CURRENCY EXCHANGE RATE OVERSIGHT REFORM ACT OF 2011–MOTION TO PROCEED — (Senate – October 03, 2011)
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The ACTING PRESIDENT pro tempore. Under the previous order, the Senate will resume consideration of the motion to proceed to S. 1619, which the clerk will report.
The assistant legislative clerk read as follows:
Motion to proceed to the consideration of S. 1619, a bill to provide for identification of
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misaligned currency, require action to correct the misalignment, and for other purposes.
The ACTING PRESIDENT pro tempore. Under the previous order, the time until 4:30 p.m. will be equally divided and controlled between the two leaders or their designees.
The ACTING PRESIDENT pro tempore. The Senator from New York.
Mr. SCHUMER. Mr. President, I rise today in strong support of S. 1619, the Currency Exchange Rate Oversight Reform Act. First, I want to say this bill is the culmination of years of hard work and collaboration between Democrats and Republicans. I thank Senator Lindsey Graham of South Carolina. He and I have been partners in this endeavor for over 5 years. We have traveled to China together. We have worked long and hard to try to gain some fairness in the way China treats American industry, particularly in regards to currency.
I thank Senator Sherrod Brown and Senator Debbie Stabenow. Both made very valuable additions to the proposal on the Senate floor today. In fact, Senator Brown is the lead sponsor of this legislation because of the strong and good work he has done. They both have worked long and hard, realizing the industries in their States are at such a competitive disadvantage.
I thank my colleague, Jeff Sessions, as well, who has been one of our partners and leaders on this legislation over the last several months, and lead sponsors in addition: Bob Casey, Olympia Snowe, Jeff Sessions, Kay Hagan, and Richard Burr, as well as dozens of other cosponsors on this bill for their work on this issue for many years.
I also want to particularly express my appreciation to Chairman Max Baucus and former ranking member of the Finance Committee Chuck Grassley for their leadership and work on currency manipulation. We believe our bill is WTO compliant, and it is in part because Senators Baucus andGrassley looked at our original bill and worked with us on suggestions as to how to change it to make it just as effective but within the rules of WTO.
Today we have an opportunity to help put middle-class Americans back to work and, amazingly enough, in a bipartisan way. Today we stand together to defend American jobs against market-distorting, job-killing exchange rate policies that subsidize foreign manufacturers at the expense of American manufacturers. These currency policies artificially raise the price of U.S. exports and suppress the price of Chinese imports into the United States, undermining the economic health of American manufacturers and their ability to compete at home and around the globe.
China is by far the biggest exploiter of predatory currency practices, but our bill does not target China or any one country. Our bill, rather, says there will be consequences for any country that engages in currency manipulation to gain an unfair advantage over American businesses.
It has been 10 years since China joined the WTO. In those 10 years the Economic Policy Institute estimates that 2.8 million American jobs were lost or displaced in manufacturing or other trade-related industries as a result of increased trade with China and the Chinese Government’s manipulation of its currency. My State of New York has suffered some of the biggest losses, with over 161,000 jobs lost or workers displaced since 2001. Accession to the WTO was supposed to bring China’s policies in line with global trade rules meant to ensure free but fair trade. Instead, China has single-mindedly flouted those rules to spur its own economy and export-oriented growth at the expense of its trading partners, most of all the United States.
Our economic relationship with China needs a fundamental change. It is not just in currency, although that is the No. 1 issue. On issue after issue, whether it is poaching intellectual property, unfairly and illegally subsidizing Chinese businesses, monopolizing rare earths, not allowing American companies to compete in China–on issue after issue China is mercantilist, plain and simple. They use the rules of free trade when it benefits them and spurn the rules of free trade when it benefits them. For years Americans have grimaced, shrugged their shoulders, but never done anything effective to in large measure stop the Chinese pursuit of unfair mercantilism.
Six years ago I was in upstate New York and a steel manufacturer told me they could compete against Chinese steel just fine, even with labor costs being lower in China, except for the fact that China manipulated its currency and gave Chinese steel imports a 30- to 40-percent advantage. The owner of the company, providing 300 good-paying jobs, pleaded with me to do something. I happened to speak with Senator Graham, and he was finding the same situation with industries in his State of South Carolina.
We began our crusade to get China to behave fairly. At first, people did not even accept the fact that currency manipulation was wrong and harmful to America. I remember at one point, within a short period of time, both the New York Times editorial page–a decidedly liberal editorial page–and the Wall Street Journal editorial page–a decidedly conservative editorial page–said China should not have to let its currency float, even though it is a tenet of free trade since Bretton Woods that said the way to correct large imbalances in trade is to let a currency readjust by floating.
We spent years convincing America, convincing our colleagues that this manipulation of currency dramatically hurt America and was unfair and against all tenets of free trade. We have achieved that goal. Now the editorials may pick reasons they do not like our particular bill, but they say: Oh, yes, we have to deal with Chinese currency manipulation.
But when we ask people who say: Don’t do your bill, deal with it a different way, we say how? No one has another answer. It was true that our initial bill introduced 5 years ago was a blunt instrument to bring attention to the issue. It was our hope then not to pass the legislation–in fact, we allowed cooling off period after cooling off period in the legislation–but, rather, simply to get the Chinese to act. But about after 3 or 4 years, Senator Graham and I became convinced that China would not act. When there was real pressure they might move the currency a little bit, but then they would back off.
The same proved true in other areas where China unfairly treats American industry, so we came to the conclusion that legislation was the only answer, no one having a preferred or even seemingly possibly effective alternative. So we worked, as I said, with Senator Baucus and Senator Grassley and came up with a proposal we believe meets WTO rules.
Then, because Senator Stabenow had worked long and hard on this issue along with Senator Collins, we combined her proposal and our proposal. Hers was mainly focused on the Banking Committee, Commerce Department, ours on Treasury. Then a year or two ago, Senator Brown and Senator Snowehad an additional proposal, and we have combined all of these proposals into one workable bill that will finally get fairness for American companies.
Over the past 6 years we have been sending a message to the Chinese Government about their exchange rate policies. Every Treasury Secretary since we began this crusade said: You know what. Let me just talk to the Chinese. I can bring reason to them.
They did it with the best of intentions and the best of hopes, every Treasury Secretary–casting no aspersions on any of them because the fault was China’s, not ours–and could not get progress at all.
So it is down to this. If we want American companies to have a fair chance of competing, this is the solution. Not everyone will agree with every jot and tittle in this bill, but I think the vast majority of my colleagues will agree with its thrust and the need to do more than we have been doing. For that reason I am hopeful that large numbers on both sides of the aisle will vote for this motion to proceed so we can begin debating this measure and listen to some amendments if people have ideas as to how to change it.
Let me go over our bill. Our bill is intended to give the administration additional tools–this administration or any–to use if countries fail to take steps to eliminate currency misalignment. The bill would prohibit Federal procurement of products or services
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from a country that fails to adopt appropriate policies or to take identifiable action to eliminate currency misalignment.
Our bill also uses U.S. trade law to counter the economic harm to U.S. manufacturers caused by currency manipulation. The artificially low value of the yuan–economists estimate it is anywhere from 20 to 40 percent less than what it should be–amounts, as is well known now, to a subsidy on Chinese exports and a tariff on imports from the United States and other countries to China.
Under existing trade laws, if the Commerce Department and the International Trade Commission find that subsidized imports are causing economic harm to American manufacturers and workers, the administration must impose duties on those imports to offset or countervail the benefit conferred on foreign producers and exporters by government subsidies. Commerce already has the authority under U.S. law to investigate whether currency undervaluation by a government provides a countervailable subsidy, although it has failed to do so despite repeated requests by industry after industry to investigate.
Our bill specifies the applicable investigation initiation standard so Commerce can’t just turn its back on these companies, and it will require Commerce to investigate whether currency undervaluation by a government provides a countervailable subsidy if the U.S. industry requests the investigation and provides the proper documentation.
Our bill also clarifies that Commerce may not refuse to investigate a subsidy allegation based on the single fact that a subsidy is available in circumstances in addition to export.
Our bill also uses the term “currency misalignment,” but it is not just a term. Administrations, both the Bush administration and the Obama administration, have, to the amazement of many Americans, refused to label China a currency manipulator. But manipulation is a subjective standard involving intent. What we do is refine that concept and go for misalignment. We believe misalignment is the appropriate standard. That is not subjective. It is not saying why the currency is misaligned or how or who did it. It is simply saying that it is. It is a narrower standard. It is a standard that is harder to wriggle out from under if anybody, any government official is intent on not enforcing the rules we think necessary to get the Chinese to act.
So the bill is carefully thought out. The decimation of our middle class, our manufacturing sector, and the American economy as a whole is due in part to developing countries such as China employing currency manipulation and other aggressive mercantilist tactics to tilt the field in their favor. In the absence of action by the administration, we have a responsibility to protect the interests of American workers and companies.
One of the questions that is raised is, Is our bill WTO compliant? We believe it is. We have worked hard to ensure this. The bill provides the President with flexibility to waive any consequences that might have an adverse impact on the U.S. economy. The bill also continues to allow the U.S. Government trade officials to do their job and make the decisions on the basis of facts argued before them. We have talked to many experts in the field. They too believe our bill is WTO compliant.
What do the critics say? No one criticizes the idea that China has manipulated its currency. No one criticizes the thought, the actuality that China manipulates its currency. Almost everybody thinks not enough is being done. The main argument against our bill is not the bill itself, but critics of the bill worry that maybe this could start a trade war with China. Well, I have news for them: We are already in a trade war with China, and we are losing. China, by its mercantilist policies on currency above all but on rare earth and intellectual property, unsubsidization of homegrown industry, on exclusion of American exports where we might have advantage, is already engaged in a trade war, and the result is that millions of Americans do not have jobs who should. The result is that hundreds of billions of dollars flow out of America and into China. If we do not do anything about this, our country will be hurt badly, perhaps irreparably.
Some argue, as did the Washington Post today, that it will not have much of an effect because the industry of China has to revalue its currency; these industries will go to places such as Bangladesh. They are making an argument that is 5 and 10 years old and stale. We are not arguing about labor-intensive industries such as clothing or shoes or toys. Those are going to Bangladesh already, with the cost of Chinese labor going up. China uses its currency manipulation against our top-notch manufacturers. The large companies say nothing because most of them have plants in China, so they can get around it, but middle- and small-sized manufacturers are up against this wall and are desperate for our help.
One manufacturer in upstate New York makes a very advanced product that deals with cleaning pollutants as they go through a power system. It is a top-notch product. This manufacturer, who employs a couple hundred people in upstate New York, said to me: China’s stealing my stuff even though I have patents and other things on it. They are stealing the method by which we do this. He said: I could live with that if they just sold the stuff in China. We are not big enough to export all around the world. Instead, what they do is steal our intellectual property on this, and then they come back and sell it in America at a 30-percent discount because of currency manipulation. How am I going to compete with that?
There is story after story just like that. When American companies are fighting for their survival and battling subsidized Chinese exports, including high-end exports, this is no longer an argument about labor-intensive industries alone.
I, for one, am not prepared to raise the white flag on American manufacturing and on American jobs, and neither should anybody else. I know American manufacturing can compete successfully against Chinese competition at home, in China, and around the world but only if the playing field is level, and our bill helps to level that playing field.
Critics of our bill say that while currency manipulation is an important issue, legislation to address it would ignore the many and growing challenges we face in China. The critics are wrong. We have no intention of ignoring the range of China’s market-distorting practices, the ones I mentioned before. In fact, because China was emboldened on currency, which the whole world–Brazil, just a week or two ago, asked China to stop manipulating its currency. The European Union feels the same way we do. Nobody does anything, so China is emboldened to pursue mercantilist policies in other areas. Just recently, they have become involved in rare earths. They tell American manufacturers: If you want rare earths, you would be a lot better off sending your plant to China. It is just unheard of.
Critics of our bill say it is unlikely to create any incentive for China to modify its exchange policies. The experience Senator Graham and I have had is that when China thinks something might be done, they begin to let their currency rise. Because nothing permanent is done, they go right back to their old habits as soon as the pressure is off. This idea that if we pressure the Chinese, they won’t do it makes no sense. If we pressure them, they do nothing, and if we don’t pressure them, they do nothing. The only answer is concrete legislation.
What would those who oppose this bill have us do? What is their suggestion? They do not really have one. Should we continue to sit back and watch while American jobs and American manufacturers and even large chunks of American wealth just drift away? Should we continue to, as one of my constituents put it, be not Uncle Sam but Uncle Sap? Well, there are too many of us in this Chamber on both sides of the aisle who will not sit back and continue to let mercantilist trade practices continue to decimate American manufacturing and American jobs–middle, low, and high–nor will my colleagues here in the Senate. Democrats and Republicans are united on this issue. We must take decisive action against China’s currency manipulation and other economically injurious behavior. The fact that they manipulate their currency imbalances the whole world trading system. Many
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economists list it as one of the reasons we had the decline in global trade in the worldwide recession. We simply have no choice but to right the wrong China is committing.
Any retaliation by China would be further evidence of their unwillingness to meet their obligations under the WTO and the global trade community. By the way, China has a lot more to lose with retaliation than we do. If there is one country that gains the most by exporting to the United States by international trade, it is China. They are very smart, and they are not going to cut their nose to spite their face.
I wholeheartedly support the President’s goal of doubling U.S. exports over the next 5 years, but that cannot
be done if we do not take concrete action to address the protectionist practices of foreign governments that concede tariff reductions only to replace tariffs with massive currency manipulation, border taxes, and a variety of state subsidies. We will not do it unless we get to the root cause.
China’s currency manipulation would be unacceptable even in good economic times. At times of high unemployment, we can no longer stand for it. There is no bigger step to create American jobs that we can take than to confront China’s currency manipulation. It is not a Democratic or Republican issue. Every one of us has manufacturers, companies that are struggling to compete at home and abroad with Chinese exports with a built-in price advantage. It is not China bashing. It is about fairness and defending American jobs.
Many of us and most Americans are worried about how things will be in 10, 20 years from now. Will America stay the leading economic power of the world? Will our children have a better life than we do? The No. 1 thing we have to do is change things at home to make that better, there is no question about it. Very high on the list as well is making sure China no longer unfairly sucks millions of jobs and hundreds of billions of dollars of American wealth to its shores. What China does will make our job of keeping America strong, of having the next generation live a better life than this generation far more difficult unless we force them to change. They will not change on their own.
Passage of this legislation will lead to real consequences for countries that unfairly manipulate their currency. We have waited a long time. We have declined to move the legislation at the request of two administrations. Patience–not of us but of the American people–has worn out. I ask my colleagues to stand with us on S. 1619. Stand up for American manufacturing, for American jobs, for American wealth. Stand up so our children can have an even brighter future than we have.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Utah.
Mr. HATCH. I have enjoyed the remarks of my distinguished friend from New York.
As we begin the debate today on the important issue of exchange rate misalignment, although it is an important debate, I seriously question its timing.
Let’s step back for a moment. At the end of last month, the Senate approved legislation renewing and expanding trade adjustment assistance. We need to be clear about what this program is–a big government spending program of dubious value but one that is important to President Obama’s union allies. Not surprisingly, given the heft labor unions wield in the liberal political coalition, this spending program is President Obama’s top trade priority, so much so that he was even willing to abandon our allies in Colombia, Panama, and South Korea unless he secured this additional spending. To get more government spending for big labor, the President was willing to hold up the three free-trade agreements with Colombia, Panama, and South Korea that everyone knows will grow this economy and create jobs.
I was happy to chat with the Trade Representative a few minutes ago, and he told me he was going to send those three trade agreements up today, and they should be here between 4 p.m. and 5 p.m. I am really happy about that because it is way beyond time to get them here.
Americans need to remember this episode when they hear the President talk about his commitment to job creation. Put aside all the talk, and it is clear where the rubber hits the road. The President will prioritize government spending over private sector job growth.
Still, because of the President’s insistence on this spending program, the TAA bill is likely to pass the House and become law. So here is my question: Given that we just debated a trade bill that we knew would likely become law, why was this currency bill not considered in that context? I can only conclude either that the administration opposes the currency bill and therefore asked that it not become part of TAA or that the consideration of this bill is merely a political exercise with little expectation that it ever will become law. With millions of Americans out of work and the economy stagnant, the people of Utah and all American citizens deserve more than political grandstanding.
Regarding the substance of the issue, the manipulation of currency values by major trading partners in order to gain unfair trade advantage represents a genuine threat to U.S. jobs and to rebalancing of the global financial and economic system. For many years and continuing into the present, that threat is a reality. There is virtually unanimous agreement among international analysts that there exists large-scale, prolonged, one-way intervention in exchange markets by some of our important trading partners in order to limit or preclude currency appreciation, primarily in China but also in some of the other economies as well. There also seems to be little question that China manipulates its currency in order to subsidize its exports.
The bill before us seeks to address exchange rate misalignment specifically and global imbalances generally by sharpening the tools available to counter currency manipulation by a trading partner. Of course, any additional tools we can construct must be carefully crafted to align with all of our international trade agreements and global rules of trade.
The issue of China’s currency has been with us for far too many years.
The issue of China’s currency has been with us for far too many years. We have repeated discussions about how to address lack of appreciation of China’s currency, followed by diplomatic bilateral discussions assurances of moves from China to allow appreciation some modest subsequent appreciation while the political heat is on, and little change thereafter once the heat subsides.
This approach does not seem to be working. We have had large and persistent bilateral trade deficits with China, and those deficits continue. We have relied on China’s massive excess savings to finance our growing debt, and we have worsened that reliance given the debt-fueled spending spree of the current President. China’s dollar-denominated reserve holdings, which have grown for many years, have ballooned from around $1.9 trillion when President Obama took office to over $3 trillion, according to some recent estimates–a 50-percent increase.
But currency misalignment by China is not the only source of global financial and economic imbalances. If the President looked in the mirror, he would see his own responsibility for global economic uncertainty. Our budget deficits have far exceeded $1 trillion for the past 3 fiscal years. For 2011, the deficit is expected to be around $1.3 trillion, which is an unsustainable 8.5 percent of GDP and the third-largest deficit in the past 65 years, exceeded only by the deficits in 2009 and 2010. Deficits of this magnitude have not been seen since the years surrounding World War II,
when virtually the entire economy was being directed by the Federal government. Given our budget deficits and the China currency issue, the important question is: What is being done?
Let’s look at what is being done with a bit of recent history for context. Back in 2008, then-candidate Obama wrote the following to textile organizations:
The massive current account surpluses accumulated by China are directly related to its manipulation of its currency’s value. The result is not good for the United States, not good for the global economy, and likely to create problems in China itself.
He went went on to promise that, if elected, he would use all diplomatic
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means at his disposal to induce China to change its foreign exchange policies. He promised to beef up U.S. enforcement efforts against unfair trade practices.
Also, back in 2009, during the Treasury Secretary’s confirmation hearing before the Senate Finance Committee, now-Secretary Geithner stated that:
President Obama–backed by the conclusions of a broad range of economists–believes that China is manipulating its currency.
Those are strong words. Yet once in office, the President and Secretary Geithner failed to follow up on those words with action. The Administration promised to usher in an era of change but failed to change the way the U.S. deals with the China currency issue.
The Omnibus Trade and Competitiveness Act of 1988 requires that the Treasury Secretary report on exchange rate policies of major U.S. trading partners. Under the act, Treasury must consider whether
countries manipulate exchange rates for purposes of preventing balance of payments adjustments or gaining unfair trade advantage.
The evidence clearly seems to show that China’s currency policies amount to manipulation leading to an unfair advantage in international trade.
Candidate Obama agreed during his campaign.
Treasury Secretary Geithner agreed during his confirmation testimony.
Yet, as Treasury Secretary and as President, the two have refused to act.
Secretary Geithner has issued five foreign exchange reports, but has refused to label China as a country that manipulates its exchange rate for the purpose of gaining unfair competitive advantage in international trade. Let me repeat that, despite many bold claims about using all the tools at their disposal to counteract China’s trade policies, the administration refuses to designate China’s policies as being consistent with currency manipulation for trade advantage. The question that I and most of my colleagues from both sides of the aisle have is: Why?
Clearly, the administration must recognize the consequences of China’s manipulation for American workers and manufacturers and for the stability of the global financial and economic system. Why, then, is the administration protecting China by refusing to designate it as a currency manipulator?
Under the Omnibus Trade and Competitiveness Act, once a country is so designated, there are no draconian actions required. The immediate repercussions are merely stepped-up monitoring and greater vigilance in dialogue. Those don’t
seem to be things that would lead to currency or trade wars.
So, why doesn’t the administration act?
After all, American jobs are at stake. American workers can compete with any workers in the world, but our workers should not have to compete against foreign firms that receive massive subsidies. If the President is as intent on focusing on job creation in America as his campaigning suggests, then why has he refused to take such a simple step as designating known, existing currency manipulation?
There is a severe mismatch here between political rhetoric and action.
My fear is that the administration’s overreliance on overseas funding–in particular from China–to finance their exploding deficits is preventing the President and his officers from acting on behalf of the competitive, but struggling, American workforce.
It is well past time for the administration to recognize the negative consequences of China’s manipulation for American workers and manufacturers, and for global stability.
Even though there has been only tepid support, even on the Democratic side of the aisle, for the President’s much touted jobs plan, there is bipartisan agreement that Congress needs to take significant actions to address the massive jobs deficit this Nation is facing. We face a national crisis in having unemployment persisting at over 9 percent, with elevated numbers of the unemployed suffering from long-term bouts of joblessness and with many American workers having become so discouraged that they have simply dropped out of the labor force.
According to statements by the majority leader of the Senate, a focus
on jobs is precisely why we are considering the bill before us. According to one of those statements, the majority leader is reported as having said that “I don’t think there’s anything more important for a jobs measure than China trade.”
I am starting to think my friends on the other side of the aisle are like the gang that couldn’t shoot straight. The majority leader thinks that addressing China trade is essential to job creation. But based on its failure to use existing tools available to designate China as a currency manipulator, the administration apparently disagrees or it would have long ago used its authority to make such a designation under the Omnibus Trade and Competitiveness Act and then acted on the problem.
The President’s focus seems to be elsewhere. He seems to think that at least as important for jobs as the issue of China trade identified by the majority leader is his so-called American Jobs Act. Advertisements by the Democratic National Committee and campaign speeches by the President since he announced it in a joint session of Congress early last month tell us quite clearly that we should “meet our responsibilities” and consider that Act “right away.”
Yet my friends on the other side of the aisle apparently believe that a political debate over China and its currency policies are more important for job creation than the President’s American Jobs Act.
If the President’s act is, as advertised, so crucial for job creation in the face of our national unemployment crisis, why is Senate Democratic leadership delaying its consideration? Why not consider the legislation right away, as demanded by the President in his campaign
speeches and Democratic National Committee advertisements?
We are told by the President that Americans who are out of work cannot wait until the next election for us to act boldly for job creation. So why are we not considering his American Jobs Act, unless my Democrat friends disagree with the President that the act would be the most important job creator available to us today?
I suspect they know that the $447 billion in new stimulus spending included in the President’s jobs bill, and the accompanying proposals to impose $1.5 trillion in new taxes on a sluggish economy, is economically counterproductive and a sure-fire political loser.
I must say that the President’s Jobs Act looks like more of the same debt-fueled stimulus spending, cloaked under the guise of “investment,” along with higher taxes, cloaked under the label “tax reform.”
While I may disagree on the particulars of the President’s proposal, I do not disagree with his premise that we face a national crisis in our labor markets and that we should be debating measures that will promote American job creation now, without delay.
We are also told by the President that we must pass our pending trade agreements with Colombia, Panama, and South Korea. Jobs are at stake, he says. As with the political campaign rhetoric exhorting Congress to pass the President’s American Jobs Act, which the majority leader has opted to shelve until some unspecified future date, the President delayed the action required to get these agreements passed for much too long.
Pass the American Jobs Act, the President scolds.
But we can’t because the Democrat’s majority leader has not brought the Act to the Senate floor. The currency bill, which is unlikely to lead to much, if any, job creation before the next election, has come first, perhaps to allow more time for campaign speeches and ads by the Democratic National Committee.
Pass the free trade agreements, the President lectures. But they were delayed, as they sit idle on his desk.
I am pleased, since the trade leader in the administration called me a few minutes ago to tell me they are on their way up here today.
This currency bill is coming first. But what needs to come first is job creation, not electioneering and politics.
Our jobs deficit is a full-blown national crisis. The unemployment rate has been persistently above 9 percent since April of this year. It has averaged 9.4 percent since the President took office. It has been above 9 percent in 26
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out of the 31 months since the President took office, despite promises by administration economists that the massive debt-fueled stimulus, which will cost over $1 trillion when all costs are included, would keep unemployment contained below 8 percent. And the unemployment rate is even higher, at over 16 percent, once we include, for example, people who want to work but have become so discouraged that they no longer look for work.
Nearly 14 million workers are unemployed, and the number grows when we include discouraged workers. The number of long-term unemployed workers has been at record highs. According to Census data released last month, those in their twenties and thirties are suffering from the highest unemployment rate since World War II. The enthusiasm of young citizens in 2008 long ago gave way to disappointment and disaffection.
Our joblessness crisis is nothing short of a crisis for liberty.
When American men and women do not have jobs and opportunity, their freedom to make lives for themselves is eroded. Yet we are to understand that in the face of this historic crisis, there is no more important issue regarding jobs than our bilateral trade with China.
Again, I agree we need to address the issue of currency manipulation and our sustained and large trade deficits with China. However, let us be clear that dealing with issues related to China involves only one bilateral trade relationship. The trade and current account problems facing the United States, and the global financial, trade, and economic imbalances that everyone faces are not solved by addressing this one trading relationship. That is one reason I will be offering an amendment to this bill calling for multilateral and plurilateral negotiations to address currency misalignment. If we are going to succeed, we need to look at the big picture and work with our allies to counter China’s current practices. I will discuss my amendment in more detail soon, but hope it will receive strong bipartisan support.
Our trade imbalances are not with China alone. Rather, as part of the problem of saving too little, the United States has multilateral trades imbalances which require more action than focusing solely on one bilateral relationship.
According to recent data from the U.S. International Trade Commission, the United States has trade deficits with nearly 100 countries. The United States saves too little, and that problem will not be solved solely by passing the bill before us.
Make no mistake, the legislation we are considering can provide useful tools for addressing concerns about China, if the administration actually uses the tools. But those tools alone are not sufficient. If we try to address our multilateral problems by putting pressure on China alone, without also attending to our lack of saving and our own role in generating trade deficits with nearly 100 other countries, the Chinese piece of the U.S. imbalance will migrate somewhere else. This bill is not a magic bullet to solve our problems or the problems arising from global imbalances. And it almost surely is not the highest priority piece of legislation if job creation is truly our focus.
The United States, for its part, contributes to global imbalances by persistently saving too little. Following the financial crisis, which was precipitated partly by large runups in household indebtedness, American families have tightened their belts to save more and repair their own balance sheets. It is the U.S. Federal Government that has been missing in action to restore national savings, reduce our Federal debt, and promote global balance.
Rather than repair the Federal balance sheet, the administration has chosen to run trillions of dollars of debt-fueled deficits and borrow ever-increasing sums from abroad, including China. And rather than facing the fact that the Federal Government has a spending problem, the President is advertising and campaigning on a new American Jobs Act stimulus and tax hike platform containing even more spending and short-term debt accumulation.
We are told that it will be in the interest of the American people to borrow more today in order to spend more on infrastructure, for example. The stimulus proponents say: Interest rates are low, so let’s ramp up borrowing right now. That is the same approach the Senate took when it voted to extend and expand trade adjustment assistance. They ignore, however, that piling trillions more onto our national credit card issued by China and our other creditors moves us that much faster into the company of the eurozone countries who now face default and elevated interest costs.
While Federal borrowing rates are low today, what happens when global markets tire of our profligacy and debt-financed spending and begin to demand higher interest compensation? As Spain and Italy have seen recently, low interest rates are not guaranteed and the interest rate environment that you face can pivot on a dime and escalate rapidly. Borrowing at low rates today sounds great, until you wake up tomorrow and are forced to refinance at more punitive rates. More debt-fueled government spending beyond our means is sure to drive us rapidly down the road to the stagnation and debt crisis we are seeing today in Europe.
Of course, the President claims his new stimulus and tax hike proposals are all paid for, but the payments are largely promises of future austerity. Anyone who has paid attention knows that when the Federal Government promises to go on a spending diet later it never leads to fiscal weight loss because future Congresses are not bound by today’s promises.
It is interesting to hear the President’s persistent calls for more debt-fueled infrastructure spending. Presumably, given his interest in job creation “right now,” the projects he has in mind will be more shovel-ready than the readiness of the previous stimulus projects, which turned into something the President found so funny that he joked about it. Of course, it is no joke to jobless Americans who are stuck with the stimulus debt bill.
We heard in early September from the chairman of the President’s Council on Jobs and Competitiveness that the council identified “ten high-priority infrastructure projects based on their potential to put Americans to work right away–projects that have already been funded, but are being held up by regulations.”
The jobs council says it will work with the administration to try to get the projects moving. Let me repeat that: the projects “are being held up by regulations.” This comes from the chairman of the President’s own jobs council.
Yet when some on the other side of the aisle are reminded that regulations are holding back job creation, they recoil in disbelief. If there are 10 large-scale infrastructure spending projects ready to go and already fully funded and are only being held up by regulatory review lag, I urge the President to act “right now” to get those projects underway in the interest of job creation. Make one fewer campaign appearance and use that time to expedite regulatory review and get those projects going if, as should be the case, he believes job creation is more important than politics and wishes to act on that belief.
We have also heard the President remarking on how, from a global competitiveness perspective, the United States should borrow more today and spend on what he generically calls “infrastructure,” which, as it turns out, can be anything from paving a road to doling out money to solar panel makers.
The President cited in his infrastructure advocacy a set of global rankings on infrastructure from the World Economic Forum’s Global Competitiveness Report. The President seemed to read the report and its ranking of the United States as 23rd out of 139 countries for transportation infrastructure competitiveness as a call for more spending on whatever it is he thinks of as infrastructure.
It appears, however, that he did not read the report in its entirety. If he did, he would have noticed that the ranking is for only one of nine factors in the report’s overall infrastructure assessment. More importantly, if he had read the report, he would have noticed the overriding area identified as the weakest one for the United States in terms of eroding our global competitiveness. To quote the report directly:
A lack of macroeconomic stability continues to be the United States’ greatest area of weakness (ranked 87th). Prior to the crisis, the United States had been building up
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large macroeconomic imbalances, with repeated fiscal deficits leading to burgeoning levels of public indebtedness; this has been exacerbated by significant stimulus spending. In this context, it is clear that mapping out a clear exit strategy will be an important step in reinforcing the country’s competitiveness going into the future.
There you have it. The report the President data-mined to find a number to use to support more stimulus quite clearly says that declining U.S. global competitiveness has come from fiscal deficits, exacerbated by stimulus spending. It clearly says the solution is to exit from our unsustainable fiscal path. That means reining in the runaway debt-fueled spending, not more spending.
Before turning to the legislative process on the bill before us, let me post a trail marker for our deliberations. The currency bill we are considering includes reliance on exchange rate models used by the International Monetary Fund. Those models allow for the macroeconomic effects on currency valuations of fundamental changes in policies of trade partner countries. For example, if the United States engages in fundamental tax reform that would lead to improved growth and reduced deficits and debt, the models considered in the legislation before us have the ability to capture those effects.
The marker I wish to set here is a reminder that we should be similarly so inclined to use economic models that allow for macroeconomic effects of policy changes when we choose to make fundamental changes to tax and spending policies. We should be as willing to have our budget score keepers use economic models that allow for long-run growth and macroeconomic effects of fundamental tax and spending reform policies as we seem to be here in this legislation to use models that incorporate such effects when evaluating currency alignments. If it is good to use economic models that allow for an accounting of growth effects here, then it should be good elsewhere.
I also need to address the process we will follow in our consideration of the currency bill before us. The bill has garnered bipartisan support. In the interest of promoting a truly bipartisan effort, which the American people would love to see, it is my hope there will be balance in amendments that are allowed to be considered. This bill has sound objectives, but it is not perfect. I believe amendments from both sides of the aisle can improve the final product. And, as I mentioned earlier, I have an amendment that I believe will improve this bill significantly and help us devise a long-term approach to dealing with currency misalignment. I hope there will be an opportunity for it, and others, to be considered. I hope they are not going to lock up the tree again, which is the standard practice around here by the majority. This bill is an important bill, and we ought to be able to amend it with important amendments.
The overriding objective of the legislation–job creation–is shared by Republicans and Democrats alike. Therefore, it is my hope that amendments from my side of the aisle, designed to promote job growth today and in the future, will be duly considered, allowed, and duly debated.
I look forward to consideration of the currency bill before us and a robust, bipartisan process, which includes consideration of amendments from both sides to promote job creation.
As I have said, our Nation faces a crisis of unemployment and joblessness that is filled with pain today and threatens erosion of human capital and skills, which will negatively impact families and the overall economy for years and years to follow. Let us not have politics and special interests dictate what we consider to promote job creation and economic growth. American workers and families, many of them struggling and in pain, cannot wait until the next Presidential election is resolved for the Federal Government to act to promote job creation.
Mr. President, I suggest the absence of a quorum.
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Mr. GRAHAM. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRAHAM. Mr. President, I rise to speak on two topics, briefly, the nomination of Judge Henry Floyd for the Fourth Circuit Court of Appeals, and the motion to proceed on China’s currency.
CHINA’S CURRENCY EXCHANGE PRACTICES
The issue after this vote is whether the Senate should proceed to debate legislation I have authored with Senator Schumer and others dealing with the currency exchange practices of the Communist dictatorship of China. I have been involved in this for almost 7 years. We did a sense-of-the-Senate resolution back in 2004, I believe it was, urging the Chinese to change their currency policy.
But what does this mean to the average American? The exchange rate today is 6.38 yuan to the dollar. When you look at the dollar to the euro, I don’t know what it is trading today, but it goes up and down every day. China’s economy is growing at 9 and 10 percent. They are the second largest economy in the world. They are moving like gangbusters. Does it really matter for them to suppress the value of the currency? Yes, it does.
Any objective observer, looking at the history of the way the Chinese Government deals with its monetary policy, concludes they keep the yuan below its true value to create a discount on products made in China. Look at it this way. If you are competing with China in the world marketplace, not only do you have cheap labor to compete against, but you have the Government of China directly supporting their industries in a way we don’t here, and then add to that intellectual property theft. When you do
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business in China, the next thing you know, a Chinese company across the street is producing the very product you went to China to produce.
So the Chinese Government needs to follow the rule of law and live with the norms of international business practices. And when it comes to currency manipulation, it is impossible to believe that the dollar-to-yuan ratio exists without the government manipulating the value of the yuan. People estimate that it is 25 to 40 percent below its true value. What does that mean? It means if you are competing with China, selling the same product made in China, there is a discount on the Chinese product based on the value of their money.
The trade deficit with China has exploded. Last year, it was $273 billion. We were at $160.4 billion in July of this year. Cheap exports coming out of China are the source of cash for the Chinese Government and Chinese industry.
We can’t convert the currency in China. In the United States, we can take your money and convert it to any currency we would like. But if a Chinese manufacturer sells a product in the United States and gets paid in dollars, they have to convert it to the yuan. They have very restrictive monetary policies, and the ban of trading on the yuan is 0.5 percent day. The dollar can fluctuate based on all kinds of economic forces–our debt, our trade deficit, and what is going on here at home. But the Chinese Government restricts the fluctuation of the currency in a way that costs us jobs.
It is estimated that over 2 million jobs have been lost over the last decade because of currency manipulation alone. It is one way to get an unfair advantage in the marketplace. Over 41,000 jobs have been lost in South Carolina alone because companies can’t compete with China.
So this legislation would allow the Treasury Department to create new criteria to monitor the currency practices of the Chinese Government. If it is found to be misaligned or manipulated, the Treasury Department can bring countervailing duty proposals, counterveiling duty action against China. We have done this before when the Chinese dumped steel into our market.
If a country is violating the international trading standards or business norms, under the WTO we have the ability to fight back. This legislation would elevate currency manipulation. It is one thing to dump a product such as steel or tires into the American economy, creating an unfair advantage for the Chinese manufacturing community; we have tools to deal with that. But we haven’t embraced pushing back against currency.
China should be a great place to do business, but it is not. It should be more balanced than it is. I want to do business with China. I just don’t want trade deficits of $273 billion that are artificially created. If they do something better than us, they should win in the marketplace. That is just the way business works. But if the government intervenes and creates an advantage for a Chinese company, that is not winning in the marketplace. This would not matter if it were a small country such as the Dominican Republic or some small country where they have to keep the currency in check because they don’t want wild swings of their currency. But major economic powers–China, the United States, European countries–can’t play that game.
So I hope my colleagues will vote to allow this debate to go forward because this is about American jobs at the end of the day.
Mr. President, I yield the floor, and I note the absence of a quorum.
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The PRESIDING OFFICER. Under the previous order, the cloture motion having been presented under rule XXII, the Chair directs the clerk to read the motion.
The assistant bill clerk read as follows:
We, the undersigned Senators, in accordance with the provisions of rule XXII of the Standing Rules of the Senate, hereby move to bring to a close debate on the motion to proceed to Calendar No. 183, S. 1619, a bill to provide for identification of misaligned currency, require action to correct the misalignment, and for other purposes.
Harry Reid, Sherrod Brown, Charles E. Schumer, Tom Udall, Richard J. Durbin, Richard Blumenthal, Benjamin L. Cardin, Daniel K. Akaka, Jack Reed, Joe Manchin III, Debbie Stabenow, Sheldon Whitehouse, Kay R. Hagan, Robert P. Casey, Jr., Kent Conrad, Kirsten E. Gillibrand, Robert Menendez.
The PRESIDING OFFICER. By unanimous consent, the mandatory quorum call has been waived.
The question is, Is it the sense of the Senate that debate on the motion to proceed to Calendar No. 183, S. 1619, shall be brought to a close?
The yeas and nays are mandatory under the rule.
The clerk will call the roll.
The assistant bill clerk called the roll.
Mr. DURBIN. I announce that the Senator from Hawaii (Mr. Inouye) and the Senator from Connecticut (Mr. Lieberman) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber desiring to vote?
The yeas and nays resulted–yeas 79, nays 19, as follows:
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[Rollcall Vote No. 155 Leg.]
The PRESIDING OFFICER. On this vote, the yeas are 79, the nays are 19. Three-fifths of the Senators duly chosen and sworn having voted in the affirmative, the motion is agreed to.
Ms. SNOWE. I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. SNOWE. Mr. President, I rise today in strong support of the bipartisan legislation we will be considering this week regarding the Currency Exchange Rate Oversight Reform Act of 2011. I am very pleased it received overwhelming support for us to proceed to consideration of this most critical legislation.
This day has been a long time in the making, if you ask those of us who have been calling on our government, under the leadership of both Democrats and Republicans, to hold our foreign competitors accountable when they violate our trade laws. In that respect I want to express my gratitude to my colleague from Ohio, Senator Sherrod Brown, with whom I have partnered in repeatedly calling for a vote on this crucial legislation, as well as the Senator from New York, Senator Schumer, and the Senator from South Carolina, Senator Graham, for also being with us
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and working on this legislation to address all of the facets of this issue that have been long overdue in consideration by the Congress.
This day has been far too long in coming for the millions of American workers who are out of work and whose wages have been decimated as a result of our inability to compete with unfairly subsidized Chinese imports. Since Congress first began requiring the Treasury to analyze the exchange rate policies of foreign countries in 1988, China has been cited as a currency manipulator five times, all occurring between 1992 and 1994.
Since then, despite China’s continued and in many ways intensification of these practices, our government, under both Democratic and Republican administrations, has failed to cite China even once for its policy of fixing its currency to the dollar. This is also despite Congress’s repeated efforts to make currency manipulation a top priority in our Nation’s trade agenda.
In fact, in April 2005 I joined my Senate colleagues in decisively supporting an amendment calling on China to reform its currency practices. This action is largely viewed as helping to prompt China to allow its currency to gradually appreciate between 2005 and 2008. In July 2007 I joined a majority of colleagues on the Senate Finance Committee in favor of reporting the Currency Exchange Rate Oversight Reform Act of 2007 by a vote of 20 to 1. That was 4 years ago. We started 6 years ago, and yet we still had not had any concrete, substantive action on this fundamental issue. None of these bills were brought up for a vote by the full Senate.
From 2008 to mid-2010, China again froze its exchange rate constant in an effort to maintain its production edge during the financial crisis. It was only last June that China showed signs that it might allow the RMB to gradually appreciate. But according to the Congressional Research Service, it gained only 6 or 7 percent on the dollar over the last year.
Faced with these blatantly inequitable trade distortions, I have witnessed Maine’s manufacturers and their employees going to great lengths to improve their competitiveness. According to the Manufacturers Association of Maine, workers in our State have increased output per employee by 6 percent over a period of 8 years–from 60,000 in 2001 to 89,000 in 2009. Yet the dramatic job losses we have witnessed in the American manufacturing sector over the last decade tell a very different story.
According to recent reports, between 2001, when China joined the WTO and 2010, 4.1 million manufacturing jobs were lost in this country, and 1.9 million of those jobs or 47 percent can be directly linked to our growing trade deficit with China.
In Maine, this withering of our manufacturing base has
contributed to wage and salary employment levels falling precipitously through December 2010, with job losses of 26,900, a 4.4-percent drop. Overall, employment numbers in my State have returned to 1999 levels–1999 levels–erasing any economic gains of the previous 10 years.
U.S. manufacturing employees, including thousands who live in small towns throughout my State, are recognized as the most productive workers in the world. These are the types of jobs that should be thriving in a global economy, but they cannot if foreign producers, such as those in China, are playing with a proverbial stacked deck.
For this reason I rise today to urge my colleagues to join us in supporting the Currency Exchange Rate Oversight Reform Act, legislation that I have authored with the Senator from Ohio to enforce the rules and address a paramount contributing factor in the decimation of our Nation’s once unparalleled manufacturing base–currency exchange rate manipulation.
For over a decade China has manipulated its exchange rate by pegging the Chinese renminbi to the dollar. As a result, China’s currency is estimated to be undervalued by anywhere from 12 to 50 percent according to the Congressional Research Service. In fact, despite the Chinese Government’s announcement last year that it would begin allowing its currency to gradually appreciate, the Treasury Department’s exchange rate report, released May 27, noted that “the real exchange rate of the renminbi remains substantially undervalued.”
Some of my colleagues will no doubt argue that mill closings and layoffs in States such as Maine have little to do with the value of the Chinese currency, and that legislation to hold countries such as China accountable when they intervene in currency markets will not create jobs or grow our economy.
For that matter, proponents of China’s entry into the World Trade Organization 10 years ago also claimed that liberalizing trade with China would improve our trade deficit. At the time of its entry into the WTO in December 2001, China agreed to provide greater transparency when it comes to trade policies, to enforce intellectual property rights, and to end discriminatory and unpredictable rules impeding market access for American products.
In fact, as the agreement to allow China into the WTO was being negotiated in 2000, President Clinton argued it would create, in his words, “a win-win result for both countries.”
However, as President John Adams once said, “facts are stubborn things.” Let’s examine some of the evidence.
For one, in January, I met with Microsoft CEO Steve Ballmer a few hours before he attended a private meeting at the White House. Mr. Ballmer told me that in fiscal year 2010 over 30 million PCs were sold in China that ran illegal copies of Windows. Rather telling, he noted that while China is their second largest personal computer market in the world, it is 70th in terms of Microsoft revenue per personal computer.
If one of the largest and most integrated companies in the world is being hamstrung by China’s piracy and blatant infringement of intellectual property rights, how can we expect smaller U.S. companies to stand a chance when it comes to entering the Chinese market? On top of its failure to police intellectual property rights infringement, unlike
most other countries where exchange rates are determined by market forces, the Chinese Government does not allow the renminbi to fluctuate freely and instead pegs it tightly to the U.S. dollar at a rate that makes it significantly undervalued vis-a-vis the dollar.
As a result, Chinese exports to the United States are artificially made less expensive, as we well know, and the cost of U.S. exports to China and the rest of the world are made more expensive by a similar or equivalent amount.
According to a new report featured last week in the Wall Street Journal, one significant consequence of China’s trade practices is that over the last two decades it has surged as an exporter at a “break-neck pace,” while the growth of U.S. spending on imports from China has climbed steadily. As indicated by this chart to my right, according to the report, imports from China as a share of U.S. spending climbed from below 1 percent throughout much of the 1990s, to over 5 percent today. There is no question that this trajectory reflects it in this chart, seeing China as a total of U.S. spending, and what has occurred is a dramatic rise–without abatement, without any intervention whatsoever–and we have seen a steady major rise in terms of the amount of imports and spending by Americans on Chinese imports.
Due in large part to China’s currency manipulation and other trade-distorting practices, manufacturers in Maine and places like Maine have not been able to compete against this surge in artificially cheap Chinese imports. As Americans spend increasingly more on Chinese products, as illustrated in the chart, these imports displace goods made in the USA.
Consequently, China’s currency undervaluation has contributed directly to our soaring trade deficit with China, which has ballooned from $83 billion, when China joined the WTO in 2001, to $273 billion in 2010. Those numbers are worth repeating–when you are speaking about $83 billion, which our trade deficit was in 2001, and now in 2010 it has skyrocketed to $273 billion.
This ever-expanding, explosive trade deficit, unprecedented, of course, in our history, which grew 20 percent between 2009 and 2010, destroys existing jobs, prevents new job creation and, as economists from the Economic Policy Institute have indicated, increases the global “race to the bottom,” in their words, when it comes to middle-class wages.
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For example, the Economic Policy Institute recently released a report noting that as plants have closed, workers displaced by trade from the manufacturing sector have had particular difficulty in securing comparable employment, and average wages of those who found new jobs fell by 11 to 13 percent.
As we see on the chart, reflected and demonstrated here, most graphically, the Economic Policy Institute report discovered that since China’s entry into the World Trade Organization in 2001 and through 2010, when we saw that explosive growth of the trade deficit from $83 billion to $273 billion between 2001 and 2010, the increase in the U.S.-China trade deficit eliminated or displaced 2.8 million American jobs or 310,000 jobs per year.
As we can see illustrated on the chart, virtually every State in America has been affected by the trade deficits with China, with displaced thousands and thousands of jobs, and in less than a decade 2.8 million American jobs.
In my State of Maine this means the trade deficit has displaced nearly 10,000 workers or nearly 2 percent of State employment. As the chart depicts, the pain of job losses is not unique to one individual State or region of the country. Workers in all 50 States, from California to South Carolina, from Michigan to Texas, have been harmed and unable to compete against artificially cheap Chinese imports.
While these charts and reports may paint a picture of doom and gloom, there is recourse available to American workers injured by unfair trade. Under the U.S. countervailing duty law, tariffs can be imposed on imports benefiting from foreign government subsidies if it demonstrates that the subsidies cause or threaten injury to a U.S. industry producing the same or similar product.
But while numerous U.S. industries have attempted to bring allegations of currency manipulation as an export subsidy under our trade laws, in each instance the Department of Commerce has refused to investigate.
For example, it is a little known fact that the U.S. pulp and paper industry employs 900,000 workers–roughly the equivalent number employed by the U.S. auto industry–making it an indispensable economic pillar in rural communities in Maine and across the country.
Last year, several U.S. paper manufacturers with mills in Maine brought forward allegations that China was violating trade rules by illegally subsidizing their products in the U.S. market. Just over a year ago, in 2010, I testified before the International Trade Commission and made the case–and we were ultimately successful on these points–that foreign paper manufacturers in China and Indonesia were illegally selling their products in the United States at unfairly subsidized and underpriced rates.
Amazingly, however, the Commerce Department refused to investigate whether China’s currency practices constituted an illegal–and therefore countervailable–export subsidy.
Simply put, this failure to take action is unacceptable.
In response, in November of last year, the Senator from Ohio, Senator Brown, and I sent a letter to the Senate’s leadership asking that a vote be scheduled on legislation directing the Commerce Department to investigate allegations that currency undervaluation provides a countervailable subsidy at the expense of American jobs. When the Senate failed to take action, Senator Brown and I filed the House-passed currency reform bill as an amendment to the tax extender package in December of 2010.
In January 2011, during Chinese President Hu’s visit to the United States, we sent a letter to Secretary Geithner underscoring the need to enforce trade remedy laws to provide U.S. industries affected by China’s currency practices with a lifeline to compete. And, finally, in response to our government’s failure to investigate these unfair trade practices, on February 10 of this year, Senator Brown and I introduced our legislation, the Currency Reform for Fair Trade Act.
Simply put, the Department of Commerce has failed to use its authority to respond to currency manipulation by investigating these allegations brought by U.S. industry and placing countervailing duties on foreign imports benefiting from these unfair trade practices. The purpose of our bill is to make clear that Commerce has the ability to investigate–regardless of whether the subsidy is provided to all foreign businesses in a given country or just to those that are exporting.
That is an important point, because if we wait to make that demonstration, they can continue to export their goods to the United States before we could ever reach the point of being able to make that determination on imposing that countervailing subsidy or determining which companies in China are actually doing the exporting. So it is important to eliminate that distinction, because that has been a barrier.
In fact, it certainly prevented the Department of Commerce, in their words, from being able to impose any kind of subsidies or to investigate the case before they could impose a countervailing duty. So this way we eliminate the distinction, irrespective of whether a business is exporting within China their goods. The point is, we don’t want to wait for the Department of Commerce to make that determination. Those industries that do export–and once they do export–have already done the damage. So it is clearly important to be able to have the Department of Commerce in a position of being able at the outset to initiate this investigation on those companies that actually export goods to the United States from China at an unfair price.
Notably, our bill does not legislatively deem that a currency undervaluation satisfies the requirement of finding a countervailing subsidy. It just requires Congress to determine on a case-by-case basis whether currency undervaluation is giving foreign companies an unfair competitive advantage over their counterparts in our country.
Since introducing our legislation in February, we have added 11 bipartisan Senate cosponsors, and the House companion to our legislation has over 200 cosponsors. Furthermore, on September 23, I was proud to join as a lead original cosponsor of the bipartisan legislation before us today, which combines the key elements of our bill with critical provisions of the legislation authored by the Senator from New York, Senator Schumer, and the Senator from South Carolina, Senator Graham, that I also supported as an initiative when it came before the Senate Finance Committee in 2007.
The merged bill utilizes U.S. trade law to counter the economic damage and harm to U.S. manufacturers caused by currency manipulation and it authorizes new consequences for countries that fail to adopt appropriate policies to eliminate unfair currency undervaluation. Most critically, it will also provide businesses that are damaged by China’s trade practices with the tools to respond on behalf of American workers. It ensures our government will heed the requests of a wide range of U.S. industries, such as paper manufacturers in Maine, to investigate whether currency undervaluation by a government provides a subsidy, and one in which we can initiate an action by imposing countervailing duties.
Finally, while some of my colleagues have expressed concerns that challenging China’s unfair trade practices could lead that government to retaliate against U.S. goods and jeopardize our economic recovery, the fact is the potential benefit of currency reform is enormous when it comes to fighting unemployment and boosting the American economy, because as of today China essentially rigs the game to undercut true market competition and undermine U.S. businesses.
For example, a study released in June by the Economic Policy Institute discovered that addressing Chinese currency manipulation and enforcing fair trade provisions when it comes to these violations would support the creation of more than 2 million U.S. jobs, increase the gross domestic product by as much as $285 billion, and reduce the deficit by more than $70 billion a year.
Failing to act now is not an option. The International Monetary Fund recently announced that China will surpass the United States economically in 2016–a mere 5 years from now. If this turns out to be true, it will be due in large part to our current policies, which are fueling our decline and China’s rise. We import more than we export, keep running huge trade deficits, consume more than we produce, and outsource thousands of jobs.
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If one manufacturer is compelled to close because we failed to combat subsidized imports, that is one less manufacturer able to export and help grow our economy. And frankly, if there was ever a moment to empower a workforce when it comes to competing in a global economy, is there any doubt, given our dire economic state, that time is now? From Maine to the Midwest, China’s currency manipulation has been among the greatest impediments to our manufacturing sector. Unfortunately, the silence of our government when it comes to this issue has become the silence of our factories.
It is time to take action to rebuild our economic foundations, and this legislation will ensure our government has the tools to respond on behalf of American companies and workers by imposing countervailing duties on exports subsidized by currency manipulation undervaluation.
It is absolutely vital we take this action this year–right now–because, as I indicated at the beginning of my remarks, if you look at the historical picture of the consideration of this legislation, it is clear it has been
underestimated, it has been overlooked in terms of the value it brings to our country, to the value it brings to the manufacturing segment of our economy, and to the value it brings to our workers. I am deeply concerned, because it also seems as if it is an either/or proposition when we talk about trade-related issues–either we do nothing or we will invite a trade war.
We have to look at the trade practices of our trading partners and the laws which they are required to uphold–in this case, for China, through the World Trade Organization. They made a commitment at the onset when they joined that organization, and they have refused to uphold it when it comes to leveling the playing field and creating the equilibrium–to let the currency flow as required and stipulated under that agreement when they became a member of that organization. They have failed time and again to monitor these agreements and to monitor the actions of their own companies with respect to this practice, and it has decimated many industries across this country.
As I indicated with this chart, virtually every State in America has been damaged as a result of the loss of jobs because we have failed to uphold the standards of fair trade. So it isn’t about encouraging a trade war. Far from it. I think it creates not only a level playing field, but it creates an equitable circumstance for our trading partners. And it is important for those countries, such as China, to be prepared to live up to the agreements to which they have subscribed through the World Trade Organization. They are required to live by their agreement, and that means they have to establish the standards where they cannot manipulate their currency, as they have been doing for more than two decades.
It has been a problem, and it has been a persistent problem. Unfortunately, both sides of the aisle–whether it is Democratic or Republican administrations, the presidency or here in Congress–have failed to take a concrete, concerted action that could have made a profound difference long before this point. This could have been averted. Time and again we haven’t been able to have a Treasury Secretary designate China as a currency manipulator that I think would have then prompted much more significant action on the part of any administration.
So that issue has been addressed in this legislation–to change the threshold, to redesign and to target the legislation more precisely so that it will give the tools to the administration, and specifically to the Treasury Secretary, to be able to designate China as a currency manipulator, which then kicks in certain safeguards and actions.
The same is true for the Department of Commerce, that they will be able to initiate at the outset an investigation to determine whether devaluing the currency on the part of China has contributed to unfair trading practices and, obviously, adversely affecting our goods and workers and companies here in the United States. It is important to give the tools to our agencies to make sure they can fulfill their obligations.
I know there are times in which they have not done so, even when they have had the tools, and they have been empowered to use those tools, much to the detriment of our industries–much to the detriment of these jobs and these manufacturing companies all across America–that have either closed their doors or they have sharply curtailed their businesses or their level of employment.
I know that firsthand from my State. It has brought tremendous consequences to rural Maine and to rural America as a result, because that is what has been the basis of our economy. The manufacturing segment of our industry has been so critical to good-paying jobs, and that ultimately has been damaged and harmed as a result of this currency manipulation issue that has been persistent on the part of the Chinese, and one that we now have to address through this legislation.
I appreciate this opportunity to address the Senate on this critical issue. As we go forward in the days ahead in debating this legislation, I look forward to working with my colleagues–the Senator from Ohio, who has done yeoman’s work on this issue and has brought this issue to the highest levels in terms of its attention and importance to this country, most assuredly. I am looking forward to working with him and our other colleagues to make sure we can fulfill our commitment to passing this legislation.
It is not only about debating it, it is not just voting on it, it is about its becoming law. I think we should bring this to its logical conclusion and send it to the President for his signature. The time has come, as I said, and it is long overdue. We have failed the workers and the industries of this country who are trying to compete and who can make goods. We are not going to forsake our manufacturing sector, because we have the ability to make the best goods with the most productive workers in the world, and we should be able to continue to do that. The only way we can fulfill that obligation to them is through this legislation. There is no other recourse at this moment in time.
I yield the floor, Mr. President.
The PRESIDING OFFICER (Mr. Merkley). The Senator from Ohio.
Mr. BROWN of Ohio. Mr. President, I, first of all, thank Senator Snowe for her leadership on this currency legislation. Its time has come, as she has said. She has been a real leader on this for months–years, for that matter. I so appreciate her work on this problem.
Pure and simple, this is the most important bipartisan jobs bill the Senate will pass in my 4 1/2 years since I have been a Member of the Senate. Senator Snowe has been here a good bit longer and has been a member of the Finance Committee that understands these issues of how China has gamed the system. Senator Snowe and I were joined in our legislation, combining it with Senator Schumer and Senator Graham in their legislation, also Senator Stabenow, a Democrat from Michigan; SenatorSessions, a Republican from Alabama; both Senators from North Carolina, Senator Burr, a Republican and Senator Hagan, a Democrat; joined by Senator Casey and the other Maine Senator, Senator Caseyfrom Pennsylvania, a Democrat, and the other Maine Senator, a Republican, Senator Collins. And that just shows the bipartisan support.
We had this vote today. On S. 1619, the cloture vote was 79-19, which is a strong message to the House and to our colleagues that this legislation as we debate this week is so important. It is deserving of basically a week of the Senate’s time to discuss and debate what China trade is all about.
We know what China trade is all about. We know, as Senator Snowe said, the trade deficit with China has ballooned in the 10 years since China has been part of the World Trade Organization. Think of it this way. Every day we buy $750 million more from China than we sell to China–every single day–Sunday, Monday, Tuesday, Wednesday, Thursday, Friday, Saturday–every day of every week every year. So for the past year, $750 million we buy from China more than we sell to China. You just can’t keep doing that. You can’t keep doing that and hold the industrial base that the people of Oregon, the people of Maine, the people from Ohio care about.
Look at it this way. I don’t want to inundate my colleagues with figures and numbers and dollars and job numbers and all that, but President Bush I
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said $1 billion in trade surplus or trade deficit translates into 13,000 jobs. He said that 15 years ago. No President has quantified that since. But think about that. Thousands of jobs for every $1 billion in trade deficit or surplus. Well, with China alone, we have three-quarters of $1 billion every single day. Our trade deficit with the whole world is $600 billion, more than that.
So we buy $600 billion more than we sell to the world every year. How can a country, no matter how wealthy–and this is a rich country still, even though millions of people have been unemployed, have lost manufacturing jobs in my State and other States across the country. How can we continue as a prosperous nation if manufacturing is outsourced and these jobs go somewhere else?
I don’t believe ever that I can think of in world history–and I have said this before and nobody has challenged it–have we seen a business plan of American companies moving to China, manufacturing there, and then selling back to the United States. A company such as Proctor & Gamble, on the other hand, they moved production to China, but they sell from their Chinese operations to China, East Asia, probably Taiwan and maybe Japan and Malaysia. They have their production in the areas they sell to. That makes perfect sense. That is good for those countries, good for those workers, good for the United States, and good for Cincinnati where Proctor & Gamble is located. But these companies that have it as their business plan to shut down production here, move to China, and then sell those products that they make in Shanghai and Wuhan and Beijing instead of in Akron, Canton, and Toledo–sell those products back to consumers in Oregon, Ohio, and Maine–that is why this legislation is so important.
A new study said we have lost 2.8 million jobs in the last decade to China because of currency manipulation; 1.9 million of those jobs are in manufacturing.
You know what has happened in places such as Portland, and the Senator from Maine knows what has happened in her Portland, and what that has meant to lost jobs in this country. And understanding the reason that happens is because China games the system, because China doesn’t play fair–pure and simple, say it straight, because China cheats. They have been given, for all intents and purposes, a 25 or 30 percent subsidy to their products. So because they cheat on currency–putting aside how they subsidize their paper industry, for instance, with water and capital and energy and land. Just on currency alone, when they sell something into the United States, they have a 25 to 30 percent cost advantage. I know companies in places around my State, in Mansfield, Springfield, Zanesville, Chilicothe, will say that the cost of raw materials is higher than the cost of the product when it comes from China. Why? Because China cheats. And one of the ways they cheat is they undervalue their currency so they have a 25-percent discount on their products sold into the United States. We can’t compete with that, no matter that our workers are efficient, no matter that our companies are efficient, no matter that we cut costs in so many ways with the more advanced technologies and advanced manufacturing that we do.
So that is why this was such an important step, passing overwhelmingly and sending to the floor for debate today–79-19–this bipartisan jobs bill called the Currency Exchange Rate Oversight and Reform Act of 2011.
Earlier today I was in Cleveland and I had a meeting with two owners of a company in Brunswick, OH, more or less a Cleveland suburb, Automation Tool & Dye. It is a family company that has been in operation since 1974. The owners, the two sons, Randy and Bill Bennett, spoke today about their company. They have, I believe they said, 55 employees who are a major part of American manufacturing. They are the kind of company that when it is such a disadvantage on currency, it puts them in a less than competitive position sometimes. They are still doing OK, but they know how hard the business climate is when they are at that disadvantage.
So when they are making products, because China has gamed the system and an American company might move to China to do production, they can’t up and move their family company of 55 employees–they can’t move to China to service the company that has moved to China because of the competitive disadvantage.
So we know how that has worked. We know why this legislation that Senator Snowe has worked on, the two bills we put together, Senator Snowe and my bill with Senators Schumer and Graham. As I said, we have had good strong bipartisan sponsorship on this bipartisan jobs bill and we have also had a very good vote today that was 79-19 to move this forward.
The Economic Policy Institute issued a new report showing that addressing Chinese currency manipulation could support the creation of 2.25 million American jobs, mostly in manufacturing, mostly the kind of jobs that will create other jobs because of the wealth that Senator Snowe talked about, the wealth that manufacturing creates. And as Senator Snowe pointed out, when the opponents to this–and too often we have seen administrations of both parties oppose bills such as this. When opponents say this is protectionism, I don’t know what is wrong with protecting our families and protecting our neighbors and protecting our country. But ceding that, they say this is protectionism. This, in fact, is a reaction to Chinese protectionism. And the People’s Republic of China has not really believed in the rule of law when it comes to trade. There is an emphatic strong insistence by the U.S. Senate that we do believe in the rule of law for international trade; that we do think all actors should behave. We do think that everybody in the trading system should work on a level playing field.
Today was the biggest step I have seen the U.S. Senate take since I came here in 2007. We are going to have a long debate this week. Everybody is going to get their chance. Some Members of the Senate who wanted us to debate this are still not quite sure exactly where we go with this. I think it is pretty clear, though, that the U.S. Senate today reflects what the people of this great country believe: That we make things.
My State is the third largest manufacturing State in America. Only Texas and California, States that are twice and three times our size in population, make more than we do. We know how to produce. We need to continue to produce. We know that manufacturing creates wealth.
This is a huge victory–only a first step but a huge first step and a victory for American manufacturing to help us reindustrialize our country.
I thank my colleagues for this 79-19 vote. I thank Senator Snowe especially for her terrific work on both sides of the aisle in getting this bill moving forward. It is going to matter for workers in Toledo, Dayton, Cleveland, and Columbus. And for that, I am grateful.
Mr. President, I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BROWN of Ohio. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.