Letter expressing opposition to legislation currently pending before the Senate that aims to address concerns that China's currency is undervalued (S. 1607 and S. 1677) (House)

September 24, 2007

TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:

We are writing to express our opposition to legislation currently pending before the Senate that aims to address concerns that China's currency is undervalued. The U.S. Chamber respects the intent of such proposals, but is concerned that the approaches taken in S. 1607 and S. 1677 would substantially weaken the position of the United States in our efforts to promote reforms in China, while jeopardizing our ability to increase American exports to our fastest growing trading partner. We oppose the unilateral and protectionist approaches embodied in these and other proposals pending before the Congress.

Participation in the global economy has provided significant and important benefits for the United States economy. The U.S. Chamber's members and the millions of workers they employ collectively represent all major sectors of the U.S. economy and benefit substantially from their engagement with the global trading system. International trade and investment have enabled them to expand into markets outside of the United States and to access raw materials, inputs, and finished products that make our companies and workers more globally competitive, thereby providing important gains to American consumers. Access to international markets allows U.S. farmers, manufacturers, and service providers to expand sales to new customers, which sustains and creates high-paying jobs at home.

Our commercial engagement with China—a country that represents one quarter of the world's population—has yielded important and positive results. American business has helped make China the fastest growing market for U.S. exports in American history, which in turn has provided a multitude of opportunities to U.S. farmers, manufacturers, service providers, and their workers. Exports to China grew by 32% from 2005 to 2006, making it the fastest growing major market for U.S. goods. In 2006 the United States exported $55 billion in goods to China, greater than U.S. exports to India, Brazil, and France combined. Trade with China is also benefiting U.S. service providers. In 2005 service sector exports to China grew to $3.1 billion, with an overall surplus of $2.6 billion.

Notwithstanding these positive results, the U.S. Chamber is adamant that challenges in the bilateral commercial relationship posed by unfair Chinese trading practices must be addressed. For that reason, we strongly support U.S. Treasury Secretary Paulson's efforts through the U.S.-China Strategic Economic Dialogue, and those of Secretary Gutierrez and Ambassador Schwab through the Joint Commission on Commerce and Trade, to expand access for U.S. goods and services to the Chinese market and tackle unfair Chinese trading practices. We agree that China needs to accelerate its transition to a market-determined exchange rate. We do not believe, however, that unilateral legislation will be effective in achieving this goal.

Fundamentally, our approach to China must balance the need of pressuring China to make needed reforms with the imperatives of (a) preserving the benefits of this important market for American business and workers, and (b) fostering policies that are consistent with our international obligations. Indeed, given China's large and growing market, the most effective way to improve the U.S.-China economic relationship is to improve access for U.S. products and services to China's market and address China's industrial policies. In doing so, we must use all bilateral and multilateral tools that are consistent with our trade laws and the rules of the World Trade Organization.

The U.S. Chamber recognizes that some parts of the U.S. economy are facing substantially increased competition. We agree that constructive efforts should be vigorously pursued to address such concerns and increase the benefits from engagement in the international economy for all Americans. Easing the pain of those affected by economic change, including trade, is an important goal and one that the Chamber supports.

However, we will maintain our position as the most competitive economy in the world only if we rise to the economic challenges we face. Hiding behind policies that attempt to offer short-term fixes will only jeopardize American exports to our fastest growing trading partner and reduce our leverage to affect needed reforms in China.

Respectfully,

Thomas J. Donohue