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Commentary

China & the US Congress: Patience is a Virtue

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By Michael Maughan – The 110th Congress will play a uniquely important role in the complex and dynamic relationship between the U.S. and China. As a result of the shift of power to the Democrats and a combination of political events, China will be the recipient of greater congressional attention than was the case in the 109th Congress. Although the impetus of this attention may commence along traditional Democratic criticisms of China’s human rights violations and unfair trade practices, there appears to be considerable support across the aisle for US-China trade legislation. When it comes to dealing with economic imbalances with China, members of both parties are anxious to find solutions that will allay the concerns of their constituents who view China as an economic and strategic competitor. Consequently, renewed congressional efforts to seek legislative solutions will play a significant role in the greater bilateral relationship over the next two years.

 

Historically, the US Congress has always had a reactive and problem-centric focus when it comes to pressing foreign policy and national security issues. This pattern is evident in the relationship with Congress vis-à-vis China. Members of Congress tend to pay only episodic attention to issues involving China with a focus on immediate crises and short-term problems. In the case of China and many other issues, Congress is highly sensitive to geopolitical events and domestic perceptions. The 110th Congress is no exception.

 

Since the arrival of the 110th US Congress in January, a combination of events has set China and Capitol Hill on an ominous course. On January 11, 2007, Beijing successfully conducted an anti-satellite (ASAT) test with no advance warning and no formal admission for nearly one week following the test. On March 4, 2007, the Chinese government announced a 17.8 percent increase in military spending, the biggest increase in five years. Whether or not Beijing’s decisions to go forward with the ASAT test and to increase its military budget were intentional, they have sharply redirected skeptical attention on China within Congress. Undoubtedly, the impact of these events on members of Congress will go beyond U.S.-China military policy, and influence their perspectives on the economic and political relationship with China. Moreover, they have shaken the confidence of those who might have otherwise given China the benefit of the doubt.

 

In December, prior to the commencement of the U.S.-China Strategic Economic Dialogue meetings, Secretary Paulson met with over twenty members of the U.S. China Congressional Working Group which is an informal forum that seeks to build diplomatic relations with China and make the Congress more aware of U.S.-China issues. During the meeting, Secretary Paulson outlined his call for more currency flexibility on the Chinese side and restraint against protectionist actions on the U.S. side. Members from both parties were clearly unconvinced and losing patience as they reacted with pointed questions regarding currency manipulation and unfair trade practices. Although Congress has always been concerned about the economic imbalances between the U.S. and China, the recent ASAT test and military budget increases have clearly created a new sense of urgency on Capitol Hill to seek legislative solutions to the economic problems.

 

Members of Congress face questions from their constituents along the lines of “What are you doing about China?” This question reflects a vague but deeply-felt sense among the American people that China poses a number of substantial challenges to US interests, both at home and abroad. With the current U.S. trade deficit with China at an all time high of $232.5 billion and with predictions of nearly 3 million jobs lost in the manufacturing sector as a result of unfair trade practices, members are feeling the heat from constituents in their districts. So far, agendas of the 110th Congress are reflective of this. In the powerful Ways and Means Committee, hearings are underway discussing unfair trade practices, WTO compliance, and non-market economies. Similar hearings will be held in the House and Senate Foreign Relations Committees. Legislatively, the controversial Shumer (D-NY) – Graham (R-SC) bill, which called for a 27.5% tariff on Chinese imports, may resurface in some form in the Senate. A similar bill in the House may also be introduced. Beside concerns on currency and trade, intellectual property and human rights violations are drawing considerable Congressional attention as well. Finally, members may be interested in tightening up the Iran-Libya Sanction Act in response to China’s investment in energy projects in Iran.

 

At first glance, China appears to be in for a rough ride on Capitol Hill. Rhetoric will be characterized by increasingly strident calls for the White House to take a tougher line with China to revalue its currency and to close the trade deficit with China. In the cases of unfair trade practices and intellectual property rights, it appears that the Administration is willing to take these battles on. Last week, the Administration responded to Congressional pressure by implementing 10-20% duties on all Chinese coated paper imports. The Administration further showed its resolve this week by filing two cases with the WTO that challenge China’s enforcement of anti-piracy and distribution laws. The Democratic majority will also likely place greater emphasis on human rights in China with a focus on religious freedom, Tibet, and internet and media freedom. They are likely to bring more attention to these issues through Congressional oversight hearings and by issuing non-binding resolutions without formal legislation.

 

The exception to this will be in the area of trade and monetary policy, where legislation like the one authored by Reps. Artur Davis (D-AL) and Phil English (R-PA) targeting non-market economies has a distinct possibility of passing in the House with a slightly lesser chance in the Senate. A similar bill, authored by Reps. Duncan Hunter (R-CA) and Tim Ryan (D-Ohio), targets China’s currency policy and would define foreign currency misalignment as an illegal export subsidy actionable under US trade law. Both bills would allow the U.S. to impose countervailing duties on any country that is determined to be either a non-market economy or a currency manipulator. If these bills make it to the floor, how the Congress votes could dramatically influence the immediate direction of the US-China relationship.

 

In the long term, not all hope for the relationship between the US Congress and China is lost. Congressional calls for the Administration to take a tougher line will be tempered by a Treasury Secretary who is focused on cultivating a constructive long-term economic relationship with China. Initiatives within the US China Congressional Working Group are also underway to improve the mutual understanding between Capitol Hill and Beijing by developing alternate channels of communication. Despite the perception, it is important to remember that Congress remains only one facet of the deep and evolving bilateral relationship. In the coming two years, China will need to be patient with Washington. As the Administration’s strategy to deal with a rising China evolves, it will struggle to balance increasingly protectionist sentiments at home regarding China and its impact on the domestic economy. The more patience that Beijing has with this dynamic, the better it will be able to ride out the turbulent rhetoric emanating from Congress and keep both nations focused on the long term relationship. A healthy dose of restraint within the US Congress couldn’t hurt either.

 

 


Michael Maughan is a Congressional Fellow at the Stimson Center working on the Security for a New Century (SNC) Project. This project is designed to inform and expand the dialogue within Congress on security issues across political lines.

 

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