<html xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:st1="urn:schemas-microsoft-com:office:smarttags" xmlns="http://www.w3.org/TR/REC-html40">
<head>
<meta http-equiv=Content-Type content="text/html; charset=us-ascii">
<meta name=Generator content="Microsoft Word 11 (filtered medium)">
<o:SmartTagType namespaceuri="urn:schemas-microsoft-com:office:smarttags"
name="place"/>
<o:SmartTagType namespaceuri="urn:schemas-microsoft-com:office:smarttags"
name="country-region"/>
<!--[if !mso]>
<style>
st1\:*{behavior:url(#default#ieooui) }
</style>
<![endif]-->
<style>
<!--
/* Font Definitions */
@font-face
{font-family:"Trebuchet MS";
panose-1:2 11 6 3 2 2 2 2 2 4;}
/* Style Definitions */
p.MsoNormal, li.MsoNormal, div.MsoNormal
{margin:0in;
margin-bottom:.0001pt;
font-size:12.0pt;
font-family:"Times New Roman";}
a:link, span.MsoHyperlink
{color:blue;
text-decoration:underline;}
a:visited, span.MsoHyperlinkFollowed
{color:purple;
text-decoration:underline;}
span.EmailStyle17
{mso-style-type:personal;
font-family:"Trebuchet MS";
color:navy;
font-weight:normal;
font-style:normal;
text-decoration:none none;}
span.EmailStyle18
{mso-style-type:personal-reply;
font-family:"Trebuchet MS";
color:blue;
font-weight:normal;
font-style:normal;
text-decoration:none none;}
@page Section1
{size:8.5in 11.0in;
margin:1.0in 1.25in 1.0in 1.25in;}
div.Section1
{page:Section1;}
-->
</style>
</head>
<body lang=EN-US link=blue vlink=purple>
<div class=Section1>
<p class=MsoNormal><font size=4 color=navy face="Trebuchet MS"><span
style='font-size:14.0pt;font-family:"Trebuchet MS";color:navy'><a
href="http://waysandmeans.house.gov/Hearings/hearingDetails.aspx?NewsID=11061">Hearing
on China’s Exchange Rate Policy</a> <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Click <a
href="http://www.youtube.com/watch?v=_u3p2F5gEO0" target="_blank">here</a> to watch
a video of Chairman Levin's opening statement<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><a
href="http://waysandmeans.house.gov/singlepages.aspx?NewsID=10951">Click here
to provide a submission for the record</a><o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>FOCUS OF THE
HEARING:<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 color=navy face="Trebuchet MS"><span
style='font-size:10.0pt;font-family:"Trebuchet MS";color:navy'>Economists
generally agree that the Chinese currency (the renminbi –
“RMB” – or “yuan”) is substantially undervalued
as a result of market intervention by the Government of the People’s
Republic of <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>.
This policy artificially raises the price of imports into <st1:country-region
w:st="on">China</st1:country-region> and suppresses the price of exports from <st1:place
w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>.
The purpose of this hearing is to consider: (1) the immediate and
long-term impact of <st1:country-region w:st="on">China</st1:country-region>’s
exchange rate policy on the <st1:country-region w:st="on">U.S.</st1:country-region>
and global economic recoveries and, more specifically, on <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> job creation; and (2) steps
that could be taken to address the issue.<o:p></o:p></span></font></p>
<p class=MsoNormal><b><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS";font-weight:bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS";font-weight:bold'>Opening Statement of
Chairman Sander Levin (D-MI)<o:p></o:p></span></font></b></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>Committee on Ways and Means, Chairman<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>March 24, 2010<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“It is with a sense of urgency that
the Committee is holding this hearing in the hope that with the help of our
witnesses, we can shed light on the problems associated with <st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place>’s foreign exchange rate
policy and consider possible solutions. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“What seems undisputed on this much
disputed issue is that <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>
has a persistent economic strategy, a policy, key to which is the pegging of
its currency to the dollar at an undervalued rate. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Since the mid 1990s, <st1:place
w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>
has clearly pursued an export-led growth strategy focused on addressing its
needs – namely, creating jobs and accumulating vast foreign
reserves. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Central to this export-led growth
strategy is <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>’s
policy of keeping its currency substantially undervalued. That policy
keeps <st1:country-region w:st="on">China</st1:country-region>’s exports
cheap in the <st1:country-region w:st="on">U.S.</st1:country-region> market,
and makes imports into <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>
substantially more expensive. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“<st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place> has combined its cheap
currency policy with other policies including, most notably, government
directed investments in its manufacturing sector, which in turn creates
pressure to keep its currency artificially low in order to get rid of excess
production by exporting. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Chinese leaders have argued that
these policies are necessary for <st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place>’s development for its
massive needs to create jobs – although in recent years, more and more
economists are questioning that proposition.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“While <st1:country-region w:st="on">China</st1:country-region>
has had a clear economic policy, a clear strategy, the <st1:place w:st="on"><st1:country-region
w:st="on">U.S.</st1:country-region></st1:place> on the other hand has not. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Why not?<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“One reason is that like so many other
trade issues, it gets caught up in the polarization that grips trade issues
– “free trade” vs. “protectionism” — a grip
that I have believed harmful and reject. An illustration of the futility
of the polarization is <st1:country-region w:st="on">China</st1:country-region>’s
argument that any action by the <st1:country-region w:st="on">U.S.</st1:country-region>
against <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>’s
policies of control would be “protectionism” or would lead to a
“trade war.”<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“The easy polarization has helped
handicap agreement on whether there is a problem. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Increasingly, economist of various
bents and other observers reject this.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“As Martin Wolf, the chief economics
commentator for the Financial Times, has stated, “[T]he policy of keeping
the exchange rate down is equivalent to an export subsidy and tariff, at a
uniform rate.” <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Last week, the New York Times
Editorial Board, another somewhat conservative and cautious commentator on
these economic issues, wrote that “<st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place>’s decision to base its
economic growth on exporting deliberately undervalued goods is threatening
economies around the world. It is fueling huge trade deficits in the <st1:country-region
w:st="on">United States</st1:country-region> and <st1:place w:st="on">Europe</st1:place>.
Even worse, it is crowding out exports from other developing countries,
threatening their hopes of recovery.”<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“And these comments are echoed in our trade
deficit with <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>,
which for the past three years has been over $220 billion annually, and is a
central driver in our overall trade deficit. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Some deny that it has serious
consequences for <st1:place w:st="on"><st1:country-region w:st="on">America</st1:country-region></st1:place>’s
working families. But the alarm grows that it does- Paul Krugman
estimates that China’s exchange rate reduces U.S. employment by 1.4 or
1.5 million jobs – at a time the U.S. faces a crisis of unemployment. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“<st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place>’s currency policy and
export-led growth policy are bad for the rest of the world as well, as a
November 2009 Financial Times editorial concluded. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“While some disagree with the impact
of <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>’s
policies, and others view the issue through a lens that says “hands
off” is the answer to market disequilibrium, that it is best to let
things resolve themselves, I think the status quo is not sustainable. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“The <st1:country-region w:st="on">U.S.</st1:country-region>
- <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>
relationship is a vital one for both countries. We are increasingly
interdependent and there are vital foreign policy considerations in addition to
economic ones, but the <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>
currency issue itself will not go away.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“There is no easy answer to the
problem, as is true with other important problems, but the answer is not to
deny there is a problem. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“It has been difficult to make
progress bi-laterally. At times talk has seemed to produce some progress,
but that progress then disappears. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Some then suggested unilateral action
addressing <st1:country-region w:st="on">China</st1:country-region>’s
currency manipulation under <st1:place w:st="on"><st1:country-region w:st="on">U.S.</st1:country-region></st1:place>
countervailing duty and antidumping trade remedy laws. Others have proposed the
imposition of an additional duty on all imports from <st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place>.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“In two weeks, the Obama
Administration faces again, as past Administrations have an April 15th
deadline, to decide whether to label <st1:place w:st="on"><st1:country-region
w:st="on">China</st1:country-region></st1:place> a currency manipulator in the
Department of the Treasury’s semi-annual report.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“The Report requirements may well
increase discussions about the use of multilateral fora to address the currency
issue. The IMF is the most logical place for these discussions; however,
to date, the institution has been unable to act effectively. Thus, some
have suggested using multilateral negotiations through the G-20 to address the
currency problem. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“Some have urged the <st1:place w:st="on"><st1:country-region
w:st="on">United States</st1:country-region></st1:place> bring a case in the
WTO, but the WTO articles relating to currency have never been tested. <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“We are very fortunate to have with us
today four experts on <st1:place w:st="on"><st1:country-region w:st="on">China</st1:country-region></st1:place>’s
exchange rate policy and they will discuss the extent of the problem and
alternative responses to address the problem.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face="Trebuchet MS"><span style='font-size:
10.0pt;font-family:"Trebuchet MS"'>“I now yield to ranking member
Congressman Dave Camp for his opening statement.”<o:p></o:p></span></font></p>
</div>
</body>
</html>