Letter to Secretary of the Treasury John W. Snow

August 29, 2003

The Honorable John W. Snow
Secretary
United States Department of the Treasury
1500 Pennsylvania Avenue
Washington D.C. 20510

Dear Secretary Snow:

We are writing to urge you to make the top priority in your upcoming visit to China the artificial peg of China's currency, the yuan, to the dollar. We believe the current undervaluation of China's currency is contributing to job loss and business failure in the United States at a time of great economic strain, and it is eroding the strength of industrial sectors critical to our long term economic and national security. We also agree with the Administration that markets, not governments, should determine the value of all currencies, and believe a freely floating yuan would alleviate some of the current trade imbalances in the world market.

China should act in accordance with the spirit of the world trading system it has joined and the free market competition that underlies it. As its economic growth and export success vividly illustrates, China has benefitted greatly from its international trading relationships and its membership in the International Monetary Fund and World Trade Organization. However, China's artificially undervalued currency violates not only the spirit, but the letter of these international systems. China is now a major player in the global economy; if it enjoys the benefits of membership in that community, it must also abide by the community's rules and responsibilities.

Mr. Secretary, we recognize that you have raised this issue with the Chinese government in the past and have sought to quietly encourage China's compliance with international norms. With that history in mind, we believe it is appropriate now to take a stronger stance in encouraging the Chinese government to unpeg the yuan from the dollar and allow it to freely float. Should China not take proper measures toward allowing market forces to determine the value of its currency, the Department of Treasury, along with the Office of the U.S. Trade Representative, should bring action under World Trade Organization, International Monetary Fund and U.S. trade laws to compel the Chinese government to freely float the yuan.
We should point out that a fairly valued currency is in China's own long term interests. A higher value for the yuan would help certain sectors of China's economy by lowering the cost of imports, and it would help Chinese consumers suffering under artificially high prices. If China's currency accurately reflected the strength of its economy, it could help reestablish a market-based balance in trade with its partners, bolster the fragile economies of its neighboring countries, and improve the economic stability of the region. Finally, the Chinese government's intervention in the value of the yuan also may be leading to a misdirection of capital in China and straining China's already fragile banking system and financial markets.

Given our country's job losses and the effect this issue is having on many U.S. businesses and our vital manufacturing sector, it is time for action on China's undervalued currency. Further delay by the Chinese government in complying with the spirit and letter of international trade standards not only damages U.S. workers and businesses, but it also undermines support in the United States and around the world for free trade and increases pressure for protectionist measures.

We appreciate the Administration's growing concern about this important economic issue and the Department of the Treasury's leadership in this matter.

Sincerely, 
Charles Schumer
Elizabeth Dole
Joseph Lieberman
Olympia Snowe