Currency Exchange Rate Oversight Reform Act of 2011

Floor Speech

Madam President, I rise today to speak about the issue of creating jobs in America--more specifically, the loss of jobs that has been driven by the unfair trade practices of China. The bottom line is this: Chinese manipulation of currency is a tariff on American products and a subsidy to Chinese exports, greatly disadvantaging manufacturing in America and destroying thousands of American jobs.

When we look at our challenge, it is not to simply strengthen the overall economy, often measured by the gross domestic product. Our challenge is to strengthen the American family, the financial foundations that depend upon a good living-wage job. So every proposal we consider should be weighed by whether it creates jobs or destroys jobs. That is true in times of a robust economy. It is particularly true now when we have a persistent high unemployment rate, when families have been battered not just by the loss of jobs but by the loss of equity in their homes, by the loss of their health care that went with their jobs, by the loss of their retirement savings--all of these at a time when the price of things fundamental to families keeps going up.

There are many who looked to the opening of China as an opportunity to have a vast market for American products. Indeed, many continue today to talk about China in terms of the market opportunities for American products. But the picture has changed dramatically over the last decade, and we, as policymakers here in the Senate, must recognize that change: that China has become a vast manufacturing enterprise, that it has done so through a deliberate manufacturing and export strategy, and that strategy is destroying jobs in the United States of America.

Over the last 10 years, China has reaped benefits, but it has not upheld its end of the bargain. Indeed, one piece of the deal is that they would create a rule of law that they would enforce restrictions on the theft of intellectual property. But I can tell you that when we took a bipartisan delegation to China earlier this year, led by the majority leader, company after company told us the stories of their products being stolen by Chinese enterprises, and not just the design of their products that were then replicated and sold without the appropriate patents but also the software.

If you want a simple example of this, take Microsoft Windows and its products and its Office suite. Only about half of the copies used by the official government in China are legal copies, and outside of the government, only a very small fraction of the copies are legal copies. That is just the beginning of the vast intellectual theft where China has not upheld its end of the bargain to create a rule of law and stop the outright thievery of American intellectual property, damaging American companies.

Second, we have the Chinese-pegged currency. Now, when a country pegs its currency to another, as they have their currency to the dollar, they can do so and adjust it periodically according to market influences; they can decide to end the pegging and let it float, which then you get a real market valuation or they can deliberately keep printing money to sustain a situation in which the currency is undervalued. And that is exactly what China has done. When they make their currency cheap, what they do is make their products much less expensive to other nations. That is equivalent to subsidizing their exports. When they make their currency cheap and make dollars very expensive, it is equivalent to putting a tax on American products, a tariff on American products.

While much of America has thought of the World Trade Organization as one that created a platform for free trade or even a level playing field, that is far from the truth. The truth is that China has been allowed to sustain a pegged currency that puts the equivalent of a 25-percent tariff disadvantage to American products and a 25-percent subsidy to Chinese products.

There are those in this Chamber who have come to this floor and said that to challenge the Chinese tariff on American products is to launch a trade war. My friends, do you not realize that the Chinese tariff on America is a trade war and that they are winning this war and they are destroying American jobs while vastly increasing their own production? If not, please go to China and talk to American companies and talk to the American companies that have been shut down in America. We have lost 3 million manufacturing jobs since 1998, a little bit over a decade. Not all of that is the consequence of Chinese practices, but a great amount of it is.

We must not stand by trying to pretend that the world is one way and that China represents solely a market and not a manufacturing competitor when the truth is they are a fierce competitor using industrial policy and a pegged currency to outcompete American products, to penalize American products.

In terms of the currency manipulation, our Secretary of the Treasury said this:

Whatever your definition of manipulation is, what matters is the currency is undervalued. They are intervening--

Referring to China--

to hold it down. That adversely affects our economic interests, and there is an overwhelmingly compelling economic case for the world, for China's trading partners, for China, for us, to try to alter that basic practice.

Well, certainly we have the Secretary of the Treasury echoing that we have a challenge that is hurting America and that we need to respond to that challenge. That is why we have this bill on the floor addressing the Chinese manipulation of currency.

This is not the only strategy China uses. They also, through their use of rules, use a strategy of holding down interest rates below the inflation rate. This means any Chinese citizen who puts their money in a state-controlled bank--and that is the only option they have--loses value every year on that money. This is sometimes given the fancy name of ``financial repression'' by economists--where they repress or hold down the interest rates. But let's call it something a little more understandable: insurance rate manipulation. That is done in order to allow the central bank--the Chinese banking system--to reap great revenues, which they can then take to subsidize their manufacturing. They do this through a series of grants and through a series of subsidized loans.

An American entrepreneur was in my office the morning before yesterday talking about how an individual he knows went to China and started out negotiations with China, where they offered him a 3-percent interest rate on money to operate his enterprise. They ended up offering a negative 3-percent interest rate. In other words, they would pay him to take the money in order to bring that manufacturing to China. In other words, take his plant out of the United States and bring it to China. They would pay him to do that. That is a vast subsidy.

That is not the only subsidy. The grants, the subsidization of water costs, and the subsidization of electricity--all these subsidies--have a big impact. If we go to the WTO Web site, we will see how it summarizes the structure of the WTO. Under the section called ``Subsidies,'' they note:

[Subsidies] are prohibited because they are specifically designed to distort international trades, and are they're therefore likely to hurt other countries' trade.

So the plan was, when subsidies were used deliberately to distort international trade, they would be outlawed. Guess what. China is ignoring this. China is flaunting this. They are required to disclose each and every year all the subsidies they provide to their manufacturing, and they do not do it. They did it once in 2006, a very minimal disclosure.

Why is it we continue to believe we have a structure that facilitates mutually beneficial trade in the WTO when China, through currency manipulation and direct subsidies to exports, is breaking every key aspect of the WTO framework with hardly a protest from the United States?

We have on the floor a bill which says we will no longer turn our head from the deliberate distortion of the international trading regime that was supposed to benefit both nations but, in fact, has become a powerful international tool for stealing jobs from the United States of America and undermining the success of the American worker.

Let's take a look at paper. Just a few months ago, Blue Heron, a company that has operated for nearly a century in Oregon, shut down. It is a paper company. They shut down for one simple reason: because the Chinese currency manipulation and the Chinese direct subsidies to those who manufacture paper for export in China completely undermined the market for manufacturers in the United States. So the lives of these American workers are destroyed. The workers owned Blue Heron. When they got notice they were going to have to shut down because of these Chinese subsidies and Chinese currency manipulations, they basically were completely out on the street--no health care after the Friday they shut down, no severance payment. Indeed, they are having to start from scratch--workers who are 40, 50 years old starting from scratch--in an economy where there are no jobs to be found. But they are not alone. Paper companies across the United States have been shutting down for exactly the same reasons.

Let's take the case of wind turbines. Wind turbines imported into China are subject to a 10-percent tariff, while wind turbines imported into the United States are subject to only a 2 1/2 -percent tariff. Why do we--on top of everything else I have noted--add to the injury by putting a lower tariff on their imports than they put on ours?

Can someone in this Chamber explain to me why shutting down manufacturing in the United States and opening manufacturing in China and piling on lower tariffs on a country that is already subsidizing its exports and already putting a tariff on ours makes any sense? I certainly would be very interested in that explanation. I think the workers in an industry that would otherwise be manufacturing these wind turbines in the United States would be very interested in the explanation.

China doesn't give our wind turbines a fair chance to be used in their energy products. Let me read this quote from 2009 regarding the award of contracts on Chinese projects.

..... all multinational firms bidding on National Development and Reform Commission projects [were] quickly disqualified on technical grounds within 3 days of applying.

In other words, a nontariff barrier in China was added, on top of everything else, to make sure that only Chinese manufacturers would have a chance to get the contracts.

Let's turn to solar--solar voltaic panels. The whole technology was invented in the United States, but we can see that over the last 3 years the tremendous subsidies to solar in China are destroying the American industry. One of the few remaining manufacturers is SolarWorld. It is located in my State--the State of Oregon. In the span of less than 10 months--from 2009 to 2010--three major manufacturers shut down, destroying hundreds of jobs--jobs that would not be restored.

SolarWorld is incredibly efficient. They are working with American technology. We should be building and selling these solar panels to the world, but we aren't going to be able to do so if China--using their manipulated interest rates to produce funds for grants and subsidized loans--continues to virtually pay folks to ship their manufacturing into China and discriminates against American products. I want SolarWorld to be there not just next year but 10 years from now or 20 years from now. That will not happen if we don't address this massive assault on American manufacturing.

Because China has failed to disclose its subsidies, as required under WTO, I have proposed an amendment to the bill--an amendment that will not be heard because a deal cannot be worked out to allow amendments on this bill. I am very disappointed in that. This amendment simply says, if China or any other country under the WTO fails to do the notification of subsidies that is required, our U.S. Trade Representative will do a counternotification, putting those subsidies on the table. That way we can see exactly what they are and we can be part of this debate. It is the beginning of holding China accountable for breaking the WTO rules.

This is not a Democratic amendment and it is not a Republican amendment. This is an amendment about the future of the middle class in America, the future of the worker in America. I am pleased to have Senator Enzi as my chief cosponsor and additional colleagues from across the aisle--Senator Barrasso and Senator Snowe. I am pleased on this side of the aisle to have Senators Nelson, Schumer, and Levin as cosponsors. That pretty much spans the spectrum of opinion in this Chamber, where everyone agrees China should be held accountable. If they are subsidizing their manufacturing, which they are, they have to disclose it, and they are not. We can have a better debate about how to end their rule-breaking under the WTO if we have that information.

In closing, I just wish to note that this debate should have happened a decade ago--it should have happened 5 years ago--because over that timespan we have continued to hemorrhage jobs, we have continued to hope China would apply the rule of law on intellectual property, we have continued to hope they would end their manipulation of their currency, we have continued to hope they would end their illegal subsidies and the undermining of American products. Those hopes have not been realized. China has not chosen to honor the framework that was established. So while we hope, American workers are losing their jobs. That is why we have to have this debate on the floor. That is why this bill before us must be passed--to give the President greater leverage and to send a message to China that we are now fully paying attention at a level we should have a decade ago. The fact we have not paid attention is water under the bridge, but we are paying attention now. If anyone cares about having an American middle class, with living wages for workers, then I ask them to fully support this bill. The trade war China has been carrying out, decimating manufacturing in our Nation, must not go without full debate and a full response.

I thank the Chair, and I yield the floor.

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