House Ways and Means Hears Testimony on China Currency Issue

Chairman Says Hearing Confronts Need to Directly Address China’s X-C Rate Policy

In his opening statement, Chairman Levin stated that “This hearing, and our hearing tomorrow with Secretary Geithner, confronts the need to address directly China’s exchange rate (X-C) policy and its effect on American businesses and workers - that means jobs - and various options for doing so.”

“There are many issues we face with China. China’s exchange rate policy is one of the most commercially significant. Some economists have estimated that addressing this single issue alone could add half a percentage point to U.S. GDP, could generate about one million U.S. jobs, and could reduce the U.S. trade deficit by $100 billion to $150 billion.”

Those Testifying Agreed on Need for Action, No Agreement on Approach

Testifying at the hearing were four House Representatives. Testimony was also heard from the U.S.-China Business Council, the United Steelworkers, NUCOR Corporation, Greenberg Traurig, LLP, and the Peterson Institute for International Economics.

China’s X-C rate policy hurts U.S. During the hearing, there was large agreement that China’s exchange rate policy hurts U.S. domestic manufacturers and exporters, that the rate should better reflect market forces, and that “something” should be done.

Discussion of possible actions. However, there was no agreement on the approach, with some favoring:

• Multilateral approach - some urged a multilateral, diplomatic approach to the China currency issue as the European Union, India, Brazil, and Russia have all expressed concern about the issue. They added that a multilateral approach would be most politically palpable in China and therefore, may have more chances of producing results.
• WTO litigation -- others stated that the U.S. should pursue World Trade Organization dispute settlement proceedings, since China may be more likely to respect the outcome of a legal dispute. However, some believe that there is no recourse under the WTO with respect to currency policy. Others noted that even if the WTO could deal with the issue, Congressional appeals to file WTO cases are often ignored and the Administration would have to be willing to initiate a case.
• Currency legislation -- several panelists advocated legislation such as the Currency Reform for Fair Trade Act (H.R. 2378), which would require an increase in antidumping duties for an estimated amount of currency undervaluation and grant the Commerce Department authority to investigate currency undervaluation as a trade subsidy eligible to be offset by countervailing duties. According to Representative Ryan, 143 members of Congress have already cosponsored the bill. However some argued that it is WTO-inconsistent the least likely to succeed.

Sept 16 hearing with Geithner. Several of those testifying urged the Ways and Means Committee to carefully consider Treasury Secretary Geithner’s testimony before the committee on September 16, 2010 as the Administration may have insight on the approach most likely to be effective. (See ITT’s Online Archives or 09/10/10 news, 10091002, for BP summary of this hearing announcement.)

(See ITT’s Online Archives or 09/15/10 news, 10091514, for BP summary of 36 associations writing the committee in opposition to the China Currency Bill.)

Chairman Levin’s opening statement (09/15/10) available here.