U.S. Trade with China Hearing Committee on Ways And
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U.S. TRADE WITH CHINA HEARING BEFORE THE SUBCOMMITTEE ON TRADE OF THE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION FEBRUARY 15, 2007 Serial No. 110–15 Printed for the use of the Committee on Ways and Means ( U.S. GOVERNMENT PRINTING OFFICE 40–304 WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 01:09 Mar 08, 2008 Jkt 040304 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 E:\HR\OC\40304.XXX 40304 ccoleman on PRODPC75 with HEARING COMMITTEE ON WAYS AND MEANS CHARLES B. RANGEL, New York, Chairman FORTNEY PETE STARK, California JIM MCCRERY, Louisiana SANDER M. LEVIN, Michigan WALLY HERGER, California JIM MCDERMOTT, Washington DAVE CAMP, Michigan JOHN LEWIS, Georgia JIM RAMSTAD, Minnesota RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York PHIL ENGLISH, Pennsylvania JOHN S. TANNER, Tennessee JERRY WELLER, Illinois XAVIER BECERRA, California KENNY HULSHOF, Missouri LLOYD DOGGETT, Texas RON LEWIS, Kentucky EARL POMEROY, North Dakota KEVIN BRADY, Texas STEPHANIE TUBBS JONES, Ohio THOMAS M. REYNOLDS, New York MIKE THOMPSON, California PAUL RYAN, Wisconsin JOHN B. LARSON, Connecticut ERIC CANTOR, Virginia RAHM EMANUEL, Illinois JOHN LINDER, Georgia EARL BLUMENAUER, Oregon DEVIN NUNES, California RON KIND, Wisconsin PAT TIBERI, Ohio BILL PASCRELL JR., New Jersey JON PORTER, Nevada SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York CHRIS VAN HOLLEN, Maryland KENDRICK MEEK, Florida ALLYSON Y. SCHWARTZ, Pennsylvania ARTUR DAVIS, Alabama JANICE MAYS, Chief Counsel and Staff Director BRETT LOPER, Minority Staff Director SUBCOMMITTEE ON TRADE SANDER M. LEVIN, Michigan, Chairman JOHN S. TANNER, Tennessee WALLY HERGER, California JOHN B. LARSON, Connecticut JERRY WELLER, Illinois EARL BLUMENAUER, Oregon RON LEWIS, Kentucky BILL PASCRELL JR., New Jersey KEVIN BRADY, Texas SHELLEY BERKLEY, Nevada THOMAS M. REYNOLDS, New York JOSEPH CROWLEY, New York KENNY HULSHOF, Missouri CHRIS VAN HOLLEN, Maryland KENDRICK MEEK, Florida Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occur- rences are inherent in the current publication process and should diminish as the process is further refined. ii VerDate Aug 31 2005 01:09 Mar 08, 2008 Jkt 040304 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 E:\HR\OC\40304.XXX 40304 ccoleman on PRODPC75 with HEARING C O N T E N T S Page Advisory of February 6, 2007, announcing the hearing ....................................... 2 WITNESSES Dan Glickman, Chairman and Chief Executive Officer, Motion Picture Asso- ciation of America ................................................................................................ 8 Patricia Schroeder, President and Chief Executive Officer, Association of American Publishers ............................................................................................ 15 Geralyn Ritter, Senior Vice President of International Affairs, Pharmaceutical Research and Manufacturers Association .......................................................... 21 Peter Baranay, Chief Executive Officer, ABRO Industries, Inc., South Bend, Indiana .................................................................................................................. 26 John H. Goodish, Executive Vice President and Chief Operations Officer, United States Steel, Pittsburgh, Pennsylvania ................................................. 43 Franklin J. Vargo, Vice President of International Economic Affairs, National Association of Manufacturers .............................................................................. 53 John D. Bassett, III Chairman and Chief Executive Officer, Vaughan-Bassett Furniture Company, Galax, Virginia ................................................................. 62 James C. Tyrone, Senior Vice President of Sales and Marketing, NewPage Corporation, Dayton, Ohio ................................................................................... 64 Peter Navarro, Ph.D., Professor, University of California, Irvine, The Paul Merage School of Business, Irvine, California ................................................... 67 The Honorable Karan K. Bhatia, Deputy U.S. Trade Representative, Office of the U.S. Trade Representative ........................................................................ 81 SUBMISSIONS FOR THE RECORD Advanced Medical Technology Association, statement ......................................... 98 American Forest and Paper Association, statement ............................................. 101 Americans For Fair Taxation, Conyers, GA, statement ....................................... 105 Burke, Kevin M., American Apparel and Footwear Association, letter .............. 105 Coalition of Service Industries, statement ............................................................ 108 Haley, Usha C.V., University of New Haven, West Haven, CT, statement ....... 116 National Electrical Manufacturers Association, statement .................................. 122 Stewart and Stewart, statement ............................................................................ 124 Theriault, R. John, Pfizer, New York, NY, statement .......................................... 138 United States Chamber of Commerce, statement ................................................. 140 U.S.-China Business Council, statement ............................................................... 146 iii VerDate Aug 31 2005 01:09 Mar 08, 2008 Jkt 040304 PO 00000 Frm 00003 Fmt 0486 Sfmt 0486 E:\HR\OC\40304.XXX 40304 ccoleman on PRODPC75 with HEARING VerDate Aug 31 2005 01:09 Mar 08, 2008 Jkt 040304 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 E:\HR\OC\40304.XXX 40304 ccoleman on PRODPC75 with HEARING U.S. TRADE WITH CHINA THURSDAY, FEBRUARY 15, 2007 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON TRADE, Washington, DC. The Subcommittee met, pursuant to notice, at 10:30 a.m., in room 1100, Longworth House Office Building, Hon. Sander M. Levin (Chairman of the Subcommittee), presiding. [The advisory announcing the hearing follows:] (1) VerDate Aug 31 2005 01:09 Mar 08, 2008 Jkt 040304 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\40304.XXX 40304 ccoleman on PRODPC75 with HEARING 2 ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON TRADE FOR IMMEDIATE RELEASE CONTACT: (202) 226–0158 February 06, 2007 TR–1 Trade Subcommittee Chairman Levin Announces a Hearing on Trade with China Ways and Means Trade Subcommittee Chairman Sander M. Levin today an- nounced the Trade Subcommittee will hold the first in a series of hearings on the U.S.-China trade relationship. The hearing will take place on Thursday, Feb- ruary 15, in the main Committee hearing room, 1100 Longworth House Of- fice Building, beginning at 10:00 a.m. Oral testimony at this hearing will be heard from both invited and public wit- nesses. Witnesses are expected to include a representative from the Office of the U.S. Trade Representative. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee or for inclusion in the printed record of the hearing. FOCUS OF THE HEARING: This hearing is the first in a series on U.S.-China economic and trade relations. The hearings will focus on the impact of U.S.-China trade on jobs, wages, prices, manufacturing competitiveness, and other aspects of the U.S. economy; the causes of the U.S. trade deficit with China; China’s compliance with its WTO commitments; and China’s role in the world economy. This hearing will be divided into two panels. The first panel will focus on the role and effect of subsidies in the Chinese market and their impact on competition with U.S. products in China. The other panel will focus on China’s enforcement of intellectual property rights. BACKGROUND: Trade flows between the United States and China are substantial and growing. U.S. exports to China in the first 11 months of 2006 were more than $50 billion, up from $42 billion in all of 2005, and up from just $19 billion in 2001, the year China acceded to the World Trade Organization. Notwithstanding this substantial growth in U.S. exports, the U.S. goods trade deficit with China in 2006 is expected to approach one-quarter of a trillion dollars—the largest trade deficit in U.S. his- tory. China accounts for roughly 12 percent of total U.S. trade and one-third of the total U.S. goods trade deficit with the world. At the same time, U.S. imports from other East Asian countries have fallen $10 billion between 2001 and 2005. The United States had a services trade surplus with China of $2.6 billion in 2005. It is widely recognized that China has a large number of subsidy programs that distort the Chinese market and trade with the United States. In 2006, China sub- mitted a long-overdue subsidies notification to the World Trade Organization. China identified over 70 subsidy programs (including some subsidies that appear to be pro- hibited under WTO rules),