June 6, 2016

House, Senate Committee Leaders Tell Obama Administration To Get Tough On China

Last Friday, U.S. Senate Finance Committee Chairman Orrin Hatch (R-UT), House Ways and Means Committee Chairman Kevin Brady (R-TX), Finance Committee Ranking Member Ron Wyden (D-OR), and Ways and Means Committee Ranking Member Sander Levin (D-MI) sent a letter to Obama administration officials outlining a number of concerns regarding the U.S.-China economic relationship and calling on the administration to push for meaningful reforms during the eighth session of the U.S.-China Strategic & Economic Dialogue (S&ED), which begins today. 

Calling the S&ED “a critical opportunity to address the barriers and distortions that endanger the well-being of the U.S.-China economic relationship and the international economy,” the senators specifically asked the Obama administration to address China steel and aluminum overcapacity and Chinese currency manipulation. 

The lawmakers began by addressing the oversupply of commodities. Noting that most of the recent increase in global steelmaking capacity has come from China, the lawmakers blamed Chinese overinvestment in production, stemming from subsidies and “other market-distorting measures,” for the glut. They suggested the Obama administration address the issue “in multilateral and bilateral fora with U.S. trading partners, coupled with effective trade enforcement in the United States” and that it “use these [the S&ED] meetings to reiterate the importance of China’s meaningful engagement on the establishment of new global disciplines on export credit guarantees and compliance with the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures.” 

The letter also discussed Chinese currency manipulation, noting, “instead of following through on its asserted desire to move towards a market-determined exchange rate, China has continued to let the government play a decisive role in determining the value of the RMB.” To address currency issues, the lawmakers simply said, “China must provide more and better data on its interventions into foreign exchange markets.” 

Finally, the letter also raised the fact that China is due to attain market economy status from the World Trade Organization later this year. (As a reminder, MSCI opposes this move.) Without citing specific measures the United States could take to oppose China’s ascension to market economy status, the lawmakers argued “the breadth and depth of problems faced by U.S. firms seeking to do business with and in China is a result, in large part, of China’s failure to pursue market-oriented policies in favor of continued and broad-based government intervention throughout its economy” and suggested “the way for China to achieve market economy status would be for China to undertake the reforms necessary to transition to a market economy, in which prices for Chinese goods and services are determined by market forces.” 

The full letter is available here

In related news: last week the U.S. Commerce Department announced it had made a preliminary determination to impose duties on imports of circular welded carbon-quality steel pipe from Pakistan, Oman, the United Arab Emirates and Vietnam. A final determination on these duties is expected by Oct. 16. The department also announced a preliminary decision to impose anti-dumping duties on imports of certain iron mechanical transfer drive components from Canada and China.