Chinese Competition

By:  Lindsey Graham
Date: April 27, 2004
Location: Washington DC


Mr. GRAHAM of South Carolina. Mr. President, in 2001, World Trade Organization members accepted China into the organization only after negotiating the most complex accession agreement in WTO history. Under their accession agreement, China committed to adopting a market- and rules-based economy and special safeguards for the domestic industries of other WTO members that could be severely injured by surges of imports from China's non-market economy. China has yet to live up to their commitments. China's problems stem from a significant lack of intellectual property right enforcement, to the continued dumping and transshipping of textiles, to the subsidizing of their steel industry. China also manipulates their currency, the yuan, in order to gain an unfair competitive advantage.

These unfair trade practices seriously jeopardize many United States industries, including the textile and steel industries. The textile industry has been hit particularly hard by unfair trade with China. Since 1997, more than 250 textile plants in the U.S. have closed. With quotas on textile and apparel set to be totally phased-out on January 1, 2005, it is not unrealistic to expect even more job losses and factory closings in the textile industry. Quotas are set under the Multifiber Arrangement, MFA, an international agreement that allows countries to impose quotas on the level of goods imported from individual supplier countries. The MFA was designed to prevent a worldwide crisis in textile and apparel trade. Specifically, it was needed to keep very low wage producing nations from overwhelming global markets.

If these quotas are lifted, China is poised to control 70 percent of the textile and apparel market share. Allowing China to dominate world markets in this sector will result in the devastation of many third world economies, resulting in widespread economic and social instability.

If the goals of the World Trade Organization are to increase global prosperity and economic advancement through orderly trade, and especially to advance the development of the third world through orderly trade flows, we have to ask ourselves the following question: Does our current trade policy with China help further those goals, or will it continue to cost millions of United States' manufacturing jobs and undermine global advancement in general and in the third world specifically?

With the expiration of the quotas, the United States will see even more of the products they buy manufactured in a country that allows their workers to be treated poorly. Workers in Chinese factories suffer serious, routine and on-going abuse at the hands of their employers. Health and safety conditions almost always fail to meet Chinese law or international standards, and workers regularly work illegally long hours for overtime pay that is not calculated according to law. Chinese workers also face harsh disciplinary measures and the use of heavy fines for minor infractions of factory rules.

We need to let China know that if they keep dumping and transshipping textiles, permanent quotas will be put in place. If China continues to steal intellectual property rights, they will find themselves before every WTO tribunal that exists. One of the best investments the U.S. ever made was spending billions of dollars during the Cold War to prohibit the spreading of communism. We need to show similar strength when it comes to standing up against China's communist dictatorship that trades unfairly, oppresses its people, and bleeds our economy dry.

What I would like to see my country do, Republican and Democrat, is to ask the Chinese to stop cheating; to try to persuade the Chinese government through international organizations such as the WTO, to stop stealing market share and become a better member of the Family of Nations. There's a lot of resistance to any idea about change. Our opponents argue that current trade policy is appropriate because of the fact that it may reduce prices to consumers. This is only true if you review what hidden costs we are paying. Such costs include: over 3 million lost manufacturing jobs in the past 5 years, frozen wages, health and pension benefits for workers that have managed to remain employed, shrinking tax base for Federal, State and local government. Maybe the greatest cost, however, is to our national security. There is no doubt that the United States was the single greatest military power in the 20th century because of its industrial strength. If we make China the new industrial superpower, will that not translate into China becoming the single greatest military power of the 21st century?

The large economic growth China has experienced over the last several years is not going to the average Chinese citizen. In fact, it is estimated that just 0.16 percent of the Chinese population controls 65 percent of the nation's U.S. $1.5 trillion liquid assets in the Mainland bank deposits. The income distribution in China is likely to be the most unequal in the world. Rather than using this economic growth to help China's 800 million rural residents who earn the equivalent of just 80 cents per day, it is going to their military disproportionately.

Today, China is the world's largest purchaser for foreign military weapons and technology. China's defense industry has become far more productive in the last five years and improvements can be expected as the Chinese economy continues to grow. China is now more than doubling its budgeted defense spending this year as part of an aggressive military modernization strategy. And some European countries are even pushing the European Union to lift the arms trade embargo on China. What I considered at one time to be a regional problem is a national security problem.

Rigged and unfair international trading rules are a key cause of the U.S. manufacturing crisis. China's unfair trade practices are costing United States jobs and jeopardizing our manufacturing base. They have shown that they are not yet committed to participating in a rules-based global trading system and are not yet willing to make the necessary steps to transition into a market-based economy.

China continues to manipulate the currency markets to keep the dollar artificially high and its own currency, the yuan, artificially low. By playing the currency market in this manner, China effectively subsidizes their exports to the U.S. and places a tariff on U.S. shipments to China. This mercantilist practice has caused serious damage to the U.S. manufacturing sector. The U.S. Congress must take action.

Senator CHARLES SCHUMER and I have introduced legislation that would require China to adopt a market-based system of currency. The goal of this legislation is to remove China's unfair currency advantage and the detrimental impact that it is having in the U.S. and abroad.

Something must be done to alleviate the detrimental economic impact China is having on our manufacturing industry. I urge the Leadership to allow a clean vote on this important legislation. I believe it will receive overwhelming bipartisan support and give the administration one more tool to get the Chinese to uphold their WTO obligations.

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