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68–394—PDF 2010

S. HRG. 111–1077 

THE U.S.-CHINA TRADE RELATIONSHIP: 

FINDING A NEW PATH FORWARD 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JUNE 23, 2010 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENT 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

ADMINISTRATION WITNESSES 

Locke, Hon. Gary, Secretary of Commerce, Department of Commerce, Washington, DC ............................................................................................................. 3 

Kirk, Hon. Ronald, U.S. Trade Representative, Executive Office of the President, Washington, DC .......................................................................................... 4 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 37 

Grassley, Hon. Chuck: 

Prepared statement .......................................................................................... 39 

Kirk, Hon. Ronald: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 41 

Responses to questions from committee members ......................................... 43 

Locke, Hon. Gary: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 73 

Responses to questions from committee members ......................................... 79 

COMMUNICATIONS

American Apparel & Footwear Association (AAFA) ............................................. 99 

American Beekeeping Federation, American Honey Producers Association, 

and National Honey Packers & Dealers Association ........................................ 103 

ANSAC (American Natural Soda Ash Corporation) ............................................. 111 

American Wire Producers Association (AWPA) .................................................... 116 

Stewart, Terence P. ................................................................................................. 125 

(III) 

(1) 

THE U.S.-CHINA TRADE RELATIONSHIP: 

FINDING A NEW PATH FORWARD 

WEDNESDAY, JUNE 23, 2010 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 3 p.m., in room 

SD–215, Dirksen Senate Office Building, Hon. Max Baucus (chairman of the committee) presiding. 

Present: Senators Wyden, Schumer, Stabenow, Cantwell, Nelson, 

Menendez, Hatch, and Bunning. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Amber Cottle, Chief International Trade 

Counsel; and Ayesha Khanna, International Trade Counsel. Republican Staff: David Ross, International Trade Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

Albert Einstein said, ‘‘To keep your balance, you must keep moving.’’ For many years, the United States-China relationship has 

been marked by imbalances. We have a significant trade imbalance, we have a worrisome debt imbalance, and there is a lack of 

balance in China’s currency policies. 

Our trade imbalance, the focus of this hearing, results from 

many factors. China continues to erect barriers to U.S. exports. 

China infringes U.S. intellectual property at unacceptable rates. 

China discriminates against U.S. companies through so-called indigenous innovation policies. China dumps many of its products on 

the U.S. market. And China improperly subsidizes many of its exports. 

To build a successful relationship, we must address these imbalances. We must restore balance, and to do so we must keep moving 

forward. But forward movement requires forward thinking. China 

has changed dramatically. It is now the world’s largest exporter 

and the fastest-growing economy. Consumer demand is increasing 

exponentially; its Gross Domestic Product is rising sharply. 

China is capitalizing on its emerging role as an engine of global 

growth. It is protecting its domestic industries. It is taking a more 

active role in the World Trade Organization. And it is finding its 

place in the global economy. 

China has kept moving, but the United States has not. America’s 

approach to China remains the same. The United States continues 

to pursue the same dialogues to discuss our trade irritants. These 

2 

dialogues have helped deepen the U.S.-China economic relationship, but discussions are merely a means to an end. Dialogue alone 

is not a measurable result. 

May’s Strategic and Economic Dialogue meeting proved again 

that we cannot rely on discussion alone to produce movement. We 

sought ambitious outcomes on China’s currency and indigenous innovation practices; we ended up with promises to keep talking. 

In our hearing with Treasury Secretary Geithner, I proposed a 

4-pronged strategy to rethink U.S.-China trade and economic relations. USTR and Commerce will play key roles in ensuring the success of this strategy. 

First, the administration must devise a comprehensive administration-wide plan to improve the U.S.-China economic relations, 

and each agency must develop a strategy to address its part of the 

administration-wide plan of the U.S.-China relationship. We need 

an administration-wide, single plan. We do not have one. This 

strategy will include dialogue, but it cannot end there. It must include measurable steps for progress in our economic relationship. 

Second, the United States must work multilaterally to address 

trade issues with China. USTR and Commerce maintain robust relationships with key trading partners like India and the European 

Union, and our agencies must use those relationships to identify 

and address common concerns raised by China’s trade practices. 

Third, the United States must look carefully at the tools offered 

by international institutions such as the WTO. I applaud USTR’s 

strong commitment to enforcing China’s WTO obligations. Since 

2004, USTR has filed several WTO cases against China, and I urge 

USTR to consider carefully whether the United States should bring 

additional cases to ensure that China adheres to its WTO commitments. 

Where China’s existing obligations are not sufficient, USTR and 

Commerce must seek to strengthen them. For example, China has 

long promised to accede to the WTO government procurement 

agreement, but China has failed to follow through. The United 

States must seek a timeline for China’s accession, and we should 

seek leverage to ensure that China keeps to that timeline. 

Fourth, the United States must take strong unilateral action to 

address our trade imbalance, even as we pursue multilateral action. USTR must seek suspension of China’s indigenous innovation 

policy. USTR must dismantle Chinese barriers to U.S. agricultural 

and other exports. And Commerce must apply our antidumping 

and countervailing duty laws to dumped and subsidized Chinese 

imports. 

China opened the door to appreciating its currency last week, but 

Commerce must carefully consider whether China’s currency practices constitute an improper subsidy under United States law. Taking these four steps will help to achieve results, measurable results. Taking these four steps will help the U.S.-China relationship 

to keep moving, and doing so should help the U.S.-China economic 

relationship to find a new balance. 

Senator Grassley has a scheduling conflict, so I regret that he 

will not be able to attend today’s hearing. So, we will proceed. He 

sends his regrets. As you know, he is very conscientious and wants 

3 

to attend all the hearings he possibly can, but unfortunately he 

cannot avoid this scheduling conflict. 

All right. Let us introduce our two witnesses. I would now like 

to introduce Commerce Secretary Gary Locke and U.S. Trade Representative Ron Kirk. 

Secretary Locke, welcome to the Finance Committee. Ambassador Kirk, welcome back. As is our usual practice, your statements will automatically be included in the record, and I urge you 

to summarize. Be pithy, to the point, pull no punches. Just get 

right down to it. 

Secretary Locke? 

STATEMENT OF HON. GARY LOCKE, SECRETARY OF 

COMMERCE, DEPARTMENT OF COMMERCE, WASHINGTON, DC 

Secretary LOCKE. Thank you very much, Chairman Baucus and 

other members of the Finance Committee. Thank you for this opportunity to discuss this important topic. 

The administration and Congress do need to work together to ensure that our economic relationship with China is more balanced 

and provides more benefits for American workers and businesses 

here in America. 

Over the last 20 years, including as Governor of Washington 

State where I helped double exports to China, I have watched the 

transformation of the Chinese economy, and I have seen firsthand 

how expanded trade opportunities have benefitted both of our countries. 

Last month, I led a clean energy trade mission of 24 U.S. companies to China, and on the mission’s final day we traveled to Tianjin 

to visit United Solar Ovonic’s manufacturing facility. Chinese 

workers were assembling solar panels from components made in 

the company’s Michigan plant. In fact, more than 90 percent of the 

products assembled in Tianjin were made in the United States. 

This is a model of what trade can be—not a zero-sum game 

where increased trade leads to new jobs either in America or in 

China. There is simply no escaping the importance of the Chinese 

market to U.S. exporters and companies operating in China. In 

2009, as exports to the rest of the world dipped 20 percent, exports 

to China actually remained stable. Now, thanks to strong Chinese 

demand and the recovery in prices of agricultural products, our exports to China are growing faster than overall U.S. exports. 

That growing interconnectedness would be impossible, of course, 

without real progress. But progress, which includes China’s recent 

currency announcement, has not happened by accident. It has 

taken hard work, and we have a plan to build upon it with President Obama’s National Export Initiative. 

Along with the U.S. Trade Representative and the Department 

of the Treasury, the Commerce Department has worked hard to remove barriers preventing U.S. companies from getting free and fair 

access to China’s market. The most recent round of the U.S.-China 

Joint Commission on Commerce and Trade, which Ambassador 

Kirk and I co-chair, for example, yielded results that restored market access for American farmers and removed barriers for clean energy companies. 

4 

The Chinese also agreed to end duplicative regulations for medical device manufacturers and implement new Internet and intellectual property protections, especially relating to technical journals. Still, far more needs to be done before we can be sure that 

Chinese policies affecting U.S. businesses in China are once again 

headed in the right direction. 

The Commerce Department will continue to rigorously enforce 

U.S. and international trade laws. In 2009, Commerce initiated 22 

antidumping and countervailing duty investigations against imports from China, a 47-percent increase over cases initiated in 

2008. 

And, as you know, Commerce’s Import Administration is currently reviewing allegations in two countervailing duty cases in 

which the petitioners claim that China’s currency policy constitutes 

a countervailable subsidy. Given the scrutiny that such decisions 

face on judicial review, the General Counsel’s Office and I are monitoring these cases, and, if the facts and the law warrant a decision 

to investigate, an investigation will proceed. 

Make no mistake, the Obama administration is committed to reorienting our economic relationship with China, and we share your 

concerns about new indigenous innovation policies, intellectual 

property protection, and market access. American firms operating 

in China and exporting to China should, as a matter of basic fairness, have the same opportunities as Chinese companies, and we 

are committed to ensuring that China lives up to its existing international commitments. But they cannot stop there. The global playing field will not be level unless China starts to take on a broader 

range of commitments that would bring it in line with the world’s 

other large trading partners. 

Our strategy to steadily expand the opportunities that China’s 

growth creates for U.S. companies must be continually recalibrated 

to better address our key commercial concerns, but we must also 

maintain cooperative programs that have long-term benefits and 

dialogues that enable us to demonstrate the importance of an open, 

transparent, and fair trading system. Those programs have yielded 

concrete results with direct benefits to the American people, and I 

am confident that they will continue to do so. 

So, thank you, Chairman Baucus and members of the committee, 

for the opportunity to appear before you today, and I look forward 

to answering your questions. 

The CHAIRMAN. Thank you, Mr. Secretary. We deeply appreciate 

your statement. 

[The prepared statement of Secretary Locke appears in the appendix.] 

The CHAIRMAN. Ambassador Kirk? 

STATEMENT OF HON. RONALD KIRK, U.S. TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC 

Ambassador KIRK. Chairman Baucus and members of the committee, thank you for this opportunity to join Secretary Locke in 

discussing the complex, yet evolving trade and economic relationship between the United States and China. 

5 

Mr. Chairman, as you have noted, America’s interests require an 

approach to China in a strategic and well-coordinated manner, and 

that is why the Obama administration is speaking with one voice, 

pressing for change with enhanced dialogue enforcement of America’s WTO rights and negotiations that include key trading partners, wherever appropriate. 

Secretaries Geithner, Clinton, Vilsack, Locke, and I are working 

together with the White House in the Strategic and Economic Dialogue, and Secretary Locke and I are driving the Joint Commission 

on Commerce and Trade to achieve a more robust and outcomeoriented relationship. 

USTR’s work is driven by our central mission to open markets, 

enforce America’s trade rights, and dismantle obstacles that could 

cripple opportunities for American workers, farmers, ranchers, 

manufacturers, and our service suppliers. 

Since joining the World Trade Organization in 2001, China has 

made many important economic reforms and removed trade barriers and opened markets to U.S. exports. This has created new 

American opportunities for our exporters, as our manufactured 

goods to export to China have tripled during that period of time. 

China’s strong recovery from the recent global recession has also 

facilitated recent double-digit growth in American export sectors, 

from manufactured goods and chemical products to agricultural 

goods. In fact, our goods and services exports to China now exceed 

$85 billion. 

But let us be clear: China’s implementation of its WTO commitments is incomplete. We all know that we have serious concerns 

about Chinese policies that limit market access or otherwise skew 

the playing field in our trade relationship. We are committed to addressing these concerns by setting clear priorities and working in 

results-driven dialogues. 

Our top priorities include addressing indigenous innovation and 

other discriminatory industrial policies, often intended to benefit 

Chinese state-owned enterprises and limit our exports, as well as 

improving enforcement of intellectual property rights and ending 

non-science-based regulations that block U.S. agricultural exports. 

These issues will top the agenda at our revitalized JCCT this 

fall. Our 2009 JCCT achieved important progress, including restored market access for American pork products and removal of 

troubling rules affecting the sales of information security products. 

We are also working through the Doha Round of negotiations toward better market access for U.S. firms in the multilateral context, and frankly a greater contribution from China. 

I also know many members of this committee are concerned 

about China’s currency practices. You recently heard President 

Obama, in response to China’s recent actions, state that, ‘‘It was 

a constructive step that can help safeguard the recovery and contribute to a more balanced global economy.’’ He will discuss these 

and other issues with China directly at the upcoming G–20 summit 

in Toronto. 

Treasury Secretary Geithner also welcomed China’s announcement, but also noted the real test will be how far and how fast 

China allows its currency to appreciate. We will continue to monitor and raise this issue in every forum. 

6 

Mr. Chairman, you recently suggested that our administration 

should be willing to take strong action on trade issues regarding 

China, and we are prepared to use the full range of enforcement 

options where dialogue fails. The United States, under the Obama 

administration, has been the most active and the most successful 

of any WTO member in bringing WTO dispute settlement cases 

against China. Our most recent case challenged China’s use of export restraints on key raw materials, which have hurt U.S. workers 

and companies in the U.S. steel, aluminum, and chemical sectors. 

You have our commitment to continue to coordinate with other 

agencies across the government, as well as the Congress, to execute 

a comprehensive and effective China strategy. We will also work 

with China in other fora to open up their markets for America’s exporters as well. 

In closing, let me simply reiterate the importance of getting our 

relationship with China right, and we look forward to working with 

you to make that happen. 

Thank you. 

The CHAIRMAN. Thank you, both. 

[The prepared statement of Ambassador Kirk appears in the appendix.] 

The CHAIRMAN. Let me ask a question. When anybody in our 

country has a defense-related question, what Cabinet Secretary is 

the appropriate person to go to? When a member of Congress has 

a defense-related question, what Cabinet Secretary does that member of Congress go to for an answer? 

Secretary LOCKE. It would be the Secretary of Defense. 

The CHAIRMAN. Right. Let us assume one has a foreign policy 

question, a member of Congress has a foreign policy question. Who 

does that member of Congress go to, what Cabinet Secretary? 

Secretary LOCKE. The State Department. 

The CHAIRMAN. Let us assume a member of Congress has a question about the United States’ economic policy toward China. Whom 

does he or she go to? What one Cabinet Secretary does he or she 

go to? 

Ambassador KIRK. Well, there is not one Cabinet Secretary, as 

we share the responsibility between Secretary Locke, myself, and 

Secretary Geithner. But Mr. Chairman, I would submit, we are 

working in the most coordinated fashion, under the direction of the 

White House, to approach China in the strategic manner that you 

have articulated and asked us to do so. 

The CHAIRMAN. Why do other countries not just divide and conquer? Well, we will go to Commerce for this, and we will set them 

off against USTR, against Treasury, et cetera. I mean, I am sure 

many countries, including China, are not dumb. It is, divide and 

conquer. If there is no one agency to go to, no one Cabinet member 

to go to, where do we, members of Congress, go? 

Secretary LOCKE. Well, I do not know that the United States has 

ever had a Department or a Secretary that is focused on any one 

country, just as we do not have a Secretary—— 

The CHAIRMAN. I am talking about policy, our economic policy. 

You can break it down. It could be China, or generally. I am sorry 

I interrupted you. Go ahead. 

Secretary LOCKE. No, no. That is fine. That is fine. 

7 

The CHAIRMAN. Go ahead. 

Secretary LOCKE. Well, I think that, as Ambassador Kirk indicated, the economic relationship of the United States with respect 

to economic policies, domestic policy, international policy, and with 

respect to trade policy, depends on the jurisdiction. But while we 

do have segregated responsibilities—USTR enforces and focuses on 

our government-to-government relationships and our treaty obligations, and Commerce deals with private entities—nonetheless, we 

are all very coordinated. I consult with Ambassador Kirk very extensively as we go into these JCCT meetings, as we meet with foreign officials, and we do the same with both the White House and 

with Secretary Geithner. 

The CHAIRMAN. I just have to tell you, I am very concerned that 

there is not sufficiently one point to go to, one person, one Cabinet 

member who is in charge and is, therefore, accountable. Around the 

United States, we have all these different departments, each doing 

different things. I understand the good intent to coordinate, but I 

also think that we are inefficient, we are not sufficiently focused, 

given the intensive competitive pressures in the world. 

We have to very significantly reorganize ourselves, so we are focused much more on economic progress, jobs, and with special attention to our foreign competitors. Also, we have laws that are very 

complex, your countervailing duty obligations, Mr. Secretary, as 

well as different obligations that the USTR has. I just think it behooves us to come up with a single department head. 

Now, one can say that that person could be in the White House, 

but White House personnel come and go, Presidents come and go. 

I just do not think it is sufficient, although some suggest that we 

designate somebody in the White House to work to coordinate all 

this. I am just very concerned. 

As a consequence of our failure to have a person, we do great in 

foreign policy, we do great in defense policy, but we do not do that 

great in economic policy. I think one of the big reasons is because 

it is just so splintered, it is so disaggregated, it is so spread out, 

it is just so unfocused. It behooves all of us, in my judgment, to 

try to figure out a way to get much more focus than we currently 

have. Your thoughts? 

Ambassador KIRK. Well, Senator, I would agree with you, we 

need more coordination. I would submit to you, I think this administration, the Obama administration, has tried to do just that. I 

would also remind you that, in the State of the Union, the President laid out a National Export Initiative and created an Export 

Promotion Cabinet, specifically to drive us in a more strategic manner, in a coordinated manner, in our trade and export policy. We 

will be presenting a plan to the President in September that we 

will be happy to come back and share with this committee as well, 

but obviously we would welcome your thoughts as to how we can 

do even better. 

The CHAIRMAN. My time is about to expire. We need measurable 

results, too. Until we get this focus on what I am suggesting, we 

need measurable results in what we are doing. 

Let me just ask this question, just because I am curious. What 

is the software piracy rate in China? What percent of software in 

China is pirated? 

8 

Ambassador KIRK. We have spent quite a bit of time, with the 

industry in particular, on this. 

The CHAIRMAN. What is your best guess? 

Ambassador KIRK. It is difficult for them to calculate. We have 

heard anywhere from, at least of the government-used software, 

that almost 70 percent of what they use is pirated off a copyright. 

I have spent a lot of time with some of the software developers that 

have a calculation, where they know, for every PC sold, for example, in the United States, that they expect to sell roughly $200 

worth. 

The CHAIRMAN. That is right. The figure I have is about 80 percent. It is my understanding that Chinese companies will admit 

that maybe the first 25 percent is legitimate, the rest is pirated. 

That is just their policy with that company. It is well-known in 

China, for example. 

So one of my main questions is, what are you doing about it? Do 

you have benchmarks, do you have dates by which that 80 percent 

will get reduced to a certain level or not? Do you have dates, do 

you have benchmarks, do you have goals, timetables here? How are 

we going to solve this? We talk about software ad infinitum around 

here. I want results. So, Mr. Ambassador, tell us your results plan. 

Ambassador KIRK. Well, we have used all of the tools that we 

have, both through JCCT and direct engagement, and working with 

the industry as well, to approach China, first of all, to strengthen 

their own intellectual property rights, particularly on enforcement 

and piracy. 

The CHAIRMAN. Do you have a timetable? 

Ambassador KIRK. Our timetable is to get it done as soon as we 

can, Senator. I do not have the specific metrics you are asking for, 

but we will work to develop those. 

The CHAIRMAN. With all due respect, if you do not have a timetable, you do not have a policy, in my judgment. 

Senator Hatch? 

Senator HATCH. Well, thank you, Mr. Chairman. I appreciate it. 

It is around 79 percent. I do not think there is much doubt about 

that. 

Now, Mr. Ambassador, on June 21, the New York Times reported 

an unnamed senior administration official had stated, since China 

has agreed to a very modest increase in the value of its currency, 

this had ‘‘significantly changed the dynamics of the G–20 meeting.’’ 

Removing the currency issue is the dominant item on the agenda. 

Mr. Ambassador, is that accurate? Is the Chinese currency issue 

not going to be the dominant issue of these talks? 

Ambassador KIRK. Not being familiar with, first of all, whoever 

this unnamed official is, I cannot speak to the accuracy of that. I 

would only reiterate what President Obama stated, in paraphrasing, that this was a welcomed sign, but we do not see this as 

the end of that discussion at all. The President made it clear that 

this would be the subject of continued concern and talks at the 

G–20 summit. 

Senator HATCH. Well, a related question. Dr. C. Fred Bergsten 

of the Peterson Institute of International Economics has called for 

the United States to adopt a multilateral approach in order to convince the Chinese to appreciate the yuan. 

9 

Specifically, Dr. Bergsten has argued, ‘‘The Chinese are more 

likely to respond positively to a multilateral coalition rather than 

bilateral pressure from the United States, especially if that coalition contains a number of emerging market and developing countries whose causes the Chinese frequently claim to champion.’’ 

Is the administration taking steps to put such an international 

coalition together? If so, what are those steps? Are there similar 

movements under way to address the intellectual property rights 

theft in China? 

Ambassador KIRK. On the latter, I can speak much more definitively, Senator, as we have had some of our greatest successes in 

pushing back on some of China’s policies as they relate to intellectual property in software, when we have done so, working in coordination in particular with the European Union, Canada, Japan, 

Germany, and in some cases some of these emerging markets. 

I think you do know that the issue of China’s currency, at least 

as has been reported in the papers, is one that has been addressed 

not only by the United States, but there have been expressions of 

concern from the European Union, Korea, and other countries. But 

I would have to defer to Secretary Geithner and the President on 

the extent of our coordination with our other multilateral partners. 

Senator HATCH. All right. If you would, refer to them and see if 

they can get us some answers on that. All right? 

Ambassador KIRK. Yes, sir. 

Senator HATCH. Mr. Ambassador and Mr. Secretary, we welcome 

both of you. We are pleased to have you before us. 

Now, the Congressional Research Service recently stated, ‘‘Counterfeits constitute between 15 percent and 20 percent of all products made in China and are equivalent to about 8 percent of China’s annual Gross Domestic Product.’’ Unfortunately, this problem 

seems to be getting worse. I remember back in 1995, the Chinese 

pledged to close down all large intellectual rights violators. Well, 

that obviously did not happen. Under Republican and Democratic 

administrations, it has not happened. 

I also remember that the Chinese even launched a year-long 

campaign against piracy in 2005. I cannot discern any long-term, 

overall benefit from that particular exercise. Most surprising, to 

date, I am unaware of a published, specific, and detailed plan for 

permanently solving the issue of Chinese intellectual property violations. 

Now, such a plan is not even included in the administration’s 

2010 Joint Strategic Plan on Intellectual Property Enforcement, 

which was released just yesterday, if I recall correctly. Therefore, 

why should we believe this administration will be any more effective in getting the Chinese to respect intellectual property rights? 

Ambassador KIRK. Senator, while the Strategic Intellectual Property Rights Enforcement Plan, released yesterday, did not speak 

specifically to China, I can assure you the issue of enforcement of 

intellectual property rights is at the top of every discussion agenda 

we have with China, both in the Strategic and Economic Dialogue 

and in the JCCT. 

We have had some areas of success, but one of our challenges in 

the campaign that you referenced is that China tends to seek enforcement through administrative remedies. We continue to push 

10 

them very aggressively by including them and highlighting their 

shortcomings in our Special 301 report and other fora, to put in 

place a much stronger law enforcement regime that would help to 

protect the rights of intellectual rights holders as well. 

But I think our biggest aid is going to be the growth of China’s 

burgeoning entrepreneurial community that is beginning to see the 

damage to their entrepreneurial efforts of this theft and piracy in 

copyrighting. 

Senator HATCH. Thank you. 

Go ahead, Mr. Secretary. 

Secretary LOCKE. Yes. I would like to also comment on the multilateral pressure. We have seen the results and fruits of multilateral pressure on China with respect, for instance, to their recent 

proposal on indigenous innovation. Because of a very concerted, coordinated, multilateral comment and protestation to China’s proposed policies, the Chinese withdrew that, suspended it, or have 

delayed it and have made modification. 

The CHAIRMAN. I am sorry, Mr. Secretary. I missed that. What 

did they withdraw? 

Secretary LOCKE. Well, they have not formally withdrawn it, but 

they did not act on it. They actually came up with a second version. 

We have still had a variety of different countries comment on it 

and protest it. 

The CHAIRMAN. I am sorry. The second version of? 

Secretary LOCKE. The indigenous innovation policy. 

The CHAIRMAN. They are going to withdraw their second version 

of that? 

Secretary LOCKE. No, no, no. They came out with a second 

version, following international, multilateral concerns. They came 

out with a second version, or a revised version. They have, however, delayed the implementation of that second version. That was 

part of the results of the Strategic and Economic Dialogue, where 

they have now agreed to enter into consultation and discussions 

with the U.S. and others on how to achieve innovation without necessarily—as we are concerned about the way in which they are 

doing it—discriminating against U.S. companies. 

But my point is that a multilateral approach has been successful 

so far in China not moving forward with their proposed indigenous 

innovation policy. We are still very concerned about the more recent draft, but the good news is that they have not moved forward 

to implement or to compile the list of favored, preferred innovation 

companies as they had originally scheduled. Now we are in discussions with them on next steps. 

Let me just say that, with respect to counterfeiting and IPR, we 

have proposed a third IPR attache ́. We already have two in China, 

and they work specifically with U.S. companies, and especially 

medium-sized companies, to really attack some of these issues. 

It is uneven in China, IPR enforcement. Some of the provinces 

with more high technology are moving aggressively or more aggressively on IPR violations because they recognize, as Ambassador 

Kirk indicated, that it is in their own economic self-interest to protect innovation. They are also moving forward with respect to IPR 

and counterfeiting issues with respect to food or medicine because 

they know that it affects the health and safety of their own resiVerDate Nov 24 2008 17:37 Oct 07, 2011 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 R:\DOCS\68394.000 TIMD
11 

dents. But with respect to so many other goods, whether it is shoes, 

DVDs and movies, the enforcement is not there. We must continue 

to put pressure on them and use every tool that we can to have 

them halt these violations. 

The CHAIRMAN. Thank you. 

You have one more question? 

Senator HATCH. Can I just ask one more? 

The CHAIRMAN. One more? Yes. 

Senator HATCH. The chairman has been kind enough to let me 

ask one more. 

Mr. Secretary, and Mr. Ambassador, if you care to comment, as 

Chairman Baucus has pointed out to the members of this committee and to all of us, 79 percent of all business software being 

used in China has been pirated. However, according to the International Intellectual Property Alliance, the owners of the notorious 

Chinese website called Tomato Garden were recently convicted by 

a Chinese court. The Alliance estimates that, since 2003, this 

website facilitated the downloading of 10 million copies of the Windows XP software. 

Now, this is a positive development, yet this seems to be an exception to the rule. For example, the Alliance notes that 99 percent 

of all music files being downloaded in China are pirated. Ninetynine percent. In addition, the Entertainment Software Association 

estimated, in 2009, that over half a million of its members’ titles 

were illegally downloaded in China. Therefore, my question is, why 

were Tomato Garden’s owners convicted when other large-scale, illegal websites remain open for business? What are the lessons to 

be learned from this event? 

The CHAIRMAN. I would ask you to be brief, please, because there 

are other Senators waiting. 

Ambassador KIRK. Well, Senator, I will get back to you. I cannot 

speak to why we have not been able to get China to move more aggressively on these others, but we do work with them and encourage them in every case to bring legal enforcement, to have strenuous and real enforcement. It is in our interests and in China’s interests that they do so. This is of the highest importance to us. I 

would love to tell you that there was just a silver bullet we could 

fire in this issue. It is a major problem, but it is one of the reasons 

it gets such high attention within my office, and in the Department 

of Commerce as well. 

The CHAIRMAN. Thank you, Senator. 

Senator Wyden? Senator Wyden, you might continue to run this 

hearing if I am not back. 

Senator WYDEN. All right, Mr. Chairman. Thank you. Thank you 

for allowing us to have this series of hearings as well. 

Gentlemen, as you know, the Pacific Rim countries are a fast and 

growing market for U.S. exporters, and I am of the view that to 

tap the potential of these markets is a prerequisite to achieving the 

President’s goal of doubling exports in the next 5 years. 

Also, as you know, China is projecting an economic model in the 

Pacific that is unfortunately harmful to American interests: few 

rights for workers, state-owned enterprises, disregard for intellectual property, as Senators have been mentioning. 

12 

So I want to ask you this afternoon about the opportunity to create an alternative model, and I believe that opportunity is going to 

present itself at the Trans-Pacific Partnership. Another round is 

coming up in the next few months. 

So here is the question. The key country for looking at this alternative would be Vietnam. Now, Vietnam may not be able to implement today all the commitments that the United States has come 

to expect of a free trade agreement, but I would very much like to 

see us get some short-term benefits, particularly improved access 

to that market for our exporters, for green goods, for the valueadded kind of products that I would like to see us get into Vietnam. 

So my question to you is, what would you think about the idea, 

at the Trans-Pacific Partnership, of trying to come up with a more 

pragmatic pathway that would get us these short-term benefits, improved access to the Vietnam market, but say, in effect, to the Vietnamese, when you improve workers’ rights, when you protect intellectual property, we can use this as a pathway to a broader agreement, what would amount to a free trade agreement. 

What do you think of this idea? What are your thoughts? Because I do not want to see China with an economic model that is 

hostile to our workers and intellectual property and our principles 

get a bigger toehold in countries like Vietnam. Are you open to 

those kinds of ideas, either one of you? 

Ambassador KIRK. Senator, if I might—since we have taken the 

lead on pushing forward the Trans-Pacific Partnership—I would 

say that I would agree with you almost in total, except I want to 

leave open the issue of whether we would seek a different path for 

Vietnam. 

Senator WYDEN. Well, before you do that, and I appreciate that, 

understand that this is not so much a different path, it is an alternative way to get on the path that right now we are not getting 

on. 

Ambassador KIRK. The good news, and in the interest of brevity, 

in terms of your introductory comments about the importance of 

the market, particularly as sort of a competitive hedge against 

China, that embraces very much our rationale for why the United 

States made the decision and President Obama announced, at last 

fall’s APEC summit, that we would move forward aggressively to 

engage in this Trans-Pacific Partnership. 

The good news is, we have completed two rounds of negotiations. 

We just completed the second round in San Francisco last week. 

But the key to this new trade agreement in this critical region of 

growth is that all of the partners, including Vietnam, Senator, have 

agreed to the highest-standard free trade agreement that we can 

negotiate, particularly on those issues that you specifically enumerated: the rights of workers, in terms of protecting the environment, 

and more particularly, enhancing trade and environmental goods 

and services and intellectual property rights. 

At least at this stage the good news is, to this point, Vietnam has 

said, we understand that the bar has been set very high, and we 

ascribe to those beliefs. So I think it may be a bit premature at this 

point. Vietnam has one more round in which to make a determination to say they are in or out, but right now we would like to keep 

encouraging them to walk down this path with us in which they 

13 

would agree to the highest standards that the other eight countries 

have all agreed to. If we can achieve that, then we not only achieve 

your goal, but one that is even stronger. 

Senator WYDEN. Secretary Locke, do you want to add anything 

to that? 

Secretary LOCKE. Well, Ambassador Kirk is the lead negotiator 

with respect to the Trans-Pacific Partnership, and I do know that 

obviously Vietnam provides enormous opportunities for U.S. companies, and that the U.S. companies can help the people of Vietnam achieve a higher standard of living, which then creates a winwin situation. I also know that the leaders of Vietnam would much 

prefer, or oftentimes prefer, to enter into a relationship with the 

United States, so we need to capitalize on that. 

Senator WYDEN. Here is my only point, and my time has expired. 

It is hard to support a full, free trade agreement with Vietnam 

when the country does not have any track record of enforcing intellectual property rights and getting us the improvements we need 

in workers’ rights, so we want to get to exactly the place you are 

talking about, Ambassador Kirk. I just think we need to achieve 

some concrete objectives now, like getting us these markets for our 

green products and value-added agriculture and the like while we 

get on the path to a free trade agreement. 

Mr. Chairman, thank you. 

The CHAIRMAN. Thank you, Senator, very much. 

Senator Stabenow? 

Senator STABENOW. Thank you, Mr. Chairman. 

Welcome to Secretary Locke and Ambassador Kirk. First, let me 

say I appreciate your efforts and actions that have been taken. I 

can only say, on behalf of the people of Michigan, that we need 

many more. We need to be aggressively focused. 

Secretary Locke, I am pleased to be a part of the Export Council 

that the President has established, and through your leadership as 

well. But in my judgment, if we do not address trade enforcement 

issues, we are going to be exporting jobs and not products, and we 

want to export products, not our jobs. That is the whole point of 

what we are talking about here. If we do not get a handle fully on 

what China is doing, I do not know how we meet the President’s 

export goals. That is of great concern to me. 

So the actions that you take, and I would say the message from 

the people of Michigan is, whether or not you act on currency as 

a subsidy affects the people of my State, and jobs. Whether or not 

you act on WTO agreements, whether or not you act on currency 

or intellectual property rights or what happens on procurement, all 

of those things directly relate to our people and what is happening 

in terms of jobs right now. 

As you know, Senator Schumer and I have combined two bills on 

currency into one that gives very clear authority and requirements 

to both USTR and Commerce in terms of identifying currency as 

a subsidy, which it is. They are getting artificial discounts to bring 

products in now every single day, and it is unfair, and it is a violation, and we peg it to the definition under the International Monetary Fund, so it is WTO-compliant. 

We also have specific requirements for USTR under the WTO. 

So, the first thing I would say to you is that we need to see more 

14 

than just talk from China. We have been hearing that for years, 

and years, and years. So I am glad it is going to be raised by the 

President, but frankly I think we have to take some very specific 

action. 

I would welcome your response to that, but I also want to add 

something else, and that is on this indigenous innovation policy. I 

am glad that there has been a multinational push-back on this and 

that China is reevaluating, but we all know that this is an extremely serious issue. Senator Graham and I have introduced a bipartisan bill that very simply says that, until China signs the Government Procurement Act, which they have now had 10 years as 

a member of the WTO to sign, until they sign that, that it will be 

our policy not to make any exemptions for China under the Buy 

America Act or the Buy America provisions. 

We have been told that there were no items being purchased 

from China, but Exhibit A—and this came from my colleague in 

the House, Mark Schauer—shows a Census hat made in China and 

one that is made in the United States. In fact, it is a GM plant 

5 minutes from my house in Lansing. So we do not need to be purchasing these from China when they are made in the United 

States. We also know that tires, bullets, and ammunition as well 

have been purchased from China. 

So I would like you both to react both on currency, but also 

whether you will work with us to close the loopholes on the Buy 

America provisions and make it very clear we are not going to do 

business and provide American tax dollars to China unless they 

open up their procurement processes to our businesses. 

Secretary Locke? 

Secretary LOCKE. Let me take a first stab at this. We are pleased 

with the support we received multinationally with respect to China’s proposed indigenous innovation proposal and policy, just as it 

was through multilateral concern and comment that the Chinese 

withdrew their previous Green Dam filtering software proposal. So 

we do know that, the more that other nations join in these issues 

and focus on the issues, the better the response will be. 

We are very pleased that China has made recent announcements 

regarding its currency. As Ambassador Kirk indicated, the issue of 

currency rebalancing of the world economy will obviously still be a 

very central part of the G–20 discussions. 

The Chinese have indicated that they hope to present a proposal 

with respect to the Government Procurement Agreement this summer, and we look forward to analyzing their proposal that they 

might submit. But with respect to the Census purchasing the hats 

that you have talked about, the Census Bureau spent money for 

promotional materials to help us achieve a 70–73 percent mail-back 

response rate with respect to the 2010 Census, much higher than 

folks ever thought possible. It matched the mail-back response rate 

of the year 2000, despite all the predictions to the contrary that we 

could not even come close to the 2000 response rate. A lot of that 

depended on media, through minority media outlets and publicity 

by mayors, but also promotional materials. 

Senator STABENOW. Yes. With all due respect, I appreciate that, 

but it does not need a hat made in China. 

15 

Secretary LOCKE. No. But I want to assure you that all of these 

schedules and all of these purchases were made through U.S. companies, companies that were on the GSA schedule, and that they 

all had to comply with the Buy America Act. The problem is, or 

perhaps something we can work with you on, is the Buy America 

Act does not limit products coming from other countries if it is 

under a certain dollar value. But I can also tell you, for instance, 

we are proud of the bags that our door-to-door enumerators used. 

There are some 600,000 enumerators across the country. This was 

a $12-million contract that we provided to the Industries for the 

Blind in Milwaukee. That is a $12-million contract that supported 

some 100 jobs in Wisconsin. The Industries for the Blind did purchase some component parts for those bags from outside the United 

States, and some of it may have included China. 

But under the Buy America provision, because of the dollar 

amount of this contract, more than 50 percent of the total value 

was through American input, whether the actual sewing, the design, the printing, and so forth. The same thing with the hats. 

More than 50 percent of the value was American contribution. 

The CHAIRMAN. Thank you, Senator. 

Senator STABENOW. I appreciate that. I would just add that, because of currency manipulation, they got up to a 40 percent discount on the price as well. 

Mr. Chairman, I do not know if Ambassador Kirk had wanted to 

respond to that or not. 

The CHAIRMAN. We have to move on. 

Senator STABENOW. All right. We will do that later. Thank you. 

The CHAIRMAN. We will have another round. 

Senator Nelson, you are next. 

Senator NELSON. Gentlemen, thank you for your public service. 

Chinese drywall. It has been a sad tale. Defective products. The 

chairman listed in his opening comments all the trade that goes on. 

This is not the first time. It was defective Chinese toys years ago. 

We had a Consumer Product Safety Commission that did absolutely nothing for years. Even at the beginning of this administration we could not get the acting Chairman out of there. Finally, we 

were able to get Inez Tenenbaum in, and she is cracking the whip. 

She then did her research. That took a long time. 

It out-gasses sulfur. When you go in, it smells like rotten eggs. 

The EPA and the HHS and the CDC say they cannot see any 

medical/health effects, but the examination certainly found out 

that what these sulfur-type gasses do is, they corrode every metal 

in the house. So you go into one of these houses, and all the air 

conditioning coils are corroded, they have to be replaced. Every 

piece of metal in the house is corroded. As a result, the values have 

just plummeted. Here is the poor homeowner. The bank will not 

work with them on their mortgage, the insurance company says we 

do not know you. They go to the home builder, and the home builder has gone bankrupt. Here is the poor homeowner, living in a 

house that is unlivable. They cannot sell it because the value has 

plummeted. 

Now, there is a courageous Federal judge in New Orleans who 

has issued two or three rulings. The question is not whether or not 

these companies are liable. The question is, how much is the damVerDate Nov 24 2008 17:37 Oct 07, 2011 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\68394.000 TIMD
16 

age? What he has basically said is, the only way you can remedy 

the situation is to strip it down to the studs in the walls, rip out 

all of the wiring and the pipes, and start over. Of course, that is 

a huge expense. That is the ruling of the court. So I come back to 

you. 

I went to China last summer. I was blown off. Really. Inez 

Tenenbaum has been a couple of times; Mr. Ambassador, you have 

as well. We now have the finding by the Consumer Product Safety 

Commission that there are 10 companies that brought this in. Nine 

of the 10 companies are companies owned by the Government of 

China. 

During the Nuclear Security Summit, I sought out and talked to 

the President of China, and I asked him, has anybody briefed you 

about this, and he said no. I said, well, Mr. President, you need to 

get briefed because this is a real problem. You have a great credibility problem with a defective product that has been shipped in 

from China by a number of companies, and it is harming our people. It is certainly going to besmirch your reputation for quality 

goods. Can you all tell us what in the world we can do from here? 

Because, at the end of the day, the Government of China is going 

to have to be financially responsible. 

Ambassador KIRK. Senator, I know you raised this issue when I 

was before you when we presented the President’s trade agenda. 

We continue to stand ready to assist and work with the Consumer 

Product Safety Commission. You specifically asked me if I would 

elevate this to the level of our discussions with our colleagues at 

the JCCT in April. We did that. We will do that again. Chairwoman Tenenbaum was in China at the same time that we were 

there as part of her investigation, but CPSC has the lead on this. 

We will assist them and work with you in any way that we can to 

try to help bring some relief. 

Senator NELSON. But nothing has worked thus far. What we 

have to have is, at the highest levels of government—and I am 

looking at two of them right now—we have to have fist-pounding 

to get the government of China to face the reality that they own 

companies that mined this product that was defective that is ruining American people’s lives in a number of States, not just my 

State. 

Ambassador KIRK. Senator, we will be happy to work with you 

in any way we think we can. 

Secretary LOCKE. Senator Nelson, I can tell you that I have 

raised it on numerous occasions on all my trips to China about this 

issue, and I will personally commit to raising it, even to the highest 

levels that I possibly can, and to impress upon the Chinese agencies their responsibility. 

As a person who has done a lot of remodeling of houses, who has 

done a lot of drywalling, when you put in drywall, as in this case 

with the drywall coming from these 10 Chinese companies, you do 

not know whether it is 5 panels or 50 panels, or 100 percent of the 

panels in your house that might have to be taken out. 

I have seen the pictures of just the devastating corrosive effects 

it has on the wiring, on the fixtures, you name it, and it is heartbreaking when you are going to have to tear out all of that stuff 

and replace every single piece, not just the drywall and all the 

17 

mudding and taping that goes on, but also all the subsystems within the house. You are right, this is an economic catastrophe for the 

homeowners. All it takes is just one or two sheets of 4 × 8 drywall 

to ruin the entire house, and we need to do something about it. 

Senator WYDEN. Thank you, Senator Nelson. 

Senator Bunning is next in line. 

Senator BUNNING. Thank you. 

Secretary Locke, Ambassador Kirk, I know you are both brilliant 

men. Do you know the difference between Communist China and 

the U.S. Government as far as negotiations are concerned? In other 

words, if the Secretary of the Treasury would go to China and try 

to negotiate with the Trade Minister or whomever, the number-one 

person supposedly that deals with Treasury things, do you know 

that they do not have to abide by any laws in China? 

The Secretary of the Treasury has to abide by the laws that are 

made by the people who are sitting around this dais up here. That 

is the problem. All your great negotiations mean zero and have no 

effect on the Chinese government. If they did, Senator Nelson’s 

problem would be solved. If they did, our currency problem with 

China would be solved. We have heard for the last 12 years that 

I have sat on this committee that we were going to negotiate oneon-one with the Chinese. 

Senator Nelson also said he got blown off when he went to 

China. Well, six members of the Trade Subcommittee of this committee went to China and got blown off by the Trade Ambassador, 

or the head of the Trade Commission, or whatever you call that 

person in China. They would not meet with the people who make 

the laws in the United States of America. 

Therefore, we have a miscommunication. All your negotiations 

and goodwill in meeting with those heads of the Chinese government mean absolutely nothing because you have to abide by the 

U.S. laws. 

An example. As of April 15th of this year, the Department of 

Treasury was to issue a currency report stating whether China was 

in violation of currency manipulation. We are still waiting on that 

report, but the law of the United States states that that report was 

due on the 15th of April, and another one on the 15th of October. 

Now, our Secretary of the Treasury does not have discretion. So 

I want you to explain to me how you expect to make progress with 

people who have no respect for the law that they say they are abiding by with policies of personal responsibility, CDs, intellectual 

property, whatever? They make the law and say that they have to 

abide by it, but they do not enforce it. Now, tell me how we can 

deal with it. 

Another. I will give you another for instance. We went to China 

and we said, gee, we would like to clean up the atmosphere. We 

would like to reduce our emissions in the United States as close to 

zero as possible, and they thumbed their noses at us and said, you 

go right ahead. We are not going to do it. We are not going to put 

any restrictions on the burning of coal in the Republic of China. 

How can you trust these people? Ambassador Kirk? 

The CHAIRMAN. Briefly. 

Senator BUNNING. Well, I at least get one question. 

18 

The CHAIRMAN. You do. You get one. 

Senator BUNNING. Thank you, Mr. Chairman. 

The CHAIRMAN. You are very welcome. 

Ambassador KIRK. Senator, I would argue that your underlying 

proposition of the difficulty of China’s transformation from a Communist state-owned economy to one in which they have made certain commitments to abide by the rule of law and the WTO drives 

the wisdom of our U.S. policy to have to engage China frequently, 

to keep our hand at their back, to continue to negotiate with them 

in every forum possible, whether it is through the Strategic and 

Economic Dialogue, the JCCT. Where that fails, we take them to 

the WTO. It is frustrating, but we stay at the table because this 

is a relationship too big to ignore. 

The opportunities for the United States to try to help China understand the extraordinary needs that they have, to transform the 

lives of 600 million people who live on less than $2 a day, is one 

that the United States can be a partner in if they see this as an 

opportunity to improve their quality of life, but open up their economy to those areas where the United States has an extraordinary 

gift, extraordinary talent and resources to do so. But there is not 

one silver bullet. It is frustrating to all of us. 

But I would submit to you that we do have cases where we have 

been able to argue, convince, cajole, push, and China has seen the 

wisdom and changed their behavior. It is not occurring at a rate 

fast enough that I think any of us find acceptable, but I think the 

broader opportunity for the growth and health of our economy 

mandates that we continue to stay engaged and work with China, 

as President Obama has said, to get them to rebalance their economy and their overall industrial policies. 

The CHAIRMAN. Thank you. 

Senator Schumer? 

Senator SCHUMER. Thank you, Mr. Chairman. 

On the Senate floor, we have now spent several weeks discussing 

jobs bills, tax extenders, and State fiscal relief, and the Senate is 

soon poised to take up small business legislation. Every one of 

these initiatives is important, yet, almost universally, manufacturing and labor now say that the biggest single step we can take 

to create jobs domestically and improve the outlook for domestic 

manufacturing is to get China to reform its exchange rate policy. 

In other words, if China appreciated its currency and moved towards a floating exchange rate, it would do more for jobs here in 

the United States than any single stimulus program that we could 

pass into law, and it would help China’s economy as well. After reinstating the dollar-yuan peg nearly 2 years ago, China’s central 

government finally made an announcement last weekend, ahead of 

the G–20 meetings, that it would gradually allow the yuan to appreciate. The following day, facing domestic pressures, they backtracked on that statement. On Monday, the Chinese allowed the 

currency to appreciate by 0.4 percent, but then on Tuesday they 

manipulated the market by buying enough dollars to erase half of 

those gains. 

This is typical of the Chinese government when it comes to currency practices: one step forward almost immediately followed by 

a step back. The only purpose is to fend off pressure. It is the same 

19 

pattern we have seen for years. I have been working on this with 

Senator Graham for 5 years, and we are tired, we are fed up, and 

we are not waiting. Nothing ever changes unless you force the Chinese to act. 

That is why Senators Graham, Stabenow, and I are determined 

to bring our bill to the floor soon. We are not placated by these 

public pronouncements. We want action. We are tired of the Chinese government teasing us along here, pulling back a little there, 

hoping that baby steps and public statements will convince enough 

members that real reform to our domestic currency law is not necessary. 

The Chinese will keep treating us like they have us on a yo-yo 

unless we make a serious push for our legislation, and that is what 

the six of us, three Democrats and three Republicans, are going to 

do shortly. Our bill commands brought support, both inside and 

outside the Congress. On the Finance Committee, nearly all of the 

committee’s Democrats supported a similar bill in the last Congress, and every Republican who was on the committee at the time 

voted in favor of that legislation. I am optimistic we would win a 

floor vote by a significant margin. 

One of the reasons our bill is necessary is that the government 

has not taken sufficient action, and unfortunately that includes 

both Treasury and Commerce. U.S. manufacturers have filed more 

than a dozen allegations that the Chinese government keeps its 

currency artificially low, providing its exports with an unfair trade 

advantage, yet the Commerce Department refuses to exercise its 

authority under current law to investigate. I emphasize again, we 

do not have to change the law for this because Commerce has the 

authority right now. 

Mr. Secretary, with all due respect, this is becoming similar to 

how the Treasury Department treats the currency report. Over and 

over again, dating back more than 5 years, the government finds 

a technical reason to delay action, under both Republican and 

Democratic administrations. The executive branch refuses over and 

over again to state the obvious and exercise its authority under 

law, and that is why legislation has become necessary. No delay. 

We have to move it soon. 

Now, I recognize the issues are tough. I know in some cases the 

government has taken action. For example, Ambassador Kirk, I 

want to recognize, under your leadership, USTR has initiated more 

trade enforcement actions in China, against China, in the last 18 

months than the Bush administration did in the previous 8 years, 

so progress is being made. 

But on the currency issue, not enough is being done. You cannot 

do it little product by little product. Currency affects every product—manufacturing, services, imports, exports—and we are losing 

jobs and wealth. Every day, we are making America less of a 

power, every day, because we allow the Chinese to do this and do 

not take any action in response. 

So let me turn to my questions, or question. I just have one because I only have 35 seconds left. Why has your Department, Secretary Locke, refused to act on allegations that Chinese manipulation of currency puts our products at an unfair advantage, and 

20 

when will Commerce fulfill its statutory responsibilities and initiate the CVD case on currency? Then I am finished. 

Secretary LOCKE. Thank you very much, Senator. I agree with 

you that the appreciation of the currency would do more to help the 

sale of U.S. goods, and it is essential to the world economic rebalancing that President Obama has supported and called for and 

urged on the Chinese leaders in all of his face-to-face discussions 

with them. 

With respect to the actions by the Department of Commerce, we 

have considered the issue of whether certain currency practices involving multiple exchange rates constituted countervailable subsidies in the past, and in some cases we have ruled that, where 

there are multiple exchange rates specifically geared to our exports, that is an offense that we would rule against. 

But in none of these cases did they involve an allegation of an 

under-valued unified exchange rate such as that in China. In the 

past several cases, there have been allegations about the unified 

exchange rate of China, but, from our International Trade Administration folks to the General Counsel’s Office, we have felt that they 

did not meet the very specific requirements of U.S. law. In the two 

cases that are now before us, where the allegations have been 

amended, we are taking a very hard look at this very specific issue. 

We are taking a very hard look at it. If the facts and the law merit 

an investigation, we will launch the investigation. 

Senator SCHUMER. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. This is a very important 

subject you raised. It is fundamental. 

I believe, frankly, that the U.S.-China relationship, managing 

that relationship right on both sides of the Pacific, will in many 

ways determine the standard of living in the United States and 

China, and in many countries in the world. I think this is the most 

important relationship in the world, the U.S. and China, and it has 

to be handled properly, correctly, with balance, with firmness, with 

mutual respect. I think what you are hearing here, Mr. Ambassador, Mr. Secretary, is a concern that we have to be a bit more 

self-respectful. There has to be more self-respect. The United 

States has to stand up for itself more, because, if we do not, we 

know what the consequences are. 

Now, we do not want to go overboard. We do not want to take 

advantage of China, we do not want China to take advantage of us. 

I think the major concern here is that we are frankly letting China 

take advantage of us. The subject the Senator from New York 

raised is one that all of us have been involved with for some time 

now. It is difficult, and gets to the first question I asked of you in 

this hearing: who is in charge of economic policy here? 

I am concerned, frankly, that this administration has kind of 

backtracked a little on pursuing currency a little more aggressively 

for fear that it upsets some other strategic issues and policy issues, 

foreign policy issues, defense policy issues, the administration may 

or may not have with China, whether it is North Korea, whether 

it is U.N. sanctions against Iran, whatever it is. We do not, as a 

country, stand up enough for our economic interests as much as we 

should, and we have not de-linked them. I think they should be delinked. I think the economic policies that we pursue with China 

21 

should be de-linked from foreign policy and other strategic concerns. 

Now, to help advance the ball here, I am going to reintroduce the 

bill that I have introduced before on currency. It is one that Senator Schumer and I have worked with, Senator Grassley and I have 

worked with, and other Senators, because I think we have to start 

moving more aggressively with respect to currency. My judgment 

is that China just took one little baby step to try to get everybody 

off its back, and that is not going to work. We have to show that 

we are serious if we want self-respect. So I want to just tell everyone that I plan to introduce that bill. I am considering marking up 

that bill because we need to move much more aggressively than we 

have in the past. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. 

Mr. Secretary, Ambassador Kirk, good to see both of you. 

Ambassador Kirk, for many years, China has prohibited Washington agricultural products, particularly apples and potatoes, because they say that they are prohibited based on something other 

than sound science. So what is USTR doing to open up the agricultural markets for Washington in apples and potatoes into China? 

Ambassador KIRK. Well, again, Senator, this is one of those just 

mixed challenges where we have wins but still have major hurdles 

with China because of their application of non-scientific standards 

to bar certain products. The good news is, we have a trade balance. 

One of the few areas we have a surplus with China is in our agricultural exports, so in the broad picture we are winning. 

In the specific areas, whether it is for our beef, or your apples, 

or those from Senator Schumer’s districts, we continue to be frustrated, but we continue to work with Secretary Vilsack and our 

team from the Department of Agriculture to get China to just follow international OIE standards. 

If they will apply internationally recognized sanitary and phytosanitary standards, then we believe America’s farmers and exporters will be just fine, but getting them to that point, I will be honest 

with you, has been difficult. There is a component of our JCCT discussions every year where we deal specifically with these agricultural standards and issues, and we will continue to press those 

when we meet again this fall. But in certain specific cases like 

yours, where we have those, we have pressed those individually as 

well. 

Senator CANTWELL. Thank you. 

If I could, Secretary Locke, I want to ask you about a separate 

issue, which is why an Inspector General recommendation said 

that NOAA should withhold its finalization of practical alternatives 

on their marine operation center, but NOAA went ahead with that 

process. Do you think that your agency’s acquisition process is 

above reproach? 

Secretary LOCKE. No. Our acquisition processes within NOAA 

and throughout other agencies of the Department of Commerce 

need a thorough review, and that is why we have asked for a separate, outside review and acquisition experts from other Federal 

agencies and the private sector to come in. 

22 

We are very concerned about the fact that we have a defect in 

consistency in the evaluation of, for instance, the new home porting 

of NOAA ships in the Pacific Northwest, although the Inspector 

General indicated that the defects were not sufficient to overturn 

that, and still that the award should have gone to the ultimate site, 

which was Newport. But nonetheless, the underlying findings are 

very troubling and do not give me confidence, or I think the confidence that the American public expects, on any type of acquisition 

procurement process. 

We have seen that with the Census Bureau years ago with respect to billions of dollars spent on hand-held computers that did 

not work, where we paid the money and got nothing for it. We have 

seen it with the NOAA satellite procurement that was in collaboration with the Department of Defense and NASA. 

Senator CANTWELL. With all due respect, Mr. Secretary, I have 

no information from the Inspector General that says that you 

should go ahead and that it is the lowest-cost site. So we have 

asked the Inspector General if that is the case, and he said no. So 

where are you getting that information? 

Secretary LOCKE. I read a report from the Inspector General just 

last week, prior to my phone call to you, indicating the problems 

that the Inspector General’s Office uncovered, but his conclusion 

was that these defects would not have changed the fact that the 

ultimate awardee was still the lowest cost and were nothing to reverse that contract. But I am happy to discuss that with you. 

Senator CANTWELL. Well, I would love to see that document that 

says so. I think when my staff called after our phone call, I think 

the response was, the Inspector General’s Office laughed that that 

was the answer that NOAA was given. This document that I am 

reading from, May 26, it basically says that NOAA should examine 

whether it sufficiently complied with the requirement to consider 

existing Federal facilities before pursuing a new lease acquisition. 

So we are talking millions of dollars here to the U.S. taxpayer 

by the fact that this facility did not go through a process in which 

existing Federal facilities were considered. The Inspector General 

said, go back and do that homework, and you guys said, let us just 

go ahead. So, I do not think the Inspector General is giving you a 

blanket go-ahead authority. If you have such a document, I would 

love to see it. 

Secretary LOCKE. Let me just indicate that I also agree with you 

that it would have been preferable for us to consider outside existing Federal facilities instead of trying to lease from a separate governmental agency, whether State, local, or private sector. I think 

in looking at all of this, it would have been preferable. I think that 

is why we need to have a thorough review of the acquisition processes within the Department of Commerce, and especially NOAA, 

in terms of, are we asking for Cadillac versions of things when in 

fact we should be looking at more readily available, suitable facilities or products and services before we procure? 

Senator CANTWELL. Well, I do not think the Inspector General 

has said for you to go ahead. I have a letter here from him saying 

that you should not go ahead. So when the Inspector General says 

an agency should not be taking action and is costing taxpayers 

money because they have not done a thorough review, the next step 

23 

is, usually Congress gets involved in saying you should not allocate 

monies to such projects. So, we will look forward to discussing this 

with you further. 

Secretary LOCKE. I understand. 

The CHAIRMAN. Thank you, Senator. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. Mr. Secretary, 

Mr. Ambassador, thank you very much. 

I want to echo the remarks of Senator Schumer and the chairman about China currency practices. I heard what you said, but I 

have heard that before in terms of, we are taking a hard look at 

it. Well, we have been taking a hard look at this question for some 

time, it seems. China makes a declaration that they are going to 

start moving in that direction, and then it is like the Texas TwoStep, Ambassador. You take one step forward, you take two steps 

back; I think you might know a little bit about that, in terms of 

dancing, that is. 

Well, they do a dance with us that is pretty harsh for us. There 

is a reason that China is our banker. Their prices are lower, our 

prices are higher. At the end of the day they are collecting our dollars. Then they come back and they buy our Treasury bills, so they 

are our banker. 

We cannot consistently have the lack of the currency, floating the 

currency, that they should allow to take place, as most countries 

in the world permit, to be manipulated as they do. So as long as 

we are just taking a hard look, they are going to continue to collect 

our dollars. We are going to continue to unfortunately be their customers at the bank. That is not a good proposition for American 

businesses and products and services. 

So I would like to get a sense, what is wrong with, for example, 

the legislation that the chairman and Senator Schumer have discussed, which basically says, look, if you allow your currency to 

float, great. But if you do not allow your currency to float, there 

is a tariff, there is a consequence. If China does the right thing, 

they will not face any consequences. If China, or for that fact any 

other country, does the wrong thing, there is a consequence. What 

is wrong with that? How is that not protecting the interests of the 

United States, and at the same time being fair with practices that 

we are supposed to be observing universally? 

Secretary LOCKE. Senator Menendez, I have not, and I do not believe Ambassador Kirk has, taken a position or indicated that we 

are opposed to that legislation. 

Senator MENENDEZ. All right. So do you support it? 

Secretary LOCKE. We have not taken a position on the legislation. I have not seen it. I would be more than happy to look at it 

and comment and work with your office and Senator Schumer’s on 

it. But let me just say, when you ask, why are we taking a hard 

look? Given the scrutiny that our decision with the Department of 

Commerce will face on judicial review, the General Counsel’s Office, my office, and the office and the career people within the Department of International Administration, are taking a hard look 

at the facts and the law of the specific case, and, if they warrant 

a decision to investigate, we will investigate, and we will allow that 

investigation to proceed. 

24 

Senator MENENDEZ. Well, I appreciate it. Your statement is pretty clear, and you are reading from it, and I understand that. The 

problem is, we see no concrete action that we take to get the Chinese to ultimately live under the same standards that we live 

under. We are not asking them for something that they should 

uniquely do. Every other country in the world largely lets their currency fluctuate. I hear about your desire to export more, but this 

is about American jobs. This is about America’s economy at the end 

of the day. 

Right now, we are at a competitive disadvantage in this respect, 

so I support the chairman. I hope he will move forward, and I look 

forward to joining with him because I see the G–20—we were going 

to make this a major issue at the G–20. Then I read comments that 

we are going to move away because China made some comments 

that it is going to change its practice. Well, they have done that 

before and then they go right back to the same business, and now 

we take it off the G–20 agenda. That would be absolutely wrong. 

So I hope we are going to pursue it vigorously at the G–20 meeting. 

Let me ask you another area, which is intellectual property. 

Coming from New Jersey, that is incredibly important to us. China’s policy to implement indigenous innovation policy is one of the 

huge problems. No other government in the world restricts government procurement market access on the basis of intellectual property or brand name ownership as China does. Requiring local IP 

ownership as a condition for access to the market is not only unprecedented, it fails to recognize the collaborative cross-border and 

global nature of research and development that produces innovation. 

Now, we sent you a letter. I appreciate your response that says 

you share our concerns, but just like in the currency practice, other 

than sharing our concern and taking a hard look at it, what are 

we going to do? What are we going to do, for example, in another 

area of intellectual property protections that are very significant 

for this Nation, and certainly my State, which is the area of piracy 

of copyrighted U.S. scientific, technical, and medical journals by 

Chinese companies? In New Jersey, over 2,000 people are employed 

by such entities. 

So give me a sense of what we are going to be—successfully, I 

hope—pursuing here as it relates to both the intellectual property 

issues and this other area of intellectual journals and whatnot. Between the currency practices—I will stop here and say, the Chinese 

are great, they are prolific in filing complaints under the WTO, but 

boy, they do that, and by the same token they are in the midst of 

doing a whole host of things that put us at a competitive disadvantage. 

Ambassador KIRK. Senator, thank you for your comments. We 

agree with you. 

Senator MENENDEZ. And I will not ask you to exhibit the twostep either. 

Ambassador KIRK. Well, in Texas, at least where I learned it, we 

at least try to take two steps forward and one step back, that way 

we get somewhere. 

Listen, we share your frustration. We discussed this with both 

the chairman and Senator Wyden. The good news is, we are attackVerDate Nov 24 2008 17:37 Oct 07, 2011 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 R:\DOCS\68394.000 TIMD
25 

ing indigenous innovation and working with China in every forum 

possible to get them to strengthen intellectual property rights. We 

had some measure of progress during the recent Strategic and Economic Dialogue. 

We made our concerns on this indigenous innovation policy one 

of our top three initiatives. We did get China to agree not to move 

forward with the second circular—I think that is the word you 

were looking for, Mr. Chairman—that they had issued, but we have 

also forced them to a more honest discussion of how this would 

apply in extending it to government procurement as well. 

In terms of taking China on within the WTO, since I have been 

privileged to serve and you have confirmed me as U.S. Trade Representative under President Obama, the U.S. Trade Representative’s Office has taken more cases successfully against China in the 

WTO than any other member of the WTO. A number of those cases 

have involved intellectual property rights. 

In particular, we are looking at copyrights and protection in 

those areas, those scientific journals that you referenced, and we 

have had some success in those. But we recognize, this is going to 

be an ongoing effort until China develops its own indigenous entrepreneurial community that can join in making that case with us to 

China of what the real cost of pirating and theft of intellectual 

property is to the Chinese government. 

In the interim, we continue to push them to put in place a more 

effective law enforcement regime, and where appropriate, again, we 

have not hesitated to pursue actions and remedy within the World 

Trade Organization. If there was a specific matter involving one of 

your constituents that we can follow up with you on, we will be 

happy to do so. 

The CHAIRMAN. Thank you, Senator. 

I would like to ask you, Ambassador, how do we make a little 

more headway on some agricultural products? Right now, China 

has a total ban on U.S. beef, total. Japan lets some beef in on a 

restricted basis, as does Korea on a restricted basis. But China has 

a total ban. What are you going to do about that? 

Ambassador KIRK. As you know, we think that ban is entirely 

unacceptable. One of the good-news stories that did come out of 

last year’s JCCT, as you know, is we did get them to open their 

market back up for pork, which they had restricted after the H1N1 

scare, and we now are resuming those exports. We continue to 

press, in working with Secretary Vilsack from the Department of 

Agriculture, to open their market back up to beef, from which we 

have been excluded for far too long. 

As I mentioned, I think, to Senator Cantwell, what we are trying 

to get China to do in every case is just follow the OIE internationally accepted standards and act on sound science for sanitary and 

phytosanitary products. The good news is, we do have a surplus in 

our agricultural exports to China. The frustration we have is with 

specific products like beef and poultry, in which they have just 

been very difficult to work with. 

The CHAIRMAN. I appreciate what you said, but again, you are 

using the words ‘‘are continuing to press,’’ ‘‘continuing to talk,’’ 

‘‘continuing to encourage.’’ It is all talking. I believe, frankly, that 

no country altruistically, out of the goodness of its heart, ever lowVerDate Nov 24 2008 17:37 Oct 07, 2011 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 R:\DOCS\68394.000 TIMD
26 

ers a trade barrier. Countries just do not do that altruistically 

when you ask them to do something unless it is to their own economic advantage to do so. You need leverage. Then it is no longer 

the goodness of their heart, it is in their own self-interest. 

What levers do we have? 

Ambassador KIRK. Well, Senator, I would agree with you. The 

lawyer in me says it is not always constructive for me to lay out 

all of that leverage here. I would hope you would recognize what 

we were able to achieve in Japan and the European Union, in the 

brief time I have been here, with respect to beef. I understand leverage and how to use that, but my background—— 

The CHAIRMAN. What leverage do we have? 

Ambassador KIRK. Well, we always have the threat—— 

The CHAIRMAN. But what leverage do we have, really? Honestly? 

Ambassador KIRK. Senator, I, for one, do not that readily dismiss 

the leverage and the threat of taking a case to the WTO and its 

value to the United States. We have seen tremendous results from 

that, and not just with respect to China but with other trading 

partners as well. But we work with other like-minded countries. 

We look at our ability to retaliate against China where appropriate, 

where they are not behaving. But we will use all of the tools that 

Congress has made available to us through our legislation, through 

trade remedies, through the WTO to try to gain compliance. 

The CHAIRMAN. One of them might be Commerce finding a subsidy with respect to the Chinese currency, that China is subsidizing 

the products that it ships to the United States because it fails to 

appreciate the renminbi. That enables us to countervail against 

China. 

Secretary Locke, you discussed why the Commerce Department 

has not taken action. The answer I got was something about the 

basket of currency. Secretary Locke, it sounded to me like it was 

a little bit of rationalization, maybe a little bit of sophistry, a little 

bit of dodging, that you just do not want to take it in. What is 

wrong with an allegation straight on that China alone is subsidizing its products because it fails to let the renminbi appreciate? 

Secretary LOCKE. There is no disagreement that the Chinese currency is under-valued. There is no disagreement that it is absolutely crucial for appreciation to occur and that, with respect to 

many of the questions you posed to Ambassador Kirk, that part of 

the leverage that we have is international opinion. The more that 

we can pursue these matters—— 

The CHAIRMAN. Good luck. 

Secretary LOCKE [continuing]. Multilaterally, just as we have 

with respect to indigenous innovation, the Green Dam software filter, and now on currency—— 

The CHAIRMAN. I am sorry, Mr. Secretary. I mean, world opinion, 

I do not think quite cuts it. We need a little more actual leverage, 

economic leverage. 

Secretary LOCKE. If you will recall, the United States moved forward on the 421 tire case when a lot of people were saying we 

should not do that. 

The CHAIRMAN. Yes, we did. That is right. And I think the 

United States made the right decision then. 

27 

Secretary LOCKE. So we will use every tool within our tool kit 

that is legitimate, that is appropriate, that is legal. 

The CHAIRMAN. Let me ask this question: Is your tool kit large 

enough? Do you have the right tools in the tool kit? Have you done 

an inventory of your tool kit to find out what tools you have, are 

they appropriate, and do you want more? 

Secretary LOCKE. I think what you are seeing is an administration that is willing to use the tools that we do have, compared to 

prior administrations, where we are not afraid to use those tools. 

The CHAIRMAN. All right. 

Secretary LOCKE. And we are using them. 

The CHAIRMAN. With all due respect, you did not answer my 

question. Have you done an inventory of your tool kit? Do you have 

the proper tools? Do you have enough? 

Secretary LOCKE. I think we have sufficient tools. 

The CHAIRMAN. You do? Could you do this for me, please, both 

of you? Just go back and look. Go back and see what is there. I 

would like you to come back to us with an assessment, do you have 

the right tools or not, creatively. Perhaps you could come up with 

some ideas where we could help you. This is a 2-way street. We 

want to help you. 

Ambassador KIRK. We appreciate that offer. 

Briefly, I would like to say, though, Secretary Locke did make an 

important point. It does not matter how many tools you have in 

your toolbox if you do not have the political will to use them, and 

I do think this administration deserves a tremendous amount of 

credit in moving forward, not just with China, but with other trading partners that have operated in a way against the interests of 

U.S. manufacturers, workers, and farmers, to hold them accountable, and we will do that. But we would certainly welcome the opportunity to have the discussion with you if we need new resources 

and tools. 

The CHAIRMAN. Thank you. 

Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

Mr. Secretary, I did not expect to get into the NOAA fleet in 

Newport, OR this afternoon, but since my colleague from Washington has raised the issue I think it is now important to set the 

record straight and clear the cloud that was just placed over this 

award. 

Is it not correct that, over the 3-year process, the 3 years of looking at this, the various agencies—it is like an alphabet soup of government: NOAA, the Inspector General, or the Government Accountability Office—no agency ever said that there was any practicable alternative to Newport; is that not correct? 

Secretary LOCKE. I am not aware of any decision or recommendation otherwise. 

Senator WYDEN. Very good. 

My second point goes right to the heart of your work, and I think 

to the heart of the administration’s interest in promoting science. 

My colleague from Washington essentially seemed to say that she 

was interested in politicizing the process, that after all of this vetting and effort to have a transparent, open process, she was interVerDate Nov 24 2008 17:37 Oct 07, 2011 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\68394.000 TIMD
28 

ested in overturning this and blocking funding and, in effect, 

breaking off the work that is done in Newport. 

Would this not introduce politics into every award that goes 

through your Department if, after all of this, all of this work that 

was open and transparent, the review of all these agencies, that 

now we are going to have the Congress overturn the funding, block 

it—would this not introduce politics into your agency’s work that 

would change the Commerce Department dramatically, and not for 

the better? 

Secretary LOCKE. Well, given the fact that Senator Cantwell is 

a good friend of mine, I would not want to characterize her statements as trying to politicize the process. 

Senator WYDEN. Mr. Secretary, I do not know what you call it. 

She said she was interested in, in effect, blocking funding, overturning the contract, going forward with the Inspector General 

process. As you know, the Inspector General does not even have 

legal authority in this area. Senator Cantwell is a good friend of 

mine, too. I have few better friends and allies in the Senate. 

I just want to set the record straight. Let us just go to the substance. If you had Congress overturn this award to Newport at this 

point, block the funding, in effect throw it out, would that not have 

dramatic implications for all of the other work that the Commerce 

Department does in your effort to put science first? 

Secretary LOCKE. It is very important that the Congress, as it exercises its proper oversight roles, be very careful, while ensuring 

proper procedures and impartiality in procurement decisions, that 

it be also mindful of the ultimate goal of saving the taxpayers’ dollars and getting good value for those dollars. 

In the case of Newport, all the analysis indicated that it offered 

the lowest cost of all the proposals and that, while the initial 

award failed to consider the issue of flood plain, what would be the 

impact if, during a flood, the rivers were to rise and what impact 

would that have on the docks. The docks, by their very nature, are 

in water. 

The question is, are the docks sufficiently high so, when the river 

levels rise, they will still be operational? The Inspector General of 

the Government Accountability Office said that we, in making the 

award to Newport, failed to properly address that particular issue 

and that we needed to go back and address it. We did. We also 

looked at some of the other competing sites. They are also on rivers 

that will rise during high water mark or flooding. Still, the conclusion was that the Newport site was the best value for the American 

taxpayer, which is why we stood by it. 

Senator WYDEN. So can we remove the cloud over this award this 

afternoon once and for all, in your view, Mr. Secretary? This has 

been vetted and re-vetted and examined by all of these agencies. 

It seems to me it is time to remove the cloud that was just placed 

here again. Even by your characterization, you said the Inspector 

General found nothing that would suggest that Newport was not 

the right place for this award. So is it possible to remove the cloud 

over this award this afternoon? 

Secretary LOCKE. Given that the Inspector General, in the report 

that I saw last week, said that there was nothing in his findings 

that would say that he should change the award going to Newport, 

29 

we intend to move forward because it provides the best value for 

the American taxpayer, and we need to move forward. We need to 

have a facility for all these NOAA ships so that NOAA can move 

forward with its mission. 

Senator WYDEN. So in your judgment, just as the NOAA report 

said when it said ‘‘final determination,’’ this is now final. Newport 

has the award. They have begun work. As you know, it has gone 

on for quite some time. This is final. Is that not correct? 

Secretary LOCKE. It is final with respect to the Department of 

Commerce and NOAA. Now, knowing that the Congress may have 

other—— 

Senator WYDEN. It is final unless there is an effort in the U.S. 

Congress to politicize it, and I just want folks to know that, on my 

watch, I am not going to let that happen. I do not think it is right 

for my State, I do not think it is right for taxpayers, and I think 

it means that the objectives of the Obama administration in this 

area, which was to put the science before politics, that this administration’s objectives in this area would be substantially derailed if, 

after all of this work, the years of effort through an open and 

transparent process, after the award was finally made—and you 

have described it, in my view, as a final award; you said it is final 

in your judgment—to then at this hour say we are still going to try 

to overturn the funding, we are going to have the Congress try to 

block the work that is ongoing, I think that has great implications 

for the way science decisions are made, for taxpayers in this country, and on my watch I am not going to let that happen. 

Mr. Chairman, thank you. 

The CHAIRMAN. Thank you, Senator. 

I want to give you more tools. One of them is enhancing Special 

301. I am going to introduce a bill which basically provides that, 

if a country fails to measurably improve after being placed on the 

so-called ‘‘name and shame’’ list under Special 301, that the United 

States could prohibit Federal Government procurement from that 

foreign country, prohibit new financing by OPIC and Ex-Im, and 

also the United States could withdraw any preferential treatment 

for which the foreign country qualifies under the GSP. I am just 

trying to give us more tools so we can do more. 

I do not know what the precise answer is yet, that is, what the 

focus should be within the administration so we have administration-wide economic policy and also foreign trade policy. I must say, 

the words hauntingly come back to me. Twenty, thirty years ago 

I was in Japan. A member of Congress, Speaker Foley, took many 

members of the Congress over to Japan. That was when Japan was 

growing and people were ‘‘Japan #1,’’ and all that. Several members of Congress and myself met with the Sony head, Akio Morita, 

who was head of Sony at the time. 

I asked him, Mr. Morita, assuming the next President of the 

United States—I think a presidential election either just occurred 

or was about to occur—were to come to you and say, Mr. Morita, 

and he would give you carte blanche, whatever economic policy you 

recommend, the President will implement. What would you recommend to enhance America’s economic position in the world? 

What would you recommend? 

30 

Without skipping a beat he went right at me. He said, you need 

a Department of International Trade. He said, you have a Department of Commerce, you have HUD, Department of Housing, Department of Education, Department of Agriculture. You need a department of trade. If you want to compete in the world, you have 

to have that focus. That was his perception, his observation 20, 30 

years ago when I was over there. I do believe we need to have 

something like that if we are going to compete in the world, and 

I just urge you all to be thinking about that. 

I would like to figure out some way for you to help me, help us 

together, figure out a way so we can measure our progress. How 

well are we doing in getting China to live up to the standards that 

we all want China to live up to economically, whether it is procurement code accession, whether it is IP adherence, whatever it might 

be. But, as you can tell from all the questions here and all the 

points made, this is getting to the point where it is beyond just 

talk. We just need action. I am going to keep working. I am going 

to find a solution here. 

Senator Wyden? I have to leave now. Senator Wyden, you can 

wrap up. 

Senator WYDEN. Thank you very much, Mr. Chairman. I will not 

be long. 

Secretary Locke, you will be pleased, we can go back to discussing trade here for a few minutes. I want to ask you about the 

question of antidumping and countervailing duty orders. Evasion of 

antidumping and countervailing duty orders is obviously a serious 

and growing problem, and I think we know that the Chinese are 

among the most common violators of laws in both of those areas. 

Of course, without adequate enforcement, American firms are going 

to continue to lose business and jobs to unfair imports. 

Last month, Commissioner Bersin was up, and he told us that 

enforcement of the trade laws, particularly in those two areas, antidumping and countervailing duties, is going to be an especially important part of his work. 

Secretary Locke, what are your plans to work with Commissioner 

Bersin to further prevent the evasion of our unfair trade laws? 

Secretary LOCKE. As Chairman Baucus indicated, and as Ambassador Kirk indicated, when we have tools, we have to use them. As 

I noted in the opening statement, the number of antidumping and 

countervailing duty cases this year exceeds last year’s by almost 50 

percent. When we impose those antidumping margins, it is important that they are followed. 

We have received some reports of companies in China openly trying to evade that by routing their products through another country and having it marked as coming from that other country to 

avoid paying of those duties, so we are working with the Customs 

and Border agents and that office to really try to share information. 

When we learn of this—whether it is through websites or advertisements within China or elsewhere, any other country that tries 

to do this—we need to alert and work with Customs and Border 

officials so that we are watching for these items coming on the 

docks and coming in the various ports so that we can impose those 

duties. 

31 

Senator WYDEN. The other question I wanted to ask you, Secretary Locke, involves green energy and essentially green goods. 

Now, my office recently put out a report that indicates that U.S. 

exports of a number of these environmental goods seems to be overstated, accounting for roughly 10 percent of previous estimates. 

Now, given the fact that China and a lot of our competitors are 

already pushing very, very aggressively and very hard to get these 

markets, it seems to me, first, if we are going to achieve the President’s objective to double exports in the next 5 years, and particularly consummate his agenda for green energy, we have to tap 

these markets. We are not going to be able to do it if we cannot 

even track how we are measuring our ability to get these green 

goods into promising markets. What is going to be done to at least 

improve how we measure green goods trade? 

Secretary LOCKE. Well, the Census Bureau does more than just 

conduct the decennial Census. The Census Bureau actually is a repository of a whole host of statistics and economic figures, surveying companies as well as individuals. Part of their job and part 

of their mission has involved cataloguing green jobs and the green 

economy. They came out with a report just recently trying to chronicle exactly the extent of the green economy. So we are working 

with them now, and I think we should be using their definitions. 

Part of it is a reporting—— 

Senator WYDEN. So we will get a better system to ensure that 

we accurately measure green goods trade? 

Secretary LOCKE. Given the work that the Census Bureau has 

done, we think that we are in a better position to more accurately 

document export of green jobs. I think it has been a problem of 

companies having different definitions so, when they report, whether to their trade associations or the Commerce Department, their 

export of what they call green goods, those definitions are not necessarily consistent. Now with the work of the Census Bureau and 

the report issued by them, I think we will have greater consistency 

so that companies are able to report things into the right categories. 

Senator WYDEN. Well, what we found is that the evidence with 

respect to our exports of environmental goods suggests that we 

were overstating what we were sending into these markets, and, if 

we are overstating what we are sending and we already know we 

are lagging behind, we have a big problem. So I need your office 

to keep me apprised of that. 

Secretary LOCKE. It may turn out that we are actually exporting, 

but the item or the service may not actually be a green item or a 

green service. It is still an export, but it may be in the wrong category. But, with the work of the Census Bureau trying to have 

tighter definitions and better survey analytical data, we hope that 

we will have a more accurate description. 

Senator WYDEN. As you and I know, in the real world of the Pacific Northwest, this is a jobs issue. We are making a huge push 

to get our wind turbines and solar panels into these countries. A 

prerequisite to getting this done is to be able to track these numbers accurately. So I am going to be following up with you on this. 

To me, it is an essential issue if we are going to turn this around. 

32 

One question for you, Ambassador Kirk. We all are reading these 

reports about how China is out-performing the United States in 

this space, in renewable energy, in green goods, and the various 

products that relate to energy efficiency. You are going to be the 

point man in turning this around. Can you update us on specific 

progress that you have made, certainly with the most recent negotiations, but also I would like to have you outline, for example, 

what specifically you believe will be accomplished between now and 

the end of the year that lets us tap this market. 

Ambassador KIRK. Well, first of all, I want to be clear. I wish I 

was the point person on this. We have the lead responsibility in 

terms of negotiating our new trade agreements, whether it is the 

Trans-Pacific Partnership, working through our partners in APEC 

and others, to try to promote and encourage the movement of these 

environmental goods and services, and particularly the lowest tariffs and barriers, and we will be doing that. 

Well, as you mentioned in your earlier comments, we have a 

great opportunity through this Trans-Pacific Partnership in the 

next round to have a further expansion and deepening of that. But 

this is an area where the coordination and cooperation that we 

have across the administration works quite well. 

Secretary Locke has been perhaps the most energetic advocate of 

our developing a green economy and, working through our export 

initiative, has absolutely taken the bull by the horns, so to speak, 

to make sure that we deal with the issue of our lack of capacity 

in this so that we can create the jobs that are so desperately needed, not just in the Pacific Northwest, but when I had a chance to 

visit Ranking Member Grassley’s district in Iowa earlier, he has a 

company that was formerly involved in making Maytag washing 

machines, and they are now making the blades for some of these 

wind turbines. You have companies and manufacturers from Texas 

and Michigan. This can be a real job-creating industry if we manage this appropriately, and we are going to do that across the administration. 

If I might, Senator Wyden—I know our time is coming to a 

close—I did want to respond to one thing that Chairman Baucus 

said, and I want to make it absolutely clear. This administration 

is acutely focused on the needs of Americans to find the jobs that 

we so desperately want to accompany this economy recovery. We 

believe having a smart, thoughtful, aggressive export policy is a 

way to do that. 

We share the concerns of this committee about some of our challenges with China, but I want to make sure we do not give the 

American public the impression that it would be in the best interests—economic interests—of the United States of America to withdraw from the global trading community. Ninety-five percent of the 

world’s consumers live someplace else other than the United 

States. 

The fastest-growing region economically, as you noted, is in the 

Asia Pacific Rim, and then including China, India, Russia, and 

Brazil. It is critically important that we deal with the issues that 

we address, but at the same time that we also continue to remind 

the American public that the future of our economy, the future of 

our economic well-being for our children, lies partly in our ability 

33 

to continue to relate in a commercial way and sell Americans’ 

goods, services, and agricultural products to the rest of the world. 

We look forward to working with you to make that happen. 

Senator WYDEN. Let me just respond, Mr. Secretary, to this 

point, because I want to stick up for the chairman on this. I can 

tell you, I have never, ever heard Chairman Baucus talking about, 

to use your words, Mr. Ambassador, ‘‘withdrawing from the global 

trading economy.’’ 

Ambassador KIRK. And I did not mean to suggest that he did. I 

want to make sure that I did not. 

Senator WYDEN. I want to make it clear that we are talking 

about how we are going to tap these opportunities. I listened to the 

words that you and the Secretary used. They are important. Particularly in trade policy, you have to listen to the details. 

You know I am an admirer of yours, but I want to disagree profoundly with something you said. You said that the process—in 

your words, the ‘‘coordination’’—is working quite well in this area. 

Mr. Ambassador, I think what you are hearing from the Senators 

is, we do not think the coordination is going particularly well. We 

cannot figure out who is accountable. If you look at the product, 

what we know, the product in the area of green goods, and particularly exporting, these value-added products, we continue to fall behind. 

Report after report after report of independent analysts says that 

in the green goods area we are falling further behind. So I say, to 

someone I admire and respect, when you tell me the process, to use 

your words, ‘‘is working quite well,’’ I have to tell you, I have a different opinion. Now, I think we are up to changing it. We are going 

to work with you to get this done. But, if we do not make improvements in this area, in a State like mine that is consistently close 

to 11 percent unemployment, we are not going to be able to turn 

this around. 

So, I want to let Secretary Locke chime in on this. But both with 

respect to anybody around here withdrawing from the global trading economy: not on our watch. And certainly with respect to coordination, I want the record to show that I think we have to do 

a lot better job. We cannot say it is working well when we are falling behind in this way. 

Secretary Locke? 

Secretary LOCKE. Thank you very much, Senator Wyden. I just 

do want to point out that at the most recent JCCT meeting the 

Chinese did agree to remove local content requirements on wind 

turbines. Just last month, I came back from a first-ever clean energy trade mission to China, and we were successful in helping 

some medium-sized and small-sized companies, including some 

from the Pacific Northwest, secure over some $20 million in sales, 

much more than they had ever anticipated prior to going on the 

trip. 

The focus of Ambassador Kirk and myself has been in all these 

meetings with the Chinese officials to level the playing field to 

make sure that American companies have fair access, the same access that the Chinese companies have. All we want is a level playing field. 

34 

But let me tell you that, with respect to how do we increase the 

jobs, especially in the clean energy field, the Chinese are spending 

some $9 billion a month investing in the clean energy sector, energy efficiency, and alternative energy. They are doing this—and I 

think this is the sentiment of the members of your committee—not 

just to address their greenhouse gas emissions or to meet their energy needs, they are trying to become the world’s supplier of alternative energy and energy efficiency. 

We have too many U.S. companies that excel in this technology, 

but they are under-performing simply because we do not have a 

clear U.S. energy policy. Too many companies, too many investors 

are sitting on the sidelines waiting for a clear signal from the U.S. 

Congress, or the U.S. Government, quite frankly, in terms of policy. 

Companies, investors, shareholders do not want to invest in technology A if ultimate U.S. policy supports technology B. In the 

meantime, too much capital is sitting on the sidelines. 

If we do not move quickly—and I know you support a U.S. energy policy—the longer we wait, the farther ahead the Chinese, or 

the Germans, or the Danes will be in terms of the next economic 

opportunity of the 21st century: clean energy. 

Senator WYDEN. Let me just close with this, because I think this 

sums it up. We unquestionably see these signs of progress in one 

area or another. The fact is, we continue to fall further behind. 

China is imposing tariffs of up to 30 percent on some green goods. 

This is flagrant protectionism. Flagrant protectionism. I want to 

see the administration more aggressively get those barriers visible. 

The public needs to know about it, and put the bully pulpit behind 

getting them changed. 

I just look at these negotiations. Secretary Geithner sat where 

you all are I think about a week or so ago. We asked him about 

indigenous innovation. He said that there were various agreements 

being discussed, but the highlight was essentially that China was 

going to move into the world procurement effort as part of the negotiations. I said, what an example of slow-walking. They promised 

that 10 years ago. 

Yet, a Secretary sits at the witness table and says that is what 

we are looking forward to. They are going to join the world procurement organization. So, we need to have a much more aggressive effort. I acknowledge what Secretary Locke has said about examples 

of one sort or another, but what is indisputable is we are falling 

further behind. 

With China imposing tariffs of up to 30 percent on some green 

goods, I want—as the chairman of the Trade Subcommittee and 

somebody who has consistently, to use your words, Mr. Ambassador, worked to expand the global trading system, because I think 

trade is a democratizing force. I think it is good for workers. I 

think it helps generate markets for exporters. Those products are 

good for people around the world, but we have a lot of heavy lifting 

to do. We will be following this up with both of you. 

Unless either of you have anything you would like to add, it has 

been a long, long afternoon, and we will excuse you at this time. 

Ambassador KIRK. We thank you for your leadership and look 

forward to working with you. 

Senator WYDEN. Thank you for yours, Mr. Ambassador. 

35 

Secretary LOCKE. Thank you very much. 

Senator WYDEN. And yours, Mr. Secretary. 

The Senate Finance Committee is adjourned. 

[Whereupon, at 5:01 p.m., the hearing was concluded.] 

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