chinese government has intervened in world markets, causing its currency (the renminbi – “RMB” or “yuan”) to be undervalued by as much as 25 to 40 percent.  This unfair trade practice translates into a significant subsidy, artificially making Chinese imports into the United States much cheaper and U.S. exports to China much more expensive.

What does this mean for the United States? 

China’s currency manipulation reduces American exports, causes the loss of U.S. manufacturing jobs, and contributes to our large trade deficit with China. 

Paul Krugman, winner of the 2008 Nobel Prize in Economics, estimates that China’s exchange rate policy reduces U.S. GDP by 1.4 to 1.5 percentage points annually and reduces U.S. employment by 1.4 or 1.5 million jobs. 

“[China] follows a mercantilist policy, keeping its trade surplus artificially high. And in today’s depressed world, that policy is, to put it bluntly, predatory.”  (See his New York Times piece and comments at an Economic Policy Institute Forum)

So what is the U.S. government doing about this?

The Bush Administration, the Obama Administration, and Members of Congress have tried to persuade the Chinese government to allow its currency to respond to market forces but no significant progress has been made.  This month however, the House of Representatives has taken unprecedented steps to address the issue. 

Last night the House of Representatives overwhelmingly passed the legislation with a vote of 348-79 signaling a mounting concern among U.S. lawmakers regarding China’s violation of its international obligations.

Upon passage, Chairman Levin stated:

“This is an important moment for this Congress and for the American people.  China’s persistent manipulation of its currency contributes to the outsourcing of American jobs and poses a very serious problem that requires real action.  Under our leadership, real action is now being taken in Congress to stand up for American workers and businesses. 

“China clearly has an economic strategy to bolster its businesses and workers.  Our nation needs to implement an active economic strategy to enforce the rules of trade and allow our businesses and workers to compete and win in the international marketplace.  This bill is consistent with America’s international obligations and is a significant step to bring about China’s compliance with theirs.”

The bill makes clear that additional tariffs can be imposed to offset the effects of a “fundamentally undervalued” currency under U.S. trade remedy laws (known as the countervailing duty laws). The bill contains two key provisions:

• reverses a current Commerce Department practice that has precluded it from treating foreign government currency practices as an export subsidy;

•  directs Commerce on how to measure the subsidy provided to foreign producers through currency undervaluation. 

The bill’s original sponsor Congressman Tim Ryan (D-OH) emphasized the importance of the legislation on American families on the House Floor:

Click here for more information about H.R. 2378

-by Lauren Bloomberg

This week the House is scheduled to take up an important bill that will help spur economic growth and support thousands of U.S. manufacturing jobs.  As early as tomorrow the House could consider H.R. 4380, the U.S. Manufacturing Enhancement Act of 2010, which contains hundreds of tariff suspensions and reductions on products where there is no domestic production or domestic opposition.

Chairman Levin notes that “This bill is a shot in the arm for U.S. manufacturers who need these products to keep making their goods and supporting American jobs.” 

In a letter of support, the National Association of Manufacturers (NAM), explains:

The [Miscellaneous Tariff Bill] MTB is one of the most important short-term actions Congress can take to preserve and expand good American jobs, cut the costs of doing business in the United States and boost American manufacturing exports. U.S. manufacturers large and small use the MTB’s tariff suspension provisions to obtain raw materials, proprietary inputs and other products that are not available in our nation.

 

“Without the MTB, the cost of these companies’ products will inevitably increase, forcing them to pass higher costs on to consumers and making their products less competitive. These higher costs translate into lost jobs for American workers.”

The U.S. Chamber of Commerce also supports passage of the legislation, writing: “Given its importance for preserving American jobs, the MTB should receive the same strong bipartisan support it has in the past, and the Chamber urges you to support its swift approval.”

In addition to support from NAM and the Chamber of Commerce, a coalition of over 140 businesses wrote a letter in support of H.R. 4380.

Click here for additional information on the MTB process.

- by Cameron Brenchley

President Obama and Vice-President Biden recently outlined a strategic plan to protect and enforce U.S. intellectual property rights, including protection of patents, copyrights, trade secrets, and trademarks.

The plan seeks to ensure efficiency and coordination between intellectual property enforcement coordinators at the federal, state, and local levels and enforce our intellectual property rights internationally by combating websites and other entities that violate our intellectual property rights. In addition, it attempts to prevent illegal products from entering the country by securing the supply chain by supporting law enforcement agencies and encouraging  voluntary cooperation from those in the private sector. Finally, it pledges that the government will lead by example in making sure that they do not purchase illegal products, and will be transparent with its development and implementation of policies.

 “[W]e’re going to aggressively protect our intellectual property,” President Obama said regarding the issue. “Our single greatest asset is the innovation and the ingenuity and creativity of the American people. It is essential to our prosperity and it will only become more so in this century.”

The Ways and Means Committee shares the Administration’s dedication to defending intellectual property rights, particularly with regard to U.S. – China trade.  At last week’s Full Committee hearing on China’s trade and industrial policies, the Committee heard testimony from Robert W. Holleyman II of the Business Software Alliance, who spoke about China’s frequent use of illegal software and its illegal production, and sale, of hardware.  Mr. Holleyman informed the committee that Chinese companies pay for less than 30% of used software and that the Chinese government does not sufficiently enforce existing regulations, and recommended stricter enforcement against software piracy in order to defend our essential intellectual property rights. During questioning, Holleyman discussed the importance of the Administration and Congress working together to develop a comprehensive approach to addressing the issue of intellectual property rights, rather than dealing with the issue on a case-by-case basis. The Ways and Means Committee is in the process of developing customs reauthorization legislation, which is expected to include provisions on intellectual property enforcement at our borders, and working with the Administration to make sure these provisions support our IPR needs.  

- by Matthew Beck 

Yesterday, the House Ways & Means Committee held a hearing on issues related to China’s trade and industrial policies - policies which Chairman Sander Levin (D-MI) described as having “The effect of tilting the playing field to favor Chinese companies and against U.S. companies, workers, and farmers.”

Tensions have been rising steadily over these controversial economic policies, especially regarding the issue of China’s currency. Now, many in Congress are calling for action, whether it comes from the Congress, the Administration, or China itself. As Chairman Levin said in his opening remarks, “If China does not act and the Administration does not respond promptly thereafter, Congress will act.”

Chairman Levin cited China’s exchange rate policies, their “indigenous innovation” initiative, discriminatory product standards, and manipulation of export flows as especially contentious and “often in clear violation of China’s WTO obligations.”

Committee Members, Republicans and Democrats alike, reviewed testimony from three panels of witnesses on China’s economic policies, working toward a shared goal of figuring out “how to put [our trade relationship] on a healthier, more sustainable, and mutually beneficial footing.”

An article in today’s The New York Times offers a review of the hearing and the importance of China’s trade policies in the global economy: http://nyti.ms/cBAQ5F

- by Matthew Beck