Former President Ronald Reagan
once said that "to make the international trading system work,
all must abide by the rules." He didn't say some must abide by
the rules; nor did he say we should allow our trading partners
to bend (or obliterate) the rules without consequences.
Today, it is more important than ever for
this administration and Congress to get tough on fair trade-and
the Currency Reform for Fair Trade Act of 2009 (CRFTA) is a
critical step in this direction.
The American Iron and Steel Institute
(AISI) joins other organizations in strong support for the
CRFTA for several good reasons, but a major reason is that it
addresses currency manipulation by foreign governments, which
has contributed to serious global structural imbalances and
provides a huge unfair-and artificial-competitive
While the United States plays by the rules
and adheres to its World Trade Organization (WTO) obligations,
some of our trading partners don't. Foreign countries engage in
illegal currency misalignment when they effectively prevent
market forces from determining the value of their currency.
This practice allows those foreign countries to artificially
make their exports cheaper and their imports more expensive,
thereby putting American goods and services at an unfair
China has been intervening massively in
foreign exchange markets to keep its own currency severely
undervalued (by at least 40 percent) for more than a decade.
This essentially gives China a first-and-goal position on
America's 10-yard line and has resulted in lowering America's
annual gross domestic product by as much as $500 billion.
Another result is a buildup of foreign currencies that can be
used to acquire foreign assets with what amounts to "free
money." This mercantilist policy not only subverts real free
trade but also adds to the massive imbalances that threaten the
global trading system.
American steelmakers and their workers can
compete with anyone in the world as long as everyone is playing
by the same set of rules, but we can't compete against
governments. China's currency manipulation has run up a
$1.4-trillion trade surplus with the United States since 2001.
When is enough, enough?
We need to pass legislation that
effectively addresses unfair trade and currency policies that
have devastated U.S. manufacturing. That is where the CRFTA
comes in. It builds on, refines and streamlines earlier
proposals made in the 109th and 110th Congresses and
establishes an effective trade remedy provision to neutralize
currency undervaluation. Specifically, it neutralizes the
negative effects of misaligned foreign currency by allowing
injured American industries and their workers to seek remedies
under current trade laws. It also directs the U.S. Commerce
Department to measure whether a country's currency is
fundamentally misaligned in a public, transparent and fair way
using public data from the International Monetary Fund. It also
creates an incentive for foreign governments to cease their
unfair, mercantilistic trade practices and serves as a
deterrent against similar abuses in the future.
The AISI earlier this year commended Sen.
Debbie Stabenow (D., Mich.), Sen. Sherrod Brown (D., Ohio) and
Sen. Jim Bunning (R., Ky.), Rep. Tim Ryan (D., Ohio) and Rep.
Tim Murphy (R., Pa.) for reintroducing the
CRFTA, a critical step toward leveling the playing field for
American manufacturers. We are glad that the bipartisan support
of members who have joined as co-sponsors is growing, and we
will continue to urge Congress to enact it into law.
China's trade practices, including currency
manipulation, in effect created more than $50 billion in
subsidies just in the steel sector. These subsidies include
debt-to-equity swaps, money to upgrade the steel industry,
inadequate enforcement of environmental and worker safety
rules, and large-scale subsidies in the form of preferential
loans from state-owned banks, tax incentives, interventions to
maintain exchange rate misalignment and-of growing
concern-manipulation of raw material markets.
In fact, in June the United States and the
European Union filed a dispute with the WTO challenging China's
export restrictions on key raw materials and minerals used in
manufacturing. The AISI and four other steel industry
organizations whose workers and member companies represent all
of America's steelmaking capacity commended the Obama
administration and the office of the U.S. Trade Representative
(USTR) for leading the effort to bring the case. China's
barriers on raw materials and minerals is just another way in
which China favors its domestic manufacturing industries at the
expense of the rest of the world. When China joined the WTO in
2001, it committed to removing these restrictions. China is the
largest importer of U.S. goods, with trade expanding to $408
billion last year.
Another China trade issue concerns the
Chinese government's decision to raise its value-added tax
(VAT) export rebates on a wide array of flat, long and tubular
products. This government action, reflective of China's
long-standing efforts to manipulate its VAT system in order to
promote steel exports, is particularly reckless in light of the
fact that we are facing a global recession.
Since the United States has neither a
system of VAT rebates to stimulate exports nor any import
duties on steel mill products (we agreed to go to zero steel
tariffs in the Uruguay Round), these moves represent particular
harm to American steel producers. The fact that these
trade-restricting and trade-distorting actions were apparently
taken largely by fiat, and without any transparency in process
or policy, is a further cause for concern-reflecting a tendency
to promote particular outcomes in trade through direct
government intervention rather than through a transparent,
rules-based approach. The AISI flagged these actions with the
U.S. government to review in light of the importance of trade
relations with China.
These are but a few of the trade issues at
the forefront of what the AISI has highlighted to the
administration and Congress as key policy objectives to
establish and enforce trade policies that will truly level the
international playing field for all manufacturers and to bring
an emphasis to getting tough on unfair trade from China.
We are encouraged by the progress that has
been made with the CRFTA and strongly support its passage. We
also appreciate the leadership exercised by the Obama
administration and the USTR with respect to export restrictions
placed on a variety of raw materials and minerals. One day,
perhaps the rhetorical question "When is enough enough?" will
go away. Until then, we must remain vigilant in our efforts to
enforce rules-based trade.
Thomas J. Gibson is president
and chief executive officer of the American Iron and Steel