By The Hill Staff - 05/09/07 12:28 PM EDT
The unusual joint hearing of the Ways and Means, Financial Services and Energy and Commerce trade subcommittees is a victory for a coalition of small manufacturers that has been drumming up support for action against China’s currency for years.
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“For us, it means the spotlight is not just China,” said Steve Collins, president of the Automotive Trade Policy Council, which represents General Motors, Ford and DaimlerChrysler on trade issues. “We want to see the spotlight shine equally on Japan.”
The push by the so-called Big Three U.S. automakers has not gone unnoticed by groups representing Japanese automakers, which produce many of their vehicles at U.S. plants. The Association of International Automobile Manufacturers (AIAM), which represents Japanese and other foreign automakers, has quietly been talking with members on the issue but is not mounting a big campaign, a representative said.
AIAM and its supporters argue that whereas China may be manipulating its currency for a trade advantage, Japan is not. According to Adam Posen, a senior fellow at the non-partisan Peterson Institute for International Economics, China is buying foreign currency reserves on a day-to-day basis to depreciate its own currency and make its goods cheaper abroad, but Japan is not.
Posen charges that the Big Three are opportunistically trying to take advantage of growing concerns about China’s currency by linking Japan to the issue. That way, he said, the companies hope to “spook” Japan into taking action on its own to increase the value of its currency and make its goods more expensive in the U.S.
The auto industry and its supporters, by contrast, charge that Japanese officials continue to talk down their currency. Jim Doyle, president of the Left Field Institute, which was set up by retirees of the Big Three companies, insists the value of the yen has a greater impact on Detroit’s bottom line than the healthcare costs that are seen as a crippling burden for U.S. automakers.
Rep. Sandy Levin (D-Mich.), who chairs the Ways and Means trade subcommittee and was a key force in organizing the hearing, said officials testifying from the U.S. departments of Treasury and Commerce and the Office of the U.S. Trade Representative should expect a lot of questions about Japan. Those could include queries from members who were frustrated that President Bush did not put the currency issue on his agenda with Japanese Prime Minister Shinzo Abe during their recent meeting in Washington.
But Levin said members also hope the hearing will increase pressure on the administration to press China to revalue its currency when the U.S.-China Strategic Economic Dialogue meets for a second round of talks in Washington on May 23-24. Treasury Secretary Henry Paulson will lead the U.S. side for those talks.
Levin said today’s hearing reflects a growing urgency members feel to do something about the trade effects of the Japanese and Chinese currencies. Levin, who is in his 25th year in Congress, said he doesn’t remember a previous joint hearing among the three subcommittees. He also noted that Japan and China both have huge foreign reserves, with China’s totaling about $1.2 trillion and Japan’s $900 billion.
But Levin offered few clues on what legislation will emerge from Congress. Reps. Tim Ryan (D-Ohio) and Duncan Hunter (R-Calif.) have introduced a bill — backed by small manufacturers — that would allow the U.S. to impose countervailing duties on imports from countries that are found to have misaligned currencies. That bill now has 94 House sponsors and is expected to be a major part of the joint hearing.
Levin said he has not endorsed that bill because he thinks that the hearing will look at a variety of approaches, including Ryan-Hunter.
U.S. automakers are divided on the issue. The China Currency Coalition prefers the Ryan-Hunter bill, while the Big Three have not endorsed that legislation, possibly out of fear of antagonizing China, a major foreign market. Instead, the automakers support a bill introduced by Sen. Debbie StabenowDebbie StabenowSenators hope for deal soon on mental health bill The Hill's 12:30 Report Dems: GOP playing from 'Trump textbook' MORE (D-Mich.) that would have the administration create a report on currency intervention and exchange-rate misalignment. The bill would also call on the U.S. to convince Japan to decrease foreign currency reserves through consultations.
Members of the China Currency Coalition, however, don’t see that alternative as effective. Charles Blum, a member of the coalition’s executive committee, described such steps as “moral suasion with no effect.”