WASHINGTON — Demands are growing louder from domestic manufacturers and a contingent of lawmakers for the new Congress and President Bush to get tough on China’s unfair trade practices.
The complaints about low-cost Chinese exports harming U.S. industries, such as those registered Thursday at a Capitol Hill hearing before the U.S. China Economic and Security Review Commission, are bringing some fresh legislative proposals. But neither Bush nor the GOP-controlled Congress appears poised to act.
“Unfortunately, the administration has allowed a culture of [trade] compliance-as-you-please to emerge” with China, Rep. Sander Levin (D., Mich.), the top Democrat on the powerful House Ways and Means subcommittee on trade, told the commission.
Congress created the bipartisan 12-member citizen commission in 2000 to report annually about how China’s trade and economic relationship with the U.S. affects national security, including economic conditions.
Critics of China from both parties argue their dossier of Chinese trade intransigences is growing, along with the country’s ballooning trade deficit with the U.S., now at $150 billion. Capitol Hill action isn’t expected anytime soon because the Bush administration’s policy has been to negotiate with the Chinese to improve their record instead of imposing mandates. Republican Congressional leaders have backed that approach.
“In the area of trade and foreign relations, it is very important, as much as we can, to speak as one voice with the President,” said Rep. Clay Shaw (R., Fla.), chairman of the trade subcommittee.
But in a nod to a small but vocal group of Republican China trade critics and a larger swath of Democrats, Shaw said he plans to hold hearings this year on China trade complaints, focusing on the depressed Chinese yuan, which is kept artificially low because it is pegged to the dollar. He called the currency issue “tremendously important.”
Panel member June Teufel Dreyer, a Republican appointee and professor of political science at the University of Miami, questioned the administration’s engagement policy.
“Is it our intention to dialogue forever without seeing results?” Dreyer asked rhetorically. “At what point do we finally say, ‘We’ve talked enough and we need to do something.’”
Shaun Donnelly, an assistant secretary of state for economic and business affairs, said the administration’s China policies have shown results in helping companies fight things like intellectual property and licensing infringement. Henry Levine, a Commerce deputy assistant secretary for Asia, said Bush officials have secured an agreement with the Chinese to discuss the country’s export industry subsidies “that can distort U.S.-China trade and create an unlevel playing field for U.S. companies.”
The hallmark of U.S.-China economic ties came in 2000, when Congress granted China Permanent Normal Trade Relations status. PNTR gave China favorable tariffs, along with most other U.S. trading partners, and cleared the way for China to join the World Trade Organization. As a WTO member, China supporters argued, the country could be persuaded to follow the global trade body’s rules for fairness. Five years later, China trade critics are still agitating for Congressional action.
“The China problem is not something that is going to fade away,” Cass Johnson, executive director of the National Council of Textile Organizations, said in an interview.
Johnson also testified before the commission Thursday, largely focusing on China’s yuan, the value of which is seen as being lowballed by as much as 30 percent.
“My sense is there is an expectation on Congress’ part that China would do something and it has not,” he said. “The more time that goes by with China not cooperating, the more likely Congress will act.”
A bill to be reintroduced this year would allow the U.S. to levy punitive tariffs, called countervailing duties, on imports from nonmarket economies when industries are subsidized by the government. The practice, including loans that aren’t based on a company’s performance, has been identified as common in China. Lead sponsors are Sens. Susan Collins (R., Maine) and Evan Bayh (D., Ind.), and Reps. Phil English (R., Penn.) and Arthur Davis (D., Ala.).
Tamara Browne, a Washington lobbyist representing a nonmarket countervailing duty coalition of domestic producers, including textile mills, foundries and paper plants, said lawmakers might be more moved to act as the 2006 Congressional elections draw closer.
“The bottom line is jobs,” Browne said. “If the job losses start piling up, then the pressure will come.”
Another China trade-curbing measure was reintroduced Thursday calling for 27.5 percent tariffs on all Chinese manufactured goods imported into the U.S. until China revalues its currency upward. Sponsors are Sens. Lindsey Graham (R., S.C.) and Charles Schumer (D., N.Y.).
“Pretty soon we’re not going to have anyone for the retailers to sell to,” said Graham.
Julia Hughes, vice president for international trade with the U.S. Association of Importers of Textiles & Apparel, said she “would be surprised” if the China currency, countervailing duty or similar measures gained traction this Congress.
But China’s escalating trade deficit with the U.S. and the lack of a commitment from the Asian nation to change its currency are breeding Capitol Hill “frustration with the administration’s approach,” said Nicholas Lardy, a senior fellow at the Institute for International Economics.
“We don’t have an election [this year] and the need for as many political points to score,” he said. “The economy is doing better and job creation has resumed.”
The China commission panel recommended legislation be pursued to direct the administration to fight China’s currency exchange rate practices by repegging the yuan to a basket of currencies, instead of only the dollar (as a Chinese official from a nongovernmental organization recently proposed at the World Economic Forum in Davos). The commission also urged the U.S. Trade Representative to investigate Chinese industry subsidies and whether the issue can be tackled at the WTO.
“The commission believes that the U.S.-China economic relationship is of such large dimensions that the future trends of globalization will be influenced to a substantial degree by how the United States manages its economic relations with China,” the commission concluded. “It is reasonable to believe that U.S.-China economic relations will help shape the rules of the road for broader global trade relations. If current failings are remedied and the relationship is developed so as to provide broad-based benefits for both sides, globalization will likely be affected in a positive manner on a worldwide scale. If not, the opposite will likely be true.”
— With contributions from Kristi Ellis