WASHINGTON, D.C. – Ahead of President Barack Obama’s meeting with Chinese President Xi Jinping, U.S. Sens. Sherrod Brown (D-OH) and Richard Burr (R-NC) today wrote to President Obama to express concerns over China’s state-controlled economy and its adherence to international trade obligations.

In the letter, the Senators warn that the U.S.-China Bilateral Investment Treaty (BIT) will earn limited Congressional support if it fails to acknowledge China’s record of noncompliance with trade law. The Senators would also like the treaty to be conditioned on economic reforms that will move China away from a state-controlled economy and toward a market-driven economy.

“In the absence of any meaningful consequences, China’s government has repeatedly demonstrated that it will adhere to international trade law only when it is in its own interest, not because the WTO accession agreement requires it or because the U.S. government has urged compliance,” said the Senators in their letter. “China’s unwillingness to grant reciprocal market access and a continued pursuit of export-driven economic growth should not be rewarded with expanded access to the U.S. market.  China must demonstrate that it is on the path to adopting sustained market-driven reforms before the U.S. enters into any further agreements. Unfortunately, all signs and evidence continue to point to a state-controlled economy and financial system.”

Full text of the letter is available below.

Dear President Obama:

In advance of Chinese President Xi Jinping’s upcoming visit to the United States, we write to underscore our concerns with China’s escalating control over its economy and the resulting harm to global markets and the U.S. economy.  It is our understanding the U.S.-China Bilateral Investment Treaty (BIT), among other trade-related topics, will be discussed.  We urge you to convey to President Xi that any new bilateral agreements will be conditioned on China’s compliance with existing commitments and a move away from a state-controlled economy to one driven by private market influence. 

China’s state ownership and control of key industrial sectors – including steel, glass, paper, aluminum, and tires – has led to global overcapacity in each of these sectors and had major consequences for U.S. workers and the U.S. market.  China’s failure to abide by market principles is worsening.  Chinese imports have surged in the U.S., and market prices have been severely depressed.  American workers have been laid off as a result.  Chinese government promises to close excess factory capacity and scale back production in line with market-driven demand have gone unfulfilled.  In fact, forecasts predict the overcapacity problem will get worse in the near future.

Ongoing state intervention in currency exchange rates, marked by a four percent devaluation of the renminbi last month, flies in the face of repeated promises by China’s leadership at the Strategic and Economic Dialogue to increase transparency and reduce intervention in currency exchange markets.  Millions of Americans have lost their jobs as a result of currency manipulation, yet China has not faced meaningful consequences and remains undeterred from intervening in exchange rates to boost exports. 

A host of other anti-competitive domestic industrial policies, such as forced technology transfer requirements and China’s anti-monopoly law, are emblematic of an economy driven by state control rather than private market influence.  These policies continue to limit U.S. access to China’s market and are in direct conflict with China’s World Trade Organization (WTO) commitments.

In the absence of any meaningful consequences, China’s government has repeatedly demonstrated that it will adhere to international trade law only when it is in its own interest, not because the WTO accession agreement requires it or because the U.S. government has urged compliance.   China’s unwillingness to grant reciprocal market access and a continued pursuit of export-driven economic growth should not be rewarded with expanded access to the U.S. market.  China must demonstrate that it is on the path to adopting sustained market-driven reforms before the U.S. enters into any further agreements.  Unfortunately, all signs and evidence continue to point to a state-controlled economy and financial system.   

American workers and companies have already paid a heavy price for China’s consistent disregard of its international commitments since joining the WTO nearly 15 years ago.  We have little confidence that an investment treaty will lead China to a newfound sense of obligation to fulfill its promises.  And expanded access to our market without securing meaningful reform of China’s non-market economy will only lead to more harm for U.S. workers and businesses.

We urge you to make China’s compliance with international trade law the top U.S. trade priority when you meet with President Xi.  We understand some in the Administration believe the BIT negotiations are a good opportunity to address China’s trade infractions, but we have serious concerns with the strategy of using further engagement to obtain compliance with previous commitments.  Congressional support for a U.S.-China BIT will be extremely limited unless the treaty acknowledges this past record of defiance and unless China adopts and maintains long-lasting, meaningful economic reforms.

Thank you for your attention to this important matter.  We look forward to working with you to create a level playing field for American workers and businesses.

###