Senate Committee Calls For Action On Chinese Trade Problems

President Barack Obama’s two top international trade officials appeared at a Senate Finance
Committee hearing on trade relations with China and ran into some strong criticism and a call for
more action by the administration to address trade imbalances.

Sen. Chuck Grassley, R-Iowa, the ranking Republican member of the committee, charged that
after 17 months in office, the Obama administration’s trade agenda is “adrift.” He said the
president has failed to come up with a credible plan for doubling U.S. exports over the next five
years. He also was critical of the administration’s failure to make “a serious effort” to implement
the stalled free trade agreements with Panama, Colombia and South Korea. “The President’s refusal
to act on our pending trade agreements is inexplicable as a matter of either good trade policy or
appropriate foreign policy,” Grassley said.

Grassley told the administration officials he “emphatically disagrees” with the Treasury
Department’s decision to delay issuance of its biannual report on currency exchange rates, saying
“everyone knows that China is manipulating the value of its currency in order to gain an unfair
advantage in international trade.” He added that China’s recent announcement that it is considering
currency reform does not solve that problem, and he called on the president to initiate a complaint
with the World Trade Organization (WTO).

Although he was not as harsh as his Republican colleague, Committee Chairman Max Baucus,
D-Mont., criticized the administration for failing to act more effectively to combat the trade
imbalances between the United States and China. “Our trade imbalance – the focus of this hearing –
results from many factors,” Baucus said. “China continues to erect barriers to U.S. exports. China
infringes U.S. intellectual property at unacceptable rates. China discriminates against U.S.
companies through its so-called ‘indigenous innovation policies.’ China dumps many of its products
on the U.S. market, and China subsidizes many of its exports.”

Baucus said the United States continues to pursue the same dialogues to discuss trade
irritants, but he said “dialogue is not a measurable result.”

Defending the Obama administration’s activities, U.S. Trade Representative (USTR) Ron Kirk
said the administration is using “enhanced dialogue,” enforcement of U.S. rights within the WTO and
negotiations that include key trading partners whenever possible.

“Since joining the World Trade Organization in 2001, China has made many important economic
reforms, removed trade barriers and opened markets to U.S. goods,” Kirk said.  “This has
created new opportunities for Americans, as manufactured goods exports to China have tripled.
China’s strong recovery from the global recession has facilitated recent double-digit growth in
American export sectors from manufactured goods and chemical products to agricultural goods. China
is America’s third-largest export market.”

He said, however, that China’s implementation of its WTO commitments is incomplete, that “we
have serious concerns about Chinese policies,” and “we are addressing these concerns by setting
clear priorities and working on results-driven dialogues.”

Secretary of Commerce Gary Locke told committee members, “I agree that we need to work
together to find a way to adjust the course of our economic relationship with China to make that
relationship more balanced.”

He cited what he says are “huge opportunities” for U.S. manufacturers and farmers to trade
with China, saying, “We should neither underestimate the importance of the China market nor the
potential it holds for American exporters who tap into it.”

He echoed the USTR’s concern about problems in dealing with China, saying “we need to address
the real challenges we face in our relations with China that are significant impediments to trade.”

Baucus proposed a four-pronged strategy for bringing about change in U.S/China trade:

1)    The administration must develop a government-wide plan to
improve trade relations with China. This plan would include dialogue, but “it must not stop there.”

2)    The United States must act multilaterally to address trade
issues with China, and develop “robust relationships” with key countries such as India and the
European Union.

3)    The United States must look carefully at and use the tools
offered by international institutions such as the WTO. 

4)    The United States must take strong unilateral actions even as
it pursues multilateral solutions. The Department of Commerce must apply anti-dumping and
countervailing duty laws to dumped and subsidized Chinese imports.

Baucus said the four steps would help achieve measurable results and also help develop a new
balance in trade with China.

June 29, 2010