October 14,2003

Currency Letter to President Bush

(WASHINGTON, D.C.) U.S. Senator Max Baucus today joined Sens. Tom Daschle (D-S.D.), Paul Sarbanes (D-Md.), and others in sending a letter to President Bush calling on the Administration to initiate negotiations with countries such as China and Japan to end the manipulation of their currencies.

Full text of the letter follows.

October 14, 2003

President George W. Bush
The White House
Washington, D.C. 20500

Dear Mr. President:

We are concerned that China, Japan, and other countries are intervening in currency markets to keep
the values of their currencies low. By doing so, they artificially depress the prices of their exports
and raise the prices of their imports, thereby harming the competitiveness of U.S. goods. This
practice is injuring the U.S. manufacturing sector. We are deeply concerned that 2.5 million
Americans have lost manufacturing jobs since 2001. We urge you to take action to stem any further
manufacturing job losses.

As you know, Section 3004 of the Omnibus Trade and Competitiveness Act of 1988 requires the
Secretary of the Treasury to determine on an annual basis whether any trading partners manipulate
the values of their currencies to gain an unfair trade advantage for their products. If such a
determination is made, the Secretary is required to initiate negotiations on an expedited basis for the
purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between
their currencies and the dollar to eliminate the unfair trade advantage. Section 3005 of the 1988
Trade Act requires the Secretary to report on his actions pursuant to Section 3004 as part of his
annual report to Congress on international economic and exchange rate policy. We expect this
report to be delivered tomorrow, October 15, as required by law.

Given Secretary Snow's visit to China to discuss its currency manipulation, his statements at the G-
7 meeting in Dubai last month, and your public statements on the matter, we expect the report to
find that certain countries, including China and Japan, are indeed manipulating the values of their
currencies to gain unfair trade advantages. We urge Secretary Snow to make such a determination.
This finding will trigger the requirement that Secretary Snow initiate negotiations with these
countries to end the manipulation of their currencies. We believe that such negotiations are the best
course for addressing this issue in a timely manner.

We also urge you to initiate an investigation under Section 302(b) of the Trade Act of 1974, which
empowers the United States Trade Representative to investigate whether the actions of any country
violate a trade agreement with the United States. In this case, it is clear that currency manipulation
violates the General Agreement on Tariffs and Trade.

A country acceding to the WTO agrees that it "shall not, by exchange action, frustrate the intent of
the provisions of this Agreement." GATT 1994 Art. XV, & 4. When a country intervenes in
currency markets to depress the value of its currency to keep the prices of its exports low and the
prices of its imports high, a country in effect provides an export sub sidy, a practice explicitly
forbidden in Article XVI. The actions of China, Japan, and others in purposefully depressing their
currency values therefore frustrate the intent of the GATT and violate Article XV, & 4.

We implore you to take prompt and forceful action to address this issue. The United States has lost
some 3.2 million private sector jobs since early 2001, including 2.5 million manufacturing jobs.
More American jobs are in jeopardy. Doing nothing puts these jobs, our economy, and our future at


Senator Tom Daschle
Senator Paul Sarbanes
Senator Max Baucus
Senator Charles Schumer
Senator Debbie Stabenow
Senator Evan Bayh
Senator James Jeffords

cc: Secretary Snow