Letter from Washington
All Quiet on the Potomac?
by Erin Ennis
It has seemed oddly quiet in recent weeks for those of us working on China issues in Washington, DC. This time last year, we faced a series of challenges. First, legislation by Senators Charles Schumer (D-NY) and Lindsey Graham (R-SC) appeared to be on the fast track to imposing a 27.5 percent tariff on all Chinese imports to the United States, unless China revalued its currency by a similar amount. Then came the bid of China National Offshore Oil Corp. (CNOOC) for Unocal Corp., which sparked a contentious debate on Chinese investment in the United States.
Fast forward a year. Schumer and Graham not only have postponed votes on their bill multiple times, but have traveled to China to see first hand the economic and financial reforms that are under way. The legislative momentum has slowed for now, though the Schumer-Graham legislation is still pending.
But in other quarters, China can still be a four-letter word. The American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) has filed a petition that requests the Office of the US Trade Representative (USTR) to investigate whether China's labor practices give it an unfair trade advantage. A similar AFL-CIO Section 301 petition filed in 2004 was rejected by the Bush administration.
In addition, the nexus of security and trade clearly remains a potential flashpoint, as shown by the uproar over CNOOC's attempt to buy Unocal last year, the proposed takeover of several US ports by Dubai-based DP World this year, and the State Department's recent decision not to use newly purchased Lenovo computers on its classified network. The State Department is reportedly considering changes to its government procurement policies in light of the issues raised by the purchase.
The message for all interested in China is clear: our work is never done.
Still, we would like to think that the quiet so far this year on the legislative front is due, at least in part, to USCBC efforts to introduce a more balanced approach on China trade issues in Washington. During the frenzy of 2005, USCBC and its member companies spent a great deal of time in congressional offices explaining the value of trade with China to the United States and to US companies. Basic education on the issues, even in an age of 24-hour news and unparalleled access to information and data, continues to be the best way to advance a reasoned, rational agenda.
This hard work has been matched by that of many members of Congress and their staffs. Notably, Senators Charles Grassley (R-IA) and Max Baucus (D-MT), the top Republican and Democrat on the Senate Finance Committee, respectively, introduced a broad trade bill in March that would alter the US Treasury Department's reporting requirements on international exchange rates. Currently, Treasury must issue a report every six months that names "currency manipulators"—a term that is difficult to define with any degree of precision. Once it names a country as a "currency manipulator," Treasury must enter into negotiations with that country.
In China's case, this requirement is superfluous, as Treasury already engages in dialogue with its PRC counterpart. As a result, the senators argue that the current currency reporting requirement has outlived its usefulness. Our own observation is that the current row over naming currency manipulators may be causing unnecessary irritation in US-China commercial relations twice a year.
The staffs of both Grassley and Baucus have indicated that they intend to seek a vote on their bill during this session, though they will likely wait until they have additional cosponsors. They could also wait until September when momentum to move the bill may pick up as the October release date for the next Treasury currency report and the September 29 deadline for the Schumer-Graham vote draw near. Several other trade measures will also consume Congress's time for the next few months, including permanent normal trade relations for Vietnam and free-trade agreements with Peru and Oman.
As a consequence, we will likely have a busy fall on China issues in Washington. That does not mean, of course, that we will be resting until then. We are continuing our education effort on Capitol Hill, spreading the facts about the value of our trade relationship with China. These direct contacts with members and their staffs are the most effective means to address misperceptions about trade with China. We are also actively engaged with USTR and the departments of Commerce and Treasury on their interactions with the PRC government on commercial issues. Our offices in China also address the trade and investment barriers in China through direct contact with PRC authorities.
So enjoy the quiet for now. It may not last for long.
Erin Ennis is vice president of the US-China Business Council in Washington, DC.
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