Major Issues in International Trade

Currency manipulation


Subsidies


China has provided billions of dollars in subsidies, directly and
indirectly, to its steel industry
Attempts to weaken the trade laws


China and other Asian countries keep the value of their
currencies artificially low to make their exports cheaper and
imports more expensive
Multinational corporations that want to be able to rely on
dumped and subsidized merchandise
Climate change

Some solutions would encourage U.S. manufacturing to move to
China and elsewhere, leading to greater greenhouse gas
emissions
U.S. Dollar per Chinese Yuan
Exchange Rate
0.18
0.17
0.16
0.15
0.14
0.13
0.12
0.11
Mar-07
Nov-06
Jul-06
Mar-06
Nov-05
Jul-05
Mar-05
Nov-04
Jul-04
Mar-04
Nov-03
Jul-03
Mar-03
Nov-02
Jul-02
Mar-02
Nov-01
Jul-01
Mar-01
Nov-00
Jul-00
Mar-00
Nov-99
Jul-99
Mar-99
Nov-98
Jul-98
Mar-98
Nov-97
Jul-97
Mar-97
Nov-96
Jul-96
Mar-96
Nov-95
Jul-95
Mar-95
Nov-94
Jul-94
Mar-94
Nov-93
Jul-93
Mar-93
0.10
U.S. Dollar per
Chinese Yuan
Source: Pacific Exchange Rate Service
Illegal and Abusive Subsidies

Discounted Land Costs

Discounted Energy Costs

Low Cost Loans

Debt Forgiveness

Lack of Environmental Compliance
Chinese Steel Production
1996-2010
700
Estimated
647 mmt by 2010
Millions of Metric Tons
600
500
400
300
200
100
2010
2009
2008
2007
Total Production of Crude Steel – International Iron & Steel Institute (IISI), Steel Statistical Yearbook 2006
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
U.S. Trade Deficit
1997-2007
900
Billions of Dollars
800
700
600
500
400
China will
account for
over 30%
of the U.S.
Trade Deficit
this year!
300
200
100
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars through July 2007 (remainder of 2007 projected); U.S. Census Bureau
Trade Deficit
U.S. Manufacturing Jobs vs. Trade Deficit (2000-2007)
900
18000
700
600
500
16000
400
300
15000
200
100
0
14000
U.S. Trade in Goods Deficit in Billions of Dollars
(Over Previous 4 Quarters)
17000
U.S. Employees in Manufacturing (in Thousands)
Manufacturing Jobs
Source: U.S. Census Bureau
800
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
Dec-03
Sep-03
Jun-03
Mar-03
Dec-02
Sep-02
Jun-02
Mar-02
Dec-01
Sep-01
Jun-01
Mar-01
Dec-00
Sep-00
Jun-00
Mar-00
Ohio Manufacturing Jobs
1,050,000
975,000
900,000
825,000
750,000
1997
1999
2001
2003
2005
Nearly One of Every Four Ohio Manufacturing
Jobs Has Been Lost in the Last Decade.
The Multinationals’ View




Large multinational manufacturers and trading
companies (“MNCs”) generally oppose any
strengthening of the trade laws
Their chief focus is maximizing worldwide
profits, not achieving maximum production and
employment in the United States
These companies have a vested interest in
bringing dumped and subsidized imports into the
United States
Because of their size, they have substantial
political clout
U.S. - China Direct Investment
(2000 – 2006)
25
China Direct
Investment in U.S.
U.S. Direct
Investment in China
Billions of U.S. Dollars
20
15
10
5
Source: The U.S. Bureau of Economic Affairs, Direct Investment, Direct Investment Position on a Historical-Cost Basis
2006
2005
2004
2003
2002
2001
2000
0
Helpful Federal Legislation






Ryan-Hunter, H.R. 782
 Applies the subsidy laws to China, makes currency manipulation a
countervailable subsidy, and bars China from obtaining more votes
in the IMF until it ends currency manipulation.
Bunning - Stabenow S.796
 Sister Bill of Ryan-Hunter
Schumer, Grassley, Bachus, Graham S.1607
 Very complex currency bill that has teeth to address ‘misalignment’
but allows wiggle room for Treasury and President to over ride.
Very creative play on the dumping laws. Most likely to succeed.
Dodd – Shelby S. 1677
 Requires Treasury to label China a ‘currency manipulator’. Treasury
will not do this. Removed intent from the label and addresses
monetary policy.
Rockefeller, S.364
 Omnibus bill that sharpens trade laws.
Davis – English H.R. 1229
 Clarifies that subsidy laws can apply to NME.