line with Premier Wen Jiabao's goal of devel-
There are many signs of growing hostility
oping "an exchange rate system that is more
toward China, with the PRC often used as a
market-oriented and flexible."32 Its success
scapegoat for U.S. domestic problems. Repre-
sentative Tancredo has introduced legislation
will depend on whether China relaxes ex-
(H.R. 1450) calling for "additional tariffs" on
change and capital controls and liberalizes
"any nonmarket economy country until the
interest rates. Washington should be patient
President certifies to the Congress that that
with China. Only 13.5 percent of U.S. imports
country is a market economy." He would then
in 2004 came from China, so even a 20 percent
earmark those tariff revenues for the "Social
appreciation of the yuan would reduce the
Security trust funds."30
trade-weighted value of the dollar by less than
3 percent. Slapping prohibitive tariffs on the
Likewise, the passage by the House on July
Chinese, on the other hand, would injure
27 of the U.S. Trade Rights Enforcement Act
American firms operating in China, harm U.S.
(H.R. 3283) is a step backward for U.S.-China
consumers, slow economic growth, and
relations. Although that act is unlikely to
endanger U.S.-China relations over the medi-
become law, it "authorizes the application of
um to long term.
the U.S. countervailing duty [CVD] law to ex-
ports from nonmarket economies such as
China." Nonmarket economies are already
Engagement versus
subject to anti-dumping law, which in most
Confrontation
cases unfairly penalizes China by using prices
in other developing countries such as India to
determine if China is selling at "below cost."
The combination of animosity toward
Penalties are then assigned. The arbitrary and
China and ignorance about energy markets
discriminatory nature of this practice is well
witnessed on Capitol Hill poses a serious risk
known.31 Using CVD law would simply in-
to the policy of engagement that has worked
to advance China's private sector and given
crease protectionism in the global economy,
millions of people the opportunity to exit the
not advance China's march toward a true mar-
state sector and escape poverty. Eventually,
ket economy.
the growth of China's middle class will create
Another prime example of protectionist leg-
still more pressure for political reform that
islation aimed directly at China is Congress's
will advance fundamental human rights.
threat to impose punitive tariffs of 27.5 percent
Indeed, that is already occurring, as evi-
on Chinese exports to the United States if
denced by the recent amendments to the
Beijing does not revalue the yuan by that
PRC Constitution that give greater protec-
amount. Action on the Schumer-Graham bill
tion to private property rights.33
(S. 295) has been temporarily delayed because
of the recent change in China's exchange rate
Alarm over China's economic and military
regime, in which China allowed the yuan to
rise is often justified by reference to China's
appreciate by 2.1 percent and moved to a man-
poor human rights record, but that record will
aged float by pegging to a basket of currencies.
not be improved by denying the Chinese peo-
Many members of Congress, however, still feel
ple the right to trade, which itself is an impor-
Countries that
tant human right.34 Countries that are left
that China is engaging in unfair trade practices
are left outside
by undervaluing its currency. So we can expect
outside the global trading system, such as
the global trading
Sen. Charles Schumer (D-NY) and his col-
Cuba and North Korea, have shown no inter-
league Sen. Lindsey Graham (R-SC), along
est in advancing human rights and have per-
system have
with other members of Congress, to renew
petuated poverty. Do we want that for China?
shown no interest
their efforts.
What China needs is less government and
China's new exchange rate regime is a far
more markets. And the surest way to achieve
in advancing
cry from the free-market system advocated by
that result is to strengthen the policy of
human rights.
U.S. Treasury Secretary John Snow, but it is in
engagement, not to threaten China with sanc-
7