China has quickly become a major force in the global economy.  When China entered the WTO, we expected that it would change the dynamics within the WTO system of trade and that system would change China. The changes have been even more profound than we expected, in part because of China’s size, its natural and human resources and its major combination of individual enterprise and State involvement in its economy.

This hearing represents an effort at an open, candid House consideration of our huge economic and trade relationship with China–its major benefits and its major problems.

The nature and extent of these problems mandate that we go beyond the automatic polarization that often grips discussions of trade issues. One of the issues being discussed today is the impact of a major imbalance in the currencies of the U.S. and China.  Yesterday, after two Senate Committees acted on this issue, Secretaries Paulsen and Gutierrez and Ambassador Schwab wrote a letter to Majority Leader Reid opposing the currency bills.  After extolling the benefits of open trade, the letter urged that when another nation has policies less open, “there is a temptation to respond by raising barriers to trade.  This is the wrong approach.  Protectionism and economic isolationism undermine our ability to promote reform abroad and weaken our economy at home:”

Invoking such rhetoric is totally misguided.  It undermines the chance of bridging differences among people who have worked actively to expand trade, including the leadership of the Ways and Means Committee. There are legitimate differences as to whether and how to address our economic relationship with China, but invoking “protectionism” or “economic isolationism” and the ghosts of Smoot-Hawley only jeopardizes intelligent discussion and effective decisions. 

So I hope that today’s hearing is a further step in serious Congressional consideration of our relationship with China.  

When “Permanent Normal Trade Relations” (PNTR) to China, and its accession to the World Trade Organization (WTO) was approved seven years ago there were expectations that the United States would take an active role in ensuring the full implementation and enforcement of China’s WTO commitments; that the United States would exercise its rights and enforce and defend its trade remedy laws; and, ultimately, that China would honor the commitments it made.

Unfortunately, those expectations have not been realized under this Administration.

This increases the relevance of a common thread in the issues in this hearing:  the extent to which Congress should delegate to the Executive the power to decide for itself, and by itself, whether and how to take action to address serious and legitimate concerns over the Government of China’s trade-distorting practices.  For example:

●    On currency, should Congress grant the President the authority to waive action necessary to address foreign government intervention in the currency markets? 

●    Under U.S. antidumping laws, should Congress continue to let the Administration decide for itself if and when a country such as China should “graduate” from the status of a non-market economy to a market economy – or does the bill introduced by Representatives Davis and English provide a better approach? 

●    Under the special China safeguard mechanism (section 421), should Congress continue to allow the President to deny relief envisioned under WTO rules to a U.S. industry that is being materially injured by a surge in Chinese imports – or has Senator Rockefeller offered a better approach?

●    Should Congress allow the Administration to acquiesce in the way dumping margins have been calculated for more than 80 years, as the U.S. faces recent WTO Appellate Body decisions that the Administration itself describes as “devoid of legal merit”?  Or should it consider the bill sponsored by Representatives Barrett, Neal, Regula, and Spratt?

History can serve as a guide in answering these questions:

1.    Special China Safeguard (Section 421)

PNTR for China included a safeguard mechanism to address surges in Chinese imports, section 421.  Since that mechanism was incorporated into law, an independent agency (the International Trade Commission) has found that imports from China were causing material injury in four cases.  But in all four cases the President refused to provide relief.  He found that relief would have an “adverse impact on the United States economy” every time.  This “adverse impact” exception in section 421 has swallowed the rule – and section 421 is now a dead letter.  In fact, no U.S. industry has petitioned for relief under section 421 in the past two years.

3.    USTR’s Unwillingness to Use WTO Dispute Resolution

This Administration has brought less than three WTO disputes per year over the past seven years (20 cases total) – and you can count on one hand the number of cases it has filed against China.  (By contrast, the Clinton Administration brought 68 cases in six years.)  And USTR has repeatedly refused to investigate China’s currency regime under section 301 – despite repeated requests from Members of Congress, including, most recently, a bipartisan request by 42 members several months ago.

In this regard, I must note that Congress is being told to be “patient” with China (on currency, subsidies, and other practices); that only dialogue will work with China; that China responds negatively to outside pressure.  The record shows, however, that on several occasions dialogue has not worked – but filing a WTO case against China has. 


Recently, the Administration has indicated that many trade bills to address China’s trade-distorting practices, including the pending currency legislation, are “WTO inconsistent.”  I am skeptical of those claims which are often used without much thought or analysis, whenever someone simply doesn’t like a particular proposal.   I would welcome the opportunity to work with the Administration to ensure the passage of strong and WTO-consistent legislation to address our heavily imbalanced relationship with China.  But the Administration has shown no interest in such legislation – indeed, as I have already explained, the Administration has been part of the problem.

There are several reasons for the insecurity felt by hard-working people and businesses in our nation.  One reason for this insecurity is that, for years, too often there has been a “hands off” approach to trade policy, while some of our trading partners have taken a “gloves off” approach – intervening in the markets to give their producers an unfair advantage over ours.

This must change.  It requires addressing the Government of China’s trade-distorting policies, which have contributed to the growing imbalance in our trading relationship with China.