STATEMENT

Contact: Tracy Cullen
(202) 974-5282
Email: tcullen@socplas.org

SPI STATEMENT ON THE GRASSLEY-BAUCUS TRADE ENHANCEMENT BILL

WASHINGTON, D.C. (March 30, 2006) – Senators Charles Grassley (R-IA and chair of the Senate Finance Committee) and Max Baucus (D-MT and the committee’s ranking member) recently introduced the “U.S. Trade Enhancement Act of 2006,” as a means to resolving “contentious currency and trade enforcement issues between the U.S. and other countries,” particularly China. If enacted, the bill would overhaul the existing legal framework under which the Treasury Department analyzes international exchange rate policies of major U.S. trading partners. Whereas under current law, Treasury is authorized to cite countries for engaging in “currency manipulation,” the Grassley-Baucus bill would require finding that a currency is “fundamentally misaligned” with macroeconomic conditions. This change is intended to provide a clearer definition for Treasury to examine and take concrete action against exchange rate practices that adversely impact U.S. economic interests. The bill also provides specific penalties that Treasury may impose if a trading partner does not adopt adequate reforms to address the fundamental misalignment of its currency in a timely manner. To facilitate Treasury’s analysis, the bill also creates a new Advisory Committee on International Monetary and Financial Policy, which, along with the Chairman of the Federal Reserve, Treasury must consult when conducting its analysis. Finally, the Grassley-Baucus bill would also elevate the USTR General Counsel to a Senate-confirmed position focused on trade enforcement, establish a new interagency Trade Enforcement Working Group, and require USTR to report on and prioritize its trade enforcement activities.

SPI President William R. Carteaux issued the following statement:

“The Society of the Plastics Industry, Inc. (SPI) and its member companies applaud Senators Grassley and Baucus for introducing legislation that aims to strengthen existing trade laws that address foreign exchange rate practices of U.S. trading partners. The bill enables the federal government to act more aggressively to address distortions created by exchange rate policies of our major trading partners, like China. Treasury will have a better tool to react to China’s significantly undervalued yuan – more than relying on diplomatic pressure that has not yet yielded satisfactory results.

“However, we are disappointed that the Grassley-Baucus bill does not allow the Commerce Department to initiate countervailing duty investigations against subsidies granted by non-market economies such as China. The House leadership has already passed a bill, and we have been waiting for the Senate to move forward on the companion bill introduced by Sen. Susan Collins (R-ME), S. 1421. Although S. 1421 needs certain revisions, SPI and its member companies have fully supported S. 1421 and had hoped it would be incorporated into the Grassley-Baucus bill. “

The omission of the subsidies provision is problematic for the U.S. plastics industry. It keeps the status quo in place where manufacturers have no remedy against harm caused by the competitive advantage conferred on subsidized Chinese exports to the U.S. market. Last year, our industry had a $5 billion bilateral deficit with China. The deficit in plastics product trade with China reached a record high of $6.4 billion. Many of our members believe that strengthening existing trade laws to address Chinese subsidies, such as export subsidies conferred through the undervalued yuan, can help restore balance to U.S.–China plastics trade.

“While we are pleased that the Senate leadership is working to strengthen U.S. law in terms of foreign exchange rate practices, SPI will continue to urge Senator Grassley and the Senate Finance Committee to pass legislation that extends the subsidies law to China and other non-market economies.”

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Founded in 1937, The Society of the Plastics Industry, Inc., is the trade association representing one of the largest manufacturing industries in the United States. SPI's members represent the entire plastics industry supply chain, including processors, machinery and equipment manufacturers and raw materials suppliers. The U.S. plastics industry employs 1.3 million workers and provides nearly $345 billion in annual shipments.

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