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Public Statements

Hearing of the Senate Committee on Finance - "The U.S.-China Economic Relationship: A New Approach for A New China"

Statement

By:
Date:
Location: Washington, DC

Senator John Kerry (D-Mass.), Chairman of the Foreign Relations Committee and senior member of the Finance Committee, today called for increased cooperation between the United States and China on issues of mutual interest and the resolution of trade irritants in our relations.

At a Finance hearing this morning entitled "The U.S.-China Economic Relationship: A New Approach for A New China," Kerry pressed U.S. Treasury Secretary Timothy Geithner to work with the Chinese government to end China's radical favoritism of domestic producers.

"American firms and workers are willing to compete with Chinese firms and workers, but they should not have to compete with the Chinese government. Today, they do," Sen. Kerry said. "Today and in the months to come, I will push the Administration and our friends in China to cooperate where we can, agree to fair rules for competition in commerce, and step up to the call for joint leadership in the world across a range of issues."

Senator Kerry's full statement as prepared is below:

A positive, open, and constructive US-China relationship is central to global peace and prosperity. This Administration has made an admirable effort at managing this critical relationship, but challenges remain.

It is not an easy task because U.S.-China relations require that we both compete and cooperate. Our workers and producers can and should compete on fair terms, driving each other to better performance, innovating, creating jobs, and growing our economies. For that to happen and for Americans to embrace it, we need a more level playing field.

American firms and workers are willing to compete with Chinese firms and workers, but they should not have to compete with the Chinese government. Today, they do. The Chinese government radically favors domestic producers in its market through its government procurement practices and industrial policy and it favors its exporters in foreign markets by artificially holding its currency value down and subsidizing inputs to export production.

So, in commerce there is tension between us. I have written the Chinese to ask them to reconsider their indigenous innovation policies which are written to discriminate against our innovators and I continue to respectfully disagree with our friends in China that their currency is properly valued or that undervaluing it is either fair or in China's interest. And disagreements are fine as long as we can agree on fair dispute resolution mechanisms. Continued delay in addressing our concerns is not a fair resolution.

But there are also issues where we should not be competing, but rather working together to help solve global challenges. We must sit on the same side of the table to persuade those who would pollute the environment, destabilize financial markets, or threaten security to change their behavior. And we both have to lead through example.

Secretary Geithner, how you and your colleagues in the Administration manage these dual missions -- negotiating with a commercial competitor and cultivating cooperation on issues of mutual interest -- will largely determine the long term legacy you leave for our workers, our planet, and our security. Together, China and the United States can learn from the recent economic crisis, work toward a strong global economic recovery and better balanced growth policies, restore the faith of American and Chinese workers and producers in our global trading system and international institutions, and push each other to innovate our way to independence from fossil fuels. But that will require a change in behavior and increased levels of trust and cooperation. And I worry that the first two years of economic dialogue with China under your leadership has not quite yielded sufficient progress given the enormity of the challenges we face.

Ours is the most open market in the world. As we exit the immediate economic challenge, we have to increasingly impose discipline on our federal budget and on ourselves as consumers and as a result we will have to fight for fair and reciprocal access to markets and consumers abroad, including in China. The steep trade deficit between our two countries - -where China clearly sells more to us than we to them on a playing field tilted in their favor -- casts a dark, long shadow over every debate we have here in America on trade and globalization.

In 2008, we imported more than $400 billion in goods and services from China and exported less than $90 billion to them. Notably, our exports to China are growing at a rate greater than that to the rest of the world. But the base from which we are starting is so low as to make it difficult to acknowledge improvement when we talk with average Americans. As our people save more, neither China nor other emerging economies should bet their development on U.S. consumers spending beyond their means. If China and others promote domestic consumption and open their markets, we both can enjoy balanced, sustainable growth.

Today, it is often difficult to discuss any global economic issue without some Americans believing that China will not play by the same rules as everyone else. While such a conclusion is premature and somewhat exaggerated, it is not wholly inaccurate for a number of reasons. While more open to U.S. companies than in the past, China's economy is still far too closed, its regulations often treat our producers unfairly, and its artificially low currency helps distort trade in China's favor. To help turn perceptions around, China needs to back away from industrial and trade policies that favor local producers over U.S. and other foreign companies, allow its currency to rise to reflect its true value, and lead in international forums toward solutions on the environment, and global trade and finance.

The United States must recognize and respond to the rise of China in a manner that is temperate but strong. China's rapid and remarkable economic growth is on the whole a positive development. As more and more Chinese attain higher living standards, China's middle-class can act as an engine for economic growth worldwide. China's growing power in international markets can also make it a leader in promoting sustainable policies that safeguard markets, protect our environment, and achieve broad-based economic growth. Today and in the months to come, I will push the Administration and our friends in China to cooperate where we can, agree to fair rules for competition in commerce, and step up to the call for joint leadership in the world across a range of issues.


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