SOURCE: The US-China Business Council

March 27, 2007 11:10 ET

USCBC Urges Senate to Take Balanced Approach to China Trade Relationship

WASHINGTON, DC -- (MARKET WIRE) -- March 27, 2007 -- The US-China Business Council (USCBC) today urged the Senate Finance Committee to pursue a balanced approach to the US trade relationship with China -- one that seeks solutions to specific trade problems with China without threatening the tremendous gains to the US economy that come from bilateral trade and investment.

In a statement, the USCBC highlighted market access barriers and other problems that exist in the US-China economic relationship, such as policies that discriminate against US companies in the awarding of licenses and approvals; an unequal enforcement environment that places US companies at a disadvantage to their Chinese competitors; and inadequate protection for intellectual property, which continues to impede US companies in China. Other problems include inadequate legal and regulatory transparency and the development of a standards regime that increasingly appears designed to favor homegrown versus established international standards.

Nevertheless, the USCBC noted the clear benefits trade and investment with China bring to the US economy, both through exports and through broader effects such as lower prices and higher productivity.

The most obvious benefits of trade with China are the rapidly growing exports of US companies. In 2006, China and Hong Kong combined ranked as the third-largest US export market, with exports of goods totaling more than $73 billion.

Oxford Economics research has found that US trade and investment with China will result in a 0.7 percent increase in US GDP and a 0.8 percent decrease in US prices by 2010 -- the combined effect of which will be an annual increase of up to $1,000 in real disposable income per US household.

Regarding currency policy, the USCBC stated that China should adopt a market-determined exchange rate. Toward this end, the focus of the United States should be on encouraging China to undertake the broad financial sector reforms that will allow market forces to determine fully the value of its currency. These include opening the financial sector to more competition, introducing more financial market products, requiring greater commercial accountability from existing financial sector companies, and, of course, allowing more foreign participation in China's capital and credit markets. USCBC understands that the Treasury Department has made these reforms a central part of its engagement with China's government through the Strategic Economic Dialogue (SED). USCBC fully supports these efforts. In the meantime, China should move more quickly to allow market influences from trade flows to be reflected in the exchange rate between the dollar and the yuan.

The full testimony is available at

http://www.uschina.org/public/documents/2007/03/submission-sfc-hearings.pdf

The USCBC (www.uschina.org) is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory, and advocacy services, along with events, to nearly 250 US corporations operating within the United States and throughout Asia.

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