Major Issues in International Major Issues in International TradeTrade

Currency manipulationCurrency manipulation China and other Asian countries keep the value of their China and other Asian countries keep the value of their

currencies artificially low to make their exports cheaper currencies artificially low to make their exports cheaper and imports more expensiveand imports more expensive

SubsidiesSubsidies China has provided billions of dollars in subsidies, directly China has provided billions of dollars in subsidies, directly

and indirectly, to its steel industryand indirectly, to its steel industry

Attempts to weaken the trade lawsAttempts to weaken the trade laws Multinational corporations that want to be able to rely on Multinational corporations that want to be able to rely on

dumped and subsidized merchandisedumped and subsidized merchandise

Climate changeClimate change Some solutions would encourage U.S. manufacturing to Some solutions would encourage U.S. manufacturing to

move to China and elsewhere, leading to greater move to China and elsewhere, leading to greater greenhouse gas emissionsgreenhouse gas emissions

U.S. Dollar per Chinese U.S. Dollar per Chinese YuanYuan

Exchange RateExchange Rate

0.10

0.11

0.12

0.13

0.14

0.15

0.16

0.17

0.18

Mar-9

3

Jul-9

3

Nov-9

3

Mar-9

4

Jul-9

4

Nov-9

4

Mar-9

5

Jul-9

5

Nov-9

5

Mar-9

6

Jul-9

6

Nov-9

6

Mar-9

7

Jul-9

7

Nov-9

7

Mar-9

8

Jul-9

8

Nov-9

8

Mar-9

9

Jul-9

9

Nov-9

9

Mar-0

0

Jul-0

0

Nov-0

0

Mar-0

1

Jul-0

1

Nov-0

1

Mar-0

2

Jul-0

2

Nov-0

2

Mar-0

3

Jul-0

3

Nov-0

3

Mar-0

4

Jul-0

4

Nov-0

4

Mar-0

5

Jul-0

5

Nov-0

5

Mar-0

6

Jul-0

6

Nov-0

6

Mar-0

7

U.S. Dollar perChinese Yuan

Source: Pacific Exchange Rate Service

Illegal and Abusive SubsidiesIllegal and Abusive Subsidies

Discounted Land CostsDiscounted Land Costs

Discounted Energy CostsDiscounted Energy Costs

Low Cost LoansLow Cost Loans

Debt ForgivenessDebt Forgiveness

Lack of Environmental ComplianceLack of Environmental Compliance

0

100

200

300

400

500

600

700

Mill

ions

of M

etric

Ton

s

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010Chinese Steel ProductionChinese Steel Production

1996-20101996-2010

Total Production of Crude Steel – International Iron & Steel Institute (IISI), Steel Statistical Yearbook 2006

Estimated Estimated 647 mmt by 2010647 mmt by 2010

0

100

200

300

400

500

600

700

800

900

Billions

of D

ollar

s

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

U.S. Trade DeficitU.S. Trade Deficit1997-20071997-2007

U.S. Trade in Goods with World (Seasonally Adjusted) in Billions of Dollars through July 2007 (remainder of 2007 projected); U.S. Census Bureau

China willChina willaccount foraccount forover 30%over 30%of the U.S.of the U.S.

Trade DeficitTrade Deficitthis year!this year!

U.S. Manufacturing Jobs vs. Trade Deficit (2000-2007)

14000

15000

16000

17000

18000

Mar-00

Jun-00

Sep-00

Dec-00

Mar-01

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

U.S

. Em

plo

ye

es

in M

an

ufa

ctu

rin

g (

in T

ho

us

an

ds

)

0

100

200

300

400

500

600

700

800

900

U.S

. Tra

de

in G

oo

ds

De

fic

it in

Bill

ion

s o

f D

olla

rs(O

ve

r P

rev

iou

s 4

Qu

art

ers

)

Manufacturing Jobs

Trade DeficitSource: U.S. Census Bureau

Ohio Manufacturing Ohio Manufacturing JobsJobs

Ohio Manufacturing Ohio Manufacturing JobsJobs

750,000

825,000

900,000

975,000

1,050,000

1997 1999 2001 2003 2005

Nearly One of Every Four Ohio Nearly One of Every Four Ohio Manufacturing Jobs Has Been Lost in the Manufacturing Jobs Has Been Lost in the

Last Decade.Last Decade.

The Multinationals’ ViewThe Multinationals’ View Large multinational manufacturers and Large multinational manufacturers and

trading companies (“MNCs”) generally trading companies (“MNCs”) generally oppose any strengthening of the trade lawsoppose any strengthening of the trade laws

Their chief focus is maximizing worldwide Their chief focus is maximizing worldwide profits, not achieving maximum production profits, not achieving maximum production and employment in the United Statesand employment in the United States

These companies have a vested interest in These companies have a vested interest in bringing dumped and subsidized imports bringing dumped and subsidized imports into the United Statesinto the United States

Because of their size, they have substantial Because of their size, they have substantial political cloutpolitical clout

U.S. - China Direct U.S. - China Direct InvestmentInvestment

(2000 – 2006)(2000 – 2006)

Source: The U.S. Bureau of Economic Affairs, Direct Investment, Direct Investment Position on a Historical-Cost Basis

0

5

10

15

20

25

Billions

of U

.S. D

ollars

2000

2001

2002

2003

2004

2005

2006

China DirectInvestment in U.S.

U.S. DirectInvestment in China

$22.2 Billion

$22.2 Billion

$554 million

$554 million

Helpful Federal Helpful Federal LegislationLegislation

Ryan-Hunter, H.R. 782Ryan-Hunter, H.R. 782 Applies the subsidy laws to China, makes currency Applies the subsidy laws to China, makes currency

manipulation a countervailable subsidy, and bars China from manipulation a countervailable subsidy, and bars China from obtaining more votes in the IMF until it ends currency obtaining more votes in the IMF until it ends currency manipulation. manipulation.

Bunning - Stabenow S.796Bunning - Stabenow S.796 Sister Bill of Ryan-HunterSister Bill of Ryan-Hunter

Schumer, Grassley, Bachus, Graham S.1607Schumer, Grassley, Bachus, Graham S.1607 Very complex currency bill that has teeth to address Very complex currency bill that has teeth to address

‘misalignment’ but allows wiggle room for Treasury and ‘misalignment’ but allows wiggle room for Treasury and President to over ride. Very creative play on the dumping President to over ride. Very creative play on the dumping laws. Most likely to succeed.laws. Most likely to succeed.

Dodd – Shelby S. 1677Dodd – Shelby S. 1677 Requires Treasury to label China a ‘currency manipulator’. Requires Treasury to label China a ‘currency manipulator’.

Treasury will not do this. Removed intent from the label and Treasury will not do this. Removed intent from the label and addresses monetary policy. addresses monetary policy.

Rockefeller, S.364Rockefeller, S.364 Omnibus bill that sharpens trade laws.Omnibus bill that sharpens trade laws.

Davis – English H.R. 1229Davis – English H.R. 1229 Clarifies that subsidy laws can apply to NME.Clarifies that subsidy laws can apply to NME.