Governor Rendell Calls on US Treasury Secretary to Protect American Workers

GOVERNOR RENDELL CALLS ON US TREASURY SECRETARY TO PROTECT AMERICAN WORKERS

Governor Edward G. Rendell today urged U.S. Treasury Secretary John Snow to take swift and serious action to help protect Pennsylvania manufacturers and workers from China's ongoing unfair currency practices.

"We need to make sure we are looking after the interests of Pennsylvania manufacturers so they can successfully compete in the global marketplace," Governor Rendell said. "It is important that all of our international competitors play according to the same rules."

Growing evidence supports assertions that China's exchange rate practices confer a de facto subsidy of 15 to 40 percent upon Chinese products sold in the United States, and a 15 to 40 percent tariff on U.S. goods sold in China.

Governor Rendell asked Secretary Snow to address the inequities in the Treasury Department's Fall 2005 Report to Congress on International Economic and Exchange Rate Policies.

In a letter to Snow, Governor Rendell said, "I urge you to seriously consider finding (as the Department did in the early 1990s) that China is improperly manipulating the rate of exchange of the RMB (Chinese currency) against the dollar in order to obtain an unfair trade advantage against the United States. America's businesses—and particularly its manufacturers—deserve to know that other nations will be held to account for this type of unfair conduct."

A copy of Governor Rendell's letter to Secretary Snow is attached.

Via Facsimile
(202) 622-0073

Hon. John W. Snow
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220

Re: Fall 2005 International Economic and Exchange Rate Policies Report

Dear Secretary Snow,

As your Department completes its work on the Fall 2005 Report to Congress on International Economic and Exchange Rate Policies as mandated by the Omnibus Trade and Competitiveness Act of 1988, I am writing to urge you to consider taking serious action to address the harms that China's currency practices continue to impose on Pennsylvania's manufacturers and workers.

There is growing evidence that China's exchange rate practices confer a de facto subsidy of 15 to 40 percent upon Chinese products sold in the United States, and a 15 to 40 percent tariff on U.S. goods sold in China—and that these advantages are the product of China's efforts to manipulate the rate of exchange of the renminbi ("RMB") to the U.S. dollar. Indeed, a September 2005 paper prepared by researchers at the International Institute of Economics ("IIE") indicates that "evidence of currency manipulation has become increasingly obvious over the past three years," and notes that China continues to intervene dramatically in the currency exchange market. This intervention is illustrated by China's prolonged, one-way involvement in the market. The data show that, at the end of the year 2000, China possessed slightly over $165 billion worth of foreign exchange reserves. These reserves have exploded since then, to approximately $610 billion at the end of 2004, and to over $750 billion at the end of August 2005 (a $140 billion increase in first eight months of this year alone). The constant, systematic increase in China's foreign exchange reserves provides strong evidence that China is manipulating its exchange rates.

In May 2005, the Treasury Department noted that "if current trends continue without substantial alteration," China's currency policies "will likely meet" the necessary requirements for the Department to conclude that China is engaging in exchange rate manipulation. China's July 2005 decision to shift from a rigid dollar peg to a currency basket and to revalue the RMB by 2 percent, though welcome, does not significantly change this analysis. For as the IIE paper notes, if "China was meeting—or was close to meeting—the technical requirements for manipulation" in May 2005 "then these same technical requirements" are likely being met today. I therefore urge you to seriously consider finding (as the Department did in the early 1990s) that China is improperly manipulating the rate of exchange of the RMB against the dollar in order to obtain an unfair trade advantage against the United States. America's businesses—and particularly its manufacturers—deserve to know that other nations will be held to account for this type of unfair conduct.

Sincerely,

Edward G. Rendell
Governor

http://www.state.pa.us/papower/cwp/view.asp?A=11&Q=446624