Senator Crapo Introduces Resolution on Korean Bailout of Hynix

Mr. CRAPO. Mr. President, I rise today to introduce this resolution on behalf of myself and Senator GEORGE ALLEN from Virginia. This resolution underscores a very serious and ongoing problem relating to the illegal subsidies being provided by the Korean Government to Hynix Semiconductor, one of the companies operating in South Korea. With this resolution, my colleagues and I urge Secretary Evans, our Secretary of the Department of Commerce, and Ambassador Zoellick, U.S. Trade Representative, to use all means at their disposal to combat these illegal subsidies in the strongest ways possible under our trade laws.

Since October 2000, the Government of Korea, acting through the banks that it owns and controls, has provided an astounding $16 billion in subsidies to Hynix, a Korean producer of DRAM semiconductors. Hynix is a company with massive debt resulting from the easy lending practices of the Korean banks during the late 1990s. With these preferential loans, Hynix built substantial new capacity and became the third largest DRAM producer in the world.

Starting in late 2000, Hynix's overdevelopment began to catch up with them and Hynix became unable to repay the principal and interest on these massive loans and bonds. Rather than letting Hynix undergo formal bankruptcy and deal with the financial situation it faced, the Korean Government orchestrated no less than five separate bailouts of Hynix. Had it not done so, Hynix would have had to face a restructuring with substantial asset sales, and would have been simply another competitor in the marketplace in a more balanced and fair playing field.

However, these subsidies have permitted Hynix to stay in business with its unrealistic business practices. Hynix, a company that cannot compete in the market on a balanced playing field, in a fair market environment, continues to run its inefficient DRAM plants at full speed, flooding world markets with subsidized products. Despite the subsidies, Hynix continues to lose money—$8 billion over the last 3 years. Yet the Korean Government continues to pour money into this company.

Just 2 months ago there was yet another bailout, amounting to $4.1 billion. This is almost twice Hynix's revenues in all of the year 2002, which amounted to $2.4 billion.

The Korean Government must not be allowed to continue to underwrite the horrendous operating losses of this company as it has done for the past 3 years. It is time for the Korean Government to stop its illegal subsidies. In the highly competitive DRAM market, subsidies of this sort completely distort production and trade.

Every other DRAM company in the world is being crippled by the subsidized DRAM products that Hynix floods the markets with. This has resulted in the worst and longest downturn in the DRAM sector that has ever been experienced by this sector. Nobody can make money in this business if one of the biggest players is being underwritten by the South Korean government treasury. Subsidies of Hynix have had a huge impact on Micron Technology, the last remaining U.S.-based producer of DRAMs. Just last week, Micron announced it was laying off 10 percent of its worldwide workforce. This translates into 1,100 lost jobs in Idaho alone, and 560 lost jobs in the State of Virginia, which is why my colleague, Senator Allen, is joining in this resolution.

This is the first time Micron has had to have layoffs since 1985, and it was only done by the company as a last resort. Hynix subsidies have had a real impact on Micron's bottom line as well. The subsidies have impacted pricing to such an extent that even Micron, one of the most efficient DRAM producers in the world, has lost $2 billion over the past 2 years. We cannot afford to see an important technology like DRAMs lost in the United States because of illegal, predatory foreign government subsidies.
The South Korean government is clearly responsible for the bailouts that have occurred. The creditor bank now owns 67 percent of Hynix, and the government owns the vast majority of the creditor bank. To argue that the government plays no role in this bailout is the height of absurdity.

The Secretary of Commerce and the United States Trade Representative have the power to remedy this situation and put a stop to more bailouts. We need to use the trade laws we have to the fullest extent possible and countervailing duty should be imposed that offsets the full amount of these subsidies. These sorts of subsidies have absolutely no place in today's global economy, particularly as we are engaged in a round of new trade talks aimed at further liberalizing trade regimes around the world. The injurious and anachronistic policies of the government of South Korea must stop.

In this context, already the European Union and the United States Government are engaged in investigations under our trade laws of the predator conduct of the South Korean government in DRAM markets. We expect decisions on these cases sometime in the next couple of months, and hopefully these cases will establish the necessary groundwork for us to be able to deal as we should in the global community with this kind of unacceptable government subsidy.

The U.S. International Trade Commission has already issued its ruling that Micron Technology has been injured by these illegal activities of the South Korean government. We must now move on to determine the extent of these activities and assure that countervailing duties are identified and applied to the DRAMs that Hynix continues to flood the world markets with.

I want to read a part of the resolution to establish what it is we are asking our Congress to do.

After the whereas clauses, it states:

Resolved by the Senate and House of Representatives concurring, That, No. 1, it is the sense of the Congress that the actions of the Republic of Korea with respect to the bailouts of Hynix Semiconductor, Inc. are severely detrimental to the bilateral friendship and economic relationships between the United States and Korea; and, No. 2, Congress calls on the Republic of Korea to immediately cease any further bailouts of Hynix and to immediately comply with all of its obligations as a member of the World Trade Organization, including its obligations regarding subsidies. The Secretary of Commerce and the U.S. Trade Representative are called on to immediately take such actions as are necessary to end any further bailouts of Hynix, including the self-initiation of further trade cases, the initiation of a further government investigation of the financial impact of these bailouts, and the calling of a special subsidies code meeting to raise legal concerns with this issue and to begin consultations with Congress regarding appropriate legislative action to fully deal with the impact of bailout of Hynix; and, the President is called on to consult with the European Union regarding joint action with respect to the unlawful subsidies to Hynix that are harming the international DRAM semiconductor and electronics markets.

As I have indicated, we face incredibly difficult times in the DRAM and semiconductor industry as a result of one nation's desire to continually prop up its competitors against all other world competitors—a competitor that has shown it cannot effectively compete without continuous government subsidies.

This is one of the core reasons why we are engaged worldwide in negotiations to reduce government subsidies to inefficient competitors, to stop nations from trying to flood the market with their company's products so that they can drive other, more efficient and more effective competitors out of the market and take those markets from other countries where they properly reside.

I encourage all of my colleagues to strongly support this resolution and send a strong message to the government of South Korea that the bailouts of Hynix must stop.

Mr. CRAPO. Mr. President, I was present as the debate took place with regard to the editorial issues that have been raised relating to the Miguel Estrada nomination. The Senator from Nevada raised this issue. In the debate over the Estrada nomination, there are many issues that flow back and forth. One of them is the question of what the public believes, and what the editorial boards across this Nation believe.

The editorial from the New York Times was discussed earlier. I point out that this editorial in the New York Times was one of only a few editorials in the country that supports the position that the Senate should continue with a filibuster of this nomination. In fact, only eight of the editorial boards across this Nation have taken the position of supporting the filibuster of Miguel Estrada's nomination, while fully 51 editorial boards across the Nation support ending the obstruction of this nomination and conclusion of the filibuster and resulting in an up-or-down vote in the Senate on the Estrada nomination, including the Los Angeles Review Journal which on two separate occasions supported Mr. Estrada.

Thank you, Mr. President. I yield the floor.