[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
U.S. TRADE POLICY AGENDA
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MARCH 21, 2018
__________
Serial No. 115-FC08
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Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California SANDER M. LEVIN, Michigan
DAVID G. REICHERT, Washington JOHN LEWIS, Georgia
PETER J. ROSKAM, Illinois LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida MIKE THOMPSON, California
ADRIAN SMITH, Nebraska JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota RON KIND, Wisconsin
KENNY MARCHANT, Texas BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee JOSEPH CROWLEY, New York
TOM REED, New York DANNY DAVIS, Illinois
MIKE KELLY, Pennsylvania LINDA SANCHEZ, California
JIM RENACCI, Ohio BRIAN HIGGINS, New York
PAT MEEHAN, Pennsylvania TERRI SEWELL, Alabama
KRISTI NOEM, South Dakota SUZAN DELBENE, Washington
GEORGE HOLDING, North Carolina JUDY CHU, California
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan
DARIN LAHOOD, Illinois
David Stewart, Staff Director
Brandon Casey, Minority Chief Counsel
C O N T E N T S
__________
Page
Advisory of March 21, 2018, announcing the hearing............... 2
WITNESS
Honorable Robert E. Lighthizer, Ambassador, United States Trade
Representative................................................. 6
QUESTIONS FOR THE RECORD
Question from Ways and Means Committee Chairman Brady to
Ambassador Lighthizer.......................................... 92
Questions from Ways and Means Committee Ranking Member Neal to
Ambassador Lighthizer.......................................... 93
Questions from Trade Subcommittee Chairman Reichert to Ambassador
Lighthizer..................................................... 98
Questions from Trade Subcommittee Ranking Member Pascrell to
Ambassador Lighthizer.......................................... 99
Questions from Representative Nunes to Ambassador Lighthizer..... 109
Questions from Representative Lewis to Ambassador Lighthizer..... 110
Question from Representative Roskam to Ambassador Lighthizer..... 114
Question from Representative Larson to Ambassador Lighthizer..... 114
Questions from Representative Paulsen to Ambassador Lighthizer... 115
Questions from Representative Black to Ambassador Lighthizer..... 120
Questions from Representative Sanchez to Ambassador Lighthizer... 123
Questions from Representative Sewell to Ambassador Lighthizer.... 124
Questions from Representative Meehan to Ambassador Lighthizer.... 125
Questions from Representative DelBene to Ambassador Lighthizer... 126
Question from Representative Chu to Ambassador Lighthizer........ 127
Questions from Representative Jason Smith to Ambassador
Lighthizer..................................................... 128
Questions from Representative Walorski to Ambassador Lighthizer.. 129
Questions from Representative LaHood to Ambassador Lighthizer.... 131
SUBMISSIONS FOR THE RECORD
American Farm Bureau Federation.................................. 133
American Fuel & Petrochemical Manufacturers (AFPM)............... 138
Air-Conditioning, Heating, & Refrigeration Institute (AHRI)...... 144
Berry Global, Incorporated....................................... 150
Center for Fiscal Equity......................................... 152
Consumer Technology Association (CTA)............................ 156
Flexible Packaging Association (FPA)............................. 158
Learning Resources, Incorporated (LR)............................ 164
National Association of Home Builders (NAHB)..................... 170
National Foreign Trade Council (NFTC)............................ 174
National Lumber and Building Material Dealers Association
(NLBMDA)....................................................... 176
Precious Metals Association of North America (PMANA)............. 182
Small Business & Entrepreneurship Council (SBE Council).......... 185
Association for Accessible Medicines (AAM)....................... 189
U.S. TRADE POLICY AGENDA
----------
WEDNESDAY, MARCH 21, 2018
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to call, at 10:05 a.m., in Room
1100, Longworth House Office Building, Hon. Kevin Brady
[Chairman of the Committee] presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, March 21, 2018
FC-08
Chairman Brady Announces Hearing on
U.S. Trade Policy Agenda
House Ways and Means Chairman Kevin Brady (R-TX), announced today
that the Committee will hold a hearing on the U.S. trade policy agenda
with U.S. Trade Representative Robert Lighthizer. The hearing will take
place on Wednesday, March 21, 2018, in room 1100 of the Longworth House
Office Building, beginning at 10:00 a.m.
In view of the limited time to hear the witness, oral testimony at
this hearing will be from the invited witness only. However, any
individual or organization may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
written comments for the hearing record must follow the appropriate
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which you would like to make a submission, and click on the link
entitled, ``Click here to provide a submission for the record.'' Once
you have followed the online instructions, submit all requested
information. ATTACH your submission as a Word document, in compliance
with the formatting requirements listed below, by the close of business
on Wednesday, April 4, 2018. For questions, or if you encounter
technical problems, please call (202) 225-3625.
FORMATTING REQUIREMENTS:
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call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
business days' notice is requested). Questions with regard to special
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Note: All Committee advisories and news releases are available at
http://www.waysandmeans.house.gov/
Chairman BRADY. Good morning. The Committee will come to
order. Before we get started this morning I just wanted to take
a moment to express my sincerest condolences on the passing
last week of our friend and colleague, Representative Louise
Slaughter. She was truly an institution within this body, and
her candor, intelligence, her humor, and her passion will be
deeply missed.
Today our Committee is honored to welcome back U.S. Trade
Representative Robert Lighthizer to testify on President
Trump's trade policy agenda. Ambassador, thank you so much for
joining us.
Our country was born because of trade. We have led the
world in commerce and trade for the last century. Trade is part
of everything we do as Americans. The freedom to trade is our
greatest economic freedom. So freedom to buy, sell, and compete
anywhere in the world with as little government interference as
possible. Through trade America has built roads and bridges,
towns and cities. We have brought peace, freedom, and hope to
our people and the nations of the world.
At this moment we stand at a crossroads. If we stand still
or worse take the path of isolationism we will abandon our
greatest freedom in the very DNA of what makes us Americans.
There is a better path. We are already seeing benefits from the
historic tax cuts that President Trump just signed into law,
which is increasing America's competitiveness and making us the
best place on the planet to do business in. Our trade policy
must build on that growth.
In the competitive world it is not enough to merely buy
American, we have to sell American to billions of customers
outside America. That is how we help our local businesses and
farmers create American jobs and spur American economic growth.
Mr. Ambassador, America must continue to lead. And we lead and
Americans win when we open up markets for our products and
services through high standard, ambitious and enforceable trade
agreements. This has to be our top priority.
If we don't break open new markets through trade agreements
with countries like Japan, the U.K., and the Trans-Pacific
Partnership 11 we will be left behind. China and Europe will
write the rules, and they will cut American producers and
workers out of other markets. We can't wait any longer while
others pass us by.
I strongly support President Trump's request for TPA
renewal. I look forward to your report showing how you will use
it to negotiate agreements that are consistent with
congressional objectives and good for America as you have set
out to do, Mr. Ambassador.
I am pleased with your progress to modernize NAFTA, the
largest and most successful trading relationship in the world.
U.S. Trade Representatives' office and you, Ambassador, your
team have worked tirelessly to achieve bold and ambitious
standards. I am hopeful we will be able to vote on and pass a
new modern NAFTA for America by year end.
That said, the road ahead isn't easy. Congress wants strong
protections for intellectual property, increased market access
for our dairy farmers and an end to Canada and Mexico's harshly
restrictive customs barriers, such as unreasonably low de
minimis levels. We need workable solutions on rules of origin
and procurement that recognize how Americans benefit from
global supply chains, otherwise we lose out to China. I also
caution that any agreement without a binding dispute
settlement, including investor state dispute settlement, won't
find sufficient support in Congress. Congress explicitly set
out this requirement in TPA knowing it is the only way to hold
trading partners accountable to make sure that strong agreement
you negotiate, Mr. Ambassador, our trading partners will be
held accountable.
America must also lead on China. China's chronic oversupply
in steel and aluminum has put many Americans out of work and
companies out of business. It is a blatant theft of our
company's technology and intellectual property, and it can't be
tolerated. I believe strong enforcement is needed, and I
appreciate President Trump's leadership on holding China
accountable. But we can't do this alone. If we hurt our allies
America will ultimately lose.
Our challenge--every President's challenge is to target
remedies to address true national security risk to eliminate
unfair trade and take into account our entire economy. The
wrong remedy puts significant American jobs at risk. We have to
make sure we don't punish American families and workers for
China's misbehaviors. Oftentimes indiscriminate tariffs are not
the right approach, and before the Administration puts those in
place it also should provide a strong opportunity for public
comments so the effect of these tariffs on our economy can be
properly assessed. It is not about backing down, it is about
hitting the target, which is China and its bad practices, not
our allies or other U.S. sectors.
And finally, I want to be clear, the Constitution vests
Congress with the authority of the U.S. trade policy agenda.
The relationship between Congress and executive branch is a
true partnership in implementing that agenda. We want to
partner with you, Mr. Ambassador, to ensure that America
continues to choose the freedom to trade. America must continue
to lead the world and to find what it means to have an open and
free economy our jobs and our values depend upon it.
Again, Ambassador Lighthizer, thank you so much for being
here today on a snow day. We look forward to your testimony.
And I now yield to the distinguished Ranking Member, Mr.
Neal, for the purposes of his opening statement.
Mr. NEAL. Thank you, Mr. Chairman, and for those of us from
New England, we don't even consider this a snow day.
Thank you, Mr. Ambassador, and I want to welcome you on
behalf of Committee Democrats. Today's hearing is an
opportunity for us to hear from you and you to hear from us
about all of the activity that is happening on the trade front.
Over the past year we have seen a great deal of activity
and commentary from the Administration. We are currently in the
process of renegotiating NAFTA to update it, and more
importantly, to rebalance it. You are also renegotiating the
U.S.-Korea Free Trade Agreement to improve it and to ensure
that it delivers more reciprocal outcomes for U.S. workers,
exporters, and businesses.
The Administration has recently decided to impose tariffs
on steel and aluminum imports under Section 232 and is
currently in the process of deciding on country exemptions and
product exclusions. As we are reading in news reports in a
matter of days the Administration will announce its findings in
the Section 301 investigation into Chinese intellectual
property abuses and may also be prepared to impose substantial
tariffs on imports from China.
The President certainly has tapped into raw feelings in
some important communities about our economy and trade
policies. We have seen in the past months that this
Administration and you personally, Mr. Ambassador, have not
been shy about challenging the status quo.
For many of us we have taken notice of the promises that
the Administration has made to improve U.S. trade policy and to
make it work for all Americans. Many of us in the past have
been skeptical about the promises that have been made for
better enforcement because oftentimes they are big promises,
and we must say we have heard them before. But we have seen
evidence of your commitment. For example, we hear that when you
say that your task is not just to renegotiate NAFTA but to
update it and to fundamentally restructure it to fix important
flaws of the original agreement, flaws that prevented Members
of Congress like me from supporting it originally.
In the tariffs on steel and aluminum imports we recognize
the intention of providing much needed relief to industries and
workers that have called for action for a very long time. But
we also have a lot of questions, and we are watching closely to
determine whether the promises the Administration has made will
be delivered upon, whether that is in NAFTA, the 232 tariffs,
the Korean agreement, or China's 301 investigation.
Finally in the bigger picture, I think it should be clear
to all of us that some of the greatest challenges facing our
economy and our values are being posed by countries that rely
heavily on state intervention and do not operate, despite what
they say on market-based principles. We should all be on the
same team in talking about these challenges. In fact, if we
want to be really effective it seems to me that it will make a
good deal of sense that we should build upon what already has
been happening between Democrats and Republicans as we address
many of these challenges.
I look forward to hearing from you today about your vision
and plan for delivering this Administration's promises on trade
about how we take on global competitive challenges effectively
and how the Administration partners with Congress.
Thank you, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Neal.
Today's sole witness is Ambassador Robert Lighthizer, U.S.
Trade Representative. The Committee, Mr. Ambassador, has
received your written statement. It will be made part of the
formal hearing record. We have reserved 5 minutes to deliver
your oral remarks. You may begin when you are ready, and again,
welcome.
STATEMENT OF HONORABLE ROBERT E. LIGHTHIZER, AMBASSADOR, UNITED
STATES TRADE REPRESENTATIVE
Ambassador LIGHTHIZER. Thank you very much, Mr. Chairman
and Ranking Member Neal, and Members of the Committee. I'm
pleased to be here today.
We at USTR greatly appreciate the expertise of the Members
of this Committee. We're grateful for all the time you give us
in working up truly bipartisan trade policy, the efforts you've
helped us with on NAFTA and the many issues we face.
Before I continue with my statement let me just say since I
generally when I come here complain about the fact that I have
no deputies I, in fact, have deputies now. So I thought it
would be appropriate since they're all going to be senior
members I believe but members of your staffs that I probably
ought to at least have you know who's working for you now
besides me.
Jeffrey Gerrish, maybe if you would stand up, Jeff, is our
deputy for Europe, the Middle East, and Asia. C.J. Mahoney is
our deputy for Africa, China, the western hemisphere, and he's
also going to do investment and services. And he will be our
transparency officer. You'll recall that we selected an
appointed official as our transparency officer. So those are
the two people that I wanted you to focus on, if you would,
since they're brand new.
First I would like to draw the Committee's attention to the
fact that this year the trade deficit in goods and services
rose to $565 billion and in goods alone it was $811 billion. Of
course these numbers there are lots of causes for these
numbers, but the President believes and I also agree that
longstanding trade deficits to some extent reflect market
distortions and that they're having a negative effect on U.S.
workers and businesses.
We also, of course, have a massive trade deficit with China
which we ought to speak about at some point of $375 billion so
the numbers essentially got worse last year. I know that
Members have a variety of views on these figures, but the
President believes that they raise significant concerns. They
indicate that sometimes the global rules of trade make it
harder for U.S. companies to compete and specifically to
export. Trade deficit also indicate that the United States--
that in the United States the cost of globalization are falling
more heavily on blue-collar workers, and this is something that
is bad for the economy and bad for the society. Finally, they
tend to undermine the support for the global trading system, so
trade deficits are a problem.
Quickly I would outline the President's trade agenda.
First, we at USTR will support the President's national
security strategy. If you haven't looked at that I would
recommend it to you. That means that our trade policy will help
to build a stronger America, preserve our national sovereignty,
respond to hostile economic competitors, recognize the
importance of technology and seek opportunities to work with
other countries that share our goals.
Second, for U.S. companies and workers to be competitive in
overseas markets we need a strong and robust economy at home,
and I commend the Committee for the work they did on the tax
cut bill.
Third, we are negotiating trade deals that will work for
all Americans. As Members of this Committee well know, the
President directed us to seek significant changes to NAFTA. We
have already had seven rounds with our partners in Canada and
Mexico, and I believe that we've made a great deal of progress.
We've also begun discussions, as most of you know, with South
Korea on updating KORUS. Now that we have a full team of
deputies, we intend to aggressively pursue other potential free
trade agreements. We have a trade working group with the United
Kingdom. We have told Japan that we're interesting in having a
free trade agreement with them at the appropriate time. We are
prepared to explore the possible countries in Africa and South
Asia who might be appropriate for us to enter into free trade
agreements, and as you said, Mr. Chairman, the President has
asked for the extension of trade promotion authority to
accomplish this.
Fourth, we are enforcing our trade laws. The President
indicated he would use all available trade laws to defend U.S.
workers, farmers, and ranchers against unfair trade, and he is,
in fact, doing that.
Finally, we seek to reform the multilateral trading system.
For too long the WTO has failed to promote trade
liberalization. Too many WTO members view it as a litigation
forum and not as a negotiation forum. In short, USTR under the
direction of President Trump is seeking to build a better,
fairer system of global trade that will lead to higher
standards for all Americans.
Thank you, and I look forward to taking your questions, Mr.
Chairman.
[The prepared statement of Ambassador Lighthizer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Thank you, Mr. Ambassador, and thank you
for introducing your chief negotiators. Mr. Neal and I did send
a letter to the Senate after your last testimony discussion
with us urging the Senate to move, so we are pleased to in a
bipartisan----
Ambassador LIGHTHIZER. Let me just say that I view that as
unprecedented and extremely helpful, so I am very grateful to
the Committee for intervening in that matter.
Chairman BRADY. You need a full team. USTR is a very small
and nimble agency. It needs everyone on board at this critical
moment. So congratulations on that.
So I am convinced NAFTA done right can create incredible
job growth and paycheck growth for America, our farmers, our
workers, our local businesses. I think a modern NAFTA is our
number one economic priority this year, and I believe not only
will it grow jobs in America but when combined with our trading
partners can make our American businesses and farmers more
competitive as China, Europe, and the rest of the world. I want
to ask you a question about that in a moment.
But first let's start with the steel and aluminum tariffs.
We strongly support President Trump's efforts to target
unfairly traded steel and aluminum, but as you know we have
made it clear it is important that we allow fairly traded steel
and aluminum to move forward. It is critical for nearly every
economic sector in America.
In the President's determination was included an exemption
process for countries to negotiate with you, Mr. Ambassador,
and the President directly in order to address transshipment
issues, multinational efforts against China's unfair trade
practices, and strengthening America's national security
footprint. Can you give us an update on the exemption process?
Ambassador LIGHTHIZER. Thank you, Mr. Chairman. As you say,
the President did set in force a process that would allow
products to get out in specific circumstances, and that is
something that's being handled by the Department of Commerce.
And then USTR working with all the appropriate agencies
including the Department of Commerce is working on this
question of country exemptions. So initially the NAFTA
countries are out of the 232, subject to certain conditions and
subject to a successful NAFTA negotiation, so that's the first
part of it.
We have a similar circumstance with respect to Korea
because we're in the process of renegotiating KORUS. I guess I
have to be careful because we're not using TPA, I won't say
renegotiating but refurbishing, perhaps, KORUS, but we're
talking about the Koreans about KORUS.
There have been other countries that have come up and that
I believe we are in the process of talking to now, Australia,
Argentina and the EU I would put in those categories. There are
a couple of other--there have been a number who have asked--a
great number as you can imagine. Another one that we will I
think soon begin talking to is Brazil, but there are a number
of countries that have come forward and they're in various
levels of the process. The kinds of things we have talked
about--well, maybe I will let it go at that, Mr. Chairman, and
then follow up on the criteria later if you----
Chairman BRADY. Great. Thank you. What is the timeframe for
those discussions and ultimate decisions roughly?
Ambassador LIGHTHIZER. I believe that countries will get
out as we come to agreement that some countries will be in a
position where the duties will not apply to them during the
course of the negotiation just so that you don't have--for
example, Canada and Mexico but others, so that you don't have a
situation where you have the status quo, 25 percent tariff and
then they get out and there's this kind of bump and it changes
real commercial relationships.
So but our hope is that by the end of April we have this
part of the process resolved. Having said that, the President
has the authority at any time during the course of the program
to let people out if he thinks it's in the national economic
interest of the United States.
Chairman BRADY. And those discussions are ongoing?
Ambassador LIGHTHIZER. Yes, sir they are ongoing.
Chairman BRADY. Thank you. So let me turn to NAFTA for a
final question. You know, I am confident you and your team are
going to negotiate a progrowth NAFTA that makes America
stronger economically. To do that and to maximize the economic
growth from our now one of the most competitive tax codes in
the world to maximize on that we need more customers, and many
of those customers live outside the United States. Many of them
are in Mexico and Canada and when we compete and win on a level
playing field we grow American jobs here, but to do that we
oftentimes have to invest in those home countries to compete
and win against China, Europe and the rest of the world.
But if that investment in those countries is to benefit
America, our investors have to receive fair treatment from
other governments, and many countries don't provide basic,
substantive, or procedural protections for American businesses.
That means American investors have to rely on the investor-
state dispute settlement process to ensure that they are
treated fairly and they aren't discriminated against in these
other countries, that the rule of law, the property and
investment is protected as it is in America and without ISDS
Americans' property is left unprotected against discrimination,
foreign seizure, regulatory abuses and other forms of unfair
action.
This issue is basically a question, when other countries
treat American investment unfairly who has their back? The
answer should be America has their back. I am deeply concerned
about reports Mexico and Canada have begun negotiating
bilateral ISDS provisions without us. Because USTR has said it
doesn't want to participate in that. Mr. Schweikert from
Arizona has wrote a letter that many of us have signed now
signed by 103 Republicans affirming that inclusion of a strong
ISDS is essential in the NAFTA agreement.
Mr. Ambassador, we have had many discussions about that.
This is a key part of passing the strong NAFTA agreement that
we are convinced you will negotiate well for us, so how do you
square USTR's current proposal against the congressional
objectives that are in law and that 103 of us have as of today
said are crucial for passage of this agreement?
Ambassador LIGHTHIZER. Well, thank you, Mr. Chairman. Yes,
I'm aware that there is some controversy surrounding ISDS.
Chairman BRADY. You picked up on that?
Ambassador LIGHTHIZER. Yes, I have picked up on that. I
would say this about it, first of all, that whatever happens on
ISDS the kinds of issues that Members are concerned about in
terms of U.S. investment overseas will be able to be handled
within the context of what we call Chapter 20 or the State-to-
State dispute settlement. So it isn't like we will be in a
position where there will be no recourse. So that is the first
thing I would say.
The second thing I would say that we have proposed an opt-
in-opt-out-proposal. We are skeptical about ISDS for a variety
of reasons, which I would like to go into if I have a second to
do it.
Number one, on the U.S. side there are questions of
sovereignty. Why should a foreign national be able to come in
and not have the rights of Americans in the American court
system but have more rights than Americans have in the American
court system? It doesn't strike me--it strikes me as something
that's at least we ought to at least be skeptical of and
analyze.
So a U.S. person goes into a court system, goes through the
system, and they're stuck with what they get. A foreign
national can do that and then at the end of the day say I want
three guys in London to say we are going to overrule the entire
U.S. system. So on the inward bound it strikes me as a question
of sovereignty, and I view myself as a conservative and a
sovereigntist so this is troubling in that respect.
On the outgoing side there are many people who believe that
in some circumstances, and I can discuss the varieties of them,
in some circumstances it's more of an outsourcing issue. So
what is it? It's a situation where somebody says I want to move
a plant from Texas and I want to put it in Mexico, and when I
go down there I don't want to take the political risk that AMLO
is going to win in Mexico and change my bargain, so I want the
U.S. Government essentially to buy political risk insurance for
me.
Our view tends to be that if you want to move a plant from
the United States to Mexico, and the economics suggest that,
that you should go with the economics and it's too bad, and
your responsibility as a Congress is to make the United States
more competitive so that that isn't a problem. But if you are
going there because we are underwriting the investment, we are
putting our finger on the scale, we're encouraging you to move
your plant down there that is not the job in my opinion at
least of the United States Government.
I would say, also, this is an area that's not without
controversy. The National Association of States Attorney
General think this is a mistake. The Cato Institute, an issue
which I don't always agree with, all indications, they think
ISDS is something that we shouldn't have.
The National Association of State Legislatures, which is
controlled by Republicans is on record as against ISDS. So
there are a whole variety of issues. I can go on and on and on.
There are people who respond, well, we haven't lost cases in
the United States in our position, and while, in fact, that is
the case we have come close to losing some, but more
importantly, we've had situations where real regulation which
should be in place which is bipartisan and everybody's interest
has not been put in place because of fears of ISDS.
So I think it is something we have to think about very
carefully. Our view was that rather than have this mandatory
ISDS provision, which we think is a problem in terms of our
sovereignty in the United States, encourages outsourcing and
losing jobs in the United States, and by the way, lowering
standards in a variety of places, that we should be very
careful before we put something like that into play.
So you say what are the alternatives for these companies?
The first alternative, as I say, is State-to-State dispute
settlement. The second alternative is if you go to any one of
these companies and ask them why do you need this, why don't
you put in place an arbitration provision in your contract?
They'll all say, well, we can do that, and indeed, they did do
it. They did it before we had ISDS. And in a country like
Mexico they subscribe to all the conventions, and they have to
enforce those.
If they put that contract, an arbitration provision in
their contract, these things are then resolved in a similar
manner but without the United States ceding sovereignty in
order to encourage people to outsource jobs. It's just not a
good trade in my opinion. I realize, however, that it is
controversial provision and that my view is in the minority in
some very intelligent caucuses.
Chairman BRADY. Mr. Ambassador, thank you for that defense.
A couple quick thoughts before I turn to Mr. Neal.
Secondly, there is no threat to sovereignty. Foreign
investors have no more rights than American investors because
American--in our country you have the greatest standards and
protections for property rights, investment rights in the
world, bar none.
Secondly, your client is Congress in speaking out for our
ag community that wants you to have America's back when they
have to invest in other countries to win customers, energy,
manufacturing, technology services, every key industry in
America that has to compete against China and the rest of the
world and other countries is saying we need to have their back
when they make their investments.
And so you are right there is a disagreement there. We are
going to continue to work together with you, Mr. Ambassador, to
get to a good place and make sure we are keeping this in the
trade agreement and we have the backs of our American
investors.
Mr. Neal.
Ambassador LIGHTHIZER. Just briefly the strongest argument
in favor of ISDS, Mr. Chairman, is that you're in favor of it.
That is the strongest argument in my opinion.
Chairman BRADY. Some would disagree with that, Mr.
Ambassador.
So Mr. Neal, you are recognized for your questions.
Mr. NEAL. Thank you, Mr. Chairman, and thank you, Mr.
Ambassador. In Massachusetts and in New England trade and
energy with Canada is critical to powering our engines of
innovation, manufacturing and indeed people's lives. In
renegotiating NAFTA to ensure the reliable and preferential
terms of that trade is a priority certainly for communities
across New England.
In trade I understand that there are some issues with
verifying origin right now that are having the effect of
burdening trade and making power more expensive for people
across New England. Is this something that is on the radar
screen and are you willing to prioritize the resolution of
these burdens as part of the renegotiation?
Ambassador LIGHTHIZER. Yes, Mr. Neal, they are, and free
flow of energy is something that I've testified about before,
and I know--I believe that the Committee is universally in
agreement on that provision, and we certainly support it, and
we're aware of your situation, and it is something that we're
concerned about.
Mr. NEAL. Thank you. China. As I mentioned earlier we are
reading about substantial tariffs on a wide variety of consumer
product imports from China that apparently will be announced
before the week is over. Can you talk about the goals of the
Administration and what you are trying to achieve through
Section 301, and do the goals in China's abusive practices
correspond to the types of products that you are thinking of
subjecting to tariffs.
Whether it is an electronics or toys iconic companies in
many of our districts and consumers that rely upon them and
enjoy these goods are profoundly concerned that some of these
penalties will end up penalizing them as well. And can you talk
about from your perspective what makes sense for our economy or
are we simply proposing to discipline China?
Ambassador LIGHTHIZER. That is a great question and one
that is----
Chairman BRADY. Mr. Ambassador, could you touch that
microphone?
Ambassador LIGHTHIZER. I am sorry. I am sorry. That is a
great question, and one that is quite topical as you suggest.
The President is going to make a decision, I believe, in the
very near future on this issue of this 301, which we started in
August and which we have--has been very thoroughly examined at
USTR. We've studied it. We've had hearings. We've spent
thousands of hours reading tens of thousands of pages in
Chinese. We have studied with American companies.
And our view is that--and once again there is no decision
until the President makes it, but our review is that we have a
very serious problem of losing our intellectual property, which
is really the biggest single advantage of the American economy
in my opinion is our intellectual property and our ability to
generate new intellectual property. We are losing that to China
in ways that are not reflective of the underlying economics.
So it's an enormously important issue. I'm happy to talk
about it at some length. We think it is perhaps the most
important thing that will have been done in a long time in
terms of rebalancing trade and trade specifically with China.
This problem of intellectual property with China has been
something that has been going on for a long, long time. If you
look back in George Herbert Walker's presidency in 1992--1991
there was a 301 on the Chinese basically not protecting
intellectual property in China and taking the technology--1991.
We had another one in the Clinton administration, both of which
really didn't amount to much.
We had a third one in the Obama administration where there
was cybertheft in an agreement. Of course none of this changed
any of the activity in my judgment. So the question becomes,
one, do you think there's a problem that strikes me as without
question clear that there is. Do you thoroughly study it, which
I believe we did. If there is a problem if it's so important to
the economy, what are the likely remedies that you would have?
The remedies in my judgment at least would be, one, doing
something on the tariff front, and, two, doing something on the
investment front and then perhaps other things because these
are the crucial areas where it comes together.
In terms of what you would do on the--on the tariff front,
which was your specific question, the USTR has the power, at
the direction of the President, to raise tariffs in these
circumstances. The way we would approach it if the President
should make this decision is, one, to study it. We have an
algorithm which will decide the extent to which there is a
problem among things that are quantifiable because it is a huge
number of things that are not quantifiable but are worth
hundreds of billions, but you take what you believe is
quantifiable and you come up with a number. Then you apply
tariffs to that number.
The process that you would use presumably would be, one,
you would develop an algorithm that will put maximum pressure
on China, minimum pressure on U.S. consumers and then there are
certain products which are clearly high tech products, which
are in the focus point of this. And the combination of those
two would be the kinds of things that you would decide to put
tariffs on if you were going to do it, and then you would take
additional action.
Now, I can go through at some detail if the Committee wants
to do it now or at another time, I know this is a matter of
great interest to the Committee, and I am happy to talk about
it now or just beyond that or just go on and wait for other
Members to ask questions.
Mr. NEAL. Thank you, Mr. Ambassador.
Chairman BRADY. Thank you, Mr. Neal. Mr. Johnson, you are
recognized.
Mr. JOHNSON. Thank you, Mr. Chairman.
Ambassador, welcome. As you know, I flew F-86s in Korea and
had my share of dog flights over there, and that is a dangerous
area of the world, and one of our allies in South Korea needs
to know that we have their back. As you may know, I voted for
the U.S.-South Korea Free Trade Agreement back in 2011 and
since that time hundreds of thousands of jobs have been created
right here in America from the trade agreement. In fact, over
40,000 jobs in Texas are directly tied to that agreement.
By the way, according to your own agency, exports of goods
have increased as a result of the agreement. So as the
President looks to renegotiate this trade agreement I would
like to express my support for doing it in a way that
strengthens the alliance with South Korea.
Mr. Ambassador, can you give me an update on the South
Korea negotiations and when will they wrap up, do you think?
Ambassador LIGHTHIZER. Thank you very much.
So we are in the process of having discussions, but the
President announced his desire to update and rebalance to the
extent we cannot using TPA, so it's a more limited kind of a
negotiation. Several months ago we spent the first several
months with the Koreans going through their process to get a
mandate from their own legislature to discuss it. We've now had
several rounds with the Korean minister.
Minister Kim is in town right now. I think we are down to
the last few issues. I'm hopeful that we will be able to come
to some agreement that will make the Committee happy, and in
addition to KORUS of course we're also talking about steel and
aluminum because it has now come up, and in the opinion of many
people Korea is a particular problem in the area of steel
primarily. But we're trying to work our way through all of
those things.
I'm hopeful that we can make headway on it, and it
certainly is my objective would be to get a good agreement--let
me say to have amendments to the agreement that will satisfy
this Committee, and I think we're moving in that direction
right now, Congressman.
Mr. JOHNSON. Thank you, sir. I would like to take my
remaining time to highlight the importance of NAFTA for Texas
and the Nation as whole. As you know, over a million jobs in
Texas are supported by trade with Canada and Mexico, and
nationwide this trade supports nearly 14 million American jobs.
That is a lot of American workers, and while I support the
efforts to update NAFTA I am concerned by the proposed sunset
clause. I don't think that is a good policy necessarily.
Businesses need certainty.
Can you tell me what the status of the proposed NAFTA
sunset clause is and what are you trying to accomplish with it?
Ambassador LIGHTHIZER. Absolutely, Congressman. So the way
the sunset clause works is that at the end of 5 years the
President would make a decision as to whether or not the
agreement should continue. It would not require congressional
action. It would not be a difficult decision. The thought
behind it is, number one, we have a number of Members in this
Committee particularly on the Republican side that believe we
ought to be sunsetting things, so I would have thought this
would have been something that would be consistent with that.
The idea is if it's such a good agreement then we'll
naturally roll it over. If it's not a good agreement, we won't.
So after a period of time--the idea is that after a period of
time we ought to be sitting down and reviewing what happens to
these agreements. There is nothing about trade in my opinion
that makes it above all other logic in the way we approach a
legislation.
So the basic idea of an agreement like this is that you
have baseline WTO trade, and then we're giving someone a
benefit, a benefit versus the rest of the world, and they're
giving us approximately similar benefits, and that's how you
create an FTA. If you find yourself in a position at some
point, and I would suggest 5 years is a reasonable period of
time, where the--what we gave and what we got is so out of
balance it is reasonable to suggest that we ought to try to
rebalance it. Things change, the economy changes.
Indeed, I would think that NAFTA is a classy example of why
we have this problem. We have a 24-year--we have a 24-year
agreement and that agreement, the whole economy has changed.
We've gotten way out of whack in terms of what our deficits
are. It's having a peculiar effect on various industries, and
it's reasonable to sit back and take a look at it. But if the
agreement is as business people tell me going to be so
spectacular it strikes me that the President looking at it
after 5 years won't be a particularly large hurdle, but it's a
reasonable thing to expect people to do, and that is the nature
of it.
Chairman BRADY. Mr. Ambassador, I apologize, time has
expired. We will be able to discuss I think some of this
further as we go through. Mr. Johnson, thank you.
Mr. Levin, you are recognized.
Mr. LEVIN. Ambassador, welcome. The two major trade issues
NAFTA and steel have a major common attribute. The clash over
both of them has been decades in the making.
After the failure to act by the U.S. Government and to be
acknowledged as a problem by traditional trade theorists.
Outsourcing in manufacturing to Mexico increased dramatically
lured by Mexico's industrial policy of cheap labor. During much
of this same period, as you know so well, China undertook a
massive increase in steel production often using state-owned
enterprises reaching 10 times that of U.S. production in
contrast to their equal amounts of production nearly 20 years
earlier.
The impact in the industrial sector from these two
developments was loss of middle class jobs and suppression of
wages. In both cases the response was the lack of any
coordinated action in this country either handcuffed by
allegiance to theories ill-equipped for the realities of
rapidly advancing globalization by a willingness to settle for
talk in conference after conference or by putting profits over
the personal impact on working families. This created a vacuum.
Like any problems left to foster it has made it more difficult
to remedy them effectively and responsively. They must be.
As to steal and aluminum I suggest we all look at a
recommendation in the recent remarks of AFL-CIO president Rich
Trumka where he said, and I quote, These tariffs will be most
effective if used strategically targeting China and other
countries that are the source of the problem.
In fact, instead of retaliating against the United States
as some have threatened our allies should work together with us
to address this global glut that threatens our economic and
national security.
As to NAFTA there cannot be a successful renegotiation, Mr.
Ambassador, which I believe most Democrats want unless the
central problem as we have discussed is fixed. Mexico must tear
down its structures of an industrial policy, built on
suppressing its workers that impacts American jobs and wages.
Instead there is evidence that in its Congress Mexico is now
moving backward.
Mexican workers today often make less in real dollar terms
than they did 25 years ago and less on the average now than
those in China. I recently met two workers in Mexico from the
auto parts industry who said their take-home pay was 75 cents
an hour in one case and $1.25 in the other. The President has
spoken about this suppression; now he must deliver.
Mr. Ambassador, we have talked about this and are you now
addressing this problem? Steel we will talk about tomorrow with
the Commerce Secretary, though you are an expert. In terms of
Mexico and their industrial policy, their endless so-called
protection agreements, where are the discussions?
Ambassador LIGHTHIZER. Well, thank you, Congressman Levin.
As you know, every time I've testified here I've taken the
position that wage increases in Mexico are in the U.S.
interests. It's better for our own competition. It also creates
customers for us, so it's something that we have as a priority.
I think that in the Mexican political system there are a
number of people who agree completely with that process. So I
mean with that thought. We are in the process of having these
negotiations really even as of today.
My focus has been on trying to get to a position where
Mexican workers actually vote on--have real secret ballot votes
on their collective bargaining agreements, and if Mexican
workers have real votes and they decide for bad contracts
that's none of our business, but it's reasonable for American
workers to expect that there would be a process whereby Mexican
workers have this.
Mr. LEVIN. Good. Let me just say on ISDS, and I will finish
with this and there will be discussion, it is an important
issue, and when we raised it in TPP Republicans just sat doing
nothing.
But it isn't the basic problem in terms of Mexico. They are
using moneys to lure industry, not cracking down on American
investment.
Chairman BRADY. The gentleman's time has expired.
Mr. Nunes, you are recognized.
Mr. NUNES. Thank you, Mr. Chairman.
Ambassador, welcome and congratulations on finally getting
your deputies in place. I want to go first into another region
of the world and that is Asia. You have talked a little bit
about what you may do in the coming weeks, and I can assure you
that we have tremendous concerns about investment that is being
made here in the United States buying up companies, stealing
our intellectual property. A lot of that is not actually being
done through trade it is just the way they make investments
into the United States.
And on the Intelligence Committee we continue to
investigate that and we have legislation pending in the
Congress now on CFIUS reforms as it relates to some of these
concerns we have with what China is doing here in the United
States.
I would also submit that I heard you--I think you have
talked a little bit about the Philippines, possibly Vietnam,
perhaps another direction that we can go in the coming weeks
and months would be to look at is it possible to do bilateral
agreements with the Philippines, Vietnam, fixing the South
Korean agreement possibly Japan, and I don't know if you can
comment on any of those negotiations because I know you are in
the middle of them, but in terms of planning for the
Philippines and Vietnam I would be very interested in.
Ambassador LIGHTHIZER. Thank you, Congressman.
First of all, the issue of Chinese investment in the United
States is as I say in the 301 is something that we're
completely focused on. In my judgment this is going to help to
define whether or not we have all succeeded or failed in terms
of what we were sent here to do, and any Members who are not on
the Intelligence Committee I hope they access themselves of the
information the Intelligence Committee has because I think in
making these judgments it's really important that you know the
basic facts.
Having said that, now that I have a deputy I've spoken
generally about the idea of having a bilateral agreement or an
FTA with some of these people and that in that part of the
world, in the Pacific part of the world. Some of the TPP
countries but also some others who weren't in the TPP like the
Philippines.
So Ambassador Gerrish, my deputy, is going to undertake to
do a thorough study of that both within the Administration, but
as importantly within Congress to find out where the targets
are. We have spoken and thought ourselves about the Philippines
as a reasonable first step in that direction. It's extremely
important that we have a positive agenda. It's extremely
important that we show that part of the world that we're very
interested in them.
Besides the Philippines, which is kind of a smaller kind of
a deal generally, smaller economy, you mentioned Vietnam,
Vietnam is one that there's been a number of Members and people
in the Administration that also thinks we ought to be moving
there. Each of these has their own kind of complications, of
course.
Japan we have indicated that we are interested in at the
appropriate time having an FTA with Japan. Right now I believe
is not that time. Japan is in the process of having the TPP
become implemented, and it was just signed on the 8th of this
month, so there is kind of a process there, but they are very
much aware that we think having a closer economic relationship
with them is in our interest and is in their interest.
Mr. NUNES. Well, Ambassador, thank you for that, and I
appreciate that and I would be willing to work with you on any
of the countries in Asia that you would be interested in making
bilateral agreements or beginning the discussions at least.
Let me switch quickly to NAFTA. The NAFTA renegotiations,
and then the Chairman mentioned in his opening statement but
for a long time Canada has been getting away with murder in
their dairy industry. It is causing tremendous problems for
farmers here in the United States. They have a very
protectionist program, have for a long time. They are dumping
in product into this country and if anything it is one of the
reasons why you are trying to update NAFTA.
And I don't know if you can update us on the process and
where we are at in the negotiations on specifically on dairy,
but we would be interested to hear what you have to say.
Ambassador LIGHTHIZER. Well, this is something that we have
focused on. It was one of our objectives, their dairy program
but also their agriculture programs and other areas, eggs and
poultry is another one where they have what you would consider
to be very not market oriented, very protectionist approaches
on these things.
It's difficult for them to change their policies in these
areas because they're sensitive just like they are in every
single district in America. Having said that, it's a very high
priority to make changes in the Canadian dairy programs so that
we have the kind of access that U.S. farmers did have and even
greater access.
So it's a high priority. I am hopeful that when we put the
final deal together it's something that we make real headway
on.
Mr. NUNES. Thank you, Mr. Ambassador.
Thank you, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Nunes.
Mr. Doggett, you are recognized.
Mr. DOGGETT. Thank you, Mr. Chairman, and thank you,
Ambassador.
NAFTA is very important in Texas. It was signed in the
district that I currently represent in San Antonio, and I
sincerely appreciate your efforts to significantly improve it
learning from the experience of the last two decades. Though I
personally continue to support more trade through a NAFTA and
around the world, one of the major reasons that I have voted
against a number of previous trade agreements is the way they
have been subverted by various special interests to serve their
own selfish agenda to the detriment of our public health.
Big tobacco, Big Pharma have been examples of that in the
past, and I am very troubled by this morning's New York Times
front page story that advises that your office is currently
involved in NAFTA negotiations to serve the obesity lobby. You
are aware, Ambassador, that the Center for Disease Control
reports that almost a third of American youth between the ages
of 17 and 24 are too overweight to serve in our military, that
the defense department reports that one in 13 American
servicemembers is clinically obese.
Now, I know there is no panacea for this problem, and I
don't endorse every action taken by a foreign government, but I
think that it is wrong to limit the power of American States
and local governments, as well as foreign governments to
address this challenge.
I want to draw your attention specifically to that Times
article in which it is said, ``The Trump administration's
proposal and the corporate pressure behind it hold the
potential to handcuff public health interests for the decades.
The American provision seeks to prevent any warning symbols,
shape, or color that,'' and this is apparently drawn from the
documents you are advancing, ``inappropriately denotes that a
hazard exists from consumption of the food or nonalcoholic
beverages.''
Is it correct that your office is urging adoption of that
provision as a part of the NAFTA renegotiation?
Ambassador LIGHTHIZER. First of all, I would like to put my
office on the record as being against obesity.
Mr. DOGGETT. I am glad to hear it. The question is whether
you are against things that prevent us addressing that problem,
and if you are supporting this provision you are certainly not.
Ambassador LIGHTHIZER. Well, I guess I would say,
Congressman, that for us it is slightly more nuanced than that.
Mr. DOGGETT. Well, just answer. First, is this a provision
that is being advanced by the American government?
Ambassador LIGHTHIZER. The idea is--yes. The idea of
putting limits on the ability of countries to put warning
labels or symbols or products is something that we are
concerned about----
Mr. DOGGETT. So it is accurate that this provision, the
language that I just read to you, is being advanced by our
negotiators?
Ambassador LIGHTHIZER. I mean, I can't comment on the exact
language in the statute, I don't have that--I've looked in the
article, I don't have the article in front of me, but the issue
is with one that we are concerned about. The other--your point
is an excellent one, and I agree with it.
On the other side of it there are lots of examples of
countries that are using this loophole to basically create a
protectionist environment. So we have--that's why I say it's
more nuanced from our point of view. We have companies that
come in with products that literally they're on shelves with no
wrapping on them. There is a kind of an extreme between one way
or another. This can be used as protectionism. To the extent
it's used as protectionism we have to be very careful of it
that is----
Mr. DOGGETT. We certainly do, and I will welcome any
further written answer you might have. I want to turn to
investor state because there is one that I applaud your answer
to the Chairman. When he asked the question who has our back,
the corporate lobby basically wants it to be three lawyers
operating behind closed doors as much as possible.
We know from the Bilcon case that corporate interests went
around Canadian law with rights they couldn't have there, and
they are only asking for half a billion dollars now because
they were denied the right to expand a quarry. I hope you will
stand firm for protection of American investors but not a
mechanism that allows them to invade our sovereignty as you
correctly noted and to subvert and undermine health and safety
regulation.
There is no reason foreigners should be given more rights
than American citizens and American companies have, and that is
what is happening through the investor state mechanism. You are
right to be skeptical on it, and I hope you will continue to
urge that position because if we don't see some genuine reform
of the investor state mechanism, renegotiation of NAFTA will
not have met the objectives that we have set out initially.
Thank you, and I look forward to your further response
about this very troubling issue on obesity.
Ambassador LIGHTHIZER. I will do that, sir.
Chairman BRADY. Mr. Reichert, you are recognized.
Mr. REICHERT. Thank you, Mr. Chairman.
Ambassador, thank you for your time today.
Mr. DOGGETT. Mr. Chairman, may I just ask unanimous consent
to put the Times article into the record, as well as the
earlier stories from the Times about Mexico and Chile.
Chairman BRADY. Without objection.
[The submissions for the Record of Hon. Lloyd Doggett
follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. DOGGETT. Thank you.
I am sorry, Mr. Reichert.
Mr. REICHERT. That is okay, Mr. Doggett.
Ambassador, thank you for being here today, and welcome to
Jeffrey and C.J. I look forward to working with all of you and
your team.
I know that you and I have a few shared priorities,
including successfully updating NAFTA and combatting unfair
trade practices, and just I want to continue to work with you
to accomplish both. In doing so we should build upon our work
done during tax reform to boost the competitiveness of American
workers and businesses.
Even though I am very appreciative of your, as some have
defined, unconventional approach I still have concerns about
several actions that have been taken by the Administration that
I believe could undermine the good work that we have
accomplished through the tax reform effort. To successfully
update NAFTA our farmers and manufacturers require certainty. I
know you are keenly aware of that and accountability. They need
to know their investments will be protected and the agreement
will be enforced. They need to know that they can rely on this
agreement.
In targeting unfair trade practices we must take a targeted
approach and work in cooperation with our global partners. We
cannot take actions that put our consumers, manufacturers, and
exporters at risk.
I am deeply troubled by the questions that remain with
Section 232 exclusion process and the possibility of tariffs
from Section 301 investigation. It is American manufacturers
and consumers that will be hurt by an ineffective exclusion
process and the placement of tariffs on imports.
I implore you to think about my constituents, for example,
the family in Maple Valley who will face higher prices, the
manufacturer in Auburn who will pay more or will lose access to
imported parts, and the apple exporter in Wenatchee who will
suffer from retaliation.
We must also begin to focus on opening markets. As our
trading partners move forward without us our farmers, workers,
and businesses fall behind. Whether it is dairy, wine,
potatoes, wheat or tree fruit, Washington's producers will lose
market share to their foreign competitors without new trade
agreements.
Trade agreements ensure Washington's businesses are treated
fairly and can sell their high quality products around the
world. I believe the U.S.-Korea Free Trade Agreement is an
example of a successful agreement for America and for the State
of Washington.
I do agree with you, however, that Korea's implementation
of the agreement has been disappointing and that any remaining
issues related to Korea's implementation need to be resolved
quickly. I am glad to see the KORUS Committee system being used
for this purpose. Of course the downside to using the joint
Committee is that there is less transparency surrounding these
discussions, and maybe with Jeffrey and C.J.'s help we can lend
some transparency to the process.
So I recommend and would strongly suggest, Mr. Ambassador,
that USTR publish detailed negotiating objectives in KORUS to
signal to the public the changes that you are seeking within
that agreement and those talks.
Can you comment on the transparency of the process and
maybe providing those detailed negotiating objectives? Do you
have a timeline on that?
Ambassador LIGHTHIZER. Well, first of all, I agree that
KORUS is an important agreement. On the issue of transparency I
guess I would say since we're not using TPA we don't have that
statutory umbrella. What I've tried to do is to the extent
possible talk to Members, and I'm happy to talk to any Members
individually or in groups to talk about this. It's not always a
good idea to talk openly about negotiating objectives and
certainly negotiating tactics.
But from the point of view of the United States we are
troubled by implementing a whole variety of implementing
issues. We are troubled by the speed with which some tariffs
are going to come off on important products in the automotive
industry but also in others. We have issues with currency. We
have a variety of issues. I'm happy to talk to Members about
this. In terms of publishing something it's probably unlikely
that I am going to do it. My hope is what we will do is talk
privately to Members and have some kind of an agreement in
principle quickly.
My objective is to try to do this as quickly as possible
with as little disruption as possible, and it really is why we
decided we are better off limiting what we were going to do,
not go through the TPA process and overload the system and just
try to work with Members and deal with this on a smaller level
and a smaller way than a normal big agreement would be.
But to the extent Members view themselves as not knowing
what our specific objectives are I'm happy to talk to the
Members and look forward to doing that, and my hope is this is
a process that comes to a conclusion fairly quickly because I
think it's having negative effects in a lot of different ways.
Chairman BRADY. Thank you, Mr. Ambassador.
Mr. Thompson, you are recognized.
Mr. THOMPSON. Thank you, Mr. Chairman.
Mr. Ambassador, thank you for being here this morning and
taking our questions and hearing our concerns.
Mr. Ambassador, I am pleased that you acknowledge not only
my colleague Mr. Nunes' issue regarding dairy but also went on
to talk about other agricultural problems: eggs and poultry.
I want to ask you, though, about the U.S. wine exports
because they continue to face some highly burdensome trade
barriers in Canada. Canada's discriminatory policy in British
Columbia, Ontario, and Quebec are restricting market access for
American wine, and giving Canadian wine producers a real
competitive advantage against us.
As you know--you and I have talked about this before, USTR
requested WTO dispute settlement consultations with Canada on
the British Columbia matter last year, but that really hasn't
yielded any resolve or any benefit. And since then, Australia
has also launched its own complaint on discriminatory practices
affecting Australian wine exports.
In addition to that, we have another agricultural problem
with China. That is our ongoing effort to get exported U.S.
rice into the Chinese market. For 10 years, we have been trying
to find some equitable resolve to that issue. We have had
promise after promise, but still those markets haven't been
open to us.
So I would like to know what it is you are doing to make
sure that U.S. wine exports are treated fairly in Canada and
what you are doing to make sure that U.S. rice exports are
treated fairly in China.
Ambassador LIGHTHIZER. Thank you, Congressman.
I would say, first of all, the wine problem is exactly as
you say: it's just rank protectionism at the provincial level
in Canada. And it is something that, in fact, is spreading.
As you say, we brought a WTO case against them. WTO cases
take time, and we're in the process of aggressively litigating
that action.
Having said that, we are far better off trying to resolve
this issue in the context of a NAFTA negotiation. It's more
likely to have a near-term solution that is satisfactory to the
industry.
So it is something that we are negotiating on. Our hope is,
with respect to that, we can see improvement in the NAFTA
talks.
Mr. THOMPSON. Other than telling us that you are working on
it, are there any specifics? Is there any progress that you can
report?
Ambassador LIGHTHIZER. Well, it's one of these issues
that--and there are a number of them in this category--you
won't know whether you're making progress until you get to the
end.
If you look at the kinds of issues, generally, it's the
tough issues--it's IP issues, and it's agriculture issues--that
are sort of brought together at the end of an agreement,
because no one is going to say they are going to do anything in
that area.
So you go through and you make progress in 30 or 33
chapters, and when you get to the ag one, there's just no
progress. You talk it through, and the reason is that no one is
going to make any concessions here, other than as part of a
final agreement.
Having said that, I believe we will make headway in this
area.
Mr. THOMPSON. How about China and the rice?
Ambassador LIGHTHIZER. Well, on China and rice, we have two
WTO cases, as you know, on China and rice. It's another example
of both, on the subsidy side, but also on the market access
side, they are not doing what they, in our judgment, are
obligated to do. We're pursuing those, and we'll retaliate.
We'll do whatever is required. There are limitations on the WTO
process to solve these kinds of issues, and you are seeing it
just heads up in the issue of all of those products.
Mr. THOMPSON. Well, I guess it is certainly frustrating to
have been trying to deal with this for quite some time now, and
even more frustrating now to hear that we don't know until we
fix it. As I point out, the China problem with the rice has
been going on for 10 years. The wine issue has been going on
for quite some time too. Both, in my view, are pretty obvious
and pretty blatant violations.
I guess I would like to hear more about what we can expect.
And if things start to go better in your negotiations, if you
could let us know, if you could circle back and let me know how
that is going, I would appreciate it. But, to date, it just
doesn't look like we are making much progress.
Ambassador LIGHTHIZER. On the wine thing, I'm happy to talk
to you.
On the rice and other WTO issues, that's a difficult
process. It's a slow difficult process, which is seriously
flawed.
Chairman BRADY. Thank you. Your time has expired.
Mr. Roskam, you are recognized.
Mr. ROSKAM. Thank you, Mr. Chairman.
Ambassador, just a personal word and then two questions.
The personal word is: I appreciate the candor with which
you approach things. My wife tells me that the older I am
getting, the more direct I am becoming. I find your ability to
engage us on these things really refreshing. I am not trying to
embarrass you, but I just find it refreshing.
Two questions. Let me give them both to you, and then if
you could just respond, I would appreciate it.
The first is, shifting gears on 232, and press is
reporting--and I don't need you to comment whether this is
true--but they are saying: Well, there is all this criterion by
which you are evaluating these country decisions. And they are
all rational, as far as I can tell. You know, a country's
participation in other questions as it relates to trade and so
forth.
Here is my question: With Ukraine, for example, are you
considering the strategic interest of the United States as it
relates to changes for Ukrainian steel? Ukraine is in a
situation under incredible pressure and incredible duress. It
is a country that has been invaded by Russia. We have sanctions
on Russia. You know the whole story. So is there a national
security element to your consideration? That is question number
one.
Then shifting gears entirely, question number two is, as it
relates to catfish--this is not an unfamiliar issue to you--we
have a situation in the United States where there is double
evaluation. USFDA has a program, and Ag has a program. It is
pretty ridiculous. And there is a number of us that are trying
to correct that. So my question is, can you speak to how the
catfish issue, in particular, has an impact on the
negotiations?
Ambassador LIGHTHIZER. Let me say with respect to the first
element, I've outlined--and we didn't put it on our website. We
find that if we say something to anyone, it is in the paper. So
it saves the issue of having to actually type things on your
website. Everything becomes public in 5 minutes. We have
criteria, and one of the elements, of course, is the national
security interest of the United States. So we do have that as
an issue.
The final criteria is that the President makes that
judgment. And that's a kind of a broad decision on his part. He
defines national security in the conventional way, but also
more broadly, as affecting U.S. economic security as part of
national security. You will see that is a theme that runs
through the National Security Strategy. It's run through our
trade agenda, and it's run through the entire Administration.
National security is defined broadly, and the United States
can't defend its allies or itself unless it has a strong
economy. So that's something the President has broadened.
The issue of the Ukraine, specifically, there clearly are
national security issues why that would be a consideration. I
would say the likelihood at this point right now is that we're
starting to focus more on trade and economic issues once you
get below a threshold of national security interests. And, of
course, it's clear that the Ukraine meets that threshold, but
there are a lot of other issues that are probably more
difficult for them to do it. So I guess that answers that.
On the question of catfish, catfish is a problem in our
trade negotiations in some areas. We do have a complicated
regulatory process in the United States. We've had cases
involving people critical of our system as being basically a
protectionist system. On the other hand, we do have a situation
where, in some other countries, there are legitimate health
issues. So it's kind of a complicated issue. It is one that we
are familiar with. I would be misleading if I suggested it rose
to the level of some of these other things. But to the extent
it does for you, then it does for us, and we're happy to work
on it. And to the extent we can have influence on your effort
to sort your way through this to try to clean it up, we're
happy to have our people do it and to work with you on it.
Chairman BRADY. Thank you.
Mr. Larson, you are recognized.
Mr. LARSON. Thank you, Mr. Chairman.
And thank you, Ambassador.
Along the same lines with respect to section 232, with
regard to aluminum tariffs, but, perhaps, as seen through the
eyes of people downstream who are impacted, now, I represent a
district that hails many manufacturers--including Pratt &
Whitney, Hamilton Standard, Sikorsky, Command, General
Dynamics--and, throughout the State of Connecticut, precision
manufacturers to downstream people who will be impacted and
have grave concerns about the impending tariffs.
One such manufacturer, Jarvis Airfoil, in my district,
makes compressor and turbine blades for jet engines. They were
asking me this recently about what can they expect. And here is
the questions--and I couldn't agree more with Mr. Roskam about
your candor and your ease of going through a number of these
issues--but from their perspective not only is--and I
appreciated the national security interests when you talked
about what is the criteria for exempting countries--but what is
the timeline for exempting countries, and what type of
alternative arrangements are you seeking from those countries?
And I say that in perspective of this perspective. Do you
plan on making these decisions on all the exemptions by the
time the tariffs go into effect, which, if I understand it
correctly, will be Friday? And so you can imagine the
intensified concern that creates about that large supply chain,
not to mention, of course, the manufacturers themselves, in
general. I am wondering if you might give us more clarity on
that.
Ambassador LIGHTHIZER. Yes, sir.
First of all, these matters are a balance, in terms of the
consumer impact and the producer impact. This is something the
President and people in the Administration have tried to
balance.
In terms of the aluminum, generally, it's a pretty clear
case that the U.S. industry is under assault and is really
close to being completely destroyed. Ninety percent of the
primary aluminum is coming in through imports. It's a very,
very serious problem. That's not in any way to minimize the
effect it is having on consumers. That is what the President
tried to do with balance.
In terms of the timeline, our hope is to get these things
resolved by the end of April.
Mr. LARSON. So I am to assume from that, with respect to
making decisions on all exemptions, by the time tariffs go into
effect on Friday that would not be the case, you are shooting
for April?
Ambassador LIGHTHIZER. That is correct.
So there will be two categories of countries. And setting
aside--your constituent may very well have a product exclusion
issue--so setting that--I am sure he knows that. He's doing
whatever he is going to do, and he may very well not have a
problem on that.
Mr. LARSON. I will submit that to you in writing, and, if
you can respond on that, I would appreciate it, that specific
concern. Thank you.
Ambassador LIGHTHIZER. And that's important. That's being
done at the Department of Commerce. But we will certainly be a
part of the process to the extent it helps your interest.
So, in terms of the countries, you'll have a certain group
of countries, I believe. Now, once again, there has no
decision, and there is no decision until the President makes a
decision. As far as I am concerned, when he signs something,
there's a decision.
But there are certain countries--the principal examples, of
course, which would be Canada and Mexico--where during the
process of this negotiation of trying to decide whether they're
going to get out of this--and I should say ``get out'' means
they can't be in a position where they get out and take
advantage of all the benefit. It doesn't go to U.S. producers,
so there ought to be some limitation on their own shipments,
but, presumably, not one that's a problem.
During the course of that process, with respect to certain
countries, the tariffs will not go into effect. That's how I
envision it. Now, whether this happens is up to the President.
But I envision it, during the course of this negotiation
between now and the end of April, that those countries do not
see their tariffs go into effect.
There are other countries who think they should be excluded
that it will go into effect, and it will go into effect on
Friday. For those people, there'll be more of a disruption.
But in terms of access for your constituent, I don't think
you are going to see an enormous shortage of aluminum. Now,
once again, I am not an economist, and we can all make our own
guesses. But you're going to have a variety of countries--in
the case of aluminum, the very fact you're negotiating with
Canada is enormous, right, because they are such an important
supplier. And the other countries I also mentioned, those
countries will not see an increase, as I believe this will work
out.
But with respect to the others, you will see a 10-percent
tariff increase as of Friday.
Mr. LARSON. Thank you, Ambassador.
Chairman BRADY. Thank you. Your time has expired.
Mr. Buchanan, you are recognized.
Mr. BUCHANAN. Thank you, Mr. Chairman.
And thanks, Ambassador, for being here today. I am excited
to see you get some of your team put together. It has been a
while, so it is great to have that.
Like many of us, I have two situations in our district that
I would like to have you just give some thought to in terms of
NAFTA, one good and bad. But, kind of like the Chairman, my
sense is I want it to be whatever we do pro-growth for the
United States and jobs.
But one company is Tropicana. It was founded in my district
in the Manatee County, Bradenton area. It creates over 1,000
jobs. It was acquired by PepsiCo. But, in terms of NAFTA, it
has been good for them and good for their industry, in terms of
eliminating tariffs. So that is one thing I would like to have
you just talk about a little bit: Tropicana. Basically, they
are, as you know, an orange juice business. You can't imagine
Florida without orange juice.
And let me just mention, also, on the second scenario, as
you know, we have pretty much the same growing season as Mexico
does. So, in terms of the second situation, unfair trade
practices, a lot of people feel, in Florida, as it relates to
tomatoes, strawberries, and peppers, it has cost that industry,
that business, about $2 billion a year, $1 billion to $3
billion, in terms of unfair trade practices.
So I would like to have you take a minute to address both
of those, as quickly as you can, because I have one other
question.
Ambassador LIGHTHIZER. I'm not very good at the quick part,
but I'll try to be quick.
Mr. BUCHANAN. I will let you know.
Ambassador LIGHTHIZER. First of all, of course, there's a
big advantage in--I mean, one of the principal advantages in
NAFTA is the reduction in those tariffs. I'm not sure exactly
which tariff we are talking about and what the numbers are. But
the reality is that if we end up with a successful agreement,
the tariff benefit will be preserved. So I think that will
probably be less of a problem, and it's more in favor of them
saying: We want to get NAFTA through. That's a provision that I
am aware of.
The seasonality provision is an important, significant, and
controversial provision. So I start with the proposition that
with all the great things of sales in Mexico of agriculture
products--and there's a lot, whether there is $18 billion or
$19 billion worth of sales by the United States in Mexico of
agriculture products--the reality is that we have a trade
deficit with Mexico on agriculture products. A good part of
that are exactly the ones that you're very familiar with.
So the idea is that these producers, even if they are
victims of unfair trade, can't take advantage of the unfair
trade laws because they really weren't constructed to deal with
products that are perishable. So the idea is to put in place
some kind of a provision that shrinks the amount of time you
look at, in terms of calculating dumping margins and injury so
that these products--if you spread it out over a year or over
three years on injury, are always going to lose--you give them
a shot at proving unfair trade. That is the nature of the
proposal. It is extremely controversial with respect to a
variety of people who don't like it.
Mr. BUCHANAN. We will take some time a little bit later and
talk a little bit more about that.
Let me just hit you quickly on, because you got some of
your team here, your new team, is on TTIP. There was a lot of
work that I think, or let's say some work, that was being done
by the last Administration in terms of Europe. And the thought
is there we have a lot of the same values, a lot of the same
background; it seems like it makes a lot of sense, and it is a
real opportunity for America. Especially as you look at wages
and benefits, there are a lot of comparable things with the
United States. And, overall, it has been pretty fair both ways.
So maybe you can comment on that now that you have a little bit
more of your team in place.
Ambassador LIGHTHIZER. Well, thank you. I will.
It is something that we have looked at. Clearly making
headway with Europe is a top priority. We have with the
European Union a $150 billion trade deficit. After China, it's
literally our biggest problem. And it is, basically, Germany,
60; Ireland, 38; Italy, 30; and France, 15; and then everyone
else we are basically, more or less, in balance with. So it is
a problem.
Making headway in that area is very important. It is
something we are looking at. They're a little bit in flux right
now. But I think making headway on Europe is a high priority.
It's clearly something the President wants to do. Whether it is
in the form of TTIP, which some people think is more cumbersome
than we need, or in another form, your point is one that we
completely endorse and think that we have to make headway on
that front, and I believe we'll make headway.
Mr. BUCHANAN. Thank you.
I yield back, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Buchanan.
Mr. Kind, you are recognized.
Mr. KIND. Thank you, Mr. Chairman.
Mr. Ambassador, thank you for your time here today. I
really appreciate it.
Just a word of advice. When it comes to KORUS
renegotiation, or however you want to call it, it is much
better to have Congress with you on the takeoff rather than
just the landing. We know that we are getting into sensitive
discussions with them, but there have been many businesses in
my district that have benefited under that agreement, too, and
they are getting nervous about where the stage of these talks
are going.
And, secondly, I am all for NAFTA modernization and
bringing it into the 21st century. The global economy has
changed. I am all for aggressive enforcement of our trade
agreements, 301 or otherwise.
What I have a problem, with and what I hesitate about, is
this go-it-alone attitude with this Administration in trying to
promote a trade agenda by further isolating ourselves. America
First does not mean America alone. There is a huge benefit to
having friends and allies around the globe that we can work
with in order to establish a trading system that works for all
of us at the end of the day.
Either this President, or this Administration, has
conveniently forgotten, or maybe never learned, the lesson of
our preeminence since the Second World War. It was not only our
military strength, but it was our willingness to take the lead
in shaping a rules-based global trading system with countries
across the globe with shared values.
By isolating us and by demonizing many of our friends and
allies with a broad scope of retaliatory action, I think makes
our trade agenda that much more complicated. I am worried about
the potential for retaliation when it comes to the steel and
aluminum tariffs. I think the whole approach to that was ill-
considered. It was chaotic. It was confusing. Now we are going
on a business-by-business exemption basis. And now we are going
to allow some of our friends and allies to apply for exemptions
without clearly defining criteria.
And I hope this Administration is thinking about what plan
B is going to look like if there is retaliatory action taken
against us. Back home in my State, in Wisconsin, my dairy
farmers' backs are up against the wall. If we lose market share
down in Mexico, that could destroy our dairy industry in this
country overnight because of the number one export market being
taken away from us. That could cause a lot of problems in the
heartland of our country.
And dealing with steel and aluminum, for every job that is
involved in steel or aluminum producing in this country, there
are 200 jobs that are involved in consuming this material. As
we learned from the 2002 steel tariff case, which was quickly
rolled back under the Bush administration, the unintended
consequences can be pretty severe for many workers and for many
businesses and industries throughout our country. So I ask you
to consider that as we move forward, including the 301 approach
to China, and what type of action they could take against us.
But what troubles me, perhaps, more than anything today,
sitting here, is this love affair that our President seems to
have with Vladimir Putin. And I come to a very fearful
conclusion that the President of Russia owns the President of
the United States. That manifested itself in a telephone call
yesterday, where the President called to congratulate Vladimir
Putin on a completely bogus and fraudulent election and then
failed to even raise the issue of a chemical weapons attack on
one of our allies' soils--Great Britain--and failed to raise
the issue of Russia's direct meddling in our democratic process
as a Nation.
And so it leaves us scratching our heads, just what is
going on with this President and this Administration in our
relationship with Russia. We passed enhanced sanctions last
year, almost unanimously, through the House and the Senate,
only to see it sat on with the Administration for months before
any action was taken with it. And that was problematic and very
troubling as well.
And, right now, I couldn't think of Vladimir Putin having a
better straw man occupying the Oval Office, given all the
missed opportunities that this President has passed up when it
comes to standing up and defending our values and our strategic
interests throughout the globe against Russia, who is not our
friend, and they are not our ally, and yet somehow the
President misses this important ingredient.
So I was just wondering whether you were part of the
economic team involved in the application of sanctions against
Russia that was passed almost on a unanimous basis last year by
this Congress and why it took so long before any action was
taken on it.
Ambassador LIGHTHIZER. Thank you, Congressman.
I only have 18 seconds. So I'll just say: With respect to
the stuff you are talking about on trade, yes, we're worried
about retaliation, and, yes, we don't want to go it alone. And
with respect to all this Russian stuff, I completely disagree
with every single thing you said.
Mr. KIND. Were you a part of that decision, as far as the
application of sanctions?
Ambassador LIGHTHIZER. I'm the U.S. Trade Representative. I
do trade work. I don't do sanctions work. It has nothing to do
with me at all--not for 5 minutes in my entire life. But I
appreciate you bringing it up.
Chairman BRADY. The gentleman's time has expired.
Mr. Smith, you are recognized.
Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman.
Thank you, Mr. Ambassador, for your time here today, as we
have very important discussions, whether it is NAFTA, whether
it is KORUS or whether it is various trade issues that we know
are important to American producers, particularly Nebraska ag
producers. That is my focus. But we know that consumers live in
every one of our districts, obviously, and we always want to be
mindful of that.
As it does relate to agriculture--and certainly I have
expressed to you and I have expressed to the President, as
well--that as we modernize our trade agreements--certainly I
appreciate that--if we could also, obviously, do no harm to
those areas we have done particularly well with, namely
agriculture. Energy has been discussed, as well.
Forty-five percent of Nebraska's agriculture exports go to
Canada and Mexico. So it is no surprise that NAFTA is important
as we do move forward. And I just continue to strongly urge you
to keep this in mind of how important these exports are,
especially as I can appreciate the need to close the gap, the
trade gaps that do exist. One thing, agriculture exports do
help us on narrowing those gaps, and I hope that we can
continue to expand our international reach and expand
international markets for agriculture.
Briefly, the President touched on the possibility of
reengaging the countries in TPP. I have two questions. That
would be one of them, is if you could elaborate, perhaps, or
reflect on the potential of reengaging a TPP that, as you know,
has moved forward without the United States.
And then, also, the President has touched on the bilateral
trade agreements that he would like to pursue, perhaps. And if
you could also reflect on that and how we might be able to
utilize that moving forward, whether it is with Japan or other
countries, that we would like to see more exports of U.S.
products heading in those directions.
Go ahead.
Ambassador LIGHTHIZER. Thank you, Congressman.
First of all, we appreciate your intervention on this issue
of the importance of agriculture. We completely agree with it.
Not only have you raised it repeatedly here, but in all other
contexts. It's very important to us, both in terms of the
consequences of our other action on agriculture, but, more
importantly, probably, using the trade agenda to promote
agriculture.
So we sit back and we talk about the fact that we have,
whatever it is, $140 billion worth of agriculture sales. In
most of the markets we go into, we could sell vastly more. And
we're really facing protectionism. I mean, Europe is a good
example, and China is a good example. There is enormous,
enormous opportunity. And a lot of things that we design, we
design with that in mind. So agriculture is important. It's
crazy to sit back and be defensive in agriculture, however,
because the reality is we're being stopped in a lot of places
from just local political pressure creating protectionism.
On the issue of TPP, I guess I would say the following:
It's complicated to get in and renegotiate that. But if you
analyze TPP, you have 11 countries in TPP. With respect to six
of them, right now, we already have a free trade agreement. So
the idea of upgrading that and getting those in a position
where you think that what you want is fine.
With respect to the other five, by far, the most important
is Japan, which we already raised. I don't know what the total
amount is. Japan is maybe a $5 trillion economy. I bet all the
rest of them together weren't $1 trillion. Because the next
biggest one is Malaysia, which is just over $300 billion. And
then Vietnam is the next one after that.
So I am saying, of the five, if you got an agreement with
Japan, you've essentially solved the whole problem. Certainly,
if you got one with Japan, Vietnam, which some people have
suggested, or Malaysia, you have basically taken care of 95
percent of what is outside of the United States albeit right
now that's in the TPP sphere.
I think when people think about TPP, sometimes they think
of it as something that we are not a part of. We already have
FTAs with six of these countries--not to say that they can't be
improved, and they should be improved.
But the way I analyze it, I say, number one, you have a
problem because you want to work it out with Japan, because
they're, by far, the biggest economy in the world, and by far
the biggest of those. And then somebody has to sit down and
decide, do you allocate resources to Malaysia, or do you
allocate resources to Vietnam? And there are reasons for that.
You can argue all of them. And our view is that is the job this
deputy has to do. We have to come to grips with that. Japan is
clear, but the next tier we have to kind of get to that, and we
have to get the opinion of this Committee.
Chairman BRADY. Thank you. The gentleman's time has
expired.
Mr. Pascrell, just a reminder, after your questioning, we
will go to two to one, so we can balance out the rest of the
hearing.
Mr. Pascrell, you are recognized.
Mr. PASCRELL. Thank you, Mr. Chairman.
Thank you, Mr. Ambassador.
I think it is clear, after Montreal and Mexico City, and
thank you for your indulgences up there, that we are
approaching, I think, a culminating part of the negotiations.
That is my judgment. We have a lot of tough issues to address.
I quickly went through the document that we are supposed to be
talking about today. Part of it is NAFTA.
Some of your NAFTA proposals have really challenged the
status quo of U.S. trade policy and I think have been creative
in trying to make the agreement work for the many and not just
the few. All the boats have to rise. And I have confidence,
still, that you are working to ensure the labor chapter of
NAFTA is fully enforceable, building on the strength of the May
10th agreement as a floor and not a ceiling. And I want you to
interrupt me if I say something that is not in place. Please
feel free to do that.
Enforceable labor standards alone will not entirely solve
the key driver of outsourcing under NAFTA. We all know that.
For 25 years, Mexico has engaged in a purposeful strategy
of labor and wage suppression in order to attract investment at
the expense of the United States and the expense of Canadian
workers in ways that have expanded poverty for Mexican families
instead of--the record is clear on this, the numbers are
clear--building a middle class market for U.S. exports.
You identified in the trade agenda report--you identified.
You said this: Since NAFTA went into effect, the gap in Mexican
wages and labor productive with the United States has widened.
The OECD, the organization that we know about for many years,
reports that the average annual wage in Mexico fell from
$16,008 in 1994 to $15,311 in 2016, unquote.
I met with the workers in Mexico City just a few weeks ago
because reading about it and looking at statistics is very
different than hearing anecdotal stories about actual
situations that are tangible. And no Democrat and no Republican
can deny these.
They are in the auto parts factory, many of them, and were
making less than a dollar an hour. No options to bargain for
better treatment. Both the labor rules in NAFTA and in Mexico--
Mexico's own labor law and practice--must be upgraded to make
real changes for workers, both in Mexico and my district.
Do you agree that Mexico has failed to live up to its
obligations with respect to NAFTA's labor side agreement, yes
or no?
Ambassador LIGHTHIZER. Yes.
Mr. PASCRELL. So please explain how USTR is working to
solve the problem of low wages in so-called protection unions,
which you identified yourself--not I--you, in Mexico, and I
agree with you wholeheartedly. How are we working to get this
done? Explain.
Ambassador LIGHTHIZER. I would say, first of all, that
while wages have been stagnant--and that was not our
expectation at all when we entered into this agreement. If you
look at the way it was sold, it was clearly sold as wages go up
in Mexico, they became customers for us and we get to sell a
lot more stuff, and that has not happened.
I would say, from the point of view of Mexico, it has
created a lot of jobs, though--low-income jobs, in our opinion,
but a lot of jobs. And a lot of those have been in the auto
industry. And I would suggest many of those at the expense of
U.S. jobs.
Mr. PASCRELL. And that is important, isn't it, Mr.
Ambassador, to understand the relationship between how low
wages--I am putting it as simple as possible--in Mexico do
affect jobs--can I at least finish what I am saying?
Chairman BRADY. I am sorry, Mr. Pascrell, all time has
expired. Maybe another Member can yield to you.
Mr. PASCRELL. I don't want anyone to yield.
I am asking a question. Can I answer finish my question?
Chairman BRADY. I am sorry, Mr. Pascrell.
Mr. PASCRELL. Well, do you know what? That stinks.
Chairman BRADY. Thank you.
Mr. PASCRELL. You are welcome.
Chairman BRADY. Ms. Jenkins, you are recognized.
Ms. JENKINS. Thank you, Mr. Chairman.
And thank you, Mr. Ambassador, for being here.
I want to reiterate my support for the continuation of
strong investor protections, like Investor-State Dispute
Settlement in NAFTA. And I have grown concerned about reports
to weaken, remove, or make protections optional.
ISDS ensures U.S. investors in foreign countries benefit
from the same process and due compensation rights that foreign
investors enjoy in the United States under our Constitution.
That sounds a lot like the reciprocity and trade deals that
this Administration wants.
Foreign investment by U.S. companies also creates and
supports U.S. jobs. For example, the family farm and ranch
operations in my district who depend on exporting their
products to Mexico utilize Kansas City Southern Railroad to
provide that vital link to reach these crucial markets. This
cross-border infrastructure will not be possible without the
$4.5 billion in Kansas City Southern invested in Mexico over
the past 20 years.
Additionally, when the House and the Senate last passed
trade promotion authority, it established ISDS as a negotiating
objective. So not including ISDS in NAFTA would be a direct
rebuke to Congress' explicit direction and could undermine
critical support for a renegotiated NAFTA lacking such
protections.
Ambassador Lighthizer, I urge you to reconsider your
position on ISDS. Continuing to include ISDS in NAFTA makes
good policy and political sense.
And to speak just a little more broadly, Ambassador
Lighthizer, I can't overstate the importance of NAFTA for the
farmers, ranchers, and manufacturers in my district. In fact,
about two-dozen county Farm Bureau members from eastern Kansas
were just in my office yesterday to hammer this point home.
They depend and rely on being able to sell to Mexico and Canada
as though their livelihoods depend upon it, because they do.
The message I received is the need for certainty that NAFTA
benefits, which have allowed Kansas exports to surge, remain in
place. This certainty is paramount to providing desperately
needed assurance to all aspects of the Kansas economy.
The small towns across my district that make up America's
agriculture heartland are depending on the Administration
getting this modernization right and moving on to expanding
into new markets and joining new trade deals. That is why I
strongly support NAFTA and why I encourage this Administration
to follow through on its promise of doing no harm.
With that, Mr. Chairman, I yield back.
Chairman BRADY. Thank you, Ms. Jenkins.
Mr. Paulsen, you are recognized.
Mr. PAULSEN. Thank you, Mr. Chairman.
And thank you, Mr. Ambassador, for being here, and also for
your work and progress on the NAFTA renegotiations,
particularly in the area of regulatory practices,
anticorruption issues, customs issues, and digital trade.
Modernizing NAFTA with a digital chapter is essential, not only
to protecting American innovation but also access to markets
through e-commerce that many of our American products and
services are sold from.
But I have to tell you: The President's decision to invoke
a very little used 1962 law to impose these broad tariffs is
creating a lot of uncertainty, and it does threaten to derail
some of the economic gains and benefits that we have seen
recently in our economy. And it seems like every time now that
I speak to a Minnesota company, they have a lot of questions
about some of this uncertainty to the current trade climate
that we have.
I usually begin the conversation by talking about the real
economic benefits that they have already seen right now from
the Tax Cuts and Jobs Act. And they tell me how they are
investing more in new equipment, they are reinvesting in their
employees, and that is a good thing. But then they also will
talk about some of the bad news regarding the new tariffs and
maybe pulling--the threat to pull out of NAFTA, for instance.
There was one Fortune 500 company in Minnesota recently
that produces engines and generators. They said that half of
their economic benefit made by tax reform will be wiped out by
the steel and aluminum tariffs that are being imposed.
And it is not just large employers that are being impacted
or putting these projects on hold now. We have small
manufacturers and small businesses, like R&M Manufacturing that
shared their thoughts with me directly, saying they are opposed
to the steel and aluminum tariffs that are under section 232,
saying it would be disastrous for them as well as other small
metal-forming companies, because raising their prices means
they are going to no longer be competitive, and they are going
to get clobbered.
So I support the President's objective, and your objective,
of really fighting for the American worker that needs that
support in helping employees of U.S. steel companies. But some
of those gains are going to be swamped by some of the larger
losses that could be felt by much larger losses at metal-
consuming companies and other areas across the economy if we
have those retaliation tariffs.
Economists now are saying, with the trade partnership, for
instance, the study says, the United States would lose five
jobs for every job created in steel and aluminum savings. And
that is without retaliatory tariffs. If you take in
retaliation, it could be a net loss of 18 jobs for every job
gained, and it is not even close. That is 470,000 jobs. Most of
those jobs are production. They are blue collar. They are
exactly the type of jobs that I think you and the President are
intent on protecting.
And I think we are on pins and needles with the upcoming
potential announcement later this week because retailers like
Best Buy in Minnesota are concerned about the upcoming section
301 tariffs. And I am all for targeting Chinese intellectual
property violations and holding them accountable, but let's be
targeted in what we want China to change and let's go after
that, because consumer electronics don't have domestic
production.
And I hope we won't be seeing tariffs imposed on products
that a lot of American families and consumers and small
businesses purchase every day. It wouldn't make sense to raise
the cost of a laptop for a college student or a couple of
hundred dollars on a computer for a small business, for
instance. I would say, I would ask: How is that going to help
change the Chinese minds?
And I know, in Minnesota, we have 800,000 jobs now that
rely on trade. It is one of the reasons that we weathered the
economic storm a lot better than most States: we have a lot of
high-value manufacturing. And those jobs, by the way, pay a lot
higher than average salaries.
So let's just not shoot ourselves in the foot. I don't
believe any country wins a trade war. I think all countries
lose. And, Mr. Ambassador, I think every one of the companies I
highlighted and I have heard from, they share the exact same
goal that you have: to change China's behavior.
I just want to ask, would you be willing to meet with some
key industry leaders or make sure some folks are sitting down
and we continue to work together on solutions that are really
going to be effective in that capacity?
And I will ask some more followup targeted questions that
are more specific in the written record, Mr. Ambassador.
Ambassador LIGHTHIZER. Well, there's a lot there.
First of all, with respect to that trade partnership study,
I haven't looked at this one particularly. I've looked at those
in the past. The accuracy of them is so slow that I wouldn't
let it keep me awake at night. That is not to say that the
basic point that we have to balance downstream effects is very
important, and we understand that.
Nobody wins from a trade war. We certainly don't want a
trade war. On the other hand, you have to ask yourself, can we
go on with an $800 billion, and growing, billion dollar trade
deficit? There is only a handful of countries in the whole
world that have a GDP the size of that. So we have to do
something.
And the people who are benefiting from the status quo are
always going to be against it. And we understand that, and we
have to balance their interest. But the reality is, if you are
on a course that is unsustainable, you have to figure out
something to change.
Am I willing to sit down and meet with business people? I
am happy to do that. And I would say I and my deputies do it
every day. We have had an enormous amount of contact with
business people, and I think it's an extremely important part
of what we do.
Mr. PAULSEN. Thank you, Mr. Ambassador.
Chairman BRADY. Thank you. The gentleman's time has
expired.
Mr. Higgins, you are recognized.
Mr. HIGGINS. Thank you, Mr. Chairman.
Ambassador Lighthizer, what is your view of the U.S. trade
relationship with Canada? Does the United States have a trade
deficit or a trade surplus, in your view?
Ambassador LIGHTHIZER. One of the great questions of all
times.
This is something on which I have spoken about for years.
Here is the situation, and the numbers are all confusing, and
when I am finished it will be appropriate to ask, ``If you are
not confused, then you are not paying attention,'' all right,
so you will be confused.
Mr. HIGGINS. Quickly. I only have 5 minutes.
Ambassador LIGHTHIZER. I'm sorry. But you can't ask a 2-
hour question. I'll give you the shortest version of it.
The fact is that, if you look at goods on a customs basis,
yes, we have a $17 billion deficit with Canada.
If you look at a customs basis, what does Canada say their
surplus is, which should be the contrary, that turns out to be
$97 billion.
So Canada thinks on a customs basis, they have a $97
billion surplus with us whereas the number is somewhere in
between. And what's the cause? The cause is a lot of things.
But the biggest one is it is products that come into the United
States and go up to Canada, in many cases, we count them as a
U.S. export, even though they are not U.S. exports. If they are
duty free, they can just be trucked up there and have nothing.
The Canadians, however, look upon it as an import from the
appropriate country. Now, if you look at it on a balance of
payments basis, then the numbers are different.
And if you look at it on a customs basis for goods only at
17--and then people sometimes will say, what's the services
surplus, because we do have a services surplus--but on a
customs basis, there is no services number, so you have to take
a services number from another dataset. And if you do that and
you use our number, then we have a small surplus. If you use
that and use their number, we still have an enormous deficit.
Mr. HIGGINS. Okay. Has the strong-arm tactics of the
President as it relates to tariff threats, have they helped or
hurt the negotiations?
Ambassador LIGHTHIZER. Well, first of all, I don't buy your
premise. I don't think there's been any strong-arm tactics. I
would be interested to know specifically what you are referring
to.
Mr. HIGGINS. Specifically, I am referring to tariff
threats. In other words, the President in published reports has
stated that he is issuing tariff threats against Canada and
Mexico as leverage to get a better deal in NAFTA negotiations.
It is pretty simple.
Ambassador LIGHTHIZER. Oh, I see what you are saying. You
are saying, does the 232 affect the negotiations?
Mr. HIGGINS. No. I am saying, does the strong-arm tactics
of the President threatening tariff threats help or hurt the
negotiations? It is a very simple question.
Ambassador LIGHTHIZER. Well, then the answer is I have seen
no strong-arm tactics, so they've had no effect on the
negotiations.
Mr. HIGGINS. Ninety-three percent of the heroin seized by
the United States Drug Enforcement Agency came from Canada--or
from Mexico--81 metric tons of heroin today. The President has
demanded that Mexico do more to prevent drugs from entering the
United States as a condition for lifting steel and aluminum
tariffs. Is that something that has found its way into the
negotiations?
Ambassador LIGHTHIZER. Well, in the first place, there is a
lot going on between the United States and Mexico to try to
deal with the heroin problem. It is a legitimate problem on
which no one can disagree. And there is a lot of stuff going
on, and it's not something that I am the slightest bit involved
with. But I know it's going on. I sort of hear about a lot of
important stuff, and I think it will make a significant
difference.
Mr. HIGGINS. So there is discussion going on.
I have a final question because this is important.
What, in your opinion, optimally and realistically, will be
in the renewed NAFTA discussion outcome, final agreement? What
will it look like as it relates to net benefits to the United
States? Specifically, name three net new provisions that will
benefit American workers.
Ambassador LIGHTHIZER. Well, I mean, there are so many of
them, some of which would be controversial, so I won't mention
them.
But, clearly, rules of origin would be an enormous increase
in benefit to the United States.
The IP provisions are going to be an enormous and just an
unarguable benefit to the United States. Huge improvements will
be made in digital trade, which will be extremely important to
the United States. And I could literally go down. There is
services trade. We have 33 chapters. And of all those chapters,
I personally don't think there is a single one that won't be a
significant improvement for the United States. And I would say
that, of the 33, the Members here would agree that 90 percent
of them are huge improvements to the United States, assuming we
get an agreement. But, yes, I think it's a very powerful, very,
very important improvement in a whole variety of areas.
Chairman BRADY. Thank you. The gentleman's time has
expired.
Mr. Marchant, you are recognized.
Mr. MARCHANT. Thank you, Mr. Chairman.
Thank you for being here today, Ambassador.
My district is in north Texas. It is the home of the
Dallas-Fort Worth Airport. So our area basically is involved
more in the administration, distribution, marketing, and
storage of NAFTA goods and services more than the production of
the actual product. That has created just a boom-town type
economy in Dallas.
And so my home builders have come to me since we gained
90,000 jobs last year. It has put a lot of pressure on our home
building and our apartment building and our whole building
community. So they are concerned because of the tariffs that
are involved in lumber, mainly with Canada, I think, and have
provided me with charts that show that the lumber prices have
escalated 40 to 60 percent in just the last year.
And I would like to just have a discussion with you about
maybe just the purpose of the tariffs. Are they serving a
purpose? Is there some relief in sight? Is the NAFTA agreement
going to address these tariffs? Are they separate? And just
general information for my home builders back home.
Ambassador LIGHTHIZER. Thank you, Congressman.
So, if we are talking about the softwood lumber tariffs
between the United States and Canada, those are the result of
sometimes people talk about those as if there's some kind of
Administration policy. There's no Administration policy on
this, other than the policy that everyone here believes, which
is that you have to enforce your laws against unfair trade.
So you have affected U.S. companies, who bring cases. They
get duties. They go through and prove what the level of the
dumping economy and subsidies are. Then they go and they prove
that they've been injured at the ITC, and then they get orders
put into effect. That is the process that has gone on, and it
will go on.
And then, in the past, and to some except ongoing, there is
an effort to try to get the U.S. industry to give up their
rights under those in exchange for some kind of a package or
something that will sort of smooth things out. That's a process
which goes on every now and then. In the past, there have been
a number of memorandums of understanding and numerous attempts
to kind of work this out, that have worked it out.
Right now, I would say there's probably not much going on
in terms of those negotiations. Are they part of NAFTA? Not as
far as I'm concerned, they're not part of NAFTA. As far as I'm
concerned, this is a function of the trade laws working the way
Congress designed them to work. When this happens, sometimes
prices go up, and sometimes it's unfair to people, and
sometimes the fact is they were just taking advantage of an
unfair situation before and making money on low prices. And I
don't know which it is in this case, but they could both be a
factor.
But, to me, it is unlikely, I think--I wouldn't put it at
zero--but it is unlikely that I am going to end up solving this
issue or trying to resolve this issue. Right now, the positions
are kind of intractable. And the people that brought the
litigation have the right, just like anyone else here, and any
your constituents are who bring a case and win it, have the
right to get the benefit of a lawsuit.
Mr. MARCHANT. Okay. I appreciate your answer. Thank you.
Chairman BRADY. Mrs. Black, you are recognized.
Mrs. BLACK. Thank you, Mr. Chairman.
And thank you, Ambassador, for being here today.
My district and my State of Tennessee has really benefited
greatly from NAFTA because it has helped to bring some of the
large-scale manufacturing automobiles to the State of
Tennessee. It is quite an operation there across our entire
State. These operations are tremendously important to our
communities, especially one right there in the middle of
Tennessee, Smyrna, which is the home of the Nissan plant that
produces more than 150,000 automobiles in that plant annually.
So it is a big issue for that middle Tennessee area.
There has been considerable press regarding USTR's auto
rules of origin proposal, which, if the press reports are
accurate, appears to be wholly unworkable for the industry and
could have some perverse effect of costing American jobs rather
than creating them, which, again, is a real concern for us
there in middle Tennessee, in particular.
I understand that Canada presented a framework of ideas as
a counterproposal during round six in Montreal, but that
Canada's proposal could result in less regional content than we
have now. So can you update us on whether Canada has been able
to provide additional details regarding their proposal or
whether Mexico has provided its own proposal on the autos rules
of origin, because it is really critical for our communities
like Smyrna, and we need to get it right?
Ambassador LIGHTHIZER. Thank you, Mrs. Black.
I would say this. First of all, the auto plants,
particularly what we used to call transplants, coming to
Tennessee and other places has been an enormous boon, very
important not only to Tennessee but for the country. So I think
we have to acknowledge that, number one.
Number two, the rules of origin will have no effect on cars
made in Tennessee and sold in the United States. They are kind
of irrelevant to that whole equation. They have no effect on
them at all.
What Nissan was worried about is that Nissan would say: I
have a plant in Mexico that wants also to sell in the United
States, and that plant, in fact, has very, very little U.S.
content, so that plant has a problem. But it will have no
effect on anybody working in Tennessee for a Nissan plant for
any car sold in the United States. I want to make that point
because sometimes when they go around and talk about this, they
kind of conflate those two things, and they're completely
separate.
In terms of our working, we are working with the industry
very closely on rules of origin. We want to be in a position
where more of these jobs that are in Mexico right now come back
to the United States. The basic model that Mexico has had--and
there has been reference to it over here. It is a smart model
from their point of view. They want to lure companies to come
to Mexico to make cars and sell them in the United States. Take
advantage of their low wages, but take advantage of other
things, too, like subsidies and like duty drawbacks and the
like.
So that's a strategy, which is buy from Mexico, that is not
necessarily a strategy that is smart for the United States. So
our objective is to have more U.S. content, but even really
Canadian content. The idea is it shouldn't just be a model
where you come in, you are subsidized, you make stuff in
Canada--I am sorry--in Mexico, and sell it to 80 percent the
United States. That's not a very good model from our point of
view.
So our objective is to try to find the line where we can
encourage them to move some of that production parts--cars, but
also parts--back to the United States. And we're in the process
of talking to the companies and trying to do that. Our hope is
that we get something that at least some of the large
manufacturers will find useful.
With respect to others, I suspect they're going to be in a
position where any change is going to move them to the point
where they will have to pay the 2.5 percent tariff. But none of
those will involve companies' workers who are in Tennessee or
in the United States. I wanted to make that clear.
If we are going to improve the situation in NAFTA, we have
to get rules of origin to get more jobs to come back to the
United States. Will they all come back? No, of course not. Not
a chance. But a lot of them can come back, and that's our
objective.
And the Canadians, to be honest, have a similar objective.
They also have been seeing a diminution in their auto industry,
and they have a similar objective. And the Mexicans are in a
position where they have to balance. But we are trying to work
our way through that.
Mrs. BLACK. Thank you. I yield back.
Chairman BRADY. The gentlelady yields back.
Ms. Sewell, you are recognized.
Ms. SEWELL. Thank you, Mr. Chairman.
And welcome, Mr. Ambassador. Thank you for joining us.
I want to spend my time, limited time, focusing on the
current U.S.-South Korea trade agreement renegotiations. As you
know, auto manufacturing is critical in Alabama's economy. I
have a Hyundai plant in my district that employs 3,000 workers
and provides many of my constituents with high-paying jobs.
Therefore, the U.S.-Korean relationship is very important to
Alabamians and especially to the Seventh Congressional
District.
I understand that this Administration has concerns about
the implementation of the original agreement, and I can
appreciate those concerns. I, like many of my colleagues who
have spoken earlier, really just want to reemphasize the
importance of transparency. I share with my colleagues the
concerns about lack of transparency in this renegotiation
process, and my question really is, as I understand it--the
reason why I would assume that you are invoking TPA for NAFTA
but not doing so for the KORUS agreement you have stated was
because there are only minor amendments, and I guess I am
questioning the unilateral decision that the executive branch
can make as to, you know, to keeping the legislative branches
and Members of Congress out of the loop. Can you talk a little
bit about, you know, your ability to not come before us for TPA
on KORUS?
Ambassador LIGHTHIZER. Sure. And that's an excellent
question. The bottom line is that TPA creates a process that
has a number of steps that Congress is involved, as are cleared
advisers and the like, and it takes more than a year to do
realistically and, in fact, probably a lot more than a year.
So, if you are in a negotiation like we had with KORUS--like we
have with KORUS--you're in a position where there is a real
price to the uncertainty of waiting for the negotiations to go
forward.
Ms. SEWELL. Well, I appreciate it takes a lot of time
obviously to go through the TPA process. I really was
questioning what the ability of this Administration or any
executive to actually make that decision versus, you know,
coming before Congress and asking for our blessings on this
renegotiation.
Ambassador LIGHTHIZER. Sure. So there is an amendment
process within the agreement, and to the extent you follow the
amendment process within the agreement, there are certain
things you can do and certain things that you can't do. Things
that require changes of law, for example, you probably cannot
do, and that is why you would almost in that circumstance say:
Okay, fine, we are going to have to go to TPA.
But there are a number of things that you can change. You
can speed up tariffs. There is a whole variety of things you
can do, and it was I would suggest contemplated by Congress
when they passed the law implementing that agreement but also
of similar agreements. It was contemplated that this process
could be used for certain things and not for other things. So--
--
Ms. SEWELL. Well, I just want to reclaim--I am running out
of time. I wanted to reclaim my time. I just really wanted to
reiterate what you have heard from lots of my colleagues that
this agreement, the KORUS renegotiation is just as important as
NAFTA, and there are lots of Members of Congress who will be
directly impacted by any changes in that agreement, like my
district, and we obviously would want to be kept abreast and in
the loop as to the changes that are going to be made and asked
our consideration as to how will it affect our districts.
The other thing I wanted to discuss is this Administration
has shown a link between national security and trade, and I
also sit on the Intelligence Committee, and I see the threats
that this country faces every day. I also have commerce--have
seen how commerce can foster international cooperation and
bolster national security. So I agree that the trade and
national security are linked, but President Trump recently
alluded to the possibility of pulling out American troops out
of South Korea if South Korea doesn't give into our demands on
the Korea negotiations. I just want to make sure that and know
your thoughts about how it is we can threaten strategic allies
in the process of this renegotiation. I think that there is a
balance, sir, that must be maintained when we are renegotiating
with our strategic allies, and threats like that, I don't think
help. Your thoughts about that?
Ambassador LIGHTHIZER. Well, I mean, we are in the process
of doing a lot of things. We certainly agree with you that
South Korea is a very important ally, and they are not only an
important ally but an important ally at a particular spot right
now where there is a great deal of vulnerability. And in terms
of my negotiations with my counterpart on the Korean-U.S.
agreement, troops and the like have nothing to do with what I
am talking about. I don't get involved with it at all.
Now, there are other people who would say that, in other
parts of the strategic relationship, from the point of the
United States, that worry about who's paying for what and all
these kinds of things, and I know there is a whole world of
stuff there that's very important that somebody has to sort
out----
Chairman BRADY. Mr. Ambassador, I apologize, the time has
expired.
Ambassador LIGHTHIZER. I am sorry.
Chairman BRADY. Mr. Kelly, you are recognized.
Mr. KELLY. Thank you, Chairman. Mr. Ambassador, thanks for
being here, and I am glad your team is starting to get filled.
I know you have been doing yeoman's work on this. Look, you
know, where I am from in western Pennsylvania--and I am going
to go through this as quickly as I can because I know there are
others waiting to talk--but at one time, steel and aluminum
were such a big part of that area and now our mills are
shuttered; our towns are decimated. And I think the President's
talking about putting tariffs on aluminum and steel has been a
big boost to those folks that live there, giving them hope
again, because for so many years, people talked about it. And
if you can repeat, what is the trade imbalance right now,
because I think people talk about us getting into a trade war?
And the imbalance right now, is it, what, $800 billion?
Ambassador LIGHTHIZER. Correct.
Mr. KELLY. So I guess that is considered a skirmish, not
really a war.
Ambassador LIGHTHIZER. $800 billion is the goods numbers,
the goods and services number is like 565 or some number like
that.
Mr. KELLY. Well, we are in a real battle right now to
maintain our jobs. One of the things I understand that you are
going to be--you are going to be leading the country exemption
process for the President, and it has been reported that there
will be roughly five criteria for granting tariff exemptions
for countries related to fighting over capacity, blocking
dumped steel from this market, participating in the global
forum on steel excess capacity, and supporting antidumping and
countervailing duty disputes lodged by the United States at the
WTO. One of the things I want to bring up, one of the companies
in the district that I represent is a company called NLMK. They
are in Farrell, Pennsylvania. They have 600 people that work at
the Farrell plant, and down in Sharon, they have another 150.
And I think they are pretty much on board with what is going on
with the tariffs, but they are a Russian-owned company, and I
know this disturbs so many people; any time the word ``Russia''
comes up, we go running around with our hair on fire. What they
are feeling is that any of these tariffs should be applied to
overseas companies that have been dumping steel or manipulating
currency for years, and one of the men up there who represents
the steelworkers, Terry Day, has said that let's go after the
people that have been the bad actors. They get the Russian
steel in, but then they reheat it, and then they roll it out,
and they make coils with it. I think that some people put
everybody in the same category. So I just want to make sure
that, when we go after these folks and these exclusions are
granted, there are some people that do have a model already in
place; they have not been taking advantage of a bad trade
situation, but they have actually, in fact, worked to get
through it. These are, by the way, American workers that are
actually producing this product. So, if you can, can you just
give me an idea on how the country exemption discussions are
proceeding at this point, and how would a company like NLMK and
the rest of the foraging companies, because we have a lot of
foraging companies, too, in Pennsylvania that are looking at
all this, so how that would work out and how--would they or
would they not be included in the exclusions, and how would it
work?
Ambassador LIGHTHIZER. Let me say, first of all, that there
are two levels of exclusion. There are product exclusions, and
I don't know if in their case they have a product coming in
that is somehow unique in a way that it doesn't reduce the
efficiency of the program. So there will be--there are--there
will be a number of countries, and when we've done this in the
past, because I have been around this before, there's always a
process where somebody comes in and says this is a unique
process and a unique product and that price should be excluded,
so there is that.
With respect to the countries, I would say there is a
cognizance on our part that some countries are bigger
contributors to the problem than others, and a number of people
believe that Russia is in that group of countries that are
contributors. So, if you look at when this was originally set
up, you had option one, which was 25 percent across the board;
you had option two, which picked out 12 countries, and those
countries would have higher duties, but others would not. So
that's the options; the President went with option number one.
With respect to option number two, one of the countries
that was viewed to be a significant contributor to the problem
was Russia, so I'm not exactly sure that, in all cases, people
would say they are basically operating in clean hands. That is
not to say that, in your situation, that it is necessarily
reflective of that. So what these countries tended to be were
people that imported product from China and exported product to
the United States. So you even had basically like Costa Rica,
you had places where you think, what, where does that come
from? And the presumption was that they were taking in steel
from China and shipping either that or their own steel and
replacing it with--to the United States. So I would suggest
that Russia is at least, in the opinion of some people, is a
problem. I would say--and there's a number of others who I can
go through. I would say that there is an effort made to try to
separate out these things. I don't think you are going to see a
lot of exclusions done in any event, but I would say this, that
to the extent exclusions are offered and product exclusions
come in, it does have a dampening effect in terms of the effect
on prices and the product, which would have a dampening effect
on any negative consequences that go down the road.
Chairman BRADY. Time has expired.
Mr. Renacci, you are recognized.
Mr. RENACCI. Thank you, Mr. Chairman. Ambassador
Lighthizer, from one Ohioan to another, thank you for being
here. Ashtabula says hello. And thank you for your testimony. I
would like to tell you about two Ohio farmers I have recently
spoken to Jerry Bambauer and Dave Dotterer. Jerry and his son
farm nearly 900 acres in Auglaize County, Ohio. He is the third
generation of his family to farm the land and hopes his
grandson eventually steps up to be the fifth generation farming
the land. His family started with owning 8 acres back in the
1930s. Through hard work and dedication, the farm eventually
grew to its current size. The main crop farmed on this land is
soybeans.
Jerry's friend Dave Dotterer lives over in Wayne County,
which is in my district, and also farms soybeans. Dave grew up
on a dairy farm but didn't really care for milking cows as much
as his older brother. He knew he wanted to farm land and wanted
to own his land, so he made it happen. He eventually purchased
1,100 acres that he farms with his son. His current focus is on
building up the farm a bit further before he passes it along to
his son.
I am telling you about Dave and Jerry because both of these
men personally identify the American Dream that many farmers in
Ohio can relate to. But I am also telling you about them so you
are aware of their concerns.
As you know, U.S. soybean farmers are very concerned about
recent suggestions from China that it may target soybeans if
trade disputes escalate. Given that the United States is one of
the world's largest exporters of soy and China is one of the
largest importers of soy, their concerns are valid, especially
since Ohio is the ninth largest producer of soybeans in the
United States. So my questions for you, Ambassador, are
threefold.
First, in your conversations with other countries, how are
you addressing the devastating effect that these types of
retaliatory measures could have on the U.S. farmers? Also, what
steps might the United States take to prevent this potential
issue from becoming a real problem? And, finally, is there any
message you would like to relay to all the concerned soybean
farmers back in Ohio?
Ambassador LIGHTHIZER. Well, thank you, Congressman. First
of all, we're very much aware of the problem, and I made this
point from the beginning, not only in the context of the steel
and aluminum but in the context of anything we do with China.
We clearly have a problem with China. We're clearly going to
have to do something to stick up for our own interests and to
prevent ourselves from further seeing our national wealth
eroded. And when they do, one of the first things they always
talk about and what we always think about is $14 billion worth
of soybean sales. They are by far our biggest market, and if
you look at what they import, even among agriculture product,
it is sort of like 14 and then the next--14 billion--the next
falls down to about a billion and a half. I mean, it is
enormous spike. It's extremely important, and it is a real
vulnerability.
I would say also that, even without any of this going on
right now, the Chinese are cutting back. They're limiting their
soybean imports, nothing to do with any of this. They're doing
it for their own reasons because they find that there are
advantages to Brazilian soybeans, and they have their own
bureaucracy doing whatever it is going to do.
So it is a major concern. It's something that we worry
about. I would say I'm focusing on soybeans because you brought
it up, but it is all agricultural products that are vulnerable
in this kind of circumstance. So it is something we have to be
very, very cognizant of as we take any steps. I don't think
it's a sufficient worry that you would say, therefore, we are
not going to stand up for American intellectual property or do
the kinds of things that we have to do. But we are trying to do
everything in a measured--appropriate and measured way. And if
there is retaliation, then the United States is going to have
to take action to stick up for our farmers because we can't be
in a position where when we do something that is not crazy or
radical but is necessary to keep the United States' economy
going, that somebody threatens farmers, and therefore, you
don't do it. Right? We can't have a $375 billion trade deficit
and not do anything to defend ourselves. But I think it's
extremely important that we're aware of it and that we have to
be prepared, working with Congress and others, to take
countermeasures if it turns out that they are acting unfairly
with respect to retaliating with respect to soybeans but also
other agricultural products and other products too, but we
generally tend to focus on agriculture.
Mr. RENACCI. Thank you, Mr. Ambassador.
Mr. Chairman, I yield back.
Chairman BRADY. Thank you.
The gentleman yields back.
Ms. Sewell, you are recognized.
Excuse me. Ms. DelBene, you are recognized.
Ms. DELBENE. Thank you, Mr. Chair.
And thank you, Mr. Ambassador, for joining us today.
Digital trade is an important part of our trade agenda and
should be a major focus area as we look to modernize our trade
agreements. But digital trade is also making trade work for
Americans across the country. We know that many small sellers,
constituents in my district but across the country, are
harnessing the power of the internet to reach customers abroad
in ways that were really impossible a decade ago. In 2015, the
United States led an effort to expand the information
technology agreement, and 53 countries, including China, agreed
to remove 201 tariffs on information and communications
technologies, ICT, products, products like next-generation
semiconductors that are manufactured in America and used in
products around the world.
So your trade agenda acknowledges the importance of digital
trade. However, the foundation of a strong and a vibrant
digital economy includes access to affordable ICT products such
as smartphones and tablets. The biggest beneficiaries of low
tariffs or low tariffs on ICT products are our students,
entrepreneurs and small businesses who use these devices to
innovative and to sell their goods and services around the
world.
So recent press reports, as we have discussed today,
indicate the Administration is considering a $60 billion tariff
package on consumer products, including consumer electronics
from China, as part of the section 301 investigations
enforcement actions, and so I wondered if you could explain for
us how these tariffs would help make it easier for our
businesses and entrepreneurs around the country to compete in a
global economy.
Ambassador LIGHTHIZER. So I guess the question is, will the
301--because we are not putting tariffs on for any reason other
than the assault on the U.S. information technology industry.
So we have an issue that China has a policy of, one, forcing
technology transfer in the case of inward bound investment;
two, forcing companies to license technology at less than the
economic value of it; three, state-subsidizing and directing
massive amounts, and I think in some of these sectors $300
billion worth of investment to take over U.S. technology firms;
and then, four, the absolute theft of technology through cyber
theft. So those are kind of the premises of the--the reason we
have launched the 301.
Now, the question is, if you go through this, you have the
study, and you decide there's a serious problem there, the
issue then is, what do you do? One of the things that you would
do is impose tariffs. The way you would impose the tariffs, and
I tried to allude to this at the beginning, is there are
certain technology products that are under assault. You have to
give consideration as to whether or not you would put tariffs
on those products. Another issue is you would create an
algorithm that would maximize the pressure on China and
minimize the pressure on U.S. consumers. And the combination of
those two would be the way you would get to the amount you
have. So you would come up with the economists' study and say,
``Here is a measured amount of what the relief should be,'' and
then you try to find a system that allows you to impose it in a
way that is most rational.
And if the President makes the decision to do this--and he
has not made that decision; we haven't done anything, but it is
imminent that he will come to a decision--that's the way we are
going to approach it. So you say, how does U.S. technology--my
view is this whole system vastly benefits U.S. technology
companies, vastly, because it protects their intellectual
property, which is the very heart of what they are. There is no
set----
Ms. DELBENE. Excuse me, before we run out of time, are you
saying then that you are taking into account in any enforcement
action that you take that the impact it would have on
consumers, the impact it would have on small sellers across the
country and on innovation and entrepreneurs across our country?
Ambassador LIGHTHIZER. Yes, we certainly have a logarithm
that tries to minimize the negative effect on us and maximize
it on them. It is a logarithm that is created, and it is the
kind of thing that you would expect us to do, and if we do
this, that's the kind of thing we will do. So, for sure, that
is right.
Ms. DELBENE. Thank you.
Mr. Chair, I yield back.
Chairman BRADY. Thank you.
Mr. Meehan, you are recognized.
Mr. MEEHAN. Thank you, Mr. Chairman.
And thank you, Mr. Lighthizer, for being here today and for
all of your continuing work in this space. I want to, for the
record, have an opportunity to express an issue. I know we have
talked about it, but I represent a district in which QVC is a
business which it broadcasts around the country and is able to
take advantage of sales of goods. Canada prevents that
broadcast from going across the borders using something called
a cultural exemption, and it is not clear to me that the basis
upon which they claim a cultural exemption would apply to
something like this. It looks really more like a way in which
they are effectively preventing, you know, what we would hope
would be the fair competition working to, you know, the
distinct disadvantage of QVC.
I know you have a lot of big issues with NAFTA, but I hope
when we get to the crossing the t's and i's, that something
important like this is an issue that is also on the negotiating
table, that and the idea that products of small people that
have small products, there is a cost associated with moving
goods into Canada for the small, you know, producer; somebody
in the same way may have a knickknack that they are selling in
Canada, but there are exclusions on getting those things in
there. I hope those kinds of things will be part of the
negotiations but get to conclusions.
Let me just switch, as well. I appreciate the work that you
are doing holding China accountable for what they are doing
dumping steel on the global stage. What concerns me and I am
hoping that, with your language about flexibility, that there
is a recognition that there are countries out there who are
going to be impacted by the tariffs. And, you know, the EU can
speak as a block. We have done things with Mexico and Canada. I
do a lot of work with Brazil in the sense of my
responsibilities here on the Committee and studying their
circumstances. I look at that as the kind of a country with a
trade surplus with the United States or the United States has a
trade surplus with them. This question about the transshipment
of steel, you know, this is a country who I do not believe is
engaged in that. We have a parallel trade in the sense that a
lot of United States coal goes to Brazil in order to be used in
some of the, you know, the preparation of that steel, which
comes in as a semifinished product which augments manufacturing
here. So there are a lot of characteristics which are, I think,
speaking to the idea that, even though people have been
identified, that these are the kinds of considerations that I
would hope would qualify for, you know, exclusions. I know that
you said that there was going to be flexibility in that, and so
I am asking if you believe that those are the kinds of criteria
that will be relevant in the determinations about whether or
not there is a basis for exemptions for countries like Brazil.
Ambassador LIGHTHIZER. First of all, on your first point
cultural----
Chairman BRADY. Mr. Ambassador, if you can hit that
microphone.
Ambassador LIGHTHIZER. Sure. On the first point, the
cultural exemption really is very often just cultural
protectionism, and you noted their de minimis standards are
another example of just raw protectionism. And when we talk
about wanting to limit people using standards and warning
labels and the like, I always think all these things can be--I
mean, there is a legitimate case for some cultural exceptions,
but it's not this kind of thing, and this is another example of
protectionism, I fear.
In the case of Brazil, there are a lot of things that would
make Brazil an unusual circumstance. As we talked about before,
you and I, yesterday and prior, the fact that they are a huge
semifinished producer and the fact that they have--a lot of
their production is basically a model, which is they send slab,
which we would call semifinished steel, to related countries--
companies in the United States, and then that's made into
steel. So there are things that are unique about the Brazilian
situation that at least we know is going to be taken into
consideration. That isn't to say that they would be successful
in getting a remedy, of getting an exclusion. I mean, that
ultimately is going to be a question for the President, but
there are factors there that are important.
Chairman BRADY. Thank you.
Mrs. Noem, you are recognized.
Thank you, Mr. Meehan.
Mrs. NOEM. Thank you, Mr. Chairman.
And thank you, Mr. Ambassador, for being here today. I
represent the State of South Dakota. And this time of year,
there is a lot of snow, it is really cold, and we watch a lot
of basketball games, so--and my son plays basketball, so that
is what we end up doing on a lot of winter evenings when I
happen to be back in the State. But recently I was sitting at
one of those basketball games and I had something happen that
has happened all too often recently. A local farmer came up and
sat beside me and said: Kristi, do you know what the
Administration is thinking on trade right now? It seems like
every time they take a position, soybeans drops 40 cents a
bushel, and we can't hardly pay our bills today.
And so it happens over and over again where a lot of
farmers and ranchers are very concerned based on comments that
come out of the Administration or positions on what could
happen to their commodity markets. It is because 73 percent of
our commodities that are grown in South Dakota are exported to
Mexico or Canada, and times are hard in farm country, a part of
America that really strongly supported President Trump. They
have endured a 45-percent drop in net farm income over the last
3 years, and its only indication is that it is going to get
worse. So these farmers are very worried that the
Administration that they supported is going to lose them a
trade deal over provisions that may be widely unpopular.
A perfect example might be the sunset provision, which
requires the deal to be renewed every 5 years. In my opinion,
trade deals are meant to foster trust between nations and
eliminate uncertainty in order to create more opportunities to
sell our goods overseas, and the sunset provision undermines a
trade deal's ability to develop necessary certainty to
encourage businesses to invest. So I am curious, Mr.
Ambassador, if you would accept a final trade deal, a trade
agreement without the provision in it?
Ambassador LIGHTHIZER. In the first place, I'm not going to
sit here and negotiate with you in public. So that is not going
to happen. I don't think that a sunset provision has any
negative effect at all on farm sales.
Mrs. NOEM. You don't think it creates uncertainty every 5
years?
Ambassador LIGHTHIZER. No, I don't think it has any effect
at all. In fact, I think exactly the opposite. I think when you
get close to that fifth year, what you're going to see is what
you saw this year with Korea. That is to say another billion
dollars' worth of sales. So what we did is the President
created this so-called uncertainty in KORUS, and you saw a
billion dollars of additional sales of agricultural products in
Korea and in--because what they want to do is get the deficit
down, and in my opinion, what you are going to see is, as you
approach that fifth year, you are going to see additional
sales. So I think they are--the people who say that I think are
exactly wrong.
Mrs. NOEM. Do you have other examples besides that one
instance? Because consistency, and that would be incredibly
important that we have a background in historical examples of
where--because all indications historically is, when there is
uncertainty in a trade provision, that you have commodity
prices fluctuating and uncertainty for producers, and many
producers market their grain a year in advance, or they may
have to hang on to it waiting for better markets, and
uncertainty causes them a lot of heartburn. So is that the one
instance that you could point to where it was actually
advantageous, or is there more----
Ambassador LIGHTHIZER. Well, to be honest, we have only
renegotiated two agreements. We're in the process of KORUS, and
we are in the process of NAFTA. So it's a fairly small
universe. But clearly there is a desire on behalf of people,
when you are going to look at the trade deficit, to get the
trade deficit down. That is number one.
Number two, I don't see it as an enormous amount of
uncertainty. The idea is to have you look back at an agreement
after 5 years and determine whether or not the agreement is in
the interest of the United States. If it is going to be as
popular as everyone says that it's going to be, and if it is
going to be as great for farmers as everyone says it is going
to be, why would we get rid of the agreement?
Mrs. NOEM. As far as adding clarity to how important the
sunset provision is, you don't want to be more specific on if
you would sign an agreement or agree to finalize an agreement
that did not have it in it?
Ambassador LIGHTHIZER. I think it is extremely important to
me, and I am not going to negotiate with you here in this forum
for sure on this or any other provision.
Mrs. NOEM. All right. Okay. Thank you.
I yield back, Mr. Chairman.
Chairman BRADY. Thank you.
Ms. Chu, you are recognized.
Ms. CHU. Ambassador Lighthizer, I know that you want to
close NAFTA negotiations soon, but the IP chapter still has
many outstanding issues. Stakeholders are worried that, in
trying to quickly close the chapters, the United States will
not honor its commitments to reform and modernize the IP
chapters or that it may even negotiate away some of the key IP
provisions for U.S. exporters that would in turn harm the U.S.
economy.
Now I represent the Los Angeles area, the heart of the
creative industries, and I am co-chair of the Creative Rights
Caucus, and so strong intellectual property protections are
very, very important to me and really important to the United
States. When movies, television shows, and songs are consumed
around the globe, the royalties are injected back into the U.S.
economy, and, in fact, the United States is widely recognized
as the leader for the creative industries, the IP-intensive
industries, these particular ones account for $6.6 trillion in
value added and more than 38 percent of the U.S. GDP, and it
supports 45.5 million jobs.
While, unfortunately, Canada and Mexico don't place the
same value on strong intellectual property, particularly
copyright protections, as the United States does, since the
NAFTA IP discussions have remained at an impasse for months
now, what assurance can you give me that USTR is working to
ensure Mexico and Canada protect U.S. intellectual property in
their markets?
Ambassador LIGHTHIZER. So, first of all, I would say, with
respect to what progress has gone on until now, there has been
an enormous amount of time spent, people have talked back and
forth, so we understand each other. This is one of those issues
that is never resolved until the very end of a negotiation, as
I am sure you know. The reality is exactly as you say: Canada
and Mexico are both takers of intellectual property. They are
not protectors of intellectual property. Most people are not
surprised about that with respect to Mexico, but it is
surprising with respect to Canada. Canada has third world
intellectual property protection, and getting them to accept
first world is not easy. However, the speed with which we close
NAFTA, and many people would say, if we close it in the next
few months, it would still not have been fast, but that won't
have any effect on where we come out on this. This is a very
important issue. We understand it's an important issue.
I believe there are forces in Canada who understand that
they have to at some point become a fully developed country on
this issue because they certainly have a lot of intellectual
property potential. So I am inclined--there are people there
who think they should be on our side of this issue, but I can't
give assurances. It certainly is our position that we want to
have strong protection for intellectual property. We think it's
not only important for the United States but important for all
the rest of these countries to do it. It's in their interest to
do it.
Ms. CHU. Well, you are saying that this is one of those
chapters that might be saved for the last, but can you show me
that the intellectual property provisions, historically some of
the most technically and politically sensitive free trade
agreement provisions, will not be negotiated away or conceded
in the final hours of NAFTA renegotiations?
Ambassador LIGHTHIZER. Well, it is certainly not my
intention to do that, but I can't very well negotiate with you.
I wouldn't negotiate with her; I can't negotiate with you
either. It just wouldn't be fair. But this is a very important
issue for us. We are completely in your camp, and we hope that
you call and say what a great job we did when the time is over.
I know you'll call.
Ms. CHU. Okay. Well, on another subject, one of the keys to
ensuring our trade agreements is strong enforcement
particularly of our labor obligations. Now, we have agreements
with Colombia, the Dominican Republic, Peru, and Honduras, and
there have been labor violations that have been filed in each
one of these countries. In fact, there are numerous violations
that include violence against unionists, inadequate labor
inspections and enforcement actions and so forth, and yet, in
most of these cases, there hasn't even been an update from the
Administration. What are you going to do to enforce these labor
agreements?
Ambassador LIGHTHIZER. Well, we have provisions in each of
the trade agreements with these people that have labor
provisions, and we are in the process of following the process
that we have to follow for dispute settlement in those cases.
It's clearly something that we brought to their attention. It's
very troubling. It's a very troubling trend, and unfortunately,
it is not just these countries. It's in a lot of other
countries in that part of the world. So it's something that we
agree with you on, and we are in the process of prosecuting
these cases following the process that is set out in the
agreement.
Ms. CHU. Thank you. I yield back.
Chairman BRADY. Thank you, Mr. Smith. You are recognized.
Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman.
Thank you, Ambassador, for taking your time out and being
here today. The folks in southeast and south central Missouri
are very optimistic about the future. If you look at the past
year under President Trump's leadership, we passed a $5.5
trillion dollar tax cut for American farmers and small
businesses. We have repealed hundreds of burdensome regulations
and created over 1.6 million new jobs. Speaking of new jobs, as
of just the day after the President did his tariffs on aluminum
and steel, I was in southeast Missouri announcing 450 new jobs
with a new aluminum smelter opening up. So these are real
changes and real aspects that are affecting real people that
have not always been on the right side of victory.
The next step for us is to go out and negotiate the best
possible trade deals so that American farmers, businesses, and
workers win around the world. We couldn't have a better person
leading the way. The President wrote a book on creating great
agreements. In the book he quoted: The worst thing you can
possibly do in a deal is to seem desperate to make it. The best
thing you can do is to deal from strength, and leverage is the
best strength you can have--on page 53, in fact. The President
knows where our strengths are. They are in our hardworking
people, our superior goods, and our world-leading services.
Mr. Lighthizer, you know this as well, and the task before
you in NAFTA and potentially KORUS and other deals is not an
easy one. While those are the hot topics, I want to talk to you
about some unfair trading practices.
I do want to applaud you and the President for its trade
enforcement actions in the World Trade Organization. Like I
mentioned before, America is ready to compete as long as the
playing field is level. But unfair trading practices
disadvantage American farmers. To ignore violations of trade
agreements does not strengthen free trade. In fact, it weakens
free trade. There has been mounting evidence that certain
countries are ignoring WTO obligations by providing price
supports to farmers well above the commitments they agreed to.
It results in surplus production that ends up in the world
markets displacing sales of U.S. farmers. It is not
conservative to allow for rampant breaches of contracts. It is
just wrong.
In what ways is this Administration leaning into the WTO to
ensure that these countries play by the rules?
Ambassador LIGHTHIZER. First of all, I agree with
everything you've said.
Mr. SMITH OF MISSOURI. Well, then I must be right. That is
great.
Ambassador LIGHTHIZER. There are some people that disagree
with me from time to time in this Committee. So I completely
agree. You are absolutely right. We are seeing a proliferation
of agriculture subsidies. We just have. In the last ministerial
round we had in Bueno Aires, I ended up hanging up the round or
the negotiations because people wanted to--their idea of an ag
negotiation was a negotiation wherein countries could have more
subsidies rather than fewer subsidies. They called this food
programs, but the reality is what it was going to do was going
do nothing but encourage more subsidies in agriculture. So we
have gone all this far to try get ourselves in a market
environment, and we said: No, we are not going to be in a
position to change that.
And it really was India who was very much a new subsidizer.
Mr. SMITH OF MISSOURI. With their rice and the grains?
Ambassador LIGHTHIZER. You're exactly right. And they were
very much in favor of having negotiations really, in my
judgment at least, about increasing subsidies. So we said: No,
we are not going to do that.
Every time we find a situation, we bring a WTO case. The
WTO, however, is not the greatest forum for enforcement of
these kinds of actions, and it's always a problem if somebody
does subsidies or dumps. In our market, we have tools to deal
with that. If they're hurting us because they are doing
something as a result of subsidies in their market or in a
third market, the tools are not that good so you have to go to
the WTO, and it is a cumbersome far from flawless forum. So we
are aggressively bringing these cases. We completely agree with
you. We are using the tools we have at hand, and hopefully we
can improve those tools and make a difference.
Mr. SMITH OF MISSOURI. Please continue. Thank you.
Chairman BRADY. Thank you.
Mr. Rice, you are recognized.
Mr. RICE. Thank you, Mr. Chairman.
Thank you, Ambassador Lighthizer, for being here today. I
have told you publicly and privately that your presence in the
Administration and Mr. Ross' are two of the main reasons I have
so much faith in this Administration. I appreciate a man of
your experience taking on this job, and it is so important for
the American worker. I am a big believer in American
competitiveness. I think our Tax Code went a long way toward
helping our economy be competitive in the world, and trade is
very important in American competitiveness; obviously also
infrastructure, a lot of the things that the President--
immigration, a lot of the things the President is trying to
work on. If we can get two or three more of those notched, our
economy would be well poised in the world.
With respect to the tariffs, my opinion is, as you said,
nobody wins in a trade war, but nobody disagrees that there are
people who have been bad actors in the world, China
particularly, and we have ignored it for too long to the
destruction of the American middle class, and so we just can't
accept that anymore. We have to respond, and it needs to be
targeted, and I appreciate your efforts in that regard.
But I wanted to talk a little bit more about NAFTA. You
know, I have been to Montreal. I mentioned Montreal. I have
been to Mexico City. I met with Mexican officials and
regulatory people and business people and chambers of commerce.
And in Canada, the same. And in America, the same. And I
haven't met anybody who doesn't think that NAFTA doesn't need
to be continued and that it doesn't need to be modernized.
Everybody is pretty much on board. And the same topics are
brought up, the same four or five things you have raised today:
rules of origin and de minimis rules and all these things. So
it sounds like you are making great progress there, and I just
am comforted having been in both of those places that everybody
recognizes that this modernization process is a good thing and
needs to be pursued.
But I wanted to zero in on one question that was asked to
you at the American Chamber of Commerce in Canada, and I loved
your response to it. And I just wanted to ask you so you could
respond publicly to everybody. What would you see as a win in
NAFTA? What is your goal? What are you shooting for when you
are trying to renegotiate this? Can you explain that to the
public?
Ambassador LIGHTHIZER. Can you give me a hint what I might
have said? If it was such a good answer, I don't want to change
it at this point. Look, from our point of view--first of all,
we have to have--we have to have an agreement that is good for
all three countries, right? I mean, we have to have that.
Secondly, we want an agreement that is going to end up
getting these trade deficits down. We have large trade
deficits, and it has to move, has to move more jobs to the
United States and create better jobs, not only more jobs but
higher paying jobs. You know, I am in the group that thinks
what we really need is a little bit of wage inflation. So I
want to do something--in the first place, I think it has to be
in everyone's interest, or you won't get an agreement, but I
want it to be something that gets the trade deficit down. I
want it to be something that creates jobs, that moves some of
these jobs back to the United States, and they're all not
coming back. We all understand that completely. But this notion
that none of them are coming back has been proven wrong by all
of you because you have seen what happened after your tax bill.
It has moved jobs back. It has. So jobs, wages are what the
President is focused on, that's what I am focused on, and I
think that this agreement will lead to efficiency, and it will
lead to higher wages and more jobs in the United States.
Mr. RICE. That is pretty much the same answer you gave in
Canada, except you said one other thing: I want to eliminate
incentives to offshore.
All those are great objectives. I want to point out one
anecdotal thing when we were in Canada having lunch with the
Canadian American Business Council. And a tax consultant from
Canada said: Where we have clients that have positions in
America and in Canada, we are advising them to ramp down in
Canada and ramp up in America because of the tax reform bill;
it seems we have lost our competitive advantage.
And under my breath, I said: Yes. So I appreciate very much
your efforts to lift the American middle class. It is smaller.
It hadn't had a raise since 1990, and I think tax reform and
your efforts will change that.
Thank you, sir. I yield back.
Ambassador LIGHTHIZER. Thank you very much.
And I would like to think--going to get credit, you know,
some of the credit for this tax bill. They are going to say:
Look, the trade deficit went down, and I am not going to give
you any credit when that happens. It will be entirely the trade
policy.
Chairman BRADY. We know how that works, Mr. Ambassador.
So, Mr. Blumenauer, you are recognized.
Mr. BLUMENAUER. Thank you, Mr. Chairman.
Mr. Ambassador, thank you. I appreciate your patience here
for the last 3 hours dealing with our questions and comments. I
must say that I appreciate the role that USTR has assumed on an
area that I have been working on for the last 10 years dealing
with illegal logging, particularly what is going on in Peru. It
has been sort of a struggle. I thought it was harder than it
should have been in the last Administration, but I appreciate
the work that you and your team have done. This, as you know,
is not just an issue of enforcing trade obligations. Illegal
logging damages the environment. It undercuts the rule of law
in developing countries, and it has negative impacts on
Americans who play by the rules, and I just wanted to say how
much I appreciated that. And I do want to identify myself with
comments that my friends Mr. Thompson and Mr. Doggett mentioned
earlier. I won't take my time or yours, but I am concerned
about having American wine industry, particularly in the
Pacific Northwest, on a level playing field, and I am concerned
about American interference with the ability of other countries
to protect the health of their citizens, and I appreciate there
are nuances there, but historically, I think we could have done
more to be more open. I think it is a larger issue, and I hope
that we can collectively focus on this because I think it is
very significant.
I listened to--my friend from Missouri referenced ``The Art
of the Deal'' or some such publication by the President. I
think there is a pretty significant difference when you are
negotiating in real estate when you can, as he states in his
book, exaggerate as you can go bankrupt and leave other people
holding the bag when things collapse and move onto the next
project. We are talking about the American economy. We are
talking about our role in the world, and I think, for example,
exaggerating or making things up in a discussion with the head
of the State of an ally and admitting it publicly doesn't help
us on the world stage. And I identify with some of my
colleagues who say we feel more comfortable knowing that you
are in the role that you are in. You have broad experience and
I think understand some of these dynamics.
And it is in that context I would like to just raise one
point with you, and that deals with some of the impacts of the
imposition of tariffs under the 301 with China, particularly as
it affects retail trade. And Mr. Reichert and I have some
involvement with companies that are involved with apparel and
footwear, and we have been working for a long time to try and
see if we can have some more rational policy as it relates to
tariffs.
As you well know, tariffs are not just magically imposed on
somebody else. It is a cost of doing business. It affects what
happens with American manufacturers and retail. And they are
ultimately paid by the consumer, and we have a system now that
is tilted against low- and moderate-income people. When you
look at clothing and footwear, the percentage that is paid at
the lower end is really quite outrageous, and I am hopeful that
we don't rush into something with China that ends up actually
making it worse. So I am hopeful that this is an area that can
be entered with great sensitivity.
Mr. Chairman, I would request unanimous consent to enter
into the record correspondence addressed to the White House but
also to the Ambassador and the Committee that speaks to this in
terms of tariff, understanding the dynamic, and I wondered if
you had any observations----
Chairman BRADY. Without objection.
[The submissions for the Record of Hon. Earl Blumenauer foll
ow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. BLUMENAUER. Thank you, sir.
If you could offer any observations that might make some of
my constituents feel better.
Ambassador LIGHTHIZER. I would say, first of all, when you
talked about the quote from ``The Art of the Deal,'' all I was
thinking was I hope I don't look desperate, so I had a
different take on it than you did. We understand and I kind of
went through this, if there are tariffs, one, you have to
establish through an algorithm what the amount is and use as
much science as you can; and, two, when you pick the products
on which you would put a tariff, you start with a logarithm
that tries to maximize the effect on China and minimize the
effect on U.S. consumers. And if you think about products on
a--you have kind of a line over here of products where they are
minimally a problem for U.S. consumers and maximally a problem
for Canada. Now you can't always follow that, but that is one
of the big factors, and that is part of the logarithm, and we
are very--we are aware of that and are cognizant of it. And if
we end up doing this, it won't be perfect, but you will see a
methodology which you will say, yes, that is a sensible----
Chairman BRADY. Time has expired.
Mr. Schweikert, you are recognized.
Mr. SCHWEIKERT. Thank you, Mr. Chairman. Mr. Ambassador,
first, just a quick comment on sort of a global basis and
particularly more for even some of your newer staff. Long term,
some of us have a fascination of what worldwide trade can do,
particularly considering our demographic issues. You know, as a
country, as we are getting much older, we are going to need
populations of folks in the prime consumer ages for us to sell
stuff to. So that is always in a long term, there are some
great articles about, you know, trade actually may help us with
some of our demographics that we are facing, and it is just
math.
Mr. Ambassador, I first want to thank you on the de
minimis. The last time you and I had an opportunity to talk
about it, you not only got it; you were an amazing advocate.
Particularly, as some of the other countries we are presently
negotiating with are listening to this hearing right now, there
are many of us on this Committee that are absolutely just
fixated on the de minimis value with Mexico and Canada and the
inequities that creates. Do you think they are hearing that
part of the discussion?
Ambassador LIGHTHIZER. I certainly hope so. It's one of
those issues where anybody who starts focusing on it, it
becomes more and more important to them because it doesn't--it
affects a lot of product, and the more you study it, the more
it's bothersome of products coming into other countries in
bulk, being broken up into smaller things and being shipped.
The fact that most of the Canadian--one of the articles I read
is most of the Canadian online sellers sell far more in the
United States than they do in Canada, and we can't go in that
direction essentially at all. I mean $20 versus $800 is just
ridiculous. It's a hugely important issue. It affects an
enormous number of sectors. So it is something that is very
important to us. And I--look, everybody knows the right answer
is to be above $20. There's no one that can argue that. You can
argue 800, but it has to go up.
Mr. SCHWEIKERT. And you make a--look, for those of us being
a border State, Arizona, where we are trying to set up trade
hubs and inland ports, and yet if you look at the current de
minimis, particularly with our trading partner of Mexico, it is
all going to be inbound because our ability for small
retailers, for high-tech commerce to go upbound, it just
doesn't work.
Just because time is so precious, I am one of those States,
communities, because being in the desert Southwest, has intense
concern on seasonal tariffs just because, if you actually sort
of game theory it, it creates distortions and then retributions
on the distortions. And if you actually start thinking about
when certain crops come in and the seasonalities, it ends up
becoming very, very ugly. And particularly for those of us who
do a lot of cash crop growing because we--Arizona provides the
winter lettuce crop for the country, and if you are doing
seasonal tariffs, the tails of those tariffs end up creating
some real pricing distortions, particularly for our consumers
on both sides of the border.
Ambassador LIGHTHIZER. So you are against the proposal.
Mr. SCHWEIKERT. Absolutely livid.
Ambassador LIGHTHIZER. There are an enormous number of
products that would be subject to these that come in from
Mexico through Arizona, and so it's basically--it is the
interest of importers in that State, and I just wanted to make
sure that I was understanding. I have heard the argument, you
know----
Mr. SCHWEIKERT. It actually gets a little more complicated.
If you are doing certain types of cash crops and you have just
had a seasonal tariff that benefitted the growing season in one
part of the country and then it falls off, all of the sudden,
you are on the pricing fall side, and so it is just that if you
think of that constant moving of that sort of bell curve.
Last thing, and, look, you have spoken about this
elegantly, though I substantially disagree with some of the
characterization, ISDS. And I know so often rhetorically we
have speakers that will say, ``Well, it is sovereignty,'' but
if you actually really walk through the mechanisms, it
absolutely is not. It is to that issue. It doesn't rewrite our
laws or the Mexican laws or the Canadian laws. It is not--it is
not a precedent for the next case. Ultimately, it is--think of
it more like, if we were to ever lose, which we have not, you
would have to pay compensation, but it does not rewrite your
sovereign statutes. And so when people use the sovereignty
quotes, I think it is an absolute distortion of how it actually
works.
Thank you, Mr. Ambassador.
Chairman BRADY. Time has expired.
Mrs. Walorski, you are recognized.
Mrs. WALORSKI. Thank you, Mr. Chairman.
Ambassador, it is good to see you. It will come as no
surprise to you I want to talk about 232, just a couple of--
point of clarifications. So it is my understanding, and I just
wanted you to confirm this, that you are considering
participating in the Global Forum on Steel Excess Capacity that
is under consideration?
Ambassador LIGHTHIZER. I mean, we do participate, and one
of the things we've asked people who might get an exclusion is
that they participate and help us with that, and most of these
countries do, by the way.
Mrs. WALORSKI. The recent Global Forum on Steel Excess
Capacity held a first minister-level meeting last November, but
you were not there, correct?
Ambassador LIGHTHIZER. That's correct. I had no deputies in
place at that time, so I was staying here.
Mrs. WALORSKI. I understand. Will you in the future attend
those yourself since the rest of the world is looking at this
with incredible significance and bringing their ministerial
level folks to the table?
Ambassador LIGHTHIZER. Well, I mean, I wouldn't guarantee--
I would say I think, at that meeting, I think there were maybe
three ministers. So it might have been a ministerial level, but
I think about 30 countries did not send ministers and about
three did. And the three that did----
Mrs. WALORSKI. But the one that I am concerned about is you
and this country.
Ambassador LIGHTHIZER. Well, I understand, but I just want
to suggest--the idea was that it was like this ministerial
level. So you had Europe send one because it was basically
around the corner; you had the German minister who doesn't have
competence in the area, but it was good to be there; and I
think there may have been one or two others.
Mrs. WALORSKI. Yes, but the reason I am asking the
question, Ambassador, is because while all of those countries
have irons in the fire here, you are the Ambassador that is
going to go forth under all these rules in 232, and I want you
to do as best as you can for our Nation and for my district,
and that is my concern. And I believe that you can, and I
believe that you will.
I want to switch gears, though, really quickly to this
issue of retaliation. In my district in northern Indiana, with
the second largest concentration of manufacturing jobs in the
country, there is a whole host of ag that I am concerned about:
corn, soybeans, dairy, pork, poultry, beef, eggs, tomatoes, and
the list goes on.
But half of the soybeans grown in Indiana are exported to
China. Honeywell makes brakes and avionics in South Bend that
go into Boeing airplanes. China is threatening retaliation
against both. In fact, today China's state-run Global Times ran
an article alleging that the United States is dumping soybeans
into China and calling for strong restrictive measures.
Corn and motor boats are exported from my district to the
EU. Both of those are the EU's retaliation list.
Setting aside the tariffs, there is an incredible amount of
anxiety in my district over the threat of retaliation. That
anxiety is shared regardless of industry because manufacturers,
suppliers, farmers, and workers will be affected. Are you
considering the devastating effect that retaliatory measures
could have, especially on small business and family farms that
absolutely do not have the resources to absorb big losses?
Ambassador LIGHTHIZER. Yes.
Mrs. WALORSKI. In what way?
Ambassador LIGHTHIZER. We are gaming out what would happen,
what the most likely areas are that you would have retaliation,
what kind of things that you would do. We can't be in a
position where we take no action because of threats of
retaliation. That is how you end up having an $800 billion
trade deficit, which cost literally millions and millions of
jobs in America.
But there is a legitimate threat. And as I have said a few
times here today and many times in the past, agriculture is
always on the front line of retaliation. I said that when I
first testified. Members would say to me: Do you think we
should be concerned? I said: If you're in agriculture, you
always have to be concerned.
Anything that happens, they are going to figure we can get
it and do something on agriculture.
It's an unfair situation, but it's one that we have to come
to grips with. You have to think about counterretaliation. You
have to think about programs for farmers who are in this
situation. There are a lot of things that are outside of my
realm that have to be considered. But it's a serious problem,
and we are very aware of it.
Mrs. WALORSKI. Thank you.
Thank you, Mr. Chairman. I yield back.
Chairman BRADY. Thank you.
Ms. Sanchez, you are recognized.
Ms. SANCHEZ. Thank you, Mr. Chairman, and to Ambassador
Lighthizer for joining with us today to talk about the Trump
administration's trade agenda.
For many years now, Democrats have been talking about the
impacts that trade agreements have on American workers, and we
lament the fact that they have caused countless good-paying
American jobs to be shipped overseas, most notably in the
manufacturing sector. Those jobs are really the bedrock of the
American middle class and critical for our economy. Those jobs
have been lost to countries whose labor standards are
impossible for our workers to compete with on a level playing
field.
I think that a lot of us were really hopeful when the
President talked about bringing American manufacturing jobs
back and creating new jobs through renegotiating our existing
trade deals. This Administration time and time again has said
that they want a level playing field for American workers, but
I have yet to hear the Administration lay out a clear vision
for how you plan to achieve this goal.
It is no secret that we met with Secretary Ross last year.
When I pressed him on that issue, ``What is your strategy for
bringing back American jobs or maintaining American jobs
here,'' the only answer that he provided us was that they are
going to renegotiate the rules of origin for autos. That was
it. That was his single sole idea or plan for bringing back
manufacturing jobs.
I think we have to do a lot more than that if we are going
to create the kind of jobs that we want here and ensure that
American workers and industries are not on an unlevel playing
field, first of all, and, second of all, in a race to the
bottom for wages and working conditions. Workers in Mexico earn
a pittance of what U.S. workers make, and is it any wonder that
we are losing jobs to Mexico? I think Canada, as well, as a
vested interest because their labor standards are similar to
ours.
Mr. Ambassador, I would like to know, the President has
said that he will bring back jobs through renegotiating trade
deals, what pieces of NAFTA specifically are you negotiating
that you think is going to deliver on that promise?
Ambassador LIGHTHIZER. Well, first of all, the most
important thing that has been done so far is to pass the tax
bill, so that was a very important part, in terms of bringing
jobs back.
Ms. SANCHEZ. I am not talking about the tax bill. I am
talking about renegotiation of NAFTA.
Ambassador LIGHTHIZER. I understand that.
Ms. SANCHEZ. I want to know, specifically, what parts of
NAFTA would you renegotiate to ensure that U.S. jobs stay in
this country or that we bring back jobs that we have lost?
Ambassador LIGHTHIZER. I think the regulatory improvements
you have made helped also.
Ms. SANCHEZ. I am not talking about regulatory--can we
stick to the subject matter of this hearing, please.
What pieces of NAFTA will you renegotiate to ensure that we
keep U.S. jobs here and bring back manufacturing jobs that we
have lost?
Ambassador LIGHTHIZER. Well, I would say the first thing is
the rules of origin. The rules of origin not just for----
Ms. SANCHEZ. Okay. Aside from auto rules of origin, what is
the plan?
Ambassador LIGHTHIZER. We have a plan for labor standards.
We have a plan for----
Ms. SANCHEZ. What is the plan for labor standards? Lay that
out for me. Specifics.
Ambassador LIGHTHIZER. Well, in the first place, there is a
limit to how much I am going to talk about this in a public
forum. I'm sure you can understand that, since I am involved in
negotiations with two countries.
Ms. SANCHEZ. I understand that.
Ambassador LIGHTHIZER. All right. Good.
I have already talked about this a couple of times, but
I'll do it again.
It is our view that U.S. workers have the right to expect
that collective bargaining agreements in Mexico are the result
of secret ballots and legitimately verified to be such. There's
a whole series of processes that were involved with in
negotiating that element, including even today. So that's a
hugely important issue. And the objective is to try to get
wages up in Mexico, which makes the United States more
competitive, but also creates customers for the United States.
Ms. SANCHEZ. So would it be fair to say that you are
seeking labor standards with our trading partners that are on
the level with U.S. labor standards, or do you intend to bring
U.S. labor standards down to the lowest common denominator?
Ambassador LIGHTHIZER. Did I say anything at all about U.S.
labor standards? If I did, I misspoke. We're doing nothing
about U.S. labor standards.
Ms. SANCHEZ. I am just asking a simple question.
Ambassador LIGHTHIZER. And the answer is we are dealing
with the Mexican labor standards. We are not dealing with the
United States labor standards.
Ms. SANCHEZ. So is it fair to say you are trying to raise
the standards of our trading partners comparable to that of the
United States? Is that what I am hearing?
Ambassador LIGHTHIZER. No. What I'm trying to do is raise
the standards in Mexico.
Ms. SANCHEZ. So you raise it, but not to U.S. standards,
not that high, somewhere in between?
Ambassador LIGHTHIZER. It is not my point.
What I'm focusing on is the basic elements of what you
expect in basic labor law. That's what I am talking about. I am
not talking about U.S. standards.
Ms. SANCHEZ. ILO conventions of labor law?
Chairman BRADY. All time has expired.
Ms. SANCHEZ. Mr. Chairman, if I could simply just make the
request that we receive the answer to the last question in
writing.
Chairman BRADY. In writing, absolutely.
Ms. SANCHEZ. Thank you. I yield back. Thank you, Mr.
Chairman.
Chairman BRADY. Thank you, Ambassador.
I will tell you, I see significant wins for the United
States in energy, agriculture, telecommunications, digital
trade, services, technology, and manufacturing because you are
being so aggressive in these areas, and we appreciate the work
there.
Mr. Curbelo, you are recognized.
Mr. CURBELO. Thank you, Mr. Chairman.
Welcome, Ambassador. Thank you so much for your time.
I first want to say I was thrilled to hear earlier your
statements regarding engagement with Argentina and Brazil. I
think that our country, in many ways, has been absent in our
own neighborhood over the last few decades. And I think in both
those countries, we are seeing very positive developments. This
is very exciting for south Florida, as you can imagine, because
we are poised to grow and to benefit greatly from further
engagement in the region, specifically with countries like
Brazil and Argentina.
On a couple issues that have been discussed extensively
here, I want to associate myself with the comments made by
Chairman Brady and others on ISDS. I think it is an important
tool for American companies, for American stakeholders, and
also with Chairman Johnson on the sunset clause.
I do believe that one of the major components to a
successful business and to enterprise generally is certainty.
And I think that if companies are operating under the threat of
the expiration of a deal, that could inhibit their ability to
invest. And, by the way, it is not just American companies'
investments abroad, but the investments of Canadian and Mexican
companies in the United States.
So I really hope that we have a strong provision to review
the deal, to revisit the deal, to make sure we keep it up to
date, which we haven't done over the last 25 years, but
certainly not always to have the threat of a potential
expiration.
Another issue I wanted to bring up is the effect trade
agreements have on the farmers of my south Florida district.
Many people not from south Florida might be surprised to know
that Miami-Dade County is one of the largest ag producing
counties in the State. We have avocados, mangos, tomatoes, and
hundreds of specialty crops. And because south Florida is
significantly warmer than even central parts of the State,
crops can be grown year-round. For example, Ambassador, it is
not snowing in south Florida today, something that we are very
pleased with.
So, as we renegotiate NAFTA, I am concerned with how the
deal will affect the farmers across Florida, but specifically
with how it will impact the agriculture community I am honored
to represent in south Dade. I know the Administration has been
advancing a seasonable and perishable proposal that could help
provide relief to our growers from Mexican dumping by making it
easier to prove entry.
Could you give us a brief update on where we are and what
the nature of the Administration's commitment with this
provision is at this time?
Ambassador LIGHTHIZER. Well, it is a provision that's very
important and not without its controversy.
The point that I try to make is that while we have a lot of
agricultural sales in Mexico--with Mexico, we have an
agricultural sales deficit of about $5 billion. So we're not on
the positive side of our agricultural sales with Mexico.
The area that is most affected negatively are the
seasonable and perishable fruits and vegetables, as you
suggest. So we have a provision that we have designed that
allows those people, only in cases where there is unfair trade,
to take advantage of the unfair trade statutes. Until now, they
are essentially precluded by the nature of the way the statutes
are taken up.
So we have put forward this proposal. It has not been
wildly popular with our trading partners, I would say in all
candor at this point. But it's an important provision, and one
that we are negotiating on right now.
Mr. CURBELO. Thank you, Ambassador. I encourage you to do
the best you can in this area. We know that the specific
proposal you have put forward may not be able to make it, but I
think anything that improves the status quo for these farmers,
which have been decimated, quite frankly, would be something
that we would welcome.
And I am more concerned with fairness and less concerned
with this deficit issue. I always tell people: I have a
deficit. My family has a trade deficit with the supermarket,
and we want to keep it that way. We are not interested in
changing that.
I think the key question is: Is it fair? And are American
companies, in this case American farmers, being given the same
opportunities to compete as Mexican farmers and as Canadian
farmers? And I think in this area of seasonable products, it is
certainly not the case.
So I appreciate your commitment to this provision and your
commitment to the farmers of south Florida, which are counting
on us to improve the status quo.
Thank you, Ambassador.
I yield back.
Chairman BRADY. The gentleman yields back.
Mr. Bishop, you are recognized.
Mr. BISHOP. Thank you, Mr. Chairman.
And thank you, Mr. Ambassador, for being here today, and
for your time and effort. I know this is a long hearing, and
you have waited all this time. I appreciate it.
NAFTA is vitally important to the State of Michigan, the
State that I represent. It is important to our economy, and it
is important to the U.S. automakers.
I want to applaud your efforts for the way you have
conducted yourself. I had the opportunity to attend the last
round in Montreal. It is evident to me and to all of us that
you have done a spectacular world-class job in representing the
United States and in preserving, to the extent that you can,
the great relationship that we have with Canada and Mexico, so
I want to thank you for that. I also want to thank you for your
efforts to update and improve NAFTA so that it better
represents the 21st century global economy.
I would like to continue, if I could--the subject has been
raised ad nauseam here, but important--it has to do with the
rules of origin. And the concern I have specifically, on behalf
of the U.S. automakers, is that there is substantial concern
that the proposed rules of origin will jeopardize their global
competitive position and that, furthermore, will likely cost
vital U.S. manufacturing jobs. And that is especially true in
the State of Michigan.
Now, I know this is high on your mind. You have indicated
it in your original testimony. You said that the purpose of the
rules of origin proposal was to move more jobs back to the
United States. But are you concerned that the aggregate impact
of the proposed rules of origin might have the exact opposite
effect than what you intended? And also, we are also aware that
the Canadian Government introduced, in the last round in Mexico
City, a modified version of their proposed rules of origin. I
wonder if you might elucidate on that proposal and also whether
or not Mexico has its own proposal regarding the rules of
origin.
Thank you, sir.
Ambassador LIGHTHIZER. Thank you, Congressman. And thank
you for your kind remarks.
The rules of origin are extremely important, as you say.
Our objective is to bring more jobs back to Michigan, and we
think that the direction that we're moving will have that
effect.
The United States had a proposal. Canada had a proposal, I
think, and Mexico has been engaged on the issue. And I think we
are in a position where we're finally starting to converge. We
are working very closely with the U.S. industry. I had people
on Monday, and I think maybe even until yesterday, in Detroit
trying to work out the details of this kind of an agreement.
Once again, I can't really say exactly what is going to end
up happening, but I think we're in a pretty good place. But our
objective is to stop the hemorrhage of jobs from the United
States and to bring jobs back to the United States. That's our
objective.
The way we analyze this thing is that Canada and Mexico
basically sell their cars to the United States. So, in the case
of the United States, we sell 900,000 cars to Canada, and they
sell almost 2 million to us. In the case of Mexico, they sell
us, I don't know what the numbers are, but maybe 2.3 million,
and we send them 200,000. So basically these are industries
that are designed to sell cars in the United States.
It is not unreasonable for us to say: If you are going to
do that, we ought to have rules of origin to get some fair
share of that manufacturing in the United States.
So how much are you actually working with? In the case of
trucks, it's 25 percent. We have an enormous amount of
leverage. In the case of cars, it is 2.5 percent. So that is
$900 a car. That is what we are talking about.
Our view is that if you are going to save $900, it is not
unreasonable to say some part of that should come back in
employment in the United States. At some point--you're right--
you make it to the point where they can't compete, and clearly,
we are aware of that. That's not our objective. Our objective
is to sort of find that sweet spot where we get some of these
jobs back.
We are the market--we can't forget that--we are the market
for all these cars. It is not like they are going north and
south, except in small numbers.
Mr. BISHOP. Thank you, sir. I appreciate your sharing that
information with us.
I agree with you 100 percent, the goal is to try and get as
many jobs back to the United States. We like to hear that in
Michigan. The number one part of our economy is our
manufacturing sector, especially in autos. So we appreciate
your efforts, and we appreciate your attention to this. And I
am glad to hear that your team has been in Detroit to talk to
our folks.
Thank you, sir.
Mr. Chairman, I yield back.
Chairman BRADY. The gentleman yields back.
Mr. LaHood, you are recognized.
Mr. LAHOOD. Thank you, Mr. Chairman.
And thank you, Ambassador Lighthizer, for your service to
our country.
Ambassador, my district is the eighth largest ag district
in the country in terms of corn and soybean production. We have
some of the most fertile farmland in the entire world.
There is real concern with farmers and agriculture folks on
the Administration's position on NAFTA and withdrawal. A couple
statistics that I think are important: 98 percent of the corn
that Mexico imports comes from the United States, much of it
from the Midwest; about one-third of the products produced in
Illinois go to Canada or Mexico; about 35,000 jobs tied
directly to NAFTA. And that is just in agriculture. By the way,
agriculture is the number one industry in the State of
Illinois.
And when I have heard repeatedly about withdrawal, the
groups that I work with--National Pork Producers Council,
American Farm Bureau Federation, National Cattlemen's Beef
Association, National Corn Growers Association, Corn Refiners
Association, American Soybean Association, Americans for
Farmers & Families--all agree that withdrawal is not an option
here.
I guess my question to you, Ambassador, is, do you know any
ag groups that think withdrawal is the right approach?
Ambassador LIGHTHIZER. Our objective is not to withdraw.
Our objective is to get a good and improved agreement. I don't
know of any ag groups that want to withdraw, but I don't know.
There may be some out there. I am not aware of them, no.
But our objective is not to withdraw either. Our objective
is to get the best agreement we can. It's an important
agreement. It's whatever it is--we always say, Mr. Chairman,
it's a tradeoff. The reality is, last year, it was like $1.1
trillion or $1.2 trillion worth of trade. There is an enormous
amount of trade between those three countries, and our
objective is to figure out a way to have disagreements be more
beneficial to the United States, and that certainly means more
benefits to American agriculture.
Mr. LAHOOD. Thank you. I appreciate those comments on that.
And I, for the record, will submit an article from Farm
Week in February that is titled ``NAFTA is American farmers'
Lifeline.'' And in there, they talk about, if the United States
quits on NAFTA, it quits on its farmers.
And the other thing is, I know the President recently
tweeted: ``NAFTA is a bad joke!''
Do you agree with that sentiment?
Ambassador LIGHTHIZER. I have no idea about that quote.
Mr. LAHOOD. Well, it was a tweet.
Ambassador LIGHTHIZER. I have no knowledge. I didn't see
that.
Mr. LAHOOD. Well, I would just tell you: That causes a lot
of concern, Mr. Ambassador, when farmers--and, by the way, the
farmers in my district and in rural America overwhelmingly
support the President and continue to support him, particularly
in all the things we have talked about today. But I can't
emphasize enough the concern with farmers in rural America when
it comes to NAFTA.
Let me switch subjects here.
Rules of origin has been talked about a lot here. And when
we think about the constituencies that we all deal with, Mr.
Ambassador, can you name a constituency that agrees with your
position on rules of origin? For instance, Chamber of Commerce,
National Federation of Business, Heritage Foundation.
Ambassador LIGHTHIZER. How about the AFL-CIO, do they
count?
Mr. LAHOOD. Okay. That is fair. So AFL-CIO. Any business
groups that you can cite?
Ambassador LIGHTHIZER. Listen, I don't know. There are
business groups all over the place. I have no idea where they
are on rules of origin.
Mr. LAHOOD. Could you submit those for the record, whatever
those are?
Ambassador LIGHTHIZER. No, I can't. I don't have the
resources. If the Chairman wants me to go out and have my
people use resources to find out where business groups are on
rules of origin, I will do it, but otherwise, I won't.
Mr. LAHOOD. Well, I guess the concern is, as we look at the
trade agreements we have in place in FTAs, when we look at
these provisions--ISDS, we have talked about, rules of origin,
sunset provision--these all appear to be very unorthodox and
unconventional as we negotiate NAFTA, as we look at our other
trade agreements.
And so I think there is real concern, Mr. Ambassador, with
the position that we have had there and having a trade policy.
With that, I want to just mention, last year, when you had gone
through your Senate confirmation, the Administration quoted:
You will be shocked by the speed at which bilateral trade
agreements will begin to materialize.
And so I am a supporter of bilateral trade agreements. Many
of us are. But we are 15 months into this Administration, and
we have not seen a template or a model for bilateral trade
agreements. And I understand you haven't had people in place,
and I am cognizant of that, but when we look at, well, is there
a model, is there a mechanism out there, particularly with your
position on ISDS, rules of origin, and sunset, can you comment
on that?
Ambassador LIGHTHIZER. Well, I will comment on all of it,
but I am not going to do it in 9 seconds, however.
Number one, of course, we are going to have different
policies than the Chamber of Commerce. Their policies are what
have gotten us $800 billion worth of trade deficits. So, of
course, we're going to have unconventional policies if we are
going to have a different result. If we do exactly the same
thing, nothing is going to change. This is an unsustainable
trade deficit. We have a $560 billion goods and services trade
deficit. We have a deficit with China which can't go on. It's
$375 billion. We are going to do things differently,
absolutely.
I personally believe that these people who voted for the
President voted for him because they didn't want it to be
exactly like half of those groups want it to be. So, of course,
it's going to be different, number one.
Number two, in terms of--I am out of time.
Chairman BRADY. Way out of time.
Thank you, Mr. Ambassador.
Ambassador LIGHTHIZER. Thank you.
Chairman BRADY. Mr. Reed, you are recognized.
Mr. REED. Mr. Ambassador, way over here.
It is a pleasure to have you here today. I want to just
follow up.
The unconventional nature of what this Administration is
doing is something I applaud, and I have stood with, because I
agree that we just cannot maintain the status quo, because, as
to your point, this policy is unsustainable.
But I think we all want to get to the same outcome, and
that is where I think we have broad agreement in regard to the
issues before us today.
Mr. Ambassador, I would be remiss not to go on the record
to raise the issues of dairy and wine coming from western New
York. The Finger Lakes wine industry is blossoming. And the
access to--and our dairy farmers in western New York. The
access to Canada, obviously--and I have shared this with you
and I shared this with Prime Minister Trudeau directly, is very
critical to our future. So I just put that on the record.
But what I want to do is ask some questions that maybe
haven't been covered here. And one of the issues that I have
been very concerned about in my entire tenure as a Member of
Congress on the issue of trade is currency manipulation and
state-owned enterprises. My understanding of the negotiations
that you are having right now with Canada and Mexico are that
those issues are being discussed; those issues are being
potentially put on the table in regard to updating NAFTA.
And, one, do you agree that there are issues of currency
manipulation across the world with other trading partners, such
as China, Japan, European Union members, and, if that is the
case, how do you see the present negotiations being a tool to
put us in a position where we can take on truly what I believe
is one of the unfair practices that is out there that has gone
unaddressed for decades?
Ambassador LIGHTHIZER. First of all, Congressman, I
completely agree with you. I think it's one of the absolutely
fundamental problems, is this issue of currency manipulation.
And it's China, which everyone agrees to.
If you go to the auto companies, they are going to tell you
it is Japan, and it varies, but it's 6, 7, 8, 9 percent. We are
worried about 2.5 percent on our auto tariffs. If the currency
manipulation is 6 percent, then it is multiples of that.
It's also an issue we believe with Korea.
So the Administration is dealing with this on a variety of
areas. And I tell you that I sit down with the pros who do this
who work for me, my professional people who have done this for
30 years, and I will say: Well, what did you do the last time
you had this or that kind of conversation with the Treasury
Department on the issue of currency manipulation?
And do you know what they say? ``We've never had a serious
conversation with any Treasury Department before this Treasury
Department.''
Secretary Mnuchin is completely engaged on this in a way
that no former--literally, my career people, Republicans and
Democrats, are like: We have never had a conversation like this
where people really have to come to grips with the issue of
currency manipulation.
So we are dealing with it in the context of NAFTA, even
though we realize these countries are not really currency
manipulators. But they have the same interests we do in
tackling this problem.
And where you go, we'll see. Clearly, a huge, huge impact
is, or factor, is transparency. We start with the position we
don't even know what these people are doing. And competitive
currency devaluation is going to be something that is
unacceptable.
It is a complicated issue. It is something that we are
involved with, but it is a Treasury issue more than it is ours.
And we have Treasury officials, besides the Secretary, David
Malpass and the Secretary are completely locked in on this
issue, and they are going to get absolutely as much as you can
get on it.
But I don't think you can overstate how important it is.
And I think it will be more important in 10 years than it is
now if we don't do something about it.
Mr. REED. Well, I totally agree with you, Mr. Ambassador. I
look forward to working with you, as well as the Treasury
Secretary, as I have raised this issue with prior Treasury
Secretaries in our tenure here.
The other issue that I wanted to just highlight and stress
to you is, as we deal with intellectual property, and I know it
has been touched on a little bit here across the panel, but
coming from an area with some interests that have really been a
bright spot in regard to our innovation economy and the
development of technology, I just wondered what your commitment
or thoughts are on how we can best protect our intellectual
property, our innovation, in the next generation of the
economy, opportunities I see coming down the pipeline for us?
Ambassador LIGHTHIZER. First of all, you understate the
importance of intellectual property in your district. It is
extremely important, and we understand that. Because it is
important, those companies--particularly, one company is
important for the whole economy.
So we are completely committed, both in NAFTA, where I have
talked about what our provisions are. Until now, there has
really been a movement away from protection of intellectual
property. In the last Administration, there was a movement away
from the protection of intellectual property. We are
recentering that, in our opinion.
But even more importantly, I would suggest the whole 301,
the whole IP protection with China, that is the absolute front
line of protection of intellectual property.
Mr. REED. I appreciate the hard work, Mr. Ambassador. I
look forward to working with you.
I yield back.
Chairman BRADY. The gentleman yields back.
Mr. Holding, you are recognized.
Mr. HOLDING. Thank you, Mr. Chairman.
Ambassador, thank you for being here. You have missed an
incredible winter wonderland that is going on outside today.
You will be glad you are going down the hill after this, rather
than having to come up the hill.
Regarding the tariffs on aluminum steel, I just encourage
you to move expeditiously to determine which of our trading
partners will be exempt from these new tariffs. There are
countries that we, obviously, know are routinely engaged in
unfair trading practices, but there are other countries which
are undeniable allies to the United States, not only
economically but for our national security, as well.
You and I have talked before about the special relationship
the United States has with the United Kingdom, and we have
discussed the tremendous opportunity that is presented to the
United States as the United Kingdom exits the European Union.
The United Kingdom and the United States have a longstanding
relationship. It goes without saying: it is certainly one of
our closest allies.
So, as you go through the exclusion process for specific
countries, I had hoped that the United Kingdom is quickly
identified by your office as being exempt.
And I am sure you are also aware that, on Monday, there was
a draft agreement put forward between the United Kingdom and
the EU, so they are another step forward to finalizing their
exit. And, in my opinion--and I think the opinion of a number
of my colleagues--this is a time when we need to be encouraging
the United Kingdom. They are undeniably a defense partner, they
are a NATO partner, and I think not exempting them would be a
step in the wrong direction.
A potential free trade agreement would be particularly good
at services. But I would say that not only are they a NATO
partner, but if you look at how we are aligned with them in the
promotion of capitalism, very few countries promote it the same
way the United States and the United Kingdom do. Promotion of
free markets.
And perhaps, most importantly of all, is entrepreneurism.
Entrepreneurism is alive and well in the United States, and it
is alive and well in the United Kingdom, and it is not really
alive and well, in our sense of the word, in a lot of other
places around the world.
So I would encourage you to work on that as expeditiously
as possible. I know that Liam Fox was here last week, the
Minister of International Trade. I am sure that you all had
several meetings. I will just give you a minute or so if you
wanted to recap and have anything to say about those meetings
and about any thoughts that you and the Administration might
have on our potential bilateral trade agreement.
Ambassador LIGHTHIZER. Well, I would say, first of all, it
is exactly as you say. I have met many times with Dr. Fox and
found them all to be informative and enjoyable. We have an
enormous amount in common. They clearly are--I think that it is
probably the universal view in the Administration that we
should, at the appropriate time, have--explore the idea of an
FTA with the U.K.
When that time is, is more up to them than it is to us. In
the meantime, what we are trying to do is do the kinds of
things that are in areas where they haven't seen the competence
of the EU. So, for example, certifications of professionals.
There are a lot of things we can do.
We have a working group that we started, I guess, just
about a year ago, that has had a number of meetings, a number
of staff-level meetings. So we are getting a lot of the work
done that would have to be done in advance of an FTA so that,
at the right time, we can move quickly.
The issue of the U.K. and 232 is a complicated one because
of the fact that they are in the EU. So that is something that
sort of has yet to be worked out. But, clearly, an FTA with
them. Clearly other examples of working together or something
is very high on our priority list, and I see no impediments at
all to moving in that direction at the appropriate time.
Mr. HOLDING. I am glad to hear you say that. I believe that
a bilateral agreement with the United Kingdom could be a
signature accomplishment of this Administration and would be
the first time that we have encapsulated in writing what the
special relationship means. It is a great opportunity for this
Administration to leave a lasting mark, not only on
geopolitical politics but on trade and trade policy.
So thank you, Mr. Ambassador.
Chairman BRADY. Thank you, Mr. Holding.
Mr. Ambassador, thank you for being our witness today.
Clearly, there is strong bipartisan support that the best
way to lower our trade deficits are not to buy less but to sell
more. We are confident in your ability in renegotiating NAFTA
and other agreements to create a level playing field for
American farmers and workers and businesses because when you
do, we win. And there is no doubt there is strong support for
your very aggressive stance in opening these markets and
modernizing NAFTA in a significant way.
That is why 103 Republicans--your strongest supporters--are
encouraging you, urging you, to include strong accountability
provisions because we want your strong new trade agreement for
America to be accountable and to be supported here in Congress.
We look forward to being your partners and your clients as we
go forward.
Ambassador, please be advised, Members of the Committee
have 2 weeks to submit written questions to be answered later
in writing. Those questions and your answers will be made part
of the formal record.
With that, Mr. Ambassador, thank you.
The Committee stands adjourned.
[Whereupon, at 1:40 p.m., the Committee was adjourned.]
[Questions for the Record follow:]
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