By Matthew Beck 202-225-8933

WASHINGTON – Ways and Means Committee Chairman Sander M. Levin (D-MI) issued the following opening statement upon consideration of a Chairman’s Amendment in the Nature of a Substitute to H.R. 2378, legislation to address China’s fundamental undervaluation of its currency (as prepared for delivery):

“The Committee will come to order for the purpose of considering an Amendment in the Nature of a Substitute to H.R. 2378, the Currency Reform for Fair Trade Act.

“This Committee is charged with establishing U.S. Trade policy and we all take this responsibility very seriously.

“Our trade relationship with China is one of utmost importance, and today’s action comes after years of deliberation and discussion in multilateral venues.

“We are here today to address one of the critical issues in our trade relationship with China, its mercantilist exchange rate policy.

“Our hearings last week on this issue brought out these facts:

1.            “China’s persistent manipulation of its currency is a major distortion in the international marketplace. 

“The Government of China has now accumulated more than $2.4 trillion in foreign assets – far greater than the reserves of any other country today and generally believed to be greater than the reserves held by any other country in history.  In 2009 alone, we exported $70 billion to China, who, in turn exported $296 billion to the U.S. – a staggering $226 billion trade deficit with China alone.

2.            “China’s exchange rate policy has a major impact on American businesses, and American jobs, which is what this is all about.  

“For years, U.S. workers, businesses and farmers have been held to a competitive disadvantage because of China’s intervention to keep the price of Chinese goods to the U.S. artificially low and of U.S produced goods to China artificially high. 

3.            “Efforts to date have not worked to correct the imbalances. They have basically relied on discussions between the parties. 

“In June (shortly before a G-20 meeting), China announced that it would allow the RMB to appreciate for the first time since the middle of 2008.  Since then, however, China has allowed the RMB to appreciation less than two percent against the dollar – most of this appreciation taking place in the last two weeks.

4.            “Additional measures are necessary, and that is why we are here today.

5.            “The legislation before us today clarifies that countervailing duties can be imposed to offset the effects of an undervalued currency.  Countervailing duties would be available to any U.S. industry that could demonstrate that it has been ‘materially injured’ by imports from the country with the undervalued currency. 

By doing so, the bill will help to provide meaningful relief to those who are harmed by China’s exchange rate policy.

6.            “The Amendment in the Nature of a Substitute, modifies the original legislation introduced by Representatives Tim Ryan (D-OH) and Tim Murphy (R-PA) to make it fully consistent with World Trade Organization (WTO) rules. 

“WTO rules allow for the application of countervailing duties to offset or neutralize export subsidies.  To date, Commerce has refused to find currency manipulation a countervailable export subsidy, for the sole reason that non-exporters (e.g., U.S. tourists in China) benefit from the undervalued currency as well.  This is more restrictive and is at odds with WTO Appellate Body rulings that a subsidy can be considered an export subsidy even if it is available in some circumstances that do not involve export.  

“Importantly, the bill, as amended, preserves Commerce’s authority – and responsibility – to consider each case on its facts and make a determination as to whether all the necessary legal elements of an export subsidy are met.

“ This bill is being advanced in the absence of effective action on a multilateral basis, and the kind of multilateral structure needed to address, comprehensively, major currency imbalances.

“Some argue against action for fear of retaliation by China.  Such retaliation itself would be inconsistent with the rules of the WTO.  WTO inconsistent retaliation is not a reason to delay pursuit of WTO consistent action.  To those who would argue against this legislation because of a fear of retaliation:  Do you believe we should remain silent with respect to China’s ‘indigenous innovation’ measures, or to its policies pertaining to intellectual property rights (IPR)?

“To those who would raise the specter of ‘protectionism,’ this legislation is indeed the opposite. Dr. Fred Bergsten testified at the first Ways and Means hearing that China’s currency policy is the most protectionist measure today in the global economy – and this bill is one antidote to remedy the effects of China’s protectionist measure. 

“The legislation to be considered today builds off the basic purpose of the bipartisan Ryan-Murphy bill (cosponsored by 107 Democrats and 46 Republicans), carefully brings about compliance with our international obligations, provides enough flexibility in the implementation and enforcement of the bill and gives the Administration further impetus to pursue the issue in the international community. 

“At the outset of our hearings I said that the status quo was unacceptable and unsustainable.  This is a responsible and necessary step toward addressing the persistent imbalance created by China’s undervalued currency.

“I now yield to Ranking Member Camp for any remarks he may wish to make.”

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