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Public Statements

Hearing of the Senate Banking, Housing and Urban Affairs Committee

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Date:
Location: Washington, DC

Federal News Service

HEADLINE: HEARING OF THE SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE
 
SUBJECT: TREASURY DEPARTMENT REPORT ON INTERNATIONAL ECONOMIC AND EXCHANGE RATE POLICY
 
CHAIRED BY: SENATOR RICHARD SHELBY (R-AL)

WITNESSES: SECRETARY OF THE TREASURY JOHN SNOW

BODY:
SEN. SHELBY: (Strikes gavel.) The committee will come to order.

Mr. Secretary, we welcome you to the committee. I'm pleased that you're here today to testify on the Treasury Department's report to the Congress on international economic and exchange rate policies.

BREAK IN TRANSCRIPT

SEN. SHELBY: Senator Stabenow.

SEN. DEBBIE STABENOW (D-MI): Thank you, Mr. Chairman and Ranking Member. I would ask that my full statement be placed in the record.

SEN. SHELBY: Without objection, the full statement will be made part of the record.

SEN. STABENOW: Secretary Snow, thank you for being here. I hope that more than anything else, what you will take away from this hearing today is a sense of urgency that we all feel about the issues of currency manipulation.

Whether it's China or Japan or any other country involved in manipulating currencies, in Michigan we are feeling it. We've lost 18 percent of our manufacturing base, more jobs than any other state. It's not just our auto suppliers, our manufacturing sector in terms of automobiles, which, of course, is critical to us, but furniture makers and a wide variety of those involved in manufacturing are feeling this in very, very serious ways.

I would join with my colleagues in indicating that Senator Schumer's legislation, which a number of us are cosponsoring, is an effort to indicate how seriously we feel about this, and the fact that something needs to be done.

What we're really talking about here is a tax being placed on American goods. It's a tax being placed on American businesses, American employees. When we look at just—there are so many different numbers to look at, but the Automotive Trade Policy Council, in speaking about Japan, gave us some information that indicated—and I will just read a portion of it—"Nowhere is this trade advantage more damaging to the U.S. economy than the U.S. automotive sector. In fact, the windfall cost advantage to Japanese automakers from the weak yen has been between $2,500 and $12,000 per vehicle." That's a tax. And I can't imagine, if someone was proposing such a tax on our manufacturers in this country, that the administration would be supportive of that.

I would urge you to think of it in those terms, because that's exactly what's happening to our manufacturers and to our employees. And from my perspective, it's not a question of time running out. Time has run out. And if not now, when will we act on this? And I would urge your leadership.

BREAK IN TRANSCRIPT

SEN. SHELBY: Senator Stabenow.

SEN. STABENOW: Thank you, Mr. Chairman. I feel compelled as someone representing a state with great manufacturers, both business and employees, to say that given a level playing field, our businesses and our employees can compete anywhere, anytime. This is really about giving them a level playing field. And I'm extremely concerned that they are being placed at a disadvantage through currency manipulation as well as a number of other factors.

Mr. Secretary, as I said in my opening comments, this is about jobs. This is about real people, real jobs. This is about my opening up the paper every morning and seeing another auto supplier, tool and die maker, small furniture maker finding themselves in a situation where they may have to go out of business, or, in fact, going out of business. Not because they're not smart, they're not effective or competitive, or don't work hard, but because of the situations that they face.

I can't think of a more important issue for us as a country than the question of losing jobs. We have to make things and grow things in this country. That's what we do in Michigan. We do a great job of making things and growing things, and we cannot all be in the service business. We have to have a manufacturing base on which to build in this country, I believe.

My concern is that in listening to your comments about how you come to a conclusion about manipulation, you have indicated you look at whether or not the country was motivated by a desire to disadvantage foreign competitors. How could we look at that and not say yes? How could we look at this situation and not say that is exactly what is happening?

So one question—actually, I have two questions. But the first is, your report concludes that no major trading partners of the United States meet the technical requirements set forth in the Omnibus Trade and Competitive Act of 1988.

SEC. SNOW: Right.

SEN. STABENOW: It could be 1888, I think.

SEC. SNOW: Nineteen -- 1988.

SEN. STABENOW: Yes. I know it's 1988, but given the way it's being used, I --

SEC. SNOW: Right. Right. Okay.

SEN. STABENOW: -- I would like to know, is it time to change that act? Is this—are the technical requirements of this act so out of touch with what is happening as it relates to these situations that we need to create different definitions?

SEC. SNOW: Senator, I wouldn't—I'd have to think about that to offer you a thoughtful and informed opinion on it. But whether that's the case or not, the end objective of this statute, which is discussions, engagement, involvement with other countries, has occurred. We are—we are deeply engaged. And we're engaged for the reason that you have raised. We want to make sure that other countries are using regimes that are fair and don't prejudice opportunities for American jobs and American manufacturers. And I couldn't believe more strongly, support more strongly your statement about American workers and American manufacturers. They can compete with anybody. All they really need is a fair set of rules that are fairly and fully enforced. That's why Don Evans right now is over in China. And I've had any number of discussions with constituents of yours from the auto companies and the auto supply industry on these subjects.

And if you'll just let me offer a personal note on this, I take these responsibilities as Treasury secretary very, very seriously. And I'm deeply honored to be here, but I know it's heavy responsibilities, and none more important than jobs; none more important than waking up every morning and saying what you've really got to be concerned about here is American workers and jobs for Americans and rising standard of living for Americans. I mean, I know what it means to not have a job. (Chuckles.) I've been in that position. And I know what it means to have a job and the dignity that goes with having a job. So, I couldn't agree with you more, and we have to make sure that national economic policy at home is designed to create job opportunities and higher standards of living, and we have to make sure that the international trading arrangements and currency arrangements are consistent with doing that, as well.

SEN. STABENOW: Well, I would just indicate again that time is of the essence on this question. Our businesses and workers are looking to all of us for action.

One other point. We've been talking a lot about China, and agree with the concerns that have been raised by my colleagues regarding China. But I do also want to speak about Japan for a moment—equally concerning.

For three years, Japan has used massive currency interventions to intentionally manipulate the value of the yen against the dollar and keep it artificially weak. In fact, Japan has spent over $200 billion since January of 2000 on intervention actions, including $120 billion this year alone. They've done this with the stated goal of gaining competitive advantages for their exports, the standard that we were just talking about, particularly the United States. By maintaining this weak yen, Japan has been providing a de facto subsidy to their auto makers. In fact, automotive exports represent 60 percent of Japan's exports to the U.S., which means that U.S. auto makers have been competing against a substantial export subsidy. In fact, a recent article in Automotive News cited a figure of $18,000 per vehicle as the level of export subsidy received by Japanese autos this year alone.

Mr. Secretary, doe the administration acknowledge that this is having an extremely negative impact on the auto sector? And how will you specifically address Japan's unfair trade advantage in the automotive sector, which is one of the largest bilateral trade deficits we have with any nation in any product?

SEC. SNOW: Senator, that was a subject that was on my agenda for my meeting in September with Mr. Koizumi and his finance and economic team. We raised those issues and indicated, on the subject of currencies, our strong support for fair currency regimes that reflect market forces and that let rates adjust to the marketplace.

We didn't find—we didn't designate Japan, because I didn't think they met the specific criteria of the statute. The yen has moved quite a bit. Three months ago, it was at 117 or 118. Today, it's at about 107, 108. Two years ago, it was at about 137 -- 135-137 range. Today it's at 108. So we've seen—we've seen some movement of it in response to market forces.

That's what we want to see, we want to see market forces driving currencies, and that's a position that we have reiterated time and time again.

But I understand your point. And I have talked with your constituents in the auto and auto supply industry, and other industries, very much about that issue.

SEN. STABENOW: Well, again, we can compete anywhere, anytime. But $18,000 per vehicle difference in terms of a subsidy is not fair competition.

Thank you.

SEC. SNOW: Thank you.

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