CHINA CURRENCY COALITION WASHINGTON, D.C.
FOR IMMEDIATE RELEASE
Contact: Meg Mullery 202.342.8439
China Currency Coalition Applauds Chairman Bernanke�s Recognition that China�s Currency Undervaluation is a Distorting Subsidy
(Washington, D.C.) (December 15, 2006) � The China Currency Coalition, which has long held that China�s undervalued currency is a distortion of free market principles, applauded Federal Reserve Chairman Ben Bernanke�s candor in noting that China�s undervalued currency provides an �effective subsidy� for firms that �focus on exporting.� Bernanke�s remarks appeared today in the prepared text of a speech delivered at the conclusion of high-level meetings in China.
Said coalition counsel David A. Hartquist, �We are pleased that China�s currency undervaluation finally has been identified by a high-ranking U.S. official for what it is: a practice that disregards global trading rules, which are essential to free and fair trade. The Federal Reserve is an independent agency, and we are pleased its analysis is supportive of our position expressed in our Section 301 petition filed in September 2004. The Bush administration rejected that petition four hours after we filed it.�
Hartquist further explained that China's currency intervention provides a monetary windfall to its exporters, while American manufacturers must compete with products that are unfairly priced in the United States by virtue of the yuan being undervalued by as much as 40%.
World Trade Organization (WTO) rules strictly prohibit export subsidies. Under WTO rules, importing nations can request the imposition of countervailing duties to neutralize the injurious effects of the subsidized, imported product.
The U.S. trade deficit with China, which exceeded $202 billion last year and is on track to be even larger in 2006, is a politically potent issue. Many U.S. lawmakers blame China's misalignment of its managed currency for the imbalance, contending that an artificially weak yuan gives Chinese exporters a huge unfair trade advantage.
On April 6th, 2005, with the strong support of the members of the coalition, Congressmen Tim Ryan (D-OH) and Duncan Hunter (R-CA) introduced H.R. 1498, a bill to clarify in U.S. trade law that currency undervaluation is an illegal export subsidy. On September 28, 2006, thanks to the leadership of Senator Jim Bunning (R-KY), S. 3992, the United States Fair Currency Practices Act of 2006, was introduced. Both bills recognized that currency undervaluation is a prohibited export subsidy. China's policy on capital controls requires all exporters to exchange their U.S. dollars from trade to a Chinese central bank at a rate dictated by the Chinese government, currently at a rate of 7.82 yuan per dollar. All three of the WTO requirements for a trade practice to be determined an illegal subsidy are met in this case; namely, (1) China's policy involves a financial contribution from the government, (2) a benefit to exporters that is (3) specific to trade.
The China Currency Coalition is an alliance of industry, agriculture, and worker organizations whose mission is to support U.S. manufacturing by seeking an end to Chinese currency undervaluation. AFL-CIO Secretary-Treasurer Richard L. Trumka and Doug Bartlett, Chairman of Bartlett Manufacturing Company, Inc., in Cary, Illinois, serve as co-chairs of the coalition. David A. Hartquist, counsel to the coalition, is a Partner at Kelley Drye Collier Shannon in Washington, D.C. and Chairman of the firm�s International Trade and Customs Practice Group. For more information on the coalition, visit www.chinacurrencycoalition.org.