PrintRILA supports a policy of economic engagement with China and opposes legislation that threatens to cut off access to the U.S. market as a means of pressuring China on currency issues. RILA advocates for a balanced trade policy that recognizes the tremendous benefits that trade and investment with China bring to the U.S. economy, while also effectively addressing market access barriers and other unfair trade practices that affect U.S. companies.
RILA believes that China should continue measured and concrete movement toward a market-determined exchange rate. Toward this end, we support bilateral and multilateral efforts to encourage broader financial sector reforms in China that will allow market forces to determine the value of China’s currency. RILA believes the pending currency bills would be counterproductive, costly, and would not achieve their stated goals.
Last fall, the Senate passed the Currency Exchange Rate Oversight Reform Act (S. 1619) by a vote of 63-35; the bill threatens trade remedy actions and tariffs against imports from China as a means to pressure China to allow the value of its currency to rise more quickly. Though the Currency Reform for Fair Trade Act of 2011 (H.R. 639) was introduced in the House, Republican leadership has not acted on any currency legislation, and has made it clear that they have no intention of doing so. Nevertheless, the strong vote in the Senate has increased pressure on the House to legislate on this issue. In a separate but related matter, in March President Obama signed into law a bill allowing the Commerce Department to continue to apply countervailing duty (CVD) law to non-market economies (NME) such as China. The law effectively overturns a decision by the federal court of appeals with GPX v. United States, which found that U.S. law prohibits the Department of Commerce from applying CVDs to NMEs. The legislation also attempts to address a World Trade Organization (WTO) ruling against the United States on applying “double remedies” through the parallel use of the NME antidumping methodology and the CVD law on the same subject imports. RILA appreciated efforts to address WTO concerns, but expressed concern that the double remedy language was insufficient.
Over the last several years, China has become one of the most important export markets for American products. In 2011, China ranked as the third-largest U.S. export market, with exports of goods totaling nearly $104 billion. U.S. exports to China increased by 32% over 2009 and are growing more rapidly than exports to other major markets. U.S. services exports to China are also growing, and were $20 billion in 2010. The U.S. has a services trade surplus with China – $10.4 billion in 2010.
The effect of China’s exchange rate policy on bilateral trade is likely overstated. Economists note that the trade deficit with China is also the result of other factors, including a very low U.S. savings rate and a high personal savings rate in China. The low U.S. savings rate means that America must import surplus saving from abroad to fuel U.S. economic growth.
For more information, please contact Stephanie Lester, vice president of international trade at stephanie.lester@rila.org.