Hearing of the Senate Banking, Housing, and Urban Affairs Committee
Federal News Service
HEADLINE: HEARING OF THE SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE
SUBJECT: TREASURY DEPARTMENT REPORT ON INTERNATIONAL ECONOMIC AND EXCHANGE RATE POLICY
CHAIRED BY: SENATOR RICHARD SHELBY (R-AL)
LOCATION: 106 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.
WITNESSES: SECRETARY OF THE TREASURY JOHN SNOW
BODY:
SEN. CHARLES SCHUMER (D-NY): Thank you, Mr. Chairman.
And I want to thank you, Mr. Secretary, for being here. Again, many of us who feel strongly about this issue-nothing personal. We know you are working the best you can on this. But I have to tell you I read the report this morning with deep disappointment.
Simply put, the report lets China off the hook and it will do serious damage to the United States economy. This report is a whitewash. It treats China with kid gloves when it should be taking off the gloves and confronting Beijing about the fact that it's manipulating the yuan. Pegging the currency to any set level flies in the face of free trade.
So the time for diplomatic niceties is past. The administration needs to grow some backbone and take a firm line with the Chinese on the currency issue, or American jobs will continue to go overseas faster than children leaving a classroom on the last day of school.
The Chinese want all the advantages of being part of the world of nations. Well, how about some of the responsibilities? No one says they have to let their currency float tomorrow, but they ought to be making some progress instead of telling you not to bother to even bring it up before you set foot in China when you negotiate.
The bottom line is, I'd like to know what the administration thinks we should do if we don't toe a hard line. I'm glad that my colleague from Kentucky talked about the high inside pitch, because we're all exasperated here. We see China thumbing its nose at what's fair. We see thousands of jobs lost. Some of it, of course, is related to just the way capitalism and free enterprise work, but some of them are lost unfairly because of the pegging of the currency.
The evidence is very clear, Mr. Secretary. China is playing around with the yuan. This view has been backed by economists, including the bipartisan U.S.-China Trade Commission. It's truly baffling that this report would reach its audacious conclusion. Something-something-has to change here.
And I'd ask my entire statement, Mr. Chairman, be read into the record.
BREAK IN TRANSCRIPT
SEN. SCHUMER: Thank you, Mr. Chairman. I appreciate the hearing. I'm sorry we had many things going on, so I apologize for being a little late.
As you know, Mr. Secretary, it's not a surprise to you that I'm very disappointed in the report today. And hearing my colleagues, who I wasn't here to hear, but it was reported to me, just about everybody else seems to be, too, on a bipartisan basis. And it leads to a question. We can't quite figure this out. You said let diplomacy work. But the Chinese seem to say don't even bring this up. We don't see any progress whatsoever, any progress in this area. The Chinese just seem to feel they can get away with whatever they want.
So the question I have is this: Is there some kind of deal? Do we tell the Chinese, "You help us in foreign policy, and we won't other you on this issue"? Because certainly, this report lets the Chinese off the hook. Now the Chinese can say to any U.S. official, from the president on down, "You found we're not violating any laws, we're not doing anything wrong." So all the pressure that you've been trying to build up on them, you sort of pulled the rug out from under yourself with this report. And I don't get it.
So I can I ask you this? Is there-I mean, do you, before you issue these reports or go to China, do you talk to the State Department people? Are they saying they traditionally put economic issues second and diplomatic issues first? Many of us are sort of incredulous here about what is going on because we, in a different position than you, have to live with the exodus of the jobs. And, you know, I am well aware of the fact that not every job is going to be saved by a fairer valuation of the Chinese currency, but it sure means some of them would. And it also means that everyone who loses a job thinks that this is related.
The good economic news today is growth. The bad news is jobs. And this-what we're talking about here is directly related to jobs. I mean-so I guess my question to you is has some kind of deal been struck, either about North Korea, about some other foreign policy area, something not related to economics, or even related to economics: "Well, we'll leave you alone if you buy some planes from us, or you do this or you do that"? I mean, tell me what's going on here.
SEC. SNOW: Senator, we're, in your words, not leaving-quote, "leaving" the Chinese alone. (Chuckles.) We're engaged on a number of points with them to get them to open their economy, to get them to relax capital controls and to get them to move to a freely-floating rate.
I have been over there, I've been to Beijing, I've talked to the leadership of the country from the premier on down. I've talked to the finance minister and the central banker in a meeting of the World Bank, the IMF in Phuket, Thailand. I just came back from Morelia, Mexico, where I had bilaterals with --
SEN. SCHUMER: Have we made any progress? I know you're trying hard.
SEC. SNOW: We are. And I heard you say we're not making progress. We, I think, are making genuine progress. You weren't here a few minutes ago when I commented on some of this progress-I won't repeat it all --
SEN. SCHUMER: Okay. I'll look at the record.
SEC. SNOW: -- but one important element of progress that's really pretty startling is the interest which the Chinese are taking in talking to the Merc, the Chicago Merc, about derivatives on their currency and options on their currency. Now-and I confirmed that in a discussion I had with Governor Zhou, the head of the-the counterpart to Alan Freedman (sic). and Governor Zhou has endorsed this project with the Merc in which they've asked the Merc to help develop currency futures market in China. Now Senator, there's no point in having a currency futures market unless you let your currency --
SEN. SCHUMER: Right. But they haven't done anything-they're talking.
SEC. SNOW: Well, they've entered into a-they are entering into or have a memorandum of understanding to retain the Merc to do this for them, so they're investing in that --
SEN. SCHUMER: But they could wait two years before they did it. They could say, "We need time, we need time, we need time." No one is saying all of this has to be done in six months, but we don't see one inch of progress other than talking, and talking isn't going to get us anything done if the basic situation is unfair.
SEC. SNOW: Senator, since I started this discussion with them, U.S. financial institutions can now own a larger share of Japanese financial institutions than had been the case before, and insurance companies.
SEN. SCHUMER: Right.
SEC. SNOW: Non-Chinese-your constituents can take more hard cash into the country. There are-it's not as much as we want. They're not moving as fast, you know? But we're pressing them, and we will not relent here. We will not stop. We will keep the pressure on.
SEN. SCHUMER: Let me ask you just one other-I know my time has expired, and I-just one more question, with the chair's indulgence. And that is what is the administration's position on the legislation that the group of us have put in about the tariff? And let me ask you this. Even if you don't have a position yet, which I don't think you do --
SEC. SNOW: Right.
SEN. SCHUMER: -- isn't it fair to say that if this were to pass the Senate, it would increase your leverage and your ability to negotiate with China?
SEC. SNOW: Senator, I think we're making good progress, and I would rather continue down the path we're going.
SEN. SCHUMER: You don't think it will help, it will help your leverage?
SEC. SNOW: Well, as I say, I think we're really on a good path and are making progress, we'll continue to make progress. If I thought otherwise, I would respond differently to your question.
SEN. SCHUMER: Okay. Thank you, Mr. Chairman.