Gregg Hitt reports that Obama is talking tough about Chinese competition in the run-up to election day: China-Trade Issue Thrust Into Races as Vote Nears. This story concerns a letter sent by Obama in response to an issues questionnaire sent by a textile interest group. The group asked six questions:
The NCTO questionnaire asked the candidates viewpoints on six key textile issues: 1) a monitoring program for China following the removal of safeguards on January 1st; 2) support for the yarn forward rule in free trade negotiations; 3) support for the “Buy America” textile provisions in the Berry Amendment; 4) actions against China currency manipulation; 5) stronger trade enforcement efforts, and 6) textile issues in the Doha Round.
Democratic Sen. Barack Obama is the latest candidate to ratchet up the China rhetoric. In a letter released Wednesday by the National Council on Textile Organizations, a trade group, the Illinois senator vowed to address industry complaints that China is manipulating its currency to gain a competitive advantage in the global marketplace. [Here's a copy of Obama's letter to the Council: Obama Backs Key Textile Policy Positions - Ben]
Sen. Obama said China's massive trade surplus with the U.S. is a direct result of "manipulation of its currency's value," and stressed "China must change its policies, including its foreign-exchange policies." Sen. Obama said China's economy must rely less on exports and more on domestic demand for growth. He said he "will use all diplomatic means at my disposal to induce China to make these changes."
Obama limits himself to refering to "all diplomatic means," and doesn't say anything about seeking legislation to impose tariffs on Chinese goods if they do not comply.
For years, the Bush administration has refused to formally declare China a currency manipulator. Nevertheless, the Bush administration, with modest success, has nudged Beijing to raise the value of its currency.
In the campaign of John McCain, senior economic adviser Doug Holtz-Eakin said the Arizona senator "is experienced enough to recognize that the relationship with China should not be reduced solely to the value of its currency." Mr. Holtz-Eakin said Sen. McCain favors engagement with China across a range of issues, including international economic agreements.
Sen. Obama's commitment comes as he makes a strong play for North Carolina, where the textile industry is still a big part of the local economy, and concerns about competition posed by China run high among local voters.
Among other things, the senator also promised to closely monitor textile shipments from China, once import limits on a wide range of Chinese-made apparel expire at the end of the year. And he promised to make use of trade-remedy laws to protect industries, like textile producers, if they are threatened by unfair competition from abroad. "I am especially aware of the trade challenges faced by those working in our textile industries," he said.
Additionally, on textiles, the letter expresses support for "the requirement in the Berry Amendment that the Defense Department procure only textiles made in the United States. I also support inclusion of the yarn forward rule in free trade agreements..." The Berry Amendment requires the Defense Department to give procurement preferences to domestic goods. A "yarn forward" rule is a rule of origin used in trade agreements. Here is the explanation from the Senate Finance Committee report on the U.S.-Australia agreement:
Under a ‘‘fiber forward’’ rule, the fiber must come from one of the Parties in order for the finished product to qualify for preferential treatment under the Agreement. Under a ‘‘yarn forward’’ rule, the fiber may be imported but the yarn must be produced in one of the Parties in order for the finished product to qualify for preferential treatment under the Agreement.
So under a "yarn forward" rule, the yarn used in textiles has to come from either the U.S. or Australia if the product is to qualify for the reduced tariffs.
Edited Octber 29 to add link to letter. Title and text edited for tone, to add the questions addressed to Obama, and to add content on Obama's textile commitments.
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