(Washington D.C.)- U.S. Rep. Sander Levin (D-MI), Chairman of the House Ways and Means Trade Subcommittee, today made the following opening statement at the Trade Subcommittee Hearing on the Nonmarket Economy Trade Remedy Act of 2007:

Opening Statement
Rep. Sander Levin, Chair
Ways and Means Trade Subcommittee

Nonmarket Economy Trade Remedy Act of 2007
(H.R. 1229)
Trade Subcommittee Hearing
March 15, 2007
Prepared for Delivery

 "Thank you all for testifying today.

 "Our trading relationship with China is unbalanced and unsustainable.  Our trade deficit in goods with China in 2006 was more than $232 billion - 15% higher than in 2005, and 177% higher than in 2000.  And the United States is not alone.  According to China's trade statistics, China's trade surplus with the world was $39.7 billion in the first two months of this year - driven by a 41.5% increase in exports over the same period last year.  

 "This bill that Mr. Davis and Mr. English have introduced would be an important step in bringing about balanced rules of competition and China's fulfilling the commitments it has made.  H.R. 1229 would, for the first time in decades, treat China and other 'nonmarket economies' the same way we treat market economy countries.

 "The Department of Commerce has not applied that law to NME countries for more than 20 years.  I know there is a difference of opinion as to whether existing law allows for the application of countervailing duty law to nonmarket economy countries.   Over the years, there have been efforts in Congress to make clear such application.   The recent decision by Commerce to initiate a countervailing duty investigation on paper from China is encouraging, but the Government of China has challenged that decision in the Court of International Trade.  So, Congress needs to make sure Commerce applies the CVD law to NME countries in every case, and in the right way.

 "It is important to understand and acknowledge the scope of this problem.  China subsidizes its textiles industry; its steel industry; its petrochemical industry; its high technology industry; its forestry and paper products industry; its machinery industry; its copper and non-ferrous metals industries.  The list goes on and on.

 "The list would be even longer if the Government of China were more transparent and if it honored its commitment to provide complete information about its subsidy programs.  It committed in its WTO accession agreement to provide that report to the WTO in 2002, but it failed to do so.  It committed to provide a report in 2003, in 2004, and in 2005, but it failed to do so.  In April 2006, it finally provided the report - but the report was obviously deficient.  Still, it identified over 70 subsidy programs to the other Members of the WTO.

 "When Congress considered granting Permanent Normal Trade Relations to China, part of the legislation called for an annual review within the World Trade Organization to ensure that China was honoring its commitments.  I fault China for failing to do that.  And I fault the Administration for failing to use the annual review process negotiated in the WTO to insist that China meet these commitments and others. 

"China committed in its WTO accession agreement to eliminate all 'prohibited' subsidies - subsidies contingent upon export and 'import substitution' subsidies - but it has failed to do so.  The failure of China to provide the required reports does not explain the inaction of the Administration through the WTO against those practices already well-known and documented.  The Administration filed a WTO case last month against some of China's prohibited subsidies - a case that is long overdue, and only addresses a small subset of the subsidies that are distorting trade. 

 "Several of our witnesses today will testify about subsidies in the steel industry in China, and the effect those subsidies have on the U.S. steel industry - an industry, I might add, that produces steel more efficiently than its Chinese rivals.  The U.S. steel industry and workers can compete effectively, provided that we in the government exercise our responsibilities and take actions to halt gross distortions of basic rules of competition.

 "Mr. Visclosky, we received your letter in support of H.R. 1229 yesterday - a strongly bipartisan letter signed by 32 Members of Congress.  Thank you for expressing your interest as Chairman of the Congressional Steel Caucus and in testifying to the Subcommittee today.

 "The semiconductor industry provides another example of Chinese industrial policy and its subsidy programs.  China's 10th Five-Year Plan calls for an increase in Chinese semiconductor output from $2 billion in 2000 to $24 billion in 2010.  Committee staff has received information from a credible source in the industry that at least two local government authorities - city governments - built semiconductor foundries and then 'handed over the keys' to China's largest semiconductor fabricator (SMIC).  Each foundry costs that local government $3 billion to construct.  It's hard for a U.S. semiconductor company to compete with that.  That is simply not a level playing field.

 "I believe H.R. 1229 merits this Subcommittee's attention - and I appreciate the work of Mr. Davis and Mr. English in introducing it.  This bill is a constructive proposal that is consistent with sound principles of international trade.  Unlike some previous proposals, it is not part of a strategy to shore up support for other legislation.  Instead, it stands on its own merits.  It doesn't seek to 'bash' our trading partners, but to apply the same rules to them as to everyone else - balanced rules that provide for effective competition.

 "One of the provisions in H.R. 1229 provides that Congress should play a role in determining whether to revoke the status of a country as a 'nonmarket economy.'  The role is a modest one - Congress must vote 'up or down' on the issue within a short period of time.  I've heard critics say Congress shouldn't 'micro-manage' the Executive branch.  But the amount of Chinese imports covered by antidumping duty orders exceeds the amount of imports covered by some of our FTAs that require congressional approval under fast track.

 "Once again, I look forward to hearing from our distinguished witnesses, and thank you all again for coming here today."
  

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