Ways and Means Chair Says Congress to Act if No Progress on China Currency

The purpose of the hearing was to address China’s policies that place U.S. companies and workers at a disadvantage, including China’s “indigenous innovation” initiative, selective use of tax rebates to stimulate certain exports; export restrictions on raw materials; trade-distorting subsidies, discriminatory product standards; failure to enforce intellectual property rights; weak laws and weak enforcement of labor and environmental laws; state-owned enterprises that discriminate against U.S. companies; etc.

Chairman Warns Congress May Act on Yuan if China, Administration Do Not

In his opening remarks, Chairman Levin noted that the Administration set the G-20 meeting (at the end of June 2010) as an important juncture for China to change its inflexible currency practices. Chairman Levin warns that if China does not act and the Administration does not respond promptly thereafter, Congress will act.

Highlights of Witness Written Statements

Highlights of the witness written statements from the hearing include:

China should to look for alternative ways to achieve innovation goals. The American Chamber of Commerce in China recommends that China should suspend its indigenous innovation product catalogues pending negotiation of policies that do not discriminate against imports or products of foreign-invested enterprises. AmCham-China warns that despite recent actions by China to address the concerns of the international community, broad concerns remain that nationality of intellectual property ownership will be a criterion for government procurement, for more favorable tax treatment, and other preferential policies.

The U.S.-China Business Council (USCBC) states that in place of product lists (like under China’s indigenous innovation initiative), the U.S. should encourage China to follow international best practices for innovation incentives and use non-discriminatory tax, research, and development support, and other programs to reach its innovation goals.

China’s accession to WTO GPA should be high priority. AmCham-China also recommends prioritizing negotiation of China’s accession to the World Trade Organization’s Government Procurement Agreement (GPA).

The Center for Strategic and International Studies notes that China agreed on WTO accession to join the GPA “as soon as possible,” yet used its lack of membership to adopt a policy counter to the GPA, which suggests that the forces of reform that stood behind WTO accession are in full retreat.

Representative Schauer’s (D) statement states that his bill, the Reciprocal Government Procurement with China Creates American Jobs Act¹ (H.R. 5312) would address China’s failure to open its government procurement market to the U.S.

IPR enforcement in China is challenged by local government autonomy, etc. CSIS states that one of the primary challenges to those seeking to prevent the unopposed theft of their IPR in China is that China’s extreme geographic and political decentralization makes it very difficult for rights-holders to pursue legal protection and enforcement without having to run a gamut of local and provincial officials and courts that are more likely to side with local violators with more local political clout.

The USCBC notes that one broad policy action that must be taken is the adoption of tougher deterrents in China, with criminal penalties applicable in cases of piracy on a commercial scale.

¹H.R. 5312 contains a provision that requires the Commerce Secretary to perform both a legal and factual analysis of whether China has opened its procurement practice to U.S. goods. Under H.R. 5312, the International Trade Administration would report the total value of U.S. goods procured by the Chinese government. The Secretary of Commerce would then certify the amount of that year’s cap for U.S. procurement of Chinese goods.)

(See ITT’s Online Archives or 05/18/10 news, 10051848, for BP summary announcing the introduction of H.R. 5312.

See ITT’s Online Archives or 06/11/10 news, 10061124, for BP summary of recent Senate Finance Committee hearing on China.)