News from U.S. Senator Olympia J. Snowe
Chair, Senate Committee on Small Business and Entrepreneurship
For Immediate Release: February 10, 2006
Contact: Chris Chichester, 202-228-5843

Snowe: Chinese Government’s Unfair Trade Practices Costing Jobs

(Washington, D.C.) – U.S. Senator Olympia J. Snowe (R-Maine), Chair of the Senate Committee on Small Business and Entrepreneurship, today wrote Treasury Secretary John Snow to demand the Bush Administration finally take a stand against the Chinese government’s unfair trade practices that are costing Americans their jobs by officially labeling the country a currency manipulator in its April, 2006 report to Congress. Senator Snowe released her letter immediately after the Department of Commerce reported the annual U.S. trade deficit for 2005 increased 17.5 percent, to $725.8 billion, the highest on record.

The text of Senator Snowe’s letter:

“The ability of U.S. businesses to compete internationally on a fair and level playing field is critical to their success in the global marketplace. Unfortunately, nations, such as China, persist in reaping rewards from unfair trade practices. Most notably, the Chinese government continues to intervene in foreign exchange markets to intentionally undervalue its currency, which makes Chinese exports to the U.S. cheaper and U.S. exports to China more expensive. As a result, U.S. businesses struggle to compete and are forced to shed jobs. It is time for the Administration to take a stand against China’s unfair currency practices. Specifically, Treasury should recognize that the facts demonstrate China is a currency manipulator in its April 2006 report to Congress.

“In July 2005, China’s central bank introduced more flexibility into China’s exchange rate regime. However, since that time, China’s currency has appreciated a mere 2.7 percent against the dollar. While I am well aware of the structural changes taking place to help China’s financial infrastructure better support a flexible, market-based exchange rate, the Chinese government must move in a manner and magnitude that is sufficiently reflective of underlying market conditions. The Chinese government has put the necessary framework in place to move to a more flexible exchange rate regime, and it should do so immediately.

“The Chinese government’s unwillingness to significantly alter its exchange rate raises serious questions about the Chinese government’s willingness to compete fairly in the global marketplace. According to Chinese trade data, China’s trade surplus with the rest of the world tripled to a record $102 billion in 2005, while China’s bilateral trade surplus with the U.S. stood at a record $114.7 billion in 2005, far beyond the $80 billion surplus the previous year. Even more disturbing, official U.S. trade data finds that China registered a bilateral surplus of $206 billion in 2005. It is apparent that the Chinese government is unwilling to relinquish its unfair trade advantage by allowing for a more flexible currency.

“It is critical that U.S. businesses gain an even footing to compete against foreign firms, and that U.S. businesses are not impeded in foreign markets. President Bush highlighted this concern in his State of the Union Address, remarking that ‘...One out of every five factory jobs in America is related to global trade, and we want people everywhere to buy American. With open markets and a level playing field, no one can outproduce or outcompete the American worker...’

“It is time for the Administration to act in support of American workers and U.S. manufacturers, not just pay them lip service. As Treasury begins to finalize findings and analysis for its semiannual report to Congress on International Economic and Exchange Rate Policy, I strongly urge you to stand against unfair foreign currency practices.”

Last year, Senator Snowe introduced “The Fair Currency Practices Act of 2005” (S. 984), legislation to force nations to live up to their international obligations and stop undervaluing their currencies. It has three key provisions. The first would alter the criteria by which the Treasury Department is required to enter into negotiations with foreign countries that it labels as currency manipulators. The second would further clarify the working definition of manipulation under the Exchange Rates and International Economic Policy Coordination Act of 1998. Finally, the Fair Currency Practices Act would instruct Treasury to undertake an extensive examination of China's trade surplus, with particular attention paid to China's suspect trade data, and report on its findings.

The letter is attached.

###