Letter to Joe Biden, Vice President

Letter

In a meeting with a bipartisan group of senators and Chinese Vice President Xi Jinping, U.S. Sen. Sherrod Brown (D-OH) pressed Xi on the widening trade deficit with China, and the country's illegal export subsidies, intellectual property violations, and human rights abuses.

"Last week's announcement of a $295 billion U.S.-China trade deficit underscores the fact that China is one of the biggest violators of international trade laws, which causes American job loss," Brown said. "While China offers Ohio companies an enormous export opportunity, too many predatory practices make it an unlevel playing field for workers and companies. From currency manipulation to intellectual property theft, to its outright subsidization of a wide variety of exporters, the Chinese government has shown that it will stop at nothing to give its businesses an unfair trade advantage. If Vice President Xi is serious about improving relations, there's a long list of Chinese practices he can begin to correct."

In the closed-door meeting, Brown noted the widening U.S. trade deficit, and China's growing list of intellectual property violations, food safety lapses, and human rights abuses. Brown asked how American leaders can assure American companies -- who also do work in China -- that speaking out against Chinese human rights abuses, food safety lapses, and intellectual property violations would not result in retaliation.

Yesterday, Brown co-chaired a hearing of the Congressional-Executive Commission on China to examine the condition of Gao Zhisheng, one of China's most prominent human rights advocates who remains in official custody.

Earlier this week, in a letter sent to Vice President Joe Biden in advance of Xi's visit, Brown asked the Administration to engage with China on a variety of trade issues, including currency, rare earth materials, state-owned enterprises, indigenous innovation, intellectual property theft, labor rights, export credit agencies, and the evasion and circumvention of antidumping (AD) and countervailing (CVD) duties.

"The United States has lost over 5.5 million manufacturing jobs over the last ten years. This devastating loss of quality, middle-class jobs has been exacerbated by unfair actions undertaken by some of our largest trading partners -- such as improperly subsidizing manufacturing industries, setting discriminatory standards, and implementing other non-tariff barriers that affect a range of industries important to our economic health," Brown wrote in the letter. "For the most persistent and damaging Chinese trade practices, such as currency manipulation, this and previous Administrations have too often balked at initiating cases, preferring to address issues through forums like the Joint Committee on Commerce and Trade or the Strategic and Economic Dialogue. However, these approaches have simply not delivered results on our persistent trade imbalance with China. More must be done as China has taken numerous actions that nullify and impair its WTO commitments."

Brown is the author of the Currency Exchange and Oversight Reform Act, legislation that represents the biggest bipartisan jobs bill--at no cost to U.S. taxpayers--passed by the Senate last year.

The full text of the letter is below.

Vice President Joe Biden

The White House

1600 Pennsylvania Avenue, NW

Washington, DC 20500

Dear Mr. Vice President:

As Chinese Vice President Xi Jinping arrives this week to discuss issues vital to the U.S.-China relationship, I am writing to outline priority issues related to our trade relationship with China that I urge your attention. I applaud President Obama's announcement today of the Interagency Trade Enforcement Center (ITEC), and no issues warrant more attention by this panel than China's commitment to massive export subsidies and protectionist policies, which have contributed greatly to the record $295 billion bilateral trade deficit with China in 2011.

The long-term economic health of our nation depends on our ability to manufacture and export. American manufacturers and workers can compete with anyone, but they must do so on a level playing field. That is why we must utilize every available trade enforcement tools to ensure that other nations are playing fair.

The United States has lost over 5.5 million manufacturing jobs over the last ten years. This devastating loss of quality, middle-class jobs has been exacerbated by unfair actions undertaken by some of our largest trading partners -- such as improperly subsidizing manufacturing industries, setting discriminatory standards, and implementing other non-tariff barriers that affect a range of industries important to our economic health.

Our trade enforcement system is based on companies and workers petitioning for relief, primarily through antidumping (AD) and countervailing duty (CVD) laws. In addition to this industry-driven process, the Administration can initiate trade cases, either through the World Trade Organization (WTO) or through bilateral consultations. The reliance on an industry-driven approach too often presents a dilemma to companies trying to export to China, for fear that China will retaliate for demanding rules-based enforcement. This is one reason why President Obama's trade enforcement task force can fulfill a critical void.

For the most persistent and damaging Chinese trade practices, such as currency manipulation, this and previous Administrations have too often balked at initiating cases, preferring to address issues through forums like the Joint Committee on Commerce and Trade or the Strategic and Economic Dialogue. However, these approaches have simply not delivered results on our persistent trade imbalance with China. More must be done as China has taken numerous actions that nullify and impair its WTO commitments. I urge the Administration to take strategic and aggressive action on the most persistent and troubling Chinese trade issues, including:

Currency: Despite leaders of the Chinese government pledging last year to allow its country's currency to float more freely, the real effective exchange rate of the yuan against the dollar has been nominal during this period. Recent analysis by the International Monetary Fund shows China's yuan is undervalued by as much as 23 percent, contributing to the U.S. $295 billion bilateral trade deficit with China in 2011. That is why the Senate passed the Currency Exchange and Oversight Reform Act in October. While this legislation is stalled in the House, the Administration has authority to take action against this protectionist policy through multilateral institutions like the World Trade Organization.

Rare earth materials: On January 30, a World Trade Organization Appellate Body (AB) upheld an earlier ruling requiring that China ease its restrictions on raw material exports. This favorable ruling should pave the way for the United States to initiate a case on China's protectionist policies on rare earth materials. China's policies include quotas limiting the amount of rare earth materials that can be exported and the imposition of tariffs, which unfairly undermine the competitiveness of American manufacturers.

State-owned enterprises: I encourage the TEU to address the dramatic rise of state-owned enterprises competing against private companies and the effect of such competition in domestic and global markets. While the United States does and should continue to welcome foreign direct investment, the expanding market involvement of state-owned enterprises presents unique challenges that, left unaddressed, can harm American competitiveness. The potential for conflict in the U.S. market will increase if American workers and companies are forced to compete on an un-level playing field against state actors operating with their governments' largesse and direction. Presently, however, there are no domestic laws that adequately ensure a level playing field when state-owned or supported enterprises engage in commercial activities in the U.S. market.

Indigenous Innovation: China's policies to encourage "indigenous innovation" have the effect of excluding American companies from sales in China, or requiring American companies to transfer or reveal sensitive technology to Chinese companies in exchange for market access. Despite assurances by the Chinese government that it will change existing procurement requirements, these policies persist.

Intellectual Property Theft: Similarly, intellectual property theft remains a persistent problem for American companies doing business in China. While the Chinese government has passed laws prohibiting copyright infringement and theft, enforcement is ineffective. The costs for American companies are staggering. According to the U.S. International Trade Commission, the U.S. would increase employment by a range of 923,000 to 2.1 million jobs were China to adopt an intellectual property enforcement system equivalent to the U.S.

Labor Rights: Recent press reports regarding factories in China underscore the problem of harsh working conditions at factories and the lack of effective labor representation in China. These reports document excessive overtime, crowded and unsafe working and living conditions, underage workers, and withheld or unpaid wages at Chinese factories, some of which manufacture products popular with U.S. consumers.

Export credit agencies: Since China joined the WTO, its ExIm Bank has increased export credit agencies exponentially. In fact, China has granted more in such export credits than all of the G7 countries combined. There are reports that the terms upon this financing is provided by China ExIm Bank are below the rates at which OECD member export credit agencies provide financing. The Administration should consider holding China accountable until it adheres to OECD norms.

Evasion/Circumvention of AD and CVD Orders: In recent years, illegal duty evasion schemes have become pervasive, particularly among Chinese producers and exporters of merchandise, preventing U.S. producers from obtaining effective relief pursuant to U.S. trade laws. Such schemes include illegal transshipment of merchandise through third countries, falsified country of origin markings, undervalued invoices, and misclassified goods. The Administration should consider using existing authority to address circumvention issues by implementing a transparent and rapid investigation procedure with strict timelines and real consequences where there is a reasonable likelihood that evasion is occurring.

Thank you for your consideration, and I stand ready to work with you on these critical issues.

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