DEPARTMENT OF THE TREASURY

WASHINGTON, D.C.

SECRETARY OF THE TREASURY

November 10, 2003

The Honorable Bill Frist

Majority Leader

United States Senate

Washington, DC 20510

Dear Senator Frist:

We are writing to express our strong opposition to S. 1586, regarding
China's currency. We view the legislation as damaging to our trade and
economic interests, and are concerned because it clearly violates our
international obligations. The possible addition of this measure to S.
150, the Internet Tax Non-Discrimination Act of 2003, would also harm
chances of passage of that important and long overdue legislation.

This Administration is determined to level the playing field for
American manufacturers and workers competing in the global marketplace.
To preserve opportunities for America's manufacturers, farmers,
ranchers, and service providers to expand their exports, it is essential
that we maintain access to important foreign markets. By potentially
requiring the Administration to violate our WTO commitments, and
effectively reversing Congress's grant of Permanent Normal Trade
Relations, the legislation undermines the important goal of expanding
U.S. companies' access to the Chinese market by advancing China's
integration into the global rules-based trading system.

Unilateral imposition of a 27 percent duty on imports from China would
harm the U.S. economy just as it is beginning to gain momentum. Many
domestic manufacturers would face rising costs and consequently be less
able to compete globally. Our economy is just now beginning to resume a
pattern of consistent, strong, job-creating growth. This import tariff
would diminish the strength of the economy and its potential to create
new jobs. Further, in many cases, the cost of higher tariffs would be
passed directly to consumers, with particularly harsh consequences for
low-income Americans.

The imposition of an import duty would likely also greatly undermine
recent gains made by U.S. exporters to China. It is likely that the WTO
would authorize China to retaliate against our exports, resulting in
serious damage to U.S. exporters and consumers. Since 2001, China has
been the fastest-growing export market for the United States. Our
experts to China surged 19 percent in 2001, 15 percent last year, and
more than 20 percent from January to August of this year.

The unilateral imposition of a new import duty would also send a
chilling signal through out the world trading system. The United States
has long been the leading voice for advancing the principles of free
trade. President Bush has continued and advanced this important
tradition. A retaliatory duty such as that included in S. 1586 would
signal to the world that the United States may be abdicating its role as
the leader of the world free trade movement.

Although we oppose the legislation, we are working actively to ensure
that China continues to open its market and adheres to its international
obligations. This active, high-profile diplomatic offensive is much the
superior solution and the one prescribed by Congress in its 1988 trade
bill instructions to the Treasury Secretary. We have all recently
traveled to Beijing to meet with China's new leadership and made clear
our trade and exchange rate concerns. Our principal interest is making
sure Chinese leaders understand that a level playing field is a
fundamental requirement for free and fair trade. Our message was clear:
China needs to eliminate unfair trade practices that give Chinese
companies an unfair advantage in our market.

We have also been working to move China to a market-determined floating
exchange rate as soon as possible. Our message has been clear and
consistent and has been received by Beijing in a constructive manner.
President Bush has talked directly with Chinese President Hu on the
importance of this issue. Secretary Snow has urged China's leadership to
take the steps necessary to float their exchange rate. He has initiated
technical cooperation to help accomplish this goal. We have also worked
through multilateral fora such as the G7 and APEC to build an
international consensus for large economies -- like China -- to have a
market-determined floating exchange rate. At APEC, China helped draft
the section noting the need for flexible rates

We are making progress in our efforts to move China to a system of free
trade, free capital flows and market-determined floating exchange rates.
We look forward to working with Congress to achieve these important
objectives.

Sincerely,

/s/ /s/ /s/

John W. Snow Donald L. Evans Robert B. Zoelick

Secretary of the Treasury Secretary of Commerce United States

Trade Representative

Identical Letter sent to:

The Honorable Thomas Daschle

Minority Leader

United States Senate

Washington, D.C. 20510

Dear Senator Daschle: