[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE EFFECTS OF TARIFF INCREASES
ON THE U.S. ECONOMY AND JOBS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
APRIL 12, 2018
__________
Serial No. 115-FC10
__________
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
Gary Andres, Staff Director
Brandon Casey, Minority Chief Counsel
C O N T E N T S
__________
Page
Advisory of April 12, 2018, announcing the hearing............... 2
WITNESSES
Kevin Kennedy, President, Kennedy Fabricating, LLC............... 6
John Wolfe, Chief Executive Officer, Northwest Seaport Alliance.. 10
Roger K. Newport, Chief Executive Officer, AK Steel Corporation.. 18
John Heisdorffer, President, American Soybean Association........ 24
Calvin Dooley, President and Chief Executive Officer, American
Chemistry Council.............................................. 29
Ann Wilson, Senior Vice President, Motor & Equipment
Manufacturers Association...................................... 35
Scott N. Paul, President, Alliance for American Manufacturing.... 43
SUBMISSIONS FOR THE RECORD
Acuity Brands, Incorporated...................................... 103
Advanced Medical Technology Association (AdvaMed)................ 107
American International Automobile Dealers Association (AIADA).... 111
American Farm Bureau Federation.................................. 117
Americans for Farmers and Families (AFF)......................... 120
Associated General Contractors of America (AGC).................. 124
Beer Institute................................................... 127
Edge Dairy Farmer Cooperative.................................... 132
Flexible Packaging Association (FPA)............................. 133
Garmin International, Incorporated (Garmin International)........ 139
Greater Houston Partnership...................................... 143
Interstate Natural Gas Association of America (INGAA)............ 145
Freedom Partners Chamber of Commerce (Freedom Partners) and
Americans for Prosperity....................................... 147
Methanol Institute (MI).......................................... 151
Organizations representing U.S. manufacturers, farmers and
agribusinesses, retailers, technology companies, importers,
exporters, and other supply chain stakeholders................. 153
National Restaurant Association.................................. 158
National Association of Trailer Manufacturers (NATM)............. 160
ProAmpac Intermediate, Incorporated (ProAmpac)................... 163
Chambers of Commerce representing some of Texas' largest metro
regions........................................................ 169
RV Industry Association (RVIA)................................... 171
THE EFFECTS OF TARIFF INCREASES
ON THE U.S. ECONOMY AND JOBS
----------
THURSDAY, APRIL 12, 2018
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:06 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
Thursday, April 12, 2018
FC-10
Chairman Brady Announces Hearing on the
Effects of Tariff Increases on the
U.S. Economy and Jobs
House Ways and Means Chairman Kevin Brady (R-TX), announced today
that the Committee will hold a hearing on the effects on the U.S.
economy and jobs of the tariff increases related to Section 232 and
Section 301 investigations. The hearing will take place on Thursday,
April 12, 2018, in room 1100 of the Longworth House Office Building,
beginning at 10:00 a.m.
In view of the limited time to hear witnesses, oral testimony at
this hearing will be from invited witnesses 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
link on the hearing page of the Committee website and complete the
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for
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 Thursday, April 26, 2018. For questions, or if you encounter
technical problems, please call (202) 225-3625.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
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All submissions and supplementary materials must be submitted in a
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a total of 10 pages. Witnesses and submitters are advised that the
Committee relies on electronic submissions for printing the official
hearing record.
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organizations on whose behalf the witness appears. The name, company,
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Failure to follow the formatting requirements may result in the
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The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
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. When it comes to trade, how do you avoid punishing
Americans for China's misbehavior? Does even the prospect of
potentially higher tariffs damage our U.S. economy and harm our
local farmers and businesses? Especially now that due to
President Trump, we have one of the most pro-growth tax codes
in the world.
Today we will hear from a wide range of local American job
creators about the real-world impact of increased tariffs and
how to ensure that trade enforcement, which is important, does
not inflict collateral damage on hard-working American
manufacturers, farmers, and families.
We will focus specifically on the U.S. tariff increases
relating to the Section 232 action on steel and aluminum, which
took effect on March 23. We also want to hear about the
proposed tariff increases related to the Section 301
investigation into China's aggressive theft of America's
intellectual property and technologies.
We will also discuss the ongoing processes that determine
how and when tariffs are imposed, including the country-by-
country and product-by-product exclusions for steel and
aluminum, as well as your thoughts about the effects of
retaliation against our made-in-America products and services
being sold abroad.
We will start from common ground. It is clear that China's
dishonest and unfair trade practices are hurting the American
economy and costing us thousands of jobs here at home. The
President is right to take a hard line against China's
predatory policies in significant trade violations, including
the theft of American intellectual property and policies
compelling American businesses to hand over their most valuable
technology to Chinese competitors.
These severe trade abuses have gone on for too long and
cannot be allowed to continue. The challenge for every
president, however, is how to change China's behavior and
punish it if necessary, without harming our families,
businesses, and farmers.
We know that tariffs are, after all, taxes, and will
ultimately be passed on to consumers. And like taxes, they also
curtail economic growth, discourage new investment, delay new
hiring, and put American workers at a huge disadvantage to
foreign competitors. The mere threat of potential tariffs can
stunt the economic momentum of the new Tax Cuts and Jobs Act.
In Texas, manufacturing in February was booming. But
factories cut production growth by more than half in March due
to concerns over higher costs from the potential steel and
aluminum tariffs. Worldwide economic growth is on the verge of
finally bursting out of a decade of stagnation, but now is
pulling back on fears of a significant trade dispute.
Back home, in my district, one of our manufacturing plants
in the oil field services industries was planning to grow by up
to 500 more jobs as energy recovers, but now could face job
layoffs if their fairly-traded steel is not excluded and they
lose sales to foreign competitors. I appreciate the President
has put in place a process to exclude products like this and
give all sides in this trade dispute ample time to resolve it.
I cannot think of a better way to address these challenges
than to get input directly from U.S. stakeholders. That is
exactly what we are doing today. Our panel today brings a broad
range of perspectives, and we are looking forward to hearing
from all of you.
Over the last several weeks, many of you have experienced--
and some for a longer term--the effects of China's unfair trade
practices or the impact of tariffs on steel and aluminum,
whether as a steel producer, a user of steel or aluminum, or an
exporter facing retaliation. And although Section 301 tariffs
have not been imposed, many of you certainly also experienced
market effects of the proposed U.S. tariffs and proposed
retaliation by China.
I continue to believe it is vitally important for us to use
a targeted approach in enforcing our trade laws, whether it is
Section 232 or Section 301 tariffs. China's distortions to the
steel and aluminum market and its IP theft and forced
technology demands are global problems that ultimately require
global solutions. We should work as closely as possible with
our allies, we should never create disincentives for our allies
to join us in taking strong action. The world, not just the
United States, must stand up to China's unfair trade practices.
In addition, we must make sure that those who would be hurt
by tariffs have a full opportunity to make their case and to
seek an exclusion for fairly-traded products. I remain
committed to working with President Trump and the White House
on strong and forceful trade policies that will target bad
actors and encourage economic growth here at home. At the same
time, we must avoid unintended consequences that hurt
Americans.
Finally, it is in everyone's best interest to find a path
forward with respect to fair trade. Today and throughout the
coming months, we will continue to listen to our constituents
and our job creators across the country to make sure we take
their concerns into account each step of the way.
And now I yield to the distinguished Ranking Member, Mr.
Neal, for the purposes of his opening statement. Mr. Neal.
Mr. NEAL. Thank you, Mr. Chairman. Today's hearing is an
important opportunity to discuss the tariffs that the
Administration has started imposing recently as a result of its
Section 232 investigations, and the tariffs that the
Administration has announced that it will impose as part of its
Section 301 investigation.
Discussing the impact of these tariffs on the U.S. economy
and jobs is obviously important for us to hear from our
stakeholders about the process that the Administration has
established for finalizing and implementing the tariffs to
ensure that they are fair, transparent, and effective. It seems
just as obvious to me that in discussing these tariffs, we also
need to talk about what these tariffs are intended to
accomplish and whether we think the tariffs will be successful
in accomplishing their intended goals.
It is important to keep in mind that the reasons for both
Section 232 and Section 301 investigations that are leading to
this discussion about tariffs are China's unfair trade
practices that undercut American workers and businesses.
Section 232 investigations determined that global steel and
aluminum imports are threatening U.S. national security. Our
producers and workers in these two industries have been
seriously hurt by global overcapacity and the crisis it has
created.
It is no secret that China has been the leading driver of
this challenge. The Chinese government owns many of the steel
firms in China and has provided massive government subsidies to
many of the firms that it does not outright own. As a result,
China has started producing steel and aluminum at a pace that
is simply not based on economics and fair competition. China
now produces about half of the world's entire supply of steel
and singlehandedly produces as much steel as the entire world
did in 2000.
During that same timeframe, the U.S. share of global
production has been cut in half. China's aggressive, state-
sponsored economic intervention goes beyond just the steel and
aluminum sectors. As the USTR Section 301 investigation report
has already documented, China's government has used its
economic and political leverage over a sustained period of time
to extort, force, or outright steal intellectual property and
technology from American innovators.
I have heard the stories of individual inventor small
businesses that--and of our largest multinational corporations
and our intelligence community about the harmful impact that
these IP-related policies have had on the U.S. economy and our
national security. Now we are in a situation where the
Administration has decided to respond to both of these
problems, or at least in part, through tariffs.
In the case of the Section 232 steel and aluminum tariffs,
this logic is pretty direct. Tariffs could, if implemented and
designed thoughtfully, bring about a recovery of U.S. steel and
aluminum production. In the case of the Section 301 proposed
tariffs, the logic is less direct. It seems that for the
Administration, these tariffs are intended to be used as
leverage to bring about changes in China's practices, or to
recalibrate the U.S.-China trading relationship.
In both cases, the tariffs will bring disruption to the
U.S. economy, and the tariffs certainly will raise costs for
some, disrupt supply chains, and they are also likely to
provoke threats of retaliation and real retaliation from
countries like China. The key policy question that we are
grappling with now is whether the Administration has a plan to
use these tariffs effectively. It seems to me that after
today's hearing, we should seriously consider holding another
hearing specifically on trade--China's trade strategy.
I look forward to hearing from our witnesses today, and if
I could sum up what I think would be a general--a context of
this hearing this morning, I think our goal is pretty clear,
and that is to push China to the precipice, but in terms of a
trade war, not over the edge. It is but a delicate balancing
challenge that we all have, so I thank you, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Neal. And without objection,
other Members' opening statements will be made part of the
record.
Today's witness panel includes seven experts. First, I
would like to offer a special welcome to Kevin Kennedy,
President of Kennedy Fabricating, a great family-owned business
in Splendora, Texas. It employs hundreds of my constituents.
John Wolfe is the Chief Executive Officer of Northwest Seaport
Alliance. Roger Newport is the Chief Executive Officer of AK
Steel Corporation. John Heisdorffer is President of the
American Soybean Association. Calvin Dooley is a former Member
of the U.S. House of Representatives and President and Chief
Executive Officer of the American Chemistry Council. Ann Wilson
is Senior Vice President of Motor & Equipment Manufacturers
Association, and Scott Paul is President of the Alliance for
American Manufacturing.
The Committee has received your written statements. They
will all be made part of the formal record. We have reserved 5
minutes to deliver your oral remarks, and we will begin with
Mr. Kennedy, who hails from the home of the Splendora Wildcats
in the 8th congressional district of Texas. Welcome and, Mr.
Kennedy, you may begin when you are ready.
STATEMENT OF KEVIN KENNEDY,
PRESIDENT, KENNEDY FABRICATING, LLC
Mr. KENNEDY. Thank you. Chairman Brady, Ranking Member
Neal, other distinguished Committee Members, I want to thank
you for allowing me to discuss the impact of the Section 232
tariffs on our business. Well, the impact is that it is already
shifting our jobs and work outside of the United States. What
was presented as a tariff on foreign steel has effectively
become a tax on U.S. manufacturers like us.
My name is Kevin Kennedy. I am the President of Kennedy
Fabricating, a steel fabrication business in Splendor, Texas.
My father, Odie Kennedy, founded our company 30 years ago with
one employee. We now employ 350 people in a town of less than
2,000. We fabricate the products that make up our country's
infrastructure: things like drilling rigs, cell phone towers,
commercial buildings, pipelines, and industrial plants. We are
the ones that buy the steel that our U.S. mills produce.
In the last decade, we have grown our business over 40
times. That is not common in U.S. manufacturing these days. We
are proof that American manufacturers can compete and win
against cheaper foreign labor. There are lots of examples I
could give of obstacles we have faced and overcome as a
business if time would permit, but that is not why I am here.
Today I am here to discuss an obstacle put in front of us
that really no U.S. manufacturer should have to face. We face
the challenge of our own government subsidizing foreign
manufacturers at our expense by giving them a huge cost
advantage through the Section 232 steel tariffs. See, these
tariffs practically eliminated steel imports overnight, and
without the competition, U.S. steel producers have already
raised prices over 40 percent.
So a 25 percent tariff has led to a 40 percent price
increase. This extra 40 percent that we pay means that a
company in China can now buy a raw steel beam from a Chinese
mill at a 40 percent discount to us. They can drill some holes
in it and ship it to the United States as a fabricated beam
without a tariff. So China's still making beams, they are just
using a loophole to get them here. And this is why the AISC
recommends that fabricated steel also be covered by the tariff.
And it is not just China that is winning. One of our
Canadian competitors, Canada, just went from losing projects to
us to now winning projects at our expense. Because they can
import the same steel from China without a tariff and buy it 40
percent cheaper than we can buy it from our own domestic
suppliers. They can build their structures and ship them to our
U.S. customers, having never paid a tariff. And this scenario
is not a hypothetical scenario. This one has already actually
happened, and it has cost us millions of dollars in work.
You know, up until now, we were an exporter. We have been
manufacturing driller rigs for years and exporting them to
countries like India, Russia, even Mexico. That is not the case
now. We went from exporting to having the U.S. Government force
our U.S. customers to import the products we make from all of
our foreign competitors. You know, they would buy them from us
if these tariffs hadn't made it so expensive.
And it has been said that these tariffs are not significant
to downstream prices. Well, that may be true for those things
that only have a small steel component to them--canned
beverages, Boeing 777s--but it is not true for what we make.
The raw steel targeted with these tariffs makes up half the
cost of our products. And our customers will not pay for a 40
percent increase, at least that is what they have told us. And
our lack of new orders recently confirms it.
You know, we understand, we want to protect the U.S. steel
producers from unfair competition. The producers that are here
today, they will likely attempt to explain how these tariffs
have already increased demand and added jobs, and it sounds
nice and everybody feels great, but that is definitely
temporary.
Because that demand spike was actually from us, people like
us, other manufacturers. See, we tried to buy all the steel we
could right away as soon as the tariffs were announced, even
right before. Because we had existing projects, so we wanted to
buy all the steel we could before the prices skyrocketed,
because inevitably, we knew they would. But those projects
already existed. And with these tariffs, new projects will go
elsewhere.
Who is going to buy the U.S. steel that our mills produce
if our government forces our customers to go abroad and buy the
steel prefabricated? Now, people may try to say that that is
not going to happen, but I am here to confirm it is already
happening. For 30 years, our company has adapted to obstacles.
But the transfer of our jobs and customers across our borders
at the directive of our government is the one obstacle to which
we cannot adapt.
So who wins with Section 232? Well, not U.S. manufacturers.
Not our workers. We both lose. If a healthy steel-producing
industry is in our national security interest, then do not the
producers need someone to buy the steel? That is supposed to be
us. It is----
[The prepared statement of Mr. Kennedy follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Mr. Kennedy, I apologize, that 5 minutes
goes fast in Washington, D.C. We will continue the discussion
in a moment.
Mr. Wolfe, you are recognized for 5 minutes.
STATEMENT OF JOHN WOLFE, CHIEF EXECUTIVE OFFICER, NORTHWEST
SEAPORT ALLIANCE
Mr. WOLFE. Thank you, Chairman Brady, Ranking Member Neal,
and Members of the Committee, for inviting me to testify on the
effects of U.S. tariff policy on the economy and jobs today. I
also want to offer a special thanks to Subcommittee on Trade
Chairman Reichert, and to Representative DelBene for their
support of strong trade policies that contribute so much to the
success of Washington State's economy.
The Northwest Seaport Alliance is a marine cargo operating
partnership of the ports of Tacoma and Seattle, and the fourth-
largest container port complex in the country. I am also here
on behalf of the Port of Seattle's Seattle-Tacoma International
Airport, which includes a thriving international cargo
facility.
We are deeply invested in U.S. trade policy discussions
because they directly impact our core business, the success of
our customers and the lives of our local residents. Our marine
cargo operations in the Seattle and Tacoma harbor support more
than 48,000 jobs, while Sea-Tac air cargo operations help
create over 5,200 jobs. The Port and the Northwest Seaport
Alliance gateways are truly national assets, with more than 60
percent of the goods imported through the Northwest Seaport
Alliance destined for the rest of the country.
For example, $2.5 billion in imports of industrial and
electric machinery move through our ports to Illinois, while
Ohio and Indiana respectively import $1.9 billion and $1.2
billion worth of these products through our ports. This is true
for exports as well. Last year, our gateways sent $1.89 billion
in soybeans to China, yet none are grown in the State of
Washington.
Our success as an airport and seaport gateway is
inextricably linked to China. Last year, more than $27 billion
in imports from China came through Seattle and Tacoma cargo
terminals, with an additional $1.1 billion in imports from
China via Sea-Tac. In addition, almost $5 billion in exports to
China traveled through our cargo terminals in 2017, plus
another $2.2 billion in exports to China through Sea-Tac.
Creating a fair and level playing field for our U.S.
exporters competing in the global economy is one of the most
important goals of U.S. trade policy. From opening new markets
through trade agreements to enforcing existing trade rules, we
all win when American businesses and entrepreneurs can sell
more goods to more people throughout the world. There is
clearly more that must be done to achieve that goal, and I
think it is fair to say that the only debate we are having in
this country is regarding what are the best tactics to achieve
our desired outcome.
While there are justifiable concerns about China's trade
practices, we continue to believe that productive engagement
and negotiations are the best path to ensuring a fair and level
playing field for mutually beneficial trade. The United States
must be clear on the desired remedy sought, and then tariffs
should be a measure of last resort that are narrowly targeted
to address a problem and minimize the unintended impacts on
Americans.
While it is impossible to truly estimate the impacts of
these tariffs, roughly $8 billion in two-way trade through our
airport and seaport will potentially face some level of
increased tariff. The American Association of Port Authorities
estimates that for every $1 billion in exports shipped through
the U.S. seaports, 15,000 jobs are created. And conversely, it
is likely true as well, which means that this $8 billion in
trade likely represents 120,000 jobs.
Cherries are a good example of this potential impact. The
Northwest cherry harvest creates an estimated 19,000 jobs and
$540 million in economic impact. About 30 percent of this crop
is exported, and the majority shipped through air through Sea-
Tac airport. China is the top export market for Washington
cherries, buying 2.9 million cases valued at $127 million each
year. If the Chinese market is closed to these exporters, they
are going to have a very difficult time finding alternative
markets for their seasonable perishable crop.
In closing, as a large gateway for two-way trade, the Port
of Seattle and the Northwest Seaport Alliance are deeply
invested in U.S. trade policy discussions because they impact
our core business. We believe that over the long term, we must
continue to advocate loudly and consistently for new market
access opportunities throughout the globe. Thank you again for
the chance to participate in today's hearing, and I look
forward to responding to your questions.
[The prepared statement of Mr. Wolfe follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman BRADY. Thank you, Mr. Wolfe.
Mr. Newport, you are recognized.
STATEMENT OF ROGER K. NEWPORT,
CHIEF EXECUTIVE OFFICER, AK STEEL CORPORATION
Mr. NEWPORT. Thank you, Chairman Brady, Ranking Member
Neal, and Members of the Ways and Means Committee. I am Roger
Newport, Chief Executive Officer of AK Steel, and I thank you
for the opportunity to testify on behalf of our 9,200
employees.
I have worked at AK Steel for 33 years and have seen first
hand the challenges confronting the domestic steel industry
because of unfair trade. At no time in our history have those
challenges been more severe than in the last 3 years, during
which unfairly-traded imports spiked to record highs. While
finished steel imports grew to an average of 27 percent of the
U.S. market over that time, America's steel mills operated less
than 75 percent full.
The domestic steel industry has been fighting back through
trade cases, but the import surge has continued and has only
increased. Countries not subject to the trade case orders
rushed in with their dumped and subsidized imports and continue
to injure the U.S. steel manufacturers and threaten our
national security interests.
Recognizing the global reality we now face and the
inadequacies of our trade laws to address it, President Trump
took the bold action to impose tariffs on foreign steel under
Section 232, and we fully support those actions. AK Steel makes
carbon, stainless, and electrical steels. However, we are the
last U.S. producer of grain-oriented electrical steel, or GOES.
Our facility in Butler, Pennsylvania, located in Congressman
Kelly's district, is the only facility in all of North America
that melts this electrical steel.
GOES is the critical component in the cores of transformers
that move electricity across the entire grid and deliver power
to our homes and businesses. Damage to this infrastructure
would threaten America's national security and the economy.
Thus, it is imperative that we have a domestic electrical steel
supply chain that can react quickly following a natural
disaster or terrorist attack.
I think it is important to put into context what some are
calling a new trade war. The reality is that China has been
fighting to take out the American steel industry for many
years, and electrical steel provides a great example. Prior to
2009, AK Steel had a healthy export business of electrical
steel to China. But China slapped illegal duties on GOES
products. By the time the WTO declared those duties illegal
many years later, China had already flooded the global market
with cheap, subsidized electrical steel.
In 2013, we filed trade case petitions against imports of
GOES from 7 countries, including China, Japan, and Korea. The
Department of Commerce ruled that GOES from these countries was
being sold unfairly in the United States, however, the ITC
ruled against the domestic industry. This decision was wrong,
as imports of GOES have only continued to surge, and forced the
only other U.S. manufacturer to exit the market altogether in
2016.
Last year, imports of GOES nearly doubled compared to 2016.
That is why tariffs under Section 232 are essential. It is
important to understand, however, that trade relief must not
apply only to electrical steel, but to downstream products like
cores, core assemblies, and transformers. Core-making is simply
cutting a coil of electrical steel into sheets and stacking it
or winding it into a core. As such, it is easy and inexpensive
to set up these minor processing facilities outside of the
United States in order to simply evade a trade remedy.
In fact, imports of cores and assemblies in 2017 increased
two to six times the 2016 levels. These imports came primarily
from Canada and Mexico, where they make no GOES products. This
shows that producers will import semi-finished products in
order to evade any remedy on GOES. Similarly, our so-called
allies, Korea and Japan, have dramatically increased their
shipments of GOES in the first quarter of this year.
Korea has already shipped as much GOES in the first 3
months of 2018 as they shipped in total for the 5-year
cumulative period of 2012 to 2016. Thus, any significant
increases in imports over historical norms must be taken into
account if the Administration is to achieve its goal of
bringing the domestic steel industry to at least 80 percent of
capacity.
While the steel industry has taken the brunt of unfair
trade over the last several decades, no industry is immune, as
we have seen with washing machines, solar panels, and many
other manufactured products. That is why this Administration is
to be commended. We must fight back to make American
manufacturers stronger here in the United States, given how
critical it is to our economy in ensuring Americans have jobs
with family-sustaining wages that contribute to the health, our
local economies, and our communities across this great country.
Thank you.
[The prepared statement of Mr. Newport follows:]
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Chairman BRADY. Thank you, Mr. Newport.
Mr. Heisdorffer, welcome and please proceed.
STATEMENT OF JOHN HEISDORFFER,
PRESIDENT, AMERICAN SOYBEAN ASSOCIATION
Mr. HEISDORFFER. Good morning, Chairman Brady, Ranking
Member Neal, and Members of the Committee. My name is John
Heisdorffer, and I am a soybean farmer from Keota, Iowa. I also
grow corn and I feed 10,000 head of hogs a year. I am the
current President of the American Soybean Association, and have
been on the ASA board since 2010.
ASA represents U.S. soybean farmers on policy and
international issues. Thank you for inviting us to testify
before the Committee today on the potential impact of Chinese
tariffs on U.S. soybeans. I have also submitted written
comments for the record.
In 2017, U.S. farmers produced a record 4.4 billion bushels
of soybeans and exported 2.3 billion bushels, valued at $27
billion. For the last 20 years, soybeans have contributed more
to the U.S. trade balance than any other agricultural product.
We are very proud of this record and of our role in helping to
feed a growing world.
China is the world's largest soybean importer, buying 93
million metric tons of soybeans in 2016. In 2017, China
imported 1.4 billion bushels of U.S. soybeans, or 62 percent of
total U.S. exports. This represents nearly one-third of our
annual soy production. Over the next 10 years, Chinese demand
for soybeans will grow annually by the size of our exports to
the European Union.
Since last year, the U.S. soybean industry has been very
concerned about getting into a trade war with China. This
concern was heightened when President Trump announced his
decision to impose tariffs on steel and aluminum imports. Since
this announcement, ASA has raised concerns about the potential
for retaliation from our top customers like China. ASA believes
that there is room for our industry to grow our exports to
China, and we want to focus on ways to expand trade instead of
restricting it.
Our fears of retaliation were confirmed after the
Administration announced tariffs on an additional $50 billion
of Chinese imports under Section 301, when China stated its
intention to place a 25 percent tariff on imports of U.S.
soybeans and other products. With this announcement retaliation
is no longer a ``what if.'' The prospect of an escalating trade
war has already created significant uncertainty in the U.S.
soybean market, and has driven up premiums for Brazilian
soybeans from $10 to $30 per metric ton.
ASA has partnered with the U.S. Government for decades and
spent considerable time and money to establish foreign markets
for U.S. soybeans. China is perhaps our most impressive success
story. Through a long-term and comprehensive program to
demonstrate the value of soy-based feeds, ASA and the U.S.
Soybean Export Council helped build demand for soybeans to the
level Chinese imports are today. The value of U.S. soybean
imports to China has grown 26-fold, from $414 million in 1996
to roughly $14 billion in 2017.
According to a study for the U.S. Soybean Export Council
conducted by economists at Purdue University, soybean exports
to China could drop dramatically if China chooses to impose a
25 percent tariff on U.S. soybeans. The Purdue study projects
that China soybean imports from the United States would fall by
65 percent, total U.S. soybean exports would drop by 37
percent, and U.S. soybean production would decline by 15
percent.
It has been argued that trade in agricultural products is
fungible, and that the loss of one market to a competitor will
be replaced by other markets which that competitor will no
longer sell to. In the case of soybeans, this argument fails to
recognize that our largest competitor, Brazil, is continuing to
expand soybean production on new lands. Brazil is already the
world's largest soybean exporter, including to China, and would
respond quickly in the event U.S. trade actions trigger
retaliation against our soybean exports.
In addition to the concerns of U.S. soybean farmers, other
commodity producers are at risk of losing critical sales to a
China market. As a result of the prospective U.S. tariffs,
China has already retaliated against U.S. pork imports, and has
threatened retaliation against sorghum, wheat, cotton, corn,
and beef. Actions that threaten these markets have the
potential to upend the farm and rural economy and put the
livelihoods of farmers in jeopardy.
As producers of the number one agricultural export, soybean
farmers want to be an essential part of helping lower our trade
deficit with China. We believe that expanding market access can
play a vital role in increasing our agricultural trade surplus.
We ask this Committee and Members of Congress to help allow
soybean farmers to be part of the solution instead of
collateral damage from a potential trade war.
Chairman BRADY. Thank you, Mr.----
Mr. HEISDORFFER. Thank you for inviting me to testify. I
look forward to answering your questions.
[The prepared statement of Mr. Heisdorffer follows:]
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Chairman BRADY. Thank you, Mr. Heisdorffer. Congressman
Dooley, welcome and please proceed.
STATEMENT OF CALVIN DOOLEY, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, AMERICAN CHEMISTRY COUNCIL
Mr. DOOLEY. Thank you, Mr. Chairman, and Members of the
Committee. I represent the American chemistry industry in the
United States, and thanks to the American shale gas revolution,
in little over a decade, the chemical industry in the United
States has gone from one of the most high-cost manufacturers of
chemicals to today maybe the most competitive place to produce
chemicals in the world.
And the reason for this change is because of the increased
supplies of natural gas, which our industry uses as an energy-
intensive industry, which is very important to lowering our
cost. But also, like flour is to a bakery, natural gas is our
raw material in the chemical sector.
This has resulted in an unprecedented level of new
investment in chemical manufacturing in the United States. In
the last 8 years, about $194 billion in new investment in
chemical manufacturing has come into the United States. And
importantly, over 62 percent of that is foreign direct
investment.
According to the Department of Commerce, in 2016 and 2017,
almost 50 percent of all investment and manufacturing in the
United States was accounted for by the U.S. chemical industry.
And that expansion is providing for a foundation for a
renaissance in manufacturing in the United States, and just
with the chemical industry, it is going to create about 850,000
new jobs. Much of this new capacity is intended for export,
reflecting the industry's belief that the United States is the
most competitive platform to serve global markets.
And today, American chemical manufacturers account for 14
cents of every dollar of exports from the United States. We
have a--currently about $174 billion, and importantly, in 2017
we had a trade surplus of about $33 billion. And with this
enhanced competitive advantage, we expect by the year 2020 that
that will more than double to about $73 billion.
The tariffs proposed by President Trump are intended to
reduce our country's trade deficit, an objective that has some
merit. But when we impose import tariffs in the hopes of
protecting domestic industries that have struggled to be
competitive in an increasing global marketplace, we invite
retaliation that will inevitably be targeted at America's most
competitive and most successful sectors, including chemicals as
well as U.S. agriculture.
Nearly 40 percent of the products on China's list of
retaliatory tariffs are chemicals and plastics. The ACC
estimates that approximately $5 billion in U.S. chemicals and
plastics trade to China would be exposed to these increased
tariffs. And a recent Brookings study determined that China's
retaliatory tariffs would expose 2.1 million American workers
to increased tariffs, and the U.S. chemical sector would
account for about 40 percent of that 2.1 million.
ACC shares President Trump's concerns about China's
inadequate protections of intellectual property and forced
technology transfer practices. We share the Administration's
concern about China's refusal to appropriately address their
policies that resulted in an overcapacity of steel
manufacturing. China needs to open their market.
U.S. consumers, U.S. workers, and the U.S. economy does not
win if the tariffs we have proposed result in the
implementation of China's proposed retaliatory tariffs that
target those sectors of our economy that are global leaders.
U.S. chemical manufacturers, U.S. energy producers, and U.S.
farmers are competing and winning in the global marketplace.
They are generating increasing trade surpluses, and we cannot
allow them to become casualties of trade disputes.
We urge the United States and Chinese governments to put
aside talk of a trade war and stop the volley of potential
tariffs. We believe the Trump administration should work with
our allies across the world to demand that China responds and
modifies their unfair and market-distorting trade policies.
In the absence of a full withdrawal of the proposed Section
232 tariffs, we urge the Trump administration to modify the
steel and aluminum tariffs to make countries' exemptions
permanent, allowing associations to request exclusions on
behalf of their members, allowing product exclusions to all
companies rather than requiring on a company-by-company basis,
and exempting key U.S. allies without conditions.
Thank you for your time today. We are hopeful with the
support from Congress, the Administration and the Chinese
government will recognize that it is in the best interests of
both countries to commit to a process that will produce
mutually beneficial agreements before the proposed tariffs go
into effect.
[The prepared statement of Mr. Dooley follows:]
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Chairman BRADY. Thank you, Mr. Dooley.
Ms. Wilson, you are recognized.
STATEMENT OF ANN WILSON, SENIOR VICE PRESIDENT, MOTOR &
EQUIPMENT MANUFACTURERS ASSOCIATION
Ms. WILSON. Good morning, Chairman Brady, Ranking Member
Neal, and Members of the Committee. My name is Ann Wilson, and
I serve as the Senior Vice President of Government Affairs for
the Motor & Equipment Manufacturers Association. Thank you for
the opportunity to speak with you today.
MEMA member companies manufacture motor vehicle parts,
components, and systems for the automotive, heavy vehicle, and
after-market industries. Vehicle suppliers are the largest
sector of manufacturing jobs in the United States, directly
employing over 871,000 Americans in all 50 States. Supplier
jobs have actually increased by more than 19 percent in the
last 5 years.
MEMA supports the Administration's agenda to ensure free,
fair, and reciprocal trade and a level playing field for all
Americans. Our industry counts on a strong domestic steel and
aluminum industry, and has long supported aggressive policies
to protect intellectual property rights and enforce IPR laws
here in the United States and around the globe, including in
China.
However, MEMA is very concerned about the adverse impact on
manufacturing jobs relating to the Section 232 and 301 tariffs.
I wanted to take the opportunity today to connect the dots with
you. I know all of you have heard repeatedly that the vehicle
industry counts on a global marketplace. But our industry also
counts on regulatory and market certainty.
Our industry buys the vast majority of its steel and
aluminum domestically, but imports specialty materials as well
as finished parts. Often, these parts are manufactured further
and made into other parts, subcomponents, and systems by U.S.
workers at facilities all over the country. This allows the
U.S. supply chain, as part of the global economy, to be
competitive and prosperous, creating hundreds of thousands of
U.S. jobs.
So today I brought one of those parts with me. This is a
fuel injector. Fuel injectors are safety-critical parts that
must be durable and dependable. The manufacturer of this
particular part purchases most of their steel in the United
States. However, this particular part requires specialized
stainless steel for the housing, and that is only available
today from a supplier in Germany. This specialty steel ensures
the performance of the injector. The South Carolina plant
responsible for this fuel injector makes 40 million of these a
year, and employs 1,700 Americans.
Being able to bring this steel into the United States is a
cost-effective way and allows suppliers to produce and to
expand in the United States, hiring U.S. workers, and making
more U.S. investment. The steel from this housing is subject to
the 232 tariffs. This manufacturer does not know if the EU will
be exempt from the tariff, if their individual petition for
product exclusion will be accepted, and how long these
exemptions or exclusions will be in effect.
This situation is repeated multiple times for our many
companies. We have a member, a U.S. company, who must now pre-
pay their importer a portion of $100 million of 232 tariffs in
order to get their steel into the United States. This
manufacturer makes 90 percent of the product line subject to
the tariffs, in New York in a plant with 1,500 employees. The
payment of this tariff puts profits, investment, and potential
expansion at risk.
Another one of our members' imports are potentially subject
to the $7 million tariff because of the Section 301 decision.
These imported goods support over 600 jobs in Illinois. I am
here today because these examples are not isolated. Over the
last week, our offices fielded calls from members with
operations all over the country. Please understand, the tariffs
will cost companies, but they will also cost our country. The
price will be current jobs and future investment.
Regarding the Section 232 tariffs, MEMA has urged the
Department of Commerce to simplify the process--develop clear
procedures and processes for product exclusion applications.
Also, we have urged a regular review of the impact of the
tariffs on the consuming industries in the U.S. economy. As to
the Section 301, we have been heartened by United States--by
China's recent announcement regarding excluding motor vehicles
from potential retaliatory actions.
We urge the Administration to continue to prioritize a
negotiated resolution of the issues before imposing broad-based
tariffs. The imposition of these tariffs prior to bilateral
discussions between the United States and China will hurt our
industry, job creation, and the U.S. economy.
We agree with the Administration and many of you that the
United States must take strong action to protect our economy
and our Nation's work force. However, we believe that the
recently-implemented and proposed tariffs will have a
detrimental impact. I look forward to your questions.
[The prepared statement of Ms. Wilson follows:]
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Chairman BRADY. Thank you, Ms. Wilson.
Mr. Paul, you are recognized.
STATEMENT OF SCOTT N. PAUL, PRESIDENT,
ALLIANCE FOR AMERICAN MANUFACTURING
Mr. PAUL. Thank you, Chairman Brady, Ranking Member Neal,
and Committee Members. On behalf of the Alliance for American
Manufacturing, we appreciate the opportunity to testify.
There is no disagreement that China cheats, which is why
these tariffs are now on the table. The testimony by Mr.
Newport on steel as well as the Section 301 report prepared by
the USTR on intellectual property rights violations both ably
demonstrate that.
The United States has only ever made progress with serial
trade cheats through extraordinary pressure applied by Congress
and the Administration, including but not limited to the threat
of tariffs. So now is not the time for anybody to demonstrate
to the governments of China, Russia, or other mercantilist
nations that our resolve to eliminate unfair trade practices is
anything less than strong and unified.
AAM supports the trade actions on steel, aluminum, and
intellectual property. We view the possibility of tariffs as a
necessary step to achieve real progress, which includes
reforming anticompetitive practices and reducing market-
distorting behaviors. Withdrawing the threat of tariffs without
achieving results would be tantamount to waving the white flag
of trade surrender, signaling to China and other trade cheats
that there will be no consequences for predatory trade
behaviors. If a negotiated solution with specific disciplines
and automatic enforcement provisions can be agreed to, then and
only then should we look at lifting tariffs. Otherwise, we
would be abandoning the best leverage we have had in years.
On steel and aluminum, we are already seeing positive
results, with nearly 3,500 American jobs announced and new
cooperation from trade partners like South Korea and Canada.
JSW USA plans an expansion of its steel plant in Baytown,
Texas, a move that will add up to 500 new jobs at an average
salary of $65,000. New steel and aluminum jobs have also been
announced in Illinois, Ohio, Florida, Missouri, Indiana,
Kentucky, and elsewhere.
More broadly, manufacturing contributed a whopping 21
percent of all private sector job growth last month when the
tariffs kicked in, and employment in metals-consuming
industries rose substantially. Internationally, we now see
allies joining the United States to combat unfair trade
practices. Canada is now working to strengthen its
anticircumvention and evasion provisions. The EU is ready to
adopt safeguards on imported steel and aluminum. The agreement
with South Korea to better level the playing field on steel and
autos is also an encouraging sign.
Chinese President Xi Jinping has again promised a new phase
of opening up and allowing more imports. But after years of
China making unkept promises, the United States must impose a
sustained and credible threat of consequences should China, yet
again, fail to deliver, particularly with Made in China 2025
looming on the horizon. Meanwhile, the product exclusion
process under Section 232 should mitigate impacts for metal
users.
Let's acknowledge that the way in which this Administration
is delivering tariffs is far from perfect. The Administration
waited too long to conclude the Section 232 process. Steel
imports soared over 15 percent in 2017, putting further
pressure on an already-stressed sector. Mixed signals on
timing, scope, and applicability put more emphasis on the
tactics than on the overall strategy.
Mr. Chairman, in closing, an observation: the three-legged
stool of trade policy--expansion, enforcement, and adjustment--
was established through the Trade Expansion Act of 1962, and it
provided a solid foundation of progress for our Nation. But
enforcement and adjustment have been largely neglected as trade
and imports have dramatically expanded.
A growing body of evidence shows Chinese imports were a
major cause in the loss of nearly one in three factory jobs
since 1998. Trade-impacted workers are unlikely to ever find a
better job than the one they lost, and many will never work
full-time again. From the perspective of these workers, our
Nation has been in a trade surrender for decades. Americans do
not view the Administration as having fired the opening shots
of a trade war.
We should not be afraid to enforce trade laws. We have the
leverage to do so. The tariffs, many of which are still
aspirational, represent a fraction of our $20 trillion economy.
Goods exports to China amount to less than seven-tenths of a
percent of U.S. GDP, while more than 20 percent of China's
exports head straight to the United States. If China will not
play by the rules, it should lose some access to our markets.
[The prepared statement of Mr. Paul follows:]
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Chairman BRADY. Thank you, Mr. Paul.
Mr. PAUL. Thank you, Mr. Chairman.
Chairman BRADY. Thank you all for your excellent testimony.
We will now proceed to the question and answer period, and I
will begin.
Mr. Kennedy, your company employs 350 people in Splendora,
a town of less than 2,000 people. It would be hard to
overestimate just how important your company is to that
community. Your family, your father, your business has a
wonderful reputation, and you took it and expanded over many
years of work over and over again. You have been involved in
the community, you are involved in the Chamber of Commerce, the
Rotary Club, and you have a heart for the poor, supporting
schools in Guatemala that help Mayan children who would not get
an education get an education. So you are Main Street, America.
So recently, Congress, working with President Trump,
redesigned the tax code, lowering the rates for businesses to
the lowest in history and redesigning the tax code so our local
businesses could compete and win anywhere in the world,
including here at home. So first, can you describe the effects
of the tax cuts on your business and the demand for your
products?
Mr. KENNEDY. Sure, thank you. The tax reform was good
because one, it created certainty. I mean, it allowed us to
invest in equipment and we had plans for spending a lot of the
money that we were able to make. We were already competitive
before the tax reform against foreign competition. All the tax
reform did was make us even more competitive. Like, we were
just planning and setting on winning more work, creating more
jobs, and we had the opportunity to do that.
Now, the tariffs, on the other hand, I think for us,
specifically, more than offset that.
Chairman BRADY. Yeah, let's talk about that a second. So
look, it is not enough to merely buy American, we have to sell
American all throughout the world. The tax code was designed to
do that. You, in your testimony, said tariffs were effectively
taxes that are paid by U.S. companies, and ultimately, workers.
So what was the impact of the tariffs? How did they undermine
any improved competitiveness from the tax cuts?
Mr. KENNEDY. First of all, they created a lot of
uncertainty in the market. Nobody invests when they do not know
where the market is going to go. I mean, it completely halted
uncertainty. What they are certain about is that they can go to
our foreign competitors, manufacturers, and ship the stuff in
at the same price they could before without a tariff. For us,
they do not know where our pricing is going to go. We have
already told them it is higher.
We have gone back to every customer to say, ``Sorry, we are
paying 40 percent more for steel, we cannot bear that cost.''
And our customer says, ``Well, we cannot bear that cost
either.'' You know, the tariffs in some ways are good, and I
hear across the panel they are--the attempt is to punish China,
but, you know, this is not just punishing China. If you want to
punish China, make it surgical.
Punish China, we have a lot of free trade--fairly-traded
steel that does not make its way here that we cannot get our
hands on, and if the U.S. steel producers--which we need, we
love U.S. steel producers--if they cared as much about American
jobs, why does the price increase 40 percent? The tariff was
only 25 percent. But they clearly took advantage of a market
because of demand, everybody tried to buy their steel at one
time, all of a sudden there is no imports coming in the water,
and, you know, price gouging--there is laws against price
gouging in many scenarios. But in this instance, we are doing
it to our own manufacturers.
And, you know, I do not necessarily blame all the mills for
trying to recover some of the losses that China has put on them
unfairly. I just think there is a more tactical, surgical way
to address that.
Chairman BRADY. So your point is target the unfairly-traded
products----
Mr. KENNEDY. Right.
Chairman BRADY [continuing]. And leave the fairly-traded
products----
Mr. KENNEDY. And if you are going to do the tariff, include
the whole chain. Do not create a giant loophole that makes it
easy for these guys to self-fabricate their steel.
Chairman BRADY. A final point. Do these tariffs help you
sell more made-in-America products overseas, or less?
Mr. KENNEDY. No, they absolutely hurt us. I mean, they do
not just not help us, they hurt us.
Chairman BRADY. Okay. Thank you. Mr. Neal, you are
recognized.
Mr. NEAL. Thank you, Mr. Chairman. We all acknowledge the
complexities about how steel and aluminum tariffs will work and
how they might become effective to achieve goals. But in some
ways, we are still not sure that the Section 232 actions really
are to play out, because country exemptions are still being
negotiated and product exclusions are still being requested,
and the Administration has made clear that it is reserving the
right to revisit the overall tariff levels of 10 and 25 percent
for aluminum and steel. And I think there is an opportunity to
hear from our witnesses about these complexities.
Mr. Paul, with respect to both the steel and aluminum
tariffs, could you talk about why the next steps that the
Administration takes on country exemptions are critical to
whether or not these tariffs will be effective in achieving the
intended goals?
Mr. PAUL. Thank you, Mr. Neal, and I think that is the
appropriate question. There has been a focus on China, and I
will say people rightly point out that China is our number 11
importer of steel. But China's market-distorting behavior has
an impact, a dramatic impact on global steel markets, which is
why I think the Administration came forth with a global
solution.
The direction I think that we are headed in, if we look at
South Korea, are negotiated agreements, particularly with
trading blocs like the EU, that look at maintaining a level of
market certainty in the United States that will allow the
industry to recover some lost import market share.
As Mr. Newport mentioned, imports are almost at an all-time
high in the United States as a percentage of our market share.
Capacity utilization for companies is still only at 75 percent,
far below the level needed to assume any sort of sustainability
to provide for our national security needs.
What I would like to see as we move forward is both an
agreement by our trade partners to approach China through the
WTO and other means to essentially quarantine its unfair trade
practices, because this is where most of it is originating
from. The reason why some other nations have been included in
this is that Chinese steel is transshipped; it comes through
Vietnam, it comes through Korea, it comes through Malaysia, it
comes through Indonesia. And we need commitments from these
trade partners that they will not allow Beijing to undermine
market disciplines.
China has refused to operate by market disciplines in steel
and aluminum since it joined the WTO in 2001. There is no
single WTO case that any member could take against China that
would change this. It is going to take a dramatic effort. I
think the Administration has started the ball rolling. I want
to see it keep going in the right direction.
Mr. NEAL. Thank you, and as we hear from our witnesses that
are involved in the product exclusion process, especially since
the Department of Commerce has already received more than 800
specific exclusion requests, I think we might hear from Ms.
Wilson, if you could speak to that issue.
Ms. WILSON. Thank you, Congressman. So we represent a lot
of what are called tier-one suppliers. They are very large
global companies, but we have 1,000 members. A lot of our
members are smaller, maybe have one or two manufacturing
facilities in the United States. We have been very concerned,
first of all, the product exclusion process is not necessarily
transparent. There have been some changing rules on it, and it
is hard for those suppliers to understand exactly how they get
into the process, and that is part of the 800 applications.
We would like to see, I think as Mr. Dooley mentioned, the
ability to have a product exclusion over a wide range of
products so that, you know, competitors do not have to go in
multiple times asking for exclusions for the same product that
is coming from the same place.
We also would like to be able to--for our trade association
to be able to apply for an exclusion, because as you can well
imagine, many of our manufacturers do not have trade staff.
They do not have legal staff. They are going to have to pay for
that to be able to file for the exclusion. We also think a
sunset would be important, or at the minimum, a Committee like
this to be able to regularly review this and see what this is
having an impact on in the consuming industries. And we would
like to see the country exclusions to include things like
Switzerland and Japan.
We worked with Congresswoman Walorski, we really like the
fact that we have the duty drawback piece. But we would also
like to see--like you said, there are over 800 applications. In
my understanding, as of this morning, about 50 of them are
public. So we would like to see the duty drawback come from the
time of applying for the exclusion, rather than the time that
it is made public. Because, you know, a month of duties could
be a lot of money for a lot of these companies.
So we think there is some room for improvement, but we
really have to help focus in on how they do it. I was real
interested in talking about, you know, what we also have for
finished product. We have things like aluminum wheels and
bearings, they are subject to the tariff. That is difficult.
Mr. NEAL. Thank you, Mr. Chairman.
Chairman BRADY. No, thank you, Mr. Neal. Mr. Johnson, you
are recognized.
Mr. JOHNSON. Thank you, Mr. Chairman. Let me begin by
saying I strongly oppose the tariffs on steel and aluminum. And
as I have stated before, my primary concerns are that these
tariffs pose a serious risk to our economy and could trigger a
trade war, and they may damage our relationship with our key
allies.
I was, however, glad to see that President Trump has
temporarily exempted a number of our key trading partners and
allies from these tariffs. But make no mistake, the effects of
these tariffs are wide-ranging and will affect folks across our
Nation. It is not just affecting business.
Collin College in my district serves about 53,000 students
each year and offers more than 100 degrees and certificates. In
fact, the college is planning a $600 million building program
that will be completed over the next 7 years and will create
nearly 400,000 square feet of new classroom space. And the
project will allow the college to provide high-quality
education to more folks. But Collin College is now concerned by
the tariffs on steel and aluminum, due to the increased cost of
construction materials.
Dr. Pepper is another constituent of mine, which is
headquartered in my home town of Plano, Texas. And I have heard
from this company that they are concerned by the higher cost of
aluminum used to make cans, potential retaliatory tariffs on
other materials, and the impact higher costs will have on
consumer consumption of their products.
Mr. Kennedy, as a fellow Texan, I would like to welcome you
to this Committee. And you know Texas leads all States when it
comes to importing steel and aluminum products, so that is a
big deal, it could really hurt Texas. Mr. Kennedy, can you tell
me about how tariffs on steel and aluminum have impacted jobs
and exports at your company?
Mr. KENNEDY. Sure, thank you, Mr. Johnson. As I had, kind
of, mentioned before, we compete directly with companies in
Canada and Mexico, and they are not having to pay tariffs. So
at the end of the day, they are able to fabricate and
manufacture their goods, modify the steel to create a product,
and sell it directly to our customers.
The structures that we make are large enough that it makes
sense to be able to ship them. There is a lot of labor that
goes into them, and we have worked extremely hard over the last
decade implementing technology-efficient processes in our
manufacturing so that we can out-compete just about anybody
when it comes to labor efficiency.
You know, people say that American manufacturers have a
hard time competing with labor. Maybe from a cost-per-dollar
standpoint of the wages paid, because we pay decent wages here.
We have made up for that with efficiency. But that efficiency
goes out the door if our competitor has a 40 percent price
advantage on material costs.
And, you know, I can sympathize with our mills, but at the
end of the day, we buy from the mills. And if we are not buying
the U.S. steel mill-produced steel, then how are they--how are
their jobs, how are all these jobs they are talking about
creating, how are they going to be sustainable? You know, they
are sustainable right now because the mills are producing at
capacity today.
Like, today, you have to get in line. But that is because
everybody put their orders in right away. We are one of those.
We had to, the costs were skyrocketing and we have projects
that are due. So we had to buy right away and created a
temporary demand. But we cannot pay those prices, and our
customers will not pay them. Thank you.
Mr. JOHNSON. Thank you, I appreciate that. Thank you, Mr.
Chairman, I yield back.
Chairman BRADY. Thank you, Mr. Johnson. Mr. Levin, you are
recognized.
Mr. LEVIN. Thank you, Mr. Chairman. Welcome to the panel.
You effectively reflect the present clash of different
interests in approaches to trade, that is very clear. For
decades, our Nation's trade policy has been handicapped by
allegiance to theories ill-equipped to respond to the realities
of rapidly-advancing globalization. Japan used a tightly-knit
economic structure, operating in its closed market, and
manipulating its currency, to take full advantage of the open
U.S. market with only a lurch in U.S. policy or action here and
there.
NAFTA represented the first major individual trade
agreement with a developing nation, with a very different,
deeply-imbedded, low-cost labor structure and woesome
environmental standards. But the only safeguard was a non-
enforceable side letter.
And when China responded to its entry into the WTO with
increased, huge governmental expenditures with state-owned
enterprises and major currency manipulation, the United States
failed to use the surge provisions and the annual review
provided in PNTR, and engaged in innumerable discussions, but
no actions on currency, action that was opposed by the majority
here.
There were some successes that changed the May 10
provisions on labor environment in retention of AD/CVD, a form
of tariffs, which we fought to retain in the Uruguay round, but
it has turned out not to be enough. Prevailing doctrine often
became dogma. Essentially, alternatives for action were
dismissed as protectionism. There was little acknowledgement
that the notion of comparative advantage could be comparative
disadvantage. Now these chickens have come home to roost.
We are caught in years of inaction and ineptitude, and
international trade policy with important roots after the
Second World War came too often rigid and insensitive on steel
and aluminum, I urge. It means using proposed tariffs as a way
to achieve a long overdue global solution to a long-known
problem of a huge glut caused mainly by China. Also it means
addressing at long last China's perpetual mistreatment of
intellectual property.
On NAFTA, I urge we negotiate it. But only if Mexico
effectively addresses industrial policy and practices. Keeping
labor costs cheap at all costs, with workers without any rights
and take-home pay at $1 or $2 an hour, not only keeps Mexican
workers from becoming part of their middle class, for American
middle-class workers, it is impacting their jobs and
suppressing their wages. That issue has been acknowledged by
the Administration, but so far, the search has been in every
which way except the only way that can work.
I want to point now, if I might, to what you said, Mr.
Paul. And I urge we all take this seriously. On page one, you
say, ``We view the threat or imposition of tariffs as a
necessary step to achieve real progress, which includes
reforming anticompetitive practices and reducing market-
distorting behaviors,'' and later on you talk about the need
for a global solution. So let's all try to focus on that for
one second.
A global solution. You say tariffs are necessary as a step
in that direction. Right?
Mr. PAUL. I do, Mr. Levin. Yes.
Mr. LEVIN. And so I wonder if anybody here disagrees with
that? You know, you do? Cal.
Mr. DOOLEY. Yeah, I would just suggest that when you have
the United States taking a unilateral action in the
implementation of tariffs, now that invites a retaliation
targeted at the most competitive sectors of the U.S. economy--
--
Mr. LEVIN. Okay, but let me----
Mr. DOOLEY. Just excuse me, if I can respond to my
question. Now they are----
Mr. LEVIN. No, but you said a caveat----
Mr. DOOLEY. Now they are imposing retaliatory tariffs not
against French wine makers, they are imposing tariffs----
Mr. LEVIN. Yeah, I understand that. I understand that. But
you need to--and we have talked about trade for years--tell us
how we are going to reach a global solution on a glut of
Chinese steel that has cost American jobs. You need to answer
that.
Mr. DOOLEY. We do, and it takes----
Mr. LEVIN. You do not.
Mr. DOOLEY [continuing]. Leadership to engage with our
allies----
Chairman BRADY. Thank you all, time has expired----
Mr. LEVIN. We have been engaging for years, Mr. Dooley.
Chairman BRADY. Thank you, all time is expired. Mr. Nunes,
you are recognized.
Mr. NUNES. Thank you, Mr. Chairman. I want to first welcome
Mr. Dooley here, who is from the San Joaquin Valley. Glad to
have you back, former Congressman, long-time Congressman.
Thanks for being here.
So one of the things that I--I think we have to proceed
very, very carefully as it relates to these tariffs that are
being imposed. Most people in Congress agree with the
Administration that China has to be taken on for a number of
reasons, and I could go off, number off, tick off a whole list,
but I think I will focus mostly on the stealing of intellectual
property that they continue to engage in.
So we need to proceed very, very carefully as a country as
we implement these tariffs, and be very, very careful that we
do not have unexpected results from taking rash or quick
decisions. So one of the concepts that I have talked about in
the last trade hearing that we had was maybe focusing on a few
Asian countries. The Administration has expressed an interest
in doing bilateral agreements, and perhaps there are some Asian
countries that we could focus on that were part of the TPP
agreement that--where a lot of the negotiations have already
taken place.
I have talked about Vietnam and Japan as being a couple of
those. There is another country, the Philippines, that wasn't
directly involved in those negotiations. But I think that is
another opportunity for us. They would open up a lot of market,
so at the same time you are putting tariffs on China, you would
be trying to open up markets as quickly as possible with allies
who could take some of the American products.
With that said, and I want to leave this up to the whole
panel, but Mr. Dooley, you have been around these trade issues
for a long time, and this maybe is not in your wheelhouse
exactly, but if you could talk about maybe some of your
experience in Asia and some of those opportunities that we may
have moving forward in your mind, you know, where do you see
the best opportunities for the United States where we could
move the quickest to open up, you know, sizeable markets that
would make a difference to the United States?
Mr. DOOLEY. Yeah, thank you, Congressman Nunes. I think you
referenced the Trans-Pacific Partnership. I mean, here was an
example where the United States was engaged with a number of
other Pacific Rim countries in a collective effort to try to
advance the opening of markets. In large part, that--if you
were trying to address some of the actions of China, it was
pulling that group of countries together that was going to be
one of the most effective ways to achieve that outcome.
So we look at, you know, if you look at the rapid growth
and the increase in the per capita GDP in the Asia region, this
is going to be one of the most rapidly-growing consumer markets
that will provide tremendous opportunities for chemical
manufacturers, other manufacturers, and certainly U.S.
agriculture. It also gives us the opportunity to engage in the
issue of transshipment of products that Mr. Kennedy talked
about. And it also gives us the opportunity to address, I
think, again, a collective response to respond to some of the
intellectual property practices that China has been taking
advantage of that have--we have member companies that have
really been harmed by that.
Mr. NUNES. So Congressman, if I may ask, of those--we know
that the TPP, for now, has been shelved, but a lot of the
negotiations have taken place. I mean, a lot of them, and the
deal was practically in its final stages. For your industry now
that you are involved in, which of those countries, if you
could pick a handful of them, which of--could you name two or
three or four that might be beneficial if we were going to
explore a bilateral arrangement?
Mr. DOOLEY. Yeah, well it is hard for me to respond to that
directly. I mean, we are concerned that if you try to engage in
an--you know, strictly in bilateral negotiations, it really
gets very, very difficult in terms of, you know, capitalizing
on the real opportunity we have to maximize our competitive
advantage. When we take a regional approach, you know, that is
going to be much more effective in, again, in meeting the--I
think the opportunities that our, you know, most competitive
industries have to address. I will get back to you with the
specific----
Mr. NUNES. Yeah.
Mr. DOOLEY [continuing]. Countries of----
Mr. NUNES. And I am out of time, but maybe for the rest of
you, if you could put any thought into this of--in your
particular industries, I would be interested to have that for
the record. Thank you, Mr. Chairman, I yield back----
Chairman BRADY. Thank you, Mr. Nunes. Mr. Lewis, you are
recognized.
Mr. LEWIS. Thank you, Mr. Chairman. Let me thank each and
every one of you for being here. Mr. Paul, how important is it
that we work with our friends and allies who share our concerns
and our values?
Mr. PAUL. I think it is critically important that we do
that, which is why I am pleased with respect to the Section 232
process on steel and aluminum, that processes were set out for
Canada and Mexico as well as the EU, Korea, Australia,
Argentina, and Brazil to provide some level of exemption while
specific details could be worked out.
If we look to Korea as an example, where I think that I--at
least from my perspective, the U.S.-South Korea Free Trade
Agreement was inadequate to meeting the needs of domestic
workers in manufacturing. We were able to use the process under
Section 232 and the country exemption to make some progress
with respect to balancing that trade relationship.
South Korea agreed to limit its shipments of steel--much of
which originates in China--to the United States at 70 percent
of its recent levels, an effective quota; agreed to some
additional market access for automobiles, although I do believe
we have a long way to go there; and some recognition of
currency. Again, I think we have a ways to go there.
But I do think that this process can be useful in engaging
our allies both to apply pressure to the overcapacity issue,
most of which emanates from China, as well as to settle some--
what I would call irritants that we have in our own trade
relationships with these nations.
Mr. LEWIS. Mr. Chairman, I would like to yield the balance
of my time to Mr. Pascrell.
Chairman BRADY. The gentleman controls the time. Mr.
Pascrell.
Mr. PASCRELL. Thank you, Mr. Lewis, and thank you, Mr.
Chairman. I will save my comments for later. I have some
questions, though.
It struck me that it depends on what part of the country
you live in that really provides you with the impetus on what
you feel and what you think about tariffs and trade, and which
industries are protected, and which industries are not, winners
and losers, like anything else. So I approach this, looking
back over the last 20 years, the tariffs can be a tool, but I
think we make a mistake when we use them as a weapon.
I have a question. Mr. Dooley, in New Jersey, they have
over 100,000 people that work in our chemical industry. These
companies employ a lot of people, spend a lot of money, and
those employees spend a lot of money. Recently, I visited one
of these companies in my district, in Lyndhurst, New Jersey,
Sika--S-i-k-a. They use chemicals in the manufacturing of
products that go into our roads, our bridges, et cetera, et
cetera. They are probably one of the top three companies in the
country that do that.
Can you explain how the chemicals in the tariff of 301 that
we are talking about here, on that list, impact companies like
Sika in my district?
Mr. DOOLEY. Congressman Pascrell, I would maybe ask you to
review the Brookings Institute study, I think it just came out
yesterday or a couple days ago----
Mr. PASCRELL. Yes, it did.
Mr. DOOLEY [continuing]. Where they identified those
sectors of our economy that would be most impacted or most
exposed to the increased tariffs. Number one on that list was
plastics and chemical composites. Many of those would probably
include the products that Sika is putting into the marketplace.
So with that implementation of those tariffs, any market
opportunity they had to export into China would adversely be
impacted and would be able to create a market opportunity for
other companies that were operating in other parts of the
world.
Mr. PASCRELL. So we are not debating here, are we, Mr.
Dooley, whether or not China has been a bad actor.
Mr. DOOLEY. Absolutely.
Mr. PASCRELL. I do not think anybody, Democrat, Republican,
Independent, would conclude from what--looking at their
behavior that they need to, in some way, be impacted. And we
need to think about that.
Mr. DOOLEY. Absolutely.
Chairman BRADY. Thank you.
Mr. PASCRELL. Thank you.
Chairman BRADY. All time is expired. Yes, Mr. Lewis, thank
you. Mr. Reichert, Chairman of the Trade Subcommittee, you are
recognized.
Mr. REICHERT. Thank you, Mr. Chairman. I want to thank you
all for being here today and for your testimony. And I would
especially like to thank John Wolfe, Chief Executive Officer of
Northwest Seaport Alliance, for joining us all the way from
Washington State.
I share the Administration's goal of addressing unfair
trade and ensuring American workers and businesses can compete
on a level playing field. But as we evaluate strategies to
combat China's cheating, we need to put all American workers,
all businesses first, and put forward the strongest approach. I
think our response is strongest if we work with our global
partners.
And I thank the Chairman for holding this very important
hearing so that we can consider the impact of both 232 and 301
tariffs on the consumer, on the worker, on small business
owners, as well as on all the jobs that are tied to two-way
trade. So it is not just about the direct importer, direct
exporter; it is about the ripple effect across our country and
our economy. It is about a family that is facing higher prices
at the store or the aerospace employee putting the finishing
touches on an airplane, the cherry grower who relies on sales
to Chinese customers, and the longshoreman working at the port.
In Washington State, we often refer to ourselves as the
most trade-dependent State, highlighting the fact that we have
at least 40 percent of our jobs directly tied to trade. And we
do this because of examples like Mr. Wolfe has shared with us
today.
So my first question is to Mr. Wolfe. Can you describe the
importance of your operations not just to Washington's economy,
but to the entire country as a whole?
Mr. WOLFE. Thank you, Congressman. As you mentioned, we
consider ourselves not just a gateway for the State of
Washington, but for many regions throughout the United States.
Some 60 percent of the cargo moving through the State of
Washington moves inland to other markets, and the reverse is
true for exports. It is also important to note that there is a
direct correlation between imports and exports, and that the
trade supply chain is somewhat complex, yet intertwined.
So if we take steps that damage our export opportunities,
we can be sure that that will impact not just the State of
Washington and the important jobs--some 40 percent of the jobs
in the State, but certainly throughout the Nation. So as it has
been mentioned before, we support the notion of holding our
trading partners accountable to fair trade.
Yet, I think we need to use caution in terms of that tool
that we talk about, tariff, to apply to fair trade. We would
rather see the Administration work closely with a valued
trading partner, China, one of our most important trading
partners, to address some of those issues that we are talking
about today.
Mr. REICHERT. And as the Administration receives and
evaluates comments on the Section 301 tariffs, in your view,
what is the most important message that you hope the
Administration hears?
Mr. WOLFE. I would say, that building upon what I have
shared about the connection and correlation between imports and
exports, if we damage our import opportunities as a result of
trade barriers or tariffs, we damage our export opportunities.
And there are small businesses that are seeking global markets.
And if they do not have the equipment, the vessel space, the
infrastructure to execute on their foreign trade strategy, then
we limit the job creation and the benefits of free trade or
fair trade throughout the Nation.
So I would say that the most important thing is to
understand that correlation between imports and exports, and
make sure that we take a laser focus on those issues where we
feel like there is unfair trade practice.
Mr. REICHERT. Great, thank you. Mr. Heisdorffer, I am
hearing from my community, they are concerned about losing
market share. And I am assuming you are, too. If we do that,
and China removes tariffs and we are back in the game again, do
you expect to gain those market shares back?
Mr. HEISDORFFER. At this point, yes, I think so if this is
rescinded right now. Is that what you are talking about? Or----
Mr. REICHERT. Well let's say it goes on for a while, and
finally China decides to do away with the tariffs, then we have
a market share we have lost. How hard is that to get back?
Mr. HEISDORFFER. That is very hard to get back, sir. Those
market shares will probably go to South America. South America
has much more land that can go into production. They are
sitting there just--I will be loving every bit of this--you
know, where we are in this situation. But right now----
Chairman BRADY. Mr. Heisdorffer, I apologize. Time has
expired. I hope we will be able to get back to that answer,
okay? Mr. Doggett, you are recognized.
Mr. DOGGETT. Thank you, Mr. Chairman. Mr. Chairman, as you
know, you and I are not regularly in agreement on issues before
this Committee. But I think insofar as your opening comments
emphasize the importance of focusing on the predatory practices
of China and on supporting a targeted approach where we are not
going it alone, but working with our allies, that you have it
about right.
The main problem I see in the immediate future there, since
we are governed on everything from immigration to whether the
Special Counsel's future is preserved by the majority of the
majority, that a majority of the Republican Caucus has not
joined your letter to the President, including one-fourth of
the Members of this Committee. And I would hope that our
witnesses will focus their attention while they are here in
Washington on those many Republicans who have not joined that
targeted approach, or who are, just as is so often the case,
cowered by whatever tweet the President puts out.
I would ask our panel members when Secretary Ross was here
recently. And it is disappointing we do not have any
Administration official or any real China expert on the panel
here this morning to discuss what the Administration's policy
is. But when he was here on other matters, I asked him about
the third alternative, the targeted approach, that he advances.
This was one of the three alternatives that he presented to the
President on steel and aluminum--an approach that would have
targeted the tariffs on China; on Russia, notably; and on some
of the countries like Vietnam that are major transshipment
points.
And I really couldn't get any explanation as to why he did
not--why that approach, that alternative was rejected by the
White House and instead we took the, kind of, shotgun
blunderbuss approach to cover everyone initially. Have any of
you or your associations been advised of why the targeted
approach against Russia and China and the other countries that
he proposed was not utilized? Mr. Newport.
Mr. NEWPORT. Yes, I would comment on that, and I believe
the reason it wasn't taking that approach was because of the
ease that we have seen of the--if we targeted, say, China, they
have figured out how to cheat the system and how to beat it.
So, you know, we have had trade cases and other things in
which we have gone against China, and they have figured out how
to go through other countries. So it will just appear elsewhere
if you only picked a handful of people. And I think if you look
at--there were three alternatives put out there, the President
took option one. But with the exemption process that is being
discussed, you are really falling into option two.
Mr. DOGGETT. Well, he took an approach that covered
everyone. He gave a bit of uncertainty to countries that we
actually have a trade surplus with, if that is to be the
measure. And it seems to me that in the list in option three,
they had a number of the transshipment countries, and that the
focus there would have gotten us a better result.
In fact, an example of that is what has happened with
Russian aluminum. For other good reasons, as you probably know,
very belatedly, the Administration finally singled out the
aluminum magnate from Russia that provides most Russian
aluminum, and since singling him out with sanctions, Rusal's
shares have lost half their value and the London Metal Exchange
has said it will not stock Rusal metal. And that is a unique
situation, but it seems to me to show the value of targeted
sanctions rather than just applying it to everyone. Let me ask
you in the minute that I have left if any of you can tell me,
since we do not have an Administration official here, exactly
what the Trump trade policy is on steel and aluminum? Or China
generally, or anything--any aspect of it, if you could
describe----
Mr. PAUL. Mr. Doggett.
Mr. DOGGETT [continuing]. What the policy is.
Mr. PAUL. Yeah, just with respect to steel--and I think it
is worth reading the Section 232 report, that there is a--and
Mr. Newport described this in his testimony, that there is a
gross amount of overcapacity in the system that leaves both--it
impacts from China, from transshipments from China, and then
anticompetitive practices that result from oversupply that
needs to be addressed that is having a material impact on our
ability to supply for our own national defense.
In addition to Mr. Newport's example, there is the example
of armor plate. And there is only a handful of makers of that
left. And so I think with respect to steel, it is this ability
to provide some market certainty for domestic steel makers to
provide for our national defense.
Mr. DOGGETT. Thank you----
Chairman BRADY. Thank you. Mr. Roskam, you are recognized.
Mr. ROSKAM. Thank you, Mr. Chairman. Mr. Kennedy, one of
your opening sentences resonated with me. I represent suburban
Chicago, and I have a lot of manufacturers, and very
sophisticated manufacturers at that, many of them manufacturing
five times to the right of a decimal. And I think the sentence
that I--it was in your first paragraph, and I will paraphrase
it. What is presented as a tariff on foreign steel has become a
tax on U.S. manufacturing. And that is what I am hearing from
my constituency.
So I was out recently at a company in my district, they
import specialty steel that is not available here domestically.
They showed me a letter and, you know, here is the letter, it
is from their supplier, that says, basically, ``Not it.'' This
25 percent is on you, you make the point that there is an
exacerbating impact of that, and it is not just the 25 percent.
What I wanted to explore is something I think you talked a
little bit about, but maybe to press it a bit more deeply, and
that is that the impact of the tariffs could have this really
perverse effect of creating an incentive for more imports of
finished products that are created outside the United States.
You mentioned, you know, the Chinese doing an end-around
and doing, sort of, de minimis changes to steel. Are you seeing
that with your peers? Can you just give us a little bit more
color commentary on that?
Mr. KENNEDY. Sure. Absolutely, thank you, Mr. Roskam. Well,
we see it every day. We were talking about the energy expansion
and the building. You know, these LNG terminals on our coast,
already half the steel comes from China. I mean, we are talking
about billions of dollars of manufacturing and fabrication, and
right now, the U.S. fabricators like myself and even some
companies larger than us, we provide the other half.
You know, the long-lead items they can get from China
because it is cheaper. We have a geographic advantage, we have
a time--a lead time advantage, we are right here. What is
happening now is look, they can just fabricate all the steel.
If I have to pay 40 percent more for my steel--and steel makes
up half the cost of our end product--then China can just
fabricate all the steel. And they send it through Malaysia,
they send it through Singapore, they send it through Indonesia.
And at the end of the day, I do not understand the inability
for a targeted approach.
We have to provide traceability on our steel. Because our
customers want to know that the steel was made to a certain
quality, a certain strength. Steel has a variety of grades and
strengths. There is not one carbon steel out there. So I do not
know why we cannot have a directed, targeted approach.
We should force our Malaysian exporters, or force the other
countries who are our trade partners, to show where they got
the steel. It is easy, they come with MTRs, material
traceability reports, which show up on every piece of steel. We
can enforce that if we want to, we can target where the
punishment goes.
Right now, you know, we are talking about picking winners
and losers. And look, if we are picking losers, let's pick the
people--let's punish the people that need to lose. Right now,
we are picking winners and losers within the United States. We
are picking winners in one industry and losers in a lot of
other industries.
Mr. ROSKAM. Let me shift gears a little bit and switch to a
process question now. We have heard that there is going to be,
you know, the ability to get exclusions and so forth. I will go
back to the company that I visited. They are now in the process
of trying to navigate through petitioning for 200 different
products that apparently they have to--you know, submit this
and have this big review and so forth.
Do you have any insight on that? Do you have that range of
products? Is this not a problem for you, is this easier for
you? What is your experience?
Mr. KENNEDY. Well I can only really speak for my business,
but I would imagine it is similar in that really what it is
creating is uncertainty. I mean, timing is important.
Mr. ROSKAM. Right.
Mr. KENNEDY. You know, right now, we build drilling rigs.
That is one thing that we compete against Canada for. Once we
lose market share, I have 200 employees that touch a rig from
the time it starts, until we buy the steel the time it
finishes. Well if we lose that portion, and I lose those
employees, we have spent years building up a manufacturing
process with training personnel, getting people with the
experience they need to build our products, to be better at
building them than our competitor.
When we build something for the first time, it is always
worse than when we build it again. We get better and better at
it. When we lose all of our intellectual property, which is our
people, when we lose that temporarily, we may never get it
back.
Mr. ROSKAM. Yeah. That is good insight, thank you, Mr.
Kennedy. I yield back.
Chairman BRADY. Thank you. Mr. Thompson, you are
recognized.
Mr. THOMPSON. Thank you, Mr. Chairman, and I want to thank
all of you for being here today telling us how these ongoing
trade wars and potential for trade wars are affecting your
particular sector. Hearing from you, I cannot tell you how
important it is for us to hear from you, and how important it
would have been had the President heard from you prior to
launching his trade war efforts.
I have voted for trade agreements, and I have voted against
trade agreements. And I am not opposed to tariffs. I think they
can be a very legitimate tool for trade when they are used
strategically. But this Administration is using anything but
strategy. The trade policies, they are all over the place.
First, they want to renegotiate NAFTA. Then, they say they are
going to walk away from NAFTA. First they say trade wars are
good, then they say there are no trade wars. One thing is for
sure, this type of Washington talk is bad for producers and it
is bad for consumers.
Just look at my State of California, in China's retaliatory
tariffs. Ninety percent of California's top fruit and nut
commodities are being hit. The Chinese already had a 48.2
percent tariff on wine, and as Congressman Dooley notedly
pointed out, that when they put tariffs on wine, it is not
against everything that is competing with the United States.
Now, as a result of the President's trade war, we are facing a
67.7 percent tariff on wine. This is unsustainable, and it has
already had major negative effects on orders in my home
district.
By not having a cohesive trade agenda with consultation
from stakeholders and from Congress, this could mean a major
loss of jobs across many sectors. The California wine industry
employs almost 800,000 people nationwide. How many of those
jobs are going to be lost because of this tariff trade war
nonsense? I would hope that future hearings will focus on smart
trade policies that will promote strong economic ties and
building American companies and producers.
So, Mr. Chairman, I have two statements from the California
Wine Institute that I would like to ask unanimous consent to
have placed on the record.
Chairman BRADY. Without objection.
[The submissions for the Record of Hon. Mike Thompson
follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. THOMPSON. And I would like to yield the balance of my
time to our Ranking Member on Trade, Mr. Pascrell.
Chairman BRADY. Mr. Pascrell, you are recognized.
Mr. PASCRELL. Thank you, Mr. Thompson, Mr. Chairman. Mr.
Paul, you described in your testimony, which I read--I
apologize, I wasn't here to hear all of it--how global excess
capacity in steel devastated U.S. companies and workers. The
problem has gotten worse since 2012, if you look at the
numbers. Aluminum production has dropped 60 percent just in
that time, and in 2016, the Global Forum on Steel
Overcapacity--you are familiar with that--was created to find a
multilateral solution, and the OECD has been working on this
issue for years.
Do you think that the Global Forum has been effective, in
your view? And do you think that unilateral action actually has
the chance to incentivize countries to more meaningfully engage
in the Global Forum?
Mr. PAUL. Mr. Pascrell, thank you----
Mr. PASCRELL. We are talking about consequences here.
Mr. PAUL. Yes. It is an excellent question. And I do think
the Global Forum has been helpful in putting some focus on the
issues at stake. I will say it has been an excruciatingly slow
process, that there are some key partners that are not engaged
in the Global Forum that have pervasive unfair trade practices
in steel.
I will say the greater issue here, Mr. Pascrell, is that
China first recognized that it had excess capacity about 8 or 9
years ago in steel, and its leadership has made continued
promises to reduce that excess capacity. The opposite has, in
fact, happened, and as China's economy waxes and wanes, the
rest of the world is caught up in this trade tsunami.
The American workers suffer the most because we have the
most open steel market in the world. Our market is uniquely
penetrated by imports--they account for about 20 percent of our
consumption. And while other blocs in the EU may put up some
safeguards, we are left for the industry filing after the fact
very expensive trade cases to try to make up the difference.
That is not a sustainable----
Chairman BRADY. Thank you, Mr. Paul.
Mr. PAUL [continuing]. Policy.
Chairman BRADY. Time has expired.
Mr. PASCRELL. Thank you, Mr. Chairman----
Chairman BRADY. Mr. Smith, you are recognized.
Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman. Thank you
to all of our witnesses here today. And certainly, you bring
some important perspectives, and Mr. Heisdorffer, I appreciate
your perspective on agriculture. And obviously, heading up the
Soybean Association, you bring that perspective, but also as a
corn grower and a hog producer, I think you have an additional
perspective. And so there is your formal testimony that we
certainly appreciate, but also, you know, the impacts that are
taking place or might take place.
If you could share a little bit on how tariffs that are
already in place or those that are proposed, how you see that
affecting your community, not only your own business, but
perhaps your neighbors' planting decisions. We know that those
are very important, especially this time of year. And how,
perhaps, banks and operating capital might be responding as
well. Can you touch on those?
Mr. HEISDORFFER. Yes, Congressman, I can. Right now, farm
income is down 50 percent, crop prices are down 40 percent, and
we are expecting--and that is over the last 5 years, since
2013--and we are expecting another possibly 6 to 7 percent this
year of lower income. We cannot afford to lose a valuable
customer like China. It is our number one customer, of course,
with soybeans. All other countries combined do not come up to
what China takes from the U.S. soybean producers.
So yes, if we lose that and we lose our exports to South
America we are going to end up losing farmers. It is already
very close to happening out there now. We are going to lose
some over the next year just because of the downed prices and
things. I am putting in my 47th crop this spring, and I have
served the soybean industry for 23 years, either on a State or
a national level. My son farms with me. I am not so concerned
about myself at this point, but I am concerned about my son's
welfare for the future, and for the future young farmers that
are out there.
Mr. SMITH OF NEBRASKA. All right, thank you. I yield back.
Chairman BRADY. Mr. Larson, you are recognized.
Mr. LARSON. Thank you, Mr. Chairman, and let me commend you
and the Democratic leader, Mr. Neal, for this panel. It is not
often that you get to sit in a committee room and hear the
dynamic differences that exist within the panel itself. And,
Mr. Chairman, I would suggest that perhaps we need another
hearing, maybe more extensive, where we get to refine these.
Because I couldn't help but note the body language of
individuals when Mr. Dooley was speaking, Mr. Newport's
reaction when Mr. Paul was speaking, and Mr. Kennedy's
reaction. And rather than having us inquire of you, it would
have been great to see that dynamic contrast take place so that
we can better sharpen our views.
I say this because I think that what we are discussing here
this morning is more tactical than in terms of policy, in terms
of our response. And I think, Mr. Chairman, you were surgical
in terms of how you discussed this in the beginning, and I
think that points to a number of the things that individuals
have said. So first, let me ask the panelists in very rapid
order, are we experiencing globalization? Yes, Mr. Kennedy? Yes
or no? Or is this a globalization issue? Mr. Wolfe.
Mr. WOLFE. Absolutely.
Mr. LARSON. Mr. Newport. Mr. Heisdorffer. Mr. Dooley.
Ms. WILSON. Absolutely.
Mr. LARSON. Mr. Paul. There is no question about the fact
that what we are dealing with here is an issue of
globalization. No one less than Richard Trumka has said what we
need is a massive rewrite of the rules as they relate to global
policy. Would you agree with that? Mr. Paul.
Mr. PAUL. I think that is correct. I think that is a very
aspirational goal----
Mr. LARSON. It is, but would you agree with it?
Mr. PAUL [continuing]. Given the shortcomings of the WTO as
it exists today. But yes----
Mr. LARSON. Ms. Wilson.
Ms. WILSON. Our industries actually flourished in the
United States with some globalization policies. I think there
are areas, including IPR rights, that we need to take a look
at. But overall----
Mr. LARSON. But you would not----
Ms. WILSON [continuing]. We have supported free trade. We
have added jobs in the United States because of it.
Mr. LARSON. Would you say that we need a rewrite as it
relates to globalization and its impact?
Ms. WILSON. I would use your word, Congressman, and I would
say we need a tactical rewrite.
Mr. LARSON. Mr. Dooley.
Mr. DOOLEY. I like Ann's comment there. I think a tactical
rewrite would be----
Mr. LARSON. A tactical rewrite?
Mr. HEISDORFFER. Since we have had record crops of soybeans
the last several years, we need global exports in order to
maintain.
Mr. LARSON. Mr. Newport.
Mr. NEWPORT. Basically, we need fair trade.
Mr. LARSON. Fair trade. Mr. Wolfe.
Mr. WOLFE. I can see opportunities where fair trade has
served us well, and trade policy, so I think we should leverage
that as we look at a rewrite.
Mr. LARSON. Mr. Kennedy.
Mr. KENNEDY. I agree, I think we need free and fair trade,
and we need it quickly, if we can, to eliminate some
uncertainty.
Mr. LARSON. Mr. Pascrell pointed out--and I think a number
up here on the dais would agree, that tariffs can be an
important tool, but not if they are used as a weapon. And there
is more than I think a sense of concern up here from the dais
about tariffs being used as a weapon. Mr. Newport, I noticed
your response to Mr. Dooley's comments. I was wondering if you
wanted to have an opportunity for an exchange on what Mr.
Dooley was saying. I noticed you nodding your head in
disapproval.
Mr. NEWPORT. Oh, no, I think when you look at what has been
going on we have been facing a trade war in our industry. What
we want is fair trade. When we are exporting products overseas,
we are facing tariffs and other duties as an industry. We sell
steel overseas. There are tariffs in place, there are duties in
place, a lot of industries face it. But they can come here with
no tariffs, without duties.
And, you know, we talked earlier about the exemption
process, and should it be targeted. Well, actually, on our
allies, in electrical steel, as I testified, Korea and Japan
are our two biggest issues of what is being imported in, and
what was imported in the first quarter of this year from Korea
equated to what they imported in total from 2012 to 2016.
Mr. LARSON. Mr. Dooley, do you think we could successfully
target and utilize tariffs as a tool versus a weapon, or how
would you respond to Mr. Newport?
Mr. DOOLEY. My response is, if you listen to some of the
comments here, you would think that our economy was failing or
not being globally competitive. But our service sector is
globally competitive, if not a leader, our energy sector has
now become a global leader, the chemical manufacturing sector
is a global leader, our U.S. agriculture sector is a global
leader.
And our concern is if you are not tactical, if you take an
axe approach to, you know, heart surgery, and you have a
unilateral implementation of a tariff that is targeted at one
sector, it invites a retaliation. And that retaliation is going
to go at our most competitive sectors. And that is where, you
know, we have great concerns.
Mr. LARSON. Thank you, Mr. Chairman, I----
Chairman BRADY. Yeah----
Mr. LARSON [continuing]. I do hope we have another hearing.
Chairman BRADY. Thank you, Mr. Larson. Ms. Jenkins, you are
recognized.
Ms. JENKINS. Thank you, Mr. Chairman, and I want to thank
all the panelists for joining us this morning. I have voiced my
concerns many times about these recent tariffs and the harm
that they could cause Kansas producers, manufacturers, and
consumers alike. For instance, cattle producers, which Kansas
ranks third nationally, note that beef exports account for
around $300 a head, a point reiterated by several Kansas
cattlemen who were just in my office yesterday.
President Trump achieved a great victory last year by
reopening the Chinese market to U.S. beef for the first time in
more than a decade, but unfortunately, China has placed U.S.
beef on a proposed tariff retaliation list, which could erase
the gains our cattlemen and women have made in the Chinese
markets.
So in addition to family farmer ranch operations facing
down retaliation over trade restrictions, extreme and
exceptional drought is also creeping across most of Kansas,
diminishing the odds for bumper crops and resulting in
extraordinary measures to protect our livestock. Every producer
knows that access to foreign markets and low trade barriers are
crucial for rural America, even in the best weather conditions,
but especially so when the weather turns sour.
In fact, last month, the State of Kansas issued a statewide
drought emergency, and the USDA recently reported that,
nationally, just 32 percent of this year's winter wheat crop
was in good or excellent condition, compared to 51 percent last
year. In Kansas specifically, it includes rates of 13 percent
very poor and 31 percent poor. For an additional frame of
reference, some cattle producers in the State are having to
feed cattle on those wheat fields because the pasture grass is
yellow and brittle when it should be green and lush.
So with that being said, Mr. Heisdorffer, how do you
foresee the long-term ag economy shaping up if periods of
drought continue to hamper production and prices for what
farmers are able to produce are greatly diminished from these
tariffs and other threats of trade retaliation?
Mr. HEISDORFFER. Well, to start with, you know, if this
drought continues, and it is in my area, too. I am in Southern
Iowa. Northern Iowa is not quite that way, but Southern Iowa
is. We drained the bucket last year, there is nothing left down
underneath. And if that continues, yes, like I said, we are
going to start to lose farmers. There is no doubt about it.
And livestock, yes, we might be able to get a little bit
out of crops, but they are going to start selling off
livestock, which I am sure is going to happen in your State.
And as that happens, farmers are just going to go out of
business. There is no other way about it. We put everything
forward to our families as farmers, and we try to continue that
generation after generation.
I am fourth generation, my son is a fifth, and we will keep
that going, but I am so afraid for these young farmers
nowadays, and not just that they may fail, but most of them are
like me, who are in partnership with my son. And though I have
had a lot of years of farming, they could take me along with
them.
Ms. JENKINS. Well, thank you. I guess you have confirmed my
fear as well. And with that, Mr. Chairman, I yield back.
Chairman BRADY. Thank you, Ms. Jenkins. Mr. Kind, you are
recognized.
Mr. KIND. Thank you, Mr. Chairman. Mr. Chairman, I think
you said it very well in your opening statement, I think all
the panelists agreed, too, that with China, we have a problem.
I think we are all in agreement that they are stealing our
intellectual property, they are requiring technology transfers,
they are requiring joint ventures that place our companies in a
minority position, they are dumping steel below market price in
the global marketplace, and that is something that definitely
needs to be fixed.
But as someone who spent a strong proponent of a robust
trade agenda in this Congress, I am afraid that America, we
have a problem. We have an Administration that on day one
turned their back on the most significant multilateral trade
agreement in the 21st century, the Trans-Pacific Partnership,
in the fastest-growing economic region in the globe, the
Pacific Rim area. They put on ice the trade negotiations with
the second-largest economic marketplace, Europe, with TPP.
They threatened to blow up NAFTA, now they are moving down
the unilateral road of 232 and 301 trade sanctions, and they
have not embarked on one new bilateral trade agreement in the
year-and-a-half that they have been in office so far. Our trade
agenda is seriously off the rails, and it needs to get back on
track quickly, or we are going to be suffering economically as
a consequence.
Mr. Dooley, I do subscribe to your viewpoint, but I think
the unilateral approach makes it too easy for countries like
China or anyone else to just retaliate in kind, and
strategically hurt us where they know it is going to hurt the
most. And that is something that should bother all of us. But I
want to pick up on a comment that you mentioned in your opening
statement, which I think bears a little fleshing out. Right now
we are in the process, or the Administration put in a process
exempting countries from the tariffs and requiring individual
businesses to have to apply for exemptions, and you mentioned
that we ought to be looking at allowing associations to be able
to represent the members in the exemption. Why do you think
that is important?
Mr. DOOLEY. I think Ms. Wilson also commented on this as
well. When you have the requirement that an individual company
has to apply for an exemption--and it is also, kind of, a black
box process--and if you look at a lot of the companies that do
not have the internal capacity that have the expertise to even,
you know, go through that process, it is a significant
impediment. And it harms businesses such as Mr. Kennedy's, that
are, you know, just--that is not what they do. They build and
fabricate and, you know----
Mr. KIND. I have heard that there could be a number as high
as 6,500 individual businesses applying for some form of
exemption moving forward, is that right, Ms. Wilson? Or----
Ms. WILSON. I am not sure if it is 6,500, but we have
almost 1,000 now, and if you just look at our membership, many
of our companies are going to have to file multiple petitions
for some kind of exclusion, product exclusion. I think the
other thing that is of concern is the way I understand the
process may have an initial application, and there may be a
request for more information. And some of this information is
going to be considered proprietary. I mean, as you can well
imagine, one reason why we would like to see a blanket
exclusion process is because many of our members bring in
similar types of products. They do not necessarily want to say
who that is----
Mr. KIND. Yeah. Well, I hope the Administration will take
that into consideration as they move forward. Mr. Newport,
listen, I really appreciate your willingness to stand up and
defend your industry and the jobs that depend on it, but there
is also an important ratio that we need to keep in mind, and
that is 20 to 1. For every one job that is affected by the
production of steel and aluminum, there are 20 jobs--and I am
looking at Mr. Kennedy right now--that are affected by the
consumption of steel and aluminum.
Can you sit here today and reassure a business like Mr.
Kennedy's that you can replace the lost steel, that they could
suffer with these tariffs and still be price competitive in the
marketplace so that they are not losing contracts as they move
forward?
Mr. NEWPORT. Yes, I think if you look over time, you know,
we have been through it in the steel industry, whether it was
201 actions, et cetera, that the steel industry has been there
to support manufacturing. And I think the key on the exemption
process is making sure it is not another loophole. If we had
trade cases that people had figured out how to get around, you
have a 232 action becoming a process with exemptions that
people are going to look for loopholes to get through. So the
key is that it is effective, and that is really what the key
needs to be.
We have been here, we are also a supporter, and when you
think about what is coming from the tier ones going into the
auto industry, besides the steel manufacture, we actually
supply parts into the auto industry.
Mr. KIND. Mr. Kennedy, are you confident if the tariffs do
move forward that you are going to be able to find replacement
steel at a price competitive----
Mr. KENNEDY. Right now, our service suppliers have to get
in line at the mill. I mean, there are hulls that are missing.
A lot of that is the uncertainty. But there is a lot of fairly,
freely-traded steel from our allies that we need. And then my
question on the exemption is how do you exempt a new school or
a new plant or a wing or a modification or product, a custom
product, how do you exempt that? They are----
Mr. KIND. Yeah.
Mr. NEWPORT. And a comment, the tariffs are not stopping
the imports.
Mr. KIND. Okay. Thank you, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Kind. Mr. Paulsen, you are
recognized.
Mr. PAULSEN. Well, thank you, Mr. Chairman. This has been a
really good panel and a really good discussion. We absolutely
need to target these unfair trade practices, especially by
China, that absolutely has engaged in theft of American
technology and innovation.
China's actions have undercut our workers, stealing
intellectual property, enacting hostile policies, forcing our
American companies, again, to give up their technology. But
these solutions do need to be targeted narrowly to avoid
inflicting harm on our consumers as well, and our job creators,
as we have heard, that rely on fairly-traded imports in order
to be competitive.
I have Minnesota medical device companies and supply
industries that are very worried that the proposed tariffs
under 301 on pacemakers, defibrillators, x-ray equipment, and
orthopedics are going to end up making healthcare costs more
expensive, drive them up. And, Mr. Chairman, I would like you
to consent to enter into the record an April 6 article in the
New York Times regarding this. If I could submit that for the
record.
[The submission for the Record of Hon. Erik Paulsen
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. PAULSEN. Mr. Neal, if you want to sub in.
Mr. NEAL. I am ready.
Mr. PAULSEN. Okay. Without objection. But there are
concerns here, as the article points out, that we are impacting
consumers potentially with knee replacements, hip replacements
that could go up because of orthopedic tariffs being put in
place. And the Consumer Technology Association has outlined
concerns that proposed tariffs on TVs and monitors will raise
the price of a television 23 percent. And given Ambassador
Lighthizer's testimony to us and to this Committee to minimize
the impact to American consumers, this action just seems to
contradict that testimony. And these are concerns that have
been raised by the proposed $50 billion of tariffs coming up on
products. We do not even know what might be on the next
potential list of $100 billion that we are waiting on the
Administration to potentially release.
And look, I think the pro-growth policies that we have seen
implemented, especially the tax overhaul, now implemented over
the last year, has put our economy in a really good place,
adding 600,000 jobs just in the last 3 months, unemployment is
at its lowest rate since 2000, and the economic growth numbers
are averaging 3 percent in the last 3 quarters.
That is double what they were the year previous, and nearly
every quarter. And I am opposed to broad-based tariffs that are
going to essentially be taxes that can backfire and then
reverse our ability for American businesses and jobs to grow
and actually impose economic harm.
So, Mr. Kennedy, I want to follow up real quick in the time
I have. I have heard the same concerns that you have expressed
today from some of my Minnesota metal fabricating and
manufacturing companies. They have seen steep price increases
in steel, for instance, similar to the 40 percent you
mentioned.
Now, they have also said that their supply has gone from
maybe, like, a 6 to 8 week waiting outlook to jumping overnight
to as high as 22 weeks. Can you talk a little bit about how
that type of a jump in supply also impacts your pricing? Or
your jobs----
Mr. KENNEDY. Sure.
Mr. PAULSEN [continuing]. Or your manufacturing and your
ability to plan with certainty for the future?
Mr. KENNEDY. Sure, thank you, Mr. Paulsen. Yeah, we are
affected a number of ways. One is obviously pricing. We are at
a price disadvantage against our foreign competitors, and I
would imagine those in Minnesota are really, really close to
their Canadian foreign competitors. But lead times are an
issue, too. If I cannot meet the expected delivery of my
customer and my competitor can because they can get their hands
on the steel, then they win the work.
You know, we talked about--you just mentioned that they can
supply the steel, our mills can keep up, and it does not
prevent imports. Well, uncertainty does. Uncertainty prevents
imports. Right away, the imports stopped coming. Who is going
to send that over not knowing whether or not it is going to be
taxed or whether or not they are going to have to turn the ship
around or dump it at a loss, and they are not going to do that.
And I can attest that our mills currently, a lot of those
mills cannot keep up. And realistically, we should welcome
competitive steel. We are not scared to compete, and I do not
think that your Minnesota company fabricators are scared to
compete. We want to compete, but we do not want our government
putting up obstacles that prevent us from being able to
compete. We worked hard to compete on our own and make
ourselves competitive against our foreign competitors. But we
cannot be at a price disadvantage to our competitors.
Mr. PAULSEN. You know, Mr. Chairman, I think what we have
heard, and I agree, is that our American manufacturers can
compete and win anywhere. And so we just have to have that
certainty, a level playing field in order to be able to do
that. And we can win and sell American goods in every respect.
Mr. KENNEDY. That is right, and you know what? Our mills
can compete, too. I mean, Nucor Jewett is 2 hours from our
facility. They are a U.S. steel producer, and they compete.
They have hardworking guys. We come from the same stock of
people over there. And they can compete.
But not every mill can compete, and not every fabricator
can compete, and we should not pick winners and losers. We
should not prop up companies or industries that cannot at the
expense of those that can. And that is exactly what is
happening now. There are some mills that are going back to
work, and that is great. There are some mills that should never
go back to work.
Mr. PAULSEN. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Pascrell, you are
recognized.
Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, the
title of the hearing is ``The Effects of Tariff Increases on
the U.S. Economy and Jobs.'' This is about jobs. The Economic
Policy Institute reports that 3.4 million jobs, American jobs,
have been lost due to China trade since 2001. And I think it
has been laid out here that our steel and aluminum production
in this country has plummeted due to Chinese overcapacity.
We seem to know what the problem is. The question is what
is the response? Many China experts and former government
officials agree that our current policy just is not working. We
have tried for over a decade. Past attempts at dialogue have
not worked. A new approach is needed.
The question now is what is the new approach, and will it
be effective? The threat of tariffs, however, may be necessary
to getting China to reform its anticompetitive protectionist
policies. We have seen the pros and cons of that. But an
article in the Times the other day kind of sums up everything
in our dilemma.
That article was on April 10, it was entitled, ``How Long
Can We Last Trump's Tariffs at Home in the United States?'' And
it was about a company based in McKeesport, Pennsylvania. The
company makes seamless vessels to store gasses at a high
pressure. Steel cylinders of up to six tons that it sells to
the likes of the Navy, NASA, and T. Boone Pickens Clean Energy.
It has received the first bill from the 25 percent tariff that
President Trump placed on steel from China and a few other
countries: $178,703 assessed on steel pipe shipment scheduled
to arrive at the port of Philadelphia today. That is equivalent
to 2 weeks' payroll.
Overall, tariffs on steel pipe that the company has ordered
from China--some are already on the way across the Pacific--
will add more than half a million dollars in raw material costs
over just 6 months alone. The article goes on to say, `` `How
long can we last,' mused Michael Larson, the company's Chief
Executive. `I do not know. We could go down relatively fast.
The tariff will add 10 percent to the cost of CP Industries'
''--that is the company--`` `their cylinders, which can sell
for up to $35,000.' ''
Now, it would seem to me that we have a real dilemma when
we try to respond. We have not been able to do it since this
problem, as you pointed out, Mr. Paul, really struck us about
12 years ago, and onward. So how do we look at this? And how do
we finally come to a settlement that is not just keyed in onto
one industry, but it understands the effect that that industry
may bring to other industries and the American consumer. That
is not an easy thing to trace, is it, Mr. Paul?
Mr. PAUL. If it were easy, it would have been done, Mr.
Pascrell. I think that is fair to say. This is a process that
is--we are at the beginning of it. I agree that we need to get
to a better point. My hope is that Ambassador Lighthizer and
Secretary Ross are moving in that direction. I will say that
this has worked both ways.
When our economy was humming along well, the steel industry
was in a technical recession from about 2014 to about 2016 to
2017, and there was one reason for that and one reason only.
And that was the overcapacity that generates all these other
unfair trade practices that you see. For steel users, I think
one of the solutions may, in fact, be downstream relief that
should be temporary. I think the product exemptions----
Mr. PASCRELL. Well, some of these tariffs are temporary.
Mr. PAUL. Pardon me?
Mr. PASCRELL. Some of these tariffs--for instance, in the
South Korean trade deal, we made them very temporary.
Mr. PAUL. Yeah, there is a quota with respect to steel from
South Korea. It is also important to understand that there are
hundreds of dumping orders in place now on various products
including steel, and that is an imperfect process. It is like
playing whack-a-mole with trade policy. It is very hard to
accomplish. My hope is that we speed toward this global
solution that you referred to, Mr. Pascrell----
Mr. PASCRELL. Mr. Chairman, may I make--thank you--may I
make a recommendation, if you will? Is it possible that in this
next hearing, if we put it together as Mr. Larson suggested,
which I think would be critical, we bring some economists in?
It was just the report that came out yesterday about the
consequences of what these tariffs are going to do. And I think
we can get both sides together and talk about this, because we
have to make decisions ultimately.
Chairman BRADY. Thank you----
Mr. PASCRELL. Article 1, Section 8----
Chairman BRADY. We will certainly consider that. I would
love, though, for some economists to be hearing from real-world
people about these impacts----
Mr. PASCRELL. Yeah, I think it is a great idea.
Chairman BRADY [continuing]. And balance out, so we really
hear both views.
Mr. PASCRELL. Good.
Chairman BRADY. Mr. Marchant, you are recognized.
Mr. MARCHANT. Thank you, Mr. Chairman. I am very privileged
in my district to have some companies that have projects that
they are building across the world. And they are projects that
last 3 to 5 years when they start them. And one of the big
concerns that they have is that they are mid-project in many of
these, and they have no way to pass on.
They did not contemplate, had no way to contemplate that
these tariffs would hit them mid-project. And they are
concerned about starting new projects or bidding new projects
now, and unfortunately, some of them may get shelved or
postponed because of just the sheer unpredictability of the
cost. I think some of those industries will affect some of your
production, Mr. Dooley. I am sure, Ms. Wilson, these are a lot
of facilities.
So, as these companies are beginning to deal with this,
many of you deal with the production of the steel, fabrication
of the steel. These are people that take the end product of
your production and your fabrication and then try to piece them
together into a very sophisticated module--a chemical plant, a
power plant, you know, something like that.
What do you see as things the Administration can do in
their rules that they are making, their product exceptions, et
cetera, that we can make sure that these projects are not
disrupted, Ms. Wilson?
Ms. WILSON. So the vast majority of our members make motor
vehicle components for new vehicles, whether they are heavy
trucks or light vehicles. The average----
Mr. MARCHANT. Toyota's headquarters is in my district.
Ms. WILSON. I know. And, you know, the average cost of a
new car is about $35,000. This is a major expenditure for most
Americans. So what we see here is the cost of steel--and the
vast majority of steel and aluminum comes from the United
States. The cost of these specialty steels and aluminum, if it
goes up, that cost is going to go down to the consumer. And at
$35,000, are we going to really be able to continue to sell
cars? That is a serious concern for our members.
I think what we have to take a look at is this exemption
process for the countries. We also have to really look at this
exclusion process for products. Because, you know, a lot of the
steels that go into something like this are not the steels
that, you know, Mr. Paul has been talking about that we have
problems with. They are very specialized, and what we would
like to see is relief for those kinds of things immediately.
And will it completely do away with the cost rise? Probably
not. But it will help ameliorate it a little bit.
Mr. NEWPORT. Just one comment in regard--we are big in the
auto industry, it is about 70 percent of our business, and we
are also a direct supplier of parts. I think you have to put in
perspective, there is approximately, on an average vehicle, one
ton of steel used. And let's just use $1,000 a ton on a high
end for, you know, total metal products. And even if you put a
20 percent duty on that, you are talking $200 a ton on an
average $35,000 vehicle.
So when we are looking at this, we are looking at cost
impacts on different products that are a fraction of a percent.
So I think we have to keep in perspective something even
Secretary Ross pointed out, both in the steel and the
industry--the aluminum industry--is really what is the overall
impact----
Mr. MARCHANT. Yeah, and my projects, the companies that I
am talking about--Fluor, Exxon--they are building projects
that, after they are bid, they are 3 to 5 years out. And, Mr.
Kennedy, you must be the provider for some of those parts, and
they are needing some certainty to finish projects and bid new
projects that sometimes just the preparation to bid is 3 years
out. So that is what I am looking for in this entire process,
some certainty to proceed and continue, not to disrupt the main
business.
Mr. KENNEDY. Yeah, we are in the exact scenario. I mean, we
have rights that are locked in on projects. We get on a vendor
supplier list at the beginning of a 3-to-5-year project, and we
put some level of uncertainty into our pricing as does every
other fabricator in the world when they price it.
But when you immediately add a 25 percent tariff or
effectively a 40 percent price increase, we are locked in on
those rates, and our customers, even, are locked in on their
rates. We still have to supply the steel for a year. We still
have to supply the product, but we get no relief. We are
bearing the cost. I can promise you we didn't have 40 percent
profit in our number.
Mr. MARCHANT. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Dr. Davis, you are recognized.
Mr. DAVIS. Thank you very much, Mr. Chairman. I want to
thank all of our very informative witnesses who have been with
us this morning.
Mr. Paul, let me ask you, according to the Guardian April
7, 2018, issue, the world's richest 1 percent already own one-
half of the world's wealth. And it is on course to control as
much as two-thirds of the world's wealth by 2030. The
wealthiest 1 percent is growing on an average of 6 percent
annually, faster than the 3 percent growth of the remaining 99
percent of the world's population.
What type of jobs could be created with trade agreements
and trade modifications that would encourage these individuals
to invest and re-invest, and do you see tariff increases as
bringing or attracting jobs and work opportunities back into
the United States?
Mr. PAUL. Mr. Davis, these are good questions, and I
appreciate them. Let me speak to the types of jobs first.
First, we obviously have a diverse economy, and one that has
been in transition for a number of years.
But manufacturing still plays an outsized role in our
economy, both in terms of the types of jobs it provides--new
evidence from the Economic Policy Institute shows that there is
at least a 13 percent pay premium over the rest of the economy,
and some studies show it to be larger than that--the types of
manufacturing jobs tend to provide spin-off opportunities as
well.
You know, if AK Steel has a steel mill, there is a
downstream and upstream and a whole environment that is
supported by those types of jobs. It is also fair to say, and I
think you know this from talking to your local economic
development officials, that getting a manufacturing facility is
the holy grail.
Because they know if they get a manufacturing facility,
they are likely to get mainstream small businesses to come
along with that, they are going to get more income spent in the
community. You cannot say that for all its virtues about a
retail outlet. A retail outlet is not going to bring a factory
in. But the opposite is certainly true.
So there is a value to these jobs that cannot be
understated. The types of jobs that are being established or
reestablished at the steel mills and aluminum smelters around
the country are well-paying. Sixty-five thousand, seventy
thousand, in some cases eighty or ninety thousand dollars.
One in particular in Granite City, Illinois, in your State,
that is a community I have visited many times, was beset by
extraordinary poverty because of these unfair trade practices.
The fact that there could be a level playing field is restoring
some hope. There are 500 jobs coming back. These are well-
paying jobs that are simply irreplaceable in that metro area.
Now, with respect to the effectiveness of the tariffs in
bringing these jobs back, again, I think on a temporary basis,
companies respond to market signals. And if you need to build
your steel facility in the United States, or your aluminum
smelter, you will add capacity, you will add jobs to meet that
demand.
I think at the end of the day, and something that probably
unites us on the panel, is that none of us want Beijing calling
the shots in the American economy. And having an authoritarian
state capitalist regime is something that a private sector
company should not be expected to compete against in a global
economy. But that is the situation that we face right now.
To me, tariffs are an emergency room measure. They are
triage until we can get a much more sustainable approach, but
they are absolutely necessary to achieving the objectives that
we are seeking.
Mr. DAVIS. Thank you very much, and of course, we know that
China is the big elephant in the room. And would anyone quickly
suggest something very concrete that we might be able to do
with China?
Mr. NEWPORT. So there is an industry we have been working
on globally with global producers in trying to address the
overcapacity. So I think what this has done, the action that
has occurred has actually resulted in probably the most amount
of activity that we have seen collectively in the last couple
of years. There has been some slow progress, as was mentioned
at the G20 in OECD, but we are seeing action now in discussions
with how to address it from many countries.
Mr. DAVIS. Thank you, Mr. Chairman, I yield back----
Chairman BRADY. Thank you, Doctor. Mr. Renacci, you are
recognized.
Mr. RENACCI. Thank you, Mr. Chairman. I share President
Trump's concern about unfair trade, including the global
problem of overcapacity in steel and aluminum and the theft of
American technology innovation. China is distorting the market
and hurting Ohio workers and businesses through its aggressive
and unfair policies. At the same time, it is critically
important that we understand and address any unintended
consequences so we can collaboratively fine-tune the approach.
As I always say to my staff, if you do the right thing in
Washington, there are no hard decisions. That includes favoring
free trade when everyone is playing by the rules, always
putting America first when other countries are distorting the
market, and being ever-vigilant not to create winners and
losers along the way. Before coming to Congress, I spent 35
years in the business world.
I started over 60 businesses I provided as context to
explain how I view the product exclusion process from the 232
tariffs. While I understand the Commerce Department's need for
detail before granting exclusions, it seems especially
burdensome for small businesses lacking resources.
So I ask each of you the following yes or no question: are
small businesses with very limited resources in a burdensome
situation in navigating the product exclusion process, and
would allowing them to pull together on exclusions via an
association or other means, would that seem like it might help
diminish the burden? So start from the left and move forward.
Mr. KENNEDY. Sure, but I would like to point out, how do
you exclude certain products, like building a new school or a
new hospital, or adding a wing to a facility or custom projects
or modifications? How do you----
Mr. RENACCI. Well, that is why I am talking about the
exclusion process. Is that burdensome, yes or no?
Mr. KENNEDY. Absolutely.
Mr. RENACCI. Mr. Wolfe.
Mr. WOLFE. I believe it is as well.
Mr. RENACCI. Mr. Newport.
Mr. NEWPORT. I do not see how you can bring them together
because they are so unique.
Mr. RENACCI. Do you have any thoughts? Yes or no?
Mr. HEISDORFFER. I agree. Yes.
Mr. DOOLEY. Yes.
Mr. RENACCI. All right.
Ms. WILSON. Yes, we think it is very burdensome.
Mr. PAUL. I do not view it as necessarily burdensome. I
think it is a necessary step in the process to ensure there are
no loopholes or unintended consequences.
Mr. RENACCI. Again, it depends on whether you are the small
business having to go through it, but I do understand. I am
glad to see AK Steel represented here today as the last
producer of grain-oriented electrical steel in the United
States. As Mr. Newport mentioned, AK Steel was headquartered in
Ohio. Their footprint includes Coshocton, Mansfield,
Middletown, Walbridge, and Zanesville. I know Mr. Newport joins
me in applauding the President's effort to crack down on unfair
trade practice. We need hearings like this so we can work to
avoid unintended consequences.
One such unintended consequence starts with the fact that
the 25 percent steel tariff under the Section 232 action does
not cover goods made from electrical steel. Leaving out these
goods will result in a workaround to the 232 action in that
manufactures using electrical steel can avoid the tariff by
simply manufacturing the product outside of the United States
and then importing the goods back into the country. Said
differently, the concern is who is the biggest winners of the
steel tariff could be foreign and domestic companies who
manufacture outside of the United States before sending their
goods into the U.S. market.
Mr. Newport, can you further explain the national security
importance of the United States having the ability to produce
electrical steel domestically?
Mr. NEWPORT. If you think about electricity, you need it to
run businesses, you need it to power our homes, you need it to
power the financial markets, et cetera. When you think about
when a hurricane hits, what that has done to our country
sometimes when you have had that hit and you have to get the
power restored; when you think of the attacks that occurred in
New York when power was lost and, you know, the financial
markets were down and needing power restored; et cetera, you
think of how quickly you need to get that power restored.
And we have taken actions in the industry to adjust our
operations to make sure we prioritize our work to support that
industry. And I think about it as if you have to rely on going
to China, Japan, or Korea after a natural disaster or something
else occurs, or have that product brought to our country if
they choose to do so--and by the way, if they are the only ones
producing it longer-term, what do you think will happen with
the cost of that product if they choose to ship it to you.
And I do not think, as a country, we want to put reliance
on another country for something that is critical to run our
businesses, to run our companies, and actually to have economic
growth in our country.
Mr. RENACCI. Thank you. I want to continue to work with all
my constituents on how to make sure that we do not have any
window between what the President wants to get done and what
Ohio businesses and the economy really need. I am committed to
helping all Ohioans in working through any issue that they have
with the 232 or 301 tariffs.
I appreciate the Chairman, the staff, and my colleagues
working with American businesses on addressing unintended
consequences of tariffs. I also encourage my friends in the
Administration, my colleagues here in Congress, to continue to
work collaboratively toward the best possible outcome for the
American people. And I yield back the balance of my time.
Chairman BRADY. Thank you, Mr. Renacci. Ms. DelBene.
Ms. DELBENE. Thank you, Mr. Chairman, and thanks to all of
you for being with us today. And, Mr. Wolfe, as you know, our
home State of Washington is the most trade-dependent State in
the country. We are the gateway to some of the fastest-growing
markets in Asia, and 40 percent of our jobs are tied to trade.
In an increasingly interconnected world, my constituents
rely on open markets, whether that is selling berries and
agricultural products overseas; being able to buy fresh,
healthy produce in grocery stores year-round; or access to
affordable technologies, like computers and smart phones that
enable our students, our researchers, and our entrepreneurs to
innovate.
But the impact of trade on our region extends well beyond
our State. Many agricultural products from across the country,
including wheat, corn, and soybeans, make their way to China
and other Asian countries through our ports. And on the other
side, billions of dollars of imports headed to other parts of
the country come through Sea-Tac in the ports of Seattle and
Tacoma.
Mr. Wolfe, you touched on this in your opening testimony,
but could you please expand on the economic impact they could
have on Washington State, and also, on how many jobs in our
region could be affected by a slow-down in economic activity
due to tariffs?
Mr. WOLFE. Thank you. As you mentioned, some 40 percent of
the jobs in the State of Washington are tied to trade. And we
have talked about manufacturing jobs, and certainly
manufacturing jobs are critically important to our economy.
Yet, those are not the only jobs that are important to our
economy.
Trade creates a tremendous amount of valuable jobs not only
for the State of Washington, but for all of the United States.
I am talking about jobs like the longshore jobs on the working
water front, the truck drivers that service our gateway, the
railroads that service our gateway, the warehouse distribution
companies, and certainly the exporters that provide those goods
to foreign markets.
So if we take a unilateral approach to trade policy where
we are lobbing back and forth with our trading partner, China,
we run the risk of damaging those valuable jobs, not just in
the State of Washington, but throughout the United States.
I would say the impact just in the State of Washington
could be tens of thousands of jobs if we enter into a trade war
with China, because China is our most trade-dependent partner
in the State of Washington. So it would have a huge impact on
the economy in the State of Washington, and, I believe,
throughout the United States.
Ms. DELBENE. Given supply chain disruptions and just
uncertainty for businesses, we know that can cause people to
lose long-term contracts. We also know that you can lose
business quickly, and it is hard to get that business back.
Between these tariffs, and the fact that Canada is
participating in trade agreements in Asia and with the European
Union, are you worried about trade being diverted to Canada in
the Port of Vancouver? And how would that hurt the long-term
competitiveness of the Ports of Seattle and Tacoma and Sea-Tac?
Mr. WOLFE. Thank you for that question. Certainly, as we
are situated geographically in close proximity to the Canadian
gateway, we are seeing more and more trade move through the
Canadian ports rather than using our gateway. There are a
number of reasons for that, one of which is the potential risk
of these tariffs on trade and the uncertainty that it creates
for business.
I was visiting with one of our valued export customers just
recently, a fruit grower in Eastern Washington, and they shared
with me that although there still is uncertainty about the
impact of trade, they are looking at those other gateways,
including the Vancouver BC gateway, as an alternative gateway
for their exports as a result of the discussion around trade
disruption in the State of Washington and nationally.
So it is hard for me to measure the impact today, yet, that
uncertainty is creating questions for the business community in
our backyard and the potential of job loss.
Ms. DELBENE. And do you agree that if you lose that
business, it will be a lot harder to get it back?
Mr. WOLFE. Absolutely. We have seen examples of where our
customers have lost market share globally, and then we resolve
whatever the issue was. I think even as an example, with the
disruption on the West Coast between the employers and our
labor partners a few years ago, there was a shift in the trade
lanes as a result of that. And some of that market share, you
never get back. And so there is certainly risk there.
Ms. DELBENE. Thank you. I yield back, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Meehan, you are recognized.
Mr. MEEHAN. Thank you, Mr. Chairman. I want to thank this
panel for a robust discussion. I think we have all benefitted
from the idea that there are complex issues here, and I think
we also all agree that we need to be dealing directly with the
implications of Chinese dumping and other kinds of activities.
Mr. Chairman, I hope we also appreciate the 301
implications, because there is a lot of intellectual property
and other kinds of issues, notwithstanding there are
implications to what has been proposed.
And, Mr. Dooley, in your presentation, you discussed, I
think, some merging opportunities to the United States, which
have been realized by virtue of the shale revolution and
investment in this country, which has really driven job growth,
which has given us opportunities for international markets in
chemicals and other kinds of things.
They are job creators, but one of the concerns I have, can
you speak to the question of people who have not only made
investments in those opportunities, but foreign-based
investment that has come onto our shores to take advantage of
this, and whether those long-term plans are implicated by this
kind of inactivity, which causes an interruption that changes
their projections?
Mr. DOOLEY. Yeah, thank you for the question. You know, as
I stated, our industry has had a dramatic increase in our
global competitiveness. There has been $196 billion in new
investment, half of which has already been completed or is in
the process of construction, and the rest of it is in the
permitting process. This is unprecedented. Sixty-three percent
of that is foreign direct, so it is chemical companies from
Europe, from China, from Brazil, from India that are
recognizing that we have a global competitive advantage, and
they are making significant investments here in the United
States.
They are making these investments not to serve the domestic
marketplace, but to capitalize on the U.S.' competitive
advantage to serve the global marketplace. They are making
those also predicated that we are going to have sound trade
practices that will not result in implementation of tariffs
against our exports of chemicals globally.
And that is what our concern is here, and that is where--
you know, no one disagrees, you know, with the inappropriate
actions in the market-distorting practices that are used in
China. But I think what we should be focused on is what are the
metrics for success? How do we determine when we are winning?
And that is what, if we are very concerned of the--right
now, if you look at the Section 232s and the 301 tariffs, and
we did an evaluation in terms of the metrics in terms of what
were the economic impacts, you know, holistically, to the
United States, we are convinced our industry would suffer. And
I think you would say the soybean industry would suffer. You
know, Ms. Wilson's constituency would suffer. It is just, you
know, there are dramatic impacts. Maybe the steel industry and
aluminum industry would see a marginal improvement.
But is that the right policy that is going to maximize the
economic benefits that will benefit workers, that will benefit
companies, small and large, in the United States? And that is
where it is not the objective, but it is the tactical,
strategic approach that you take. And we think that what we are
looking at right now, if there is not significant modification
in terms of what is ultimately implemented, is that it will
have an adverse impact on the broader U.S. economy.
Mr. MEEHAN. And you talk about the implications. Mr.
Newport, a question for you if you have a moment to answer it.
Because I am concerned that when we look at the capacity to be
able to supply here in the United States, if we are being
challenged in terms of imports, do we have the capacity to meet
these demands? And are there changes now with the abrupt, I
guess, higher level that is being paid all over the investments
that were made that were predicated on lower prices of steel?
Are we going to be able to meet that capacity to fulfill
the requirements that we have currently? And are we going to be
losing by virtue of people making changes in the kinds of
aluminum and steel that they are manufacturing to meet, you
know, this demand so that aluminum goes into high-grade things
like airplane parts, but I lose the aluminum that is necessary
for a can manufacturer in my district? How are we going to be
able to assure that while this is going on, that we can supply
the steel that is necessary for American-based businesses?
Mr. NEWPORT. I think two things: one, there is----
Chairman BRADY. Sorry, Mr. Newport----
Mr. MEEHAN. Maybe if there is an opportunity to----
Chairman BRADY. The time has expired. Perhaps you could
answer in writing, Mr. Meehan----
Mr. MEEHAN [continuing]. Supplement the record in some
way----
Chairman BRADY. Yeah, please. That is a great question.
Thank you, Mr. Meehan. Ms. Chu, you are recognized.
Ms. CHU. Mr. Paul, I would like your viewpoint on this
particular issue. In addition to being on the Ways and Means
Committee, I am also a Member of the House Small Business
Committee. Small businesses are extremely important to our
economy. They create two out of every three new jobs, and in my
home of Los Angeles County, many of these small firms have
developed their business models to export overseas, often to
Asian countries across the Pacific Ocean.
According to the Census Bureau, the majority of businesses
engaged in importing and exporting goods are small or mid-sized
businesses. In fact, 76 percent of exporters in the United
States and 75 percent of importers have less than 20 employees.
Also, I understand that with the rate of U.S. goods being
exported to China increasing by 579 percent between 2001 and
2017, trade with China has been particularly robust. Among the
U.S. businesses exporting to China, 53 percent of them have
fewer than 20 workers.
Given these statistics, I am concerned about whether
imposing tariffs on China's exports in steel and aluminum and
the retaliatory measures taken by China on U.S.-made products
would have an impact on small businesses back in our districts.
Can you speak to how small businesses may be impacted by the
tariffs on steel and aluminum?
Mr. PAUL. Ms. Chu, it is a good question, thank you so much
for asking it. I agree that small businesses and the U.S.
business community in general can benefit from exports, and
certainly China has been a growing market. I would like to see
it grow even further. And with respect to both the steel and
aluminum actions on 232 and the Section 301 action on
intellectual property rights violations, I think the strategy
is to ensure that we have a level playing field and that we
have more market opportunities in China.
If you recall, Mr. Thompson talked about wine and the
addition of the tariff on that. It is stunning to me that there
is a 48 percent tariff on wine right now that China has and
that we have not pushed back enough. Or with respect to
soybeans, where there are limitations on value-added processed
soybeans coming into China, they prefer to get the raw
commodity.
There are far too many restrictions that China has in place
that are limiting our export opportunities, which is why the
boats going into Seattle and Tacoma are a lot heavier than when
they are going out. I would like to see much more balance to
this trade relationship. And part of that is to eliminate the
market-distorting and anticompetitive practices that China has.
With respect to small businesses in particular, we are
looking ahead at a lot of advanced technologies and thinking
that the United States can have success because we are an
innovation leader. I am thinking in particular of
nanotechnology and biotechnology and artificial intelligence
and robotics. All of these industries have been targeted by the
Chinese government and its Made in China 2025 program to have
national champions that will exclude competition from countries
like the United States.
I view the tariffs as the beginning of the conversation
rather than as the exclamation point at the end of it. I think
we have a lot of work to do. I think there is many sectors of
the economy that could benefit from a much more balanced
relationship with China than we have right now.
Ms. CHU. Well, I am so glad you mentioned the wine,
because, of course, that is a big issue in my State of
California. China has increased tariffs on U.S. agricultural
products such as wine, such as almonds, pistachios, and oranges
that are grown in my home State of California. And according to
the Wine Institute, China is one of the fastest-growing wine
markets in the world and will soon be second only to the United
States in value.
The value of the U.S. wine exports to China has increased
450 percent in the past decade, and it is an important export
market for U.S. wine producers. And in 2016, 11 percent of
California wine, which was worth $160 million, was exported to
China, and in addition, 12 percent of California produced
almonds, worth $518 million, was exported to China. And
overall, there were $2 billion worth of agricultural exports
sent to China. So can you discuss how retaliation by China on
these products may impact these industries in California's
economy as a whole?
Mr. PAUL. Yeah, I do think that the retaliation to the
extent that it is extralegal should be vigorously challenged by
our U.S. trade representative at the WTO and through other
mechanisms, including bilateral consultations. And I think that
all of those efforts should proceed expeditiously.
Ms. CHU. Thank you.
Chairman BRADY. Thank you. Mr. Holding, you are recognized.
Mr. HOLDING. Thank you, Mr. Chairman. I appreciate you
holding this hearing. It has been very informative. Like the
other Members here, I completely agree that the issue of unfair
trade practices by China must be addressed. North Carolina has
a very diverse economy. I have heard from folks at home
regarding how trade actions impact agriculture and
manufacturing sectors, and if farmers from my district were
here today with us, I think they would echo the points that
have been raised by Mr. Heisdorffer.
So, Mr. Heisdorffer, you mentioned in your remarks that
there is room to expand our exports into China. And you
mentioned that we should focus on expanding our trade rather
than restricting it, and I would agree with you. So my question
to you is can you elaborate on what specifically we can do in
order to expand our exports to China, and what barriers that
you see right now that prevent us from expanding our exports to
China?
Mr. HEISDORFFER. Yes, sir. Well, the United States Soybean
Export Council works constantly through all countries, besides
China. China was one of the first places they were in. It has
been 20 or so years ago that ASA started in China to develop
that trade, and now the Soybean Export Council does that in
other countries, smaller countries.
We are going to have to continue to expand just to maintain
what we have. Because, like I said, we have South America, who
is more than anxious to take a penny of our trade if they can,
and Mexico is our number two customer in soybeans, and our
number one customer of soybean meal.
I cannot specifically tell you how we can just go in and--
you know, we have more soybeans to sell. Let us try to sell
them to China. If we keep working with them, we have expanded
that market over a number of years, it keeps growing. If we can
continue to do that, it would put us in good shape. So----
Mr. HOLDING. We will be on a good trajectory. So maybe as a
followup, you know, what are the successful tools that American
farmers are using today, as far as increasing their
availability for exports and so forth? And can we strengthen
any of those tools?
Mr. HEISDORFFER. That is correct. Where I said Brazil has
more land, U.S. farmers have to use technology and new genetics
in order to make up for larger production. And we have done
that, and we are increasing the yields significantly every
year, as long as weather permits. And so we will continue to
use those technologies to expand our production.
Mr. HOLDING. So we excel in technology, another reason why
Chinese unfair trade practices and thievery of our intellectual
property needs to be countered. Existing programs are out there
to help farmers, are there any programs that you are aware of
that are not working really as they are intended to work?
Mr. HEISDORFFER. I do not know what programs we have--yes,
we have the ARC and PLC programs in the farm program. Those are
only if you have a loss.
Mr. HOLDING. Right.
Mr. HEISDORFFER. And just like crop insurance, you have to
have a loss. And no one wants to have a loss.
Mr. HOLDING. Right.
Mr. HEISDORFFER. So really, they are not any kind of a
subsidy. You know, China says we are getting subsidies. Well,
there is no subsidy, as you know, when it comes to the U.S.
farming----
Mr. HOLDING. Right. Well, thank you, and Mr. Chairman, I
think we have agreement that China is a strategic trader that
will play by the rules when it only behooves them, and ignore
them when these rules do not work in their favor. So I look
forward to continuing our work here in the Committee on this
issue. And I yield back.
Chairman BRADY. Thank you, Mr. Holding. Mr. Schweikert, you
are recognized.
Mr. SCHWEIKERT. Thank you, Mr. Chairman. Look, I am going
to try not to go over the questions, because sometimes that is
one of our bad habits is asking the same thing over and over.
So let's actually take a slightly different approach. We know
right now that a lot of our bilateral organizations that
actually should have helped us head off massive excess capacity
in China and other places are not working. And so this is going
to be a novelty for me. I am going to actually start with Mr.
Paul.
If I came to you right now and said, ``As the United States
and our trading partners, China being one of them, we need to
change our bilateral organizations so they are no longer
debating societies, where we sit there and talk and talk and
talk and talk and talk and talk, and then we talk about
talking. How do we actually move so things can move quickly,
and that when there is actually a finding, that it is not just
the marginal to that one sliver, but actually can move across
the trading platform of the world?''
Mr. PAUL. That is a good question, Mr. Schweikert. I will
first say that we are constrained somewhat by our obligations
to the World Trade Organization. I am going to set those aside
for a moment----
Mr. SCHWEIKERT. No. And I am living--this is on what being
a utopian----
Mr. PAUL. Certainly.
Mr. SCHWEIKERT [continuing]. Instead of these flare-ups
where we have to, in many ways, threaten trade to actually
force what bilateral organizations should have already fixed.
Mr. PAUL. Absolutely. So you would need the collaboration
of the major steel-producing companies of the United States,
first of all. And you have most of that through the G20--not
all, but most. And what you would want to do is add the
countries to that. You would want to establish objective
criteria, and to ensure that countries are committing to
aligning their supply and demand as much as possible, and that
there are no government interventions in their industries.
For instance, 5 of the 10 largest steel companies in the
world are owned or partially owned by the Chinese government.
That is simply not a level playing field. You would have to
provide some mechanism to----
Mr. SCHWEIKERT. Okay----
Mr. PAUL [continuing]. Alter that, and then there would
have to be enforceable, agreed-upon--you would have to enforce
those divisions----
Mr. SCHWEIKERT. Okay, so the checklist, I have had a
fixation on timelines----
Mr. PAUL. Yeah.
Mr. SCHWEIKERT [continuing]. And responses instead of on
delays. And forgive me, it is just the hazard of the 5-minute
rule. Mr. Newport, I was under the impression, because of the
low prices of our natural gas futures, a lot of other energy
that we actually, if things were--what is the term, ceteris
paribus, you know, level--we should be a low-cost producer in
the world. Your opinion?
Mr. NEWPORT. Yeah, I believe we are very competitive. The
thing we do not have that others have, like China, is
government subsidies to support the business. So that is really
what is key is having a level playing field.
Mr. SCHWEIKERT. Let's just do baseline energy costs
compared to our other competitors, particularly Europe and
other places where their hydrocarbons are imported in. What is
the differential? What is our energy production cost? When you
produce a ton of steel, you know, the dollars it costs, how
much of that ton of steel was energy?
Mr. NEWPORT. It is a smaller percentage when you look at
it. Raw materials and energy are probably about 60 percent of
our cost. So the key component is your scrap and your iron ore
that you buy.
Mr. SCHWEIKERT. Okay.
Mr. NEWPORT. And alloys and a lot of things from the
chemical industry that we use for processing steel, et cetera.
So energy is a piece of it, especially in the electrical and
furnace business.
Mr. SCHWEIKERT. All right, and I am running out of time,
and I wanted to get to this. How do you respond to Mr. Kennedy
and--forgive me--even some of my family that is in the
fabricating world that appreciate and have love and caring for
the mill, but they make things, and there is a lot more of them
making things, and the cascade effect of the price surges,
particularly over the last, you know, 6 weeks, has not been
particularly helpful to their contracts? What do I tell them?
Mr. NEWPORT. Well, I would comment on a couple of things.
Just one, I think the market will settle down some. There has
been overreaction, there has been a lot of uncertainty, I
agree, there is a lot of uncertainty, which creates a lot of
issues in all of our businesses and that we have to address.
Also, in regard to supply material, imports have not stopped.
We have had successful trade cases, we have had these 232
reports flooding in----
Mr. SCHWEIKERT. Yeah. But it is just my fear that--and this
is a horrible--I mean, you want to save, because we need the
capacity, but there are multiples and multiples out there on
the fabricating side, and they are also our brothers and
sisters, and they should not be cast aside either. I yield
back.
Chairman BRADY. Thank you, the gentleman's time has
expired. Mrs. Walorski, you are recognized.
Mrs. WALORSKI. Thank you, Mr. Chairman. Thanks to all of
you witnesses for taking the time to be here. It has been a
fascinating discussion, I am thankful that you are here. We are
here to examine the effects of tariffs on jobs and the economy,
so I want to share some observations from my district. I want
to provide some context before I do.
My district is in Northern Indiana, which has the second-
highest concentration of manufacturing jobs in the country.
They manufacture RVs, boats, trailers, and other heavy
equipment. Plenty of suppliers are also in the area. The
unemployment rate now in Cook County is around 2 percent, but
there are thousands of jobs open on any given day, so really,
it is more like zero.
These are good-paying jobs, too. The average RV worker's
salary was $68,000 in 2016, so this is what is at stake. With
that in mind, I just want to relay some of the information that
I have received from business owners in my district. If they
were sitting here today, this is what they would tell you.
One manufacturer said, ``We have seen a 50 percent increase
in the price of steel, mostly since the tariffs were announced.
Additionally, there is a shortage of steel. We are furloughing
the production line in one facility today and will probably
have to furlough some of the guys in our main facility later in
the week due to lack of availability of material. We have
raised our prices to customers because our product is a low-
margin item. The combination of the increase and the lack of
availability is affecting sales.''
Another manufacturer that produces bearings said, ``We
cannot switch to a U.S. source, it would take 1 to 2 years for
us to get approval from our customers if there was a U.S.
source. We will continue to import steel and we will pay the
duties. So far, we have incurred about $15,000 in tariff costs
with the potential of another $240,000 based upon the orders we
have already booked with our Japanese steel supplier.
We are moving forward with our exclusion requests. So far,
the cost has been close to 100 hours to complete these
exemption forms, along with some legal costs for review and
advice. We are beginning to talk to our customers regarding
possible price increases this summer.''
A trailer manufacturer said, ``We have rolling shortages of
steel and we are on allocation from our supplier in Utah.
Prices have already gone up 25 to 30 percent respectively on
aluminum and steel because of speculation. Now we are seeing a
trend past 30 to 35 percent each, and of course, I am livid.
The manufacturer also cancelled a factory expansion that he was
planning with his tax cuts.''
A steel fabricator said, ``We observed steel prices
starting to move up in early 2017 on just the talk of potential
steel tariffs, and a sharp escalation in steel prices in the
last 3 months as a tariff started to become reality. This has
resulted in a 15 to 29 percent increase in the cost of our
steel. To put this in perspective, our increase in steel cost
is larger than the entire cost of providing health insurance to
our work force.''
A component manufacturer said, ``We are the sole
manufacturer left in the United States that manufactures this
type of product. Our competitors import all or most of their
finished product from either Mexico, China, or Vietnam, et
cetera, therefore, avoiding any impact on this tariff. The
bottom line in this is if you raise our steel and aluminum
prices, our prices will have to increase in order to cover the
cost. Our foreign competitors will not be affected. We
currently purchase all of our steel and aluminum from domestic
sources.''
A canning company said, ``We are in the process of trying
to build a 147,000 square foot warehouse. The company building
the warehouse gets their steel from Canada, a country exempted
from the steel tariff. However, we are unable to get a firm
quote even out of Canada, because prices are beginning to rise
there as well with so much demand shifted to Canada. It is not
on hold, we have to build it. So we are at the mercy of a
volatile market.''
And the final story I would share with you is a steel
processer said, ``When purchasing raw materials, we give
preference to domestic steel mills wherever possible. We enjoy
long, outstanding relationships with many domestic mills. We
want them to thrive.
The actual dynamics of the entire metalworking market have
evolved in the last 40 years. In some cases, we find the
domestic mills cannot meet the quality standards required by
our customers, or they cannot meet the quality standards at a
competitive cost. In those cases, we will buy foreign material.
Why put a tariff on these items?''
And, Mr. Chairman, with that, I yield back.
Chairman BRADY. Thank you. Mr. LaHood, you are recognized.
Mr. LAHOOD. Thank you, Mr. Chairman. I want to thank the
witnesses for being here today and for your important
testimony. I represent a heavy ag district in Central Illinois.
Ours is the eighth-largest in terms of corn and soybean
production in the country.
Also, I am blessed to have Caterpillar have their
operational headquarters there. And whether it is Caterpillar
or John Deere, or our farmers, obviously, they are affected by
the Administration's current trade policy. And I have described
the Administration's trade policy as in some ways unorthodox,
unconventional. We have had Ambassador Lighthizer here, and
Secretary Ross.
And, I guess, Mr. Heisdorffer, when I look at our ag
community and I look at what is going on with NAFTA in our
current negotiations, which, obviously, we are having our
eighth round this week, and the concerns there in looking at
the potential tariffs on steel and aluminum and the retaliation
there, what we hear from the Administration is that give them
some time in terms of negotiating.
But I look at the commodities markets, and I look at the
prices, and the prices continue to go down. But I also look at
what our farmers have to do to, you know, think out 6 months,
10 months, a year in advance, and so much of what our farmers
do is looking at the future and what they are going to do. And
the uncertainty that we have right now is what I hear every day
from my farmers, many of which supported the President when he
ran.
You look at how well he did in Iowa and my part of the
country, and we just had Secretary Ross here a couple weeks
ago, and, you know, he was trying to reassure us and give them
some time. I guess, I would ask you, what gives you comfort or
reassurance with the direction we are heading as you talk to
farmers in your area, and other soybean producers?
Mr. HEISDORFFER. More exports is, of course, our biggest
push. We all have to make decisions, as you said, a year in
advance, more or less. We are going to put in a corn crop, we
have to start putting nitrogen on the year before. I am a
livestock person, so we have that swine manure that we have to
take care of in the fall, and we inject that into the ground,
according to our manure management plan, and that is our
nitrogen for our corn crop the following year.
So those acres are committed. And so soybeans work the same
way. Whatever acres do not go to corn usually gets rotated.
Understanding that your State is the number one soybean
producer here--in the last few years, anyway--we are proud that
we can produce a protein that will help feed the world. And
soybeans are that protein. And we will continue to do that as
long as we can, but any kind of interruption in our exports
really hurts us.
Mr. LAHOOD. Thank you. Congressman Dooley, I appreciate
your comments as it related broadly to trade. I want to maybe
ask your comments when I look at the justification of what this
Administration is looking at in terms of these tariffs on
aluminum and steel and national security, and using that as the
reliance and looking at the standard with the WTO and how these
cases have been dealt with, it seems to me--particularly when
you hear from our Defense Department on what they say about
national security as it relates to steel and aluminum--and you
couple that with the fact that we have not really partnered
with our European partners or the Canadians or our other allies
in terms of a trade strategy that would go after the Chinese a
little bit more. Can you comment on that?
Mr. DOOLEY. Thank you, and I think that is--you know, when
we look at the implementation of the 232s, it was on national
security grounds. You know, there needed to be, from our
perspective, a little consideration given to who are our
strongest allies.
Is our national security really jeopardized because Canada
is a source of steel to the United States? I would suggest not.
Nor would I suggest that Mexico or Brazil or our allies in the
EU were going to jeopardize their security and the U.S.
national security by failing to import critical steel to the
United States.
That group of allies, though, should be more aligned and
prepared to engage with this Administration in a more
aggressive, collaborative effort to put pressure on China to
address some of their inappropriate practices that are leading
to the excess capacity.
Mr. LAHOOD. Thank you.
Chairman BRADY. Thank you, Mr. LaHood. Before I recognize
Mr. Kelly, I want to thank the witnesses for being here. I
apologize, I have to scoot down to the White House. You know,
April 17 is the last time Americans will have to file their
taxes under this old, broken tax code that burdened American
manufacturing and farmers with the highest tax rates in the
world.
I want to thank you for being here. I am just going to--you
have been a remarkable panel, and very insightful. Mr. Kelly,
thank you for providing witness for us as well, and you are
recognized.
Mr. KELLY. Thank you, Mr. Chairman. And thank you all for
being here. I think we need to start talking about trade. There
are so many different ways to look at it, but one of the things
that I have been marveled at is that for decades now, we have
complained about our loss of market share, somehow thinking
that there is an honor system out there that people will just
stop doing bad things to us because we are nice to them. I have
to tell you, being in the automobile business and watching the
loss of market share has been incredible. You do not get it
back once it is gone. You do not get it back.
Mr. Newport, I cannot tell you how much I appreciate you
being here today. You know, last week, during our work week, we
actually went down to AK to watch them make the electrical
steel. We watched them make that grain-oriented electrical
steel. We also were up in Sharon--and Wheatland, too--when we
were in Farrell looking at the crankshaft business up there at
Sharon Crankshafts.
So with all that in mind, I was looking at some things
here, and it says, ``The U.S. power system is comprised of
3,300 utilities, 3,300 utilities that work together to deliver
electric power through 200,000 miles of high-voltage
transmission lines, 55,000 substations, and 5.5 million miles
of distribution lines that bring electricity to millions of
American homes and businesses.'' And any of the system's
principal elements--power generation, transmission, or
distribution--could be targeted, and we know that.
And the question is when you go to AK--and I watched the
hardworking men and women of AK and what they are doing, and I
have been there my whole life, so I know what they do, and I
would really suggest that Members of Congress, instead of
talking at it, go look and see what these people do. Actually
see what it is we are talking about. Do not let somebody give
you a bunch of talking points and say, ``This is what it is.''
You are the last producer of electrical steel in the United
States. I am constantly told about how fragile our power grid
is, and how it is at the very--we could lose that, and if we
were to lose that, what would the effect be on our national
security? And I understand the concern about, well, what is
going on now, and how this talk is being harmful to futures,
and how it is disrupting.
I would just suggest that this idea, again, that people
telling you, ``Oh, no, no, Kelly, you know, free trade as long
as it is fair trade.''
I say, ``You know what, and so what do you do when you find
that it is not fair trade?''
And they say, ``Well, you go to the WTO.''
I say, ``That is fine. And how many years does it take to
get a ruling on it?''
``Well, you know, sometimes three, sometimes four.''
I said, ``Okay, that ship has sailed. Okay, you win the
case, you lose the market.''
I wish we would stop talking about unfair trade practices
and change them to illegal trade practices. If we sit back--and
we finally have a President that just didn't talk about it when
he was campaigning or she was campaigning, but when the rubber
meets the road, when you actually get in the office, well, it
has only been 14 months, and I know we have passed no judgment
on the previous couple decades that we just talked about it and
did nothing.
Mr. Newport, could you talk about the effect, if we were to
lose AK, if we were to lose the only producer of electrical
steel in the United States, what kind of jeopardy that puts our
power grid in?
Mr. NEWPORT. Yeah, when you think about it, if you would
have something that would occur, whether it be a national
disaster, you have a terrorist attack, or something else, or
you just have something failing the system--which there have
been blackouts that have occurred over the last decade or two
in our country, and think about what that has done to
businesses, what that has done to the financial markets, et
cetera--how critical an impact, or how big of an impact that
would have to our industry.
I can tell you, you know, the other competitor that
produced the product went out of the business in 2016. Our
business levels have not gone up, they actually have gone down.
So our utilization is actually lower than it was a year ago,
despite the other competitor that made it going out of the
business.
But I can tell you also what will happen is if something
would occur that they continue to flood the market and take
over the market, if we weren't making it, when they are the
only supplier, a foreign producer coming in, I can tell you
what I believe would happen is the price of that is not coming
down.
You think about that, what that could do to our energy
costs, and what that can do to our businesses when we become
solely reliant on something overseas, and I agree with you. It
is getting fair trade. We have already, you know, taking on the
trade wars, we have already faced it. It has been going on for
decades.
We have seen it, as I gave examples, on electrical steel.
And because people were unfairly and illegally trading steel
does not give them the right to buy that steel. What we want is
fair trade. If we cannot compete, that is fine. I have no
problem with that. And we addressed that.
Mr. KELLY. Yeah, good. I wish I had time--we really do need
to talk to all of you for a much longer time than this. You
flew in from all over the United States and you get 5 minutes
to talk about your concerns.
So we want to keep doing that, but I really do believe that
at some point, you are going to not just talk the talk, you
better walk the walk. And for us to sit back and allow the rest
of the world to pick our pockets, and say, ``I wish they would
not do it,'' somewhere along the line, we are going to get
caught up with this.
I have to tell you, being in the automobile business, there
is very few people out of work that can buy a car or a truck.
And I am watching this, and us losing. Our base, our
manufacturing base, puts us in one hell of a bad position in a
global economy right now, in a situation where everything is
just so fragile.
So I want to thank you all for being here, you guys are
tremendous for coming in. Ladies, thank you all for being here,
we really appreciate it.
Ms. JENKINS [presiding]. Mr. Reed, you are recognized.
Mr. REED. Well thank you, Madam Chairwoman, and it is great
to be way over here. I feel like I am in Kansas. It is good to
see you. Anyway, I just want to thank the panel for being here,
and I want to echo some of the things that Mr. Kelly, my good
friend from Pennsylvania, indicated. And as this Administration
goes down this clearly new trade policy and Putting America
First agenda, I join in looking forward, not backward.
And one of the things that I know my colleagues have
already touched upon a little bit is I do not think most
Americans, when I go back to my district in Western New York--
it is a rural area, my home town is Corning, New York, it is up
near Buffalo, Rochester, the Pennsylvania border--they have no
idea, as has been confirmed here today, that we do not have a
trade agreement with China. China is operating under the WTO
standards. Nobody knows what that is, that is a DC term, to a
large degree, to the people that are working hard day in and
day out in Western New York.
And so one of the things that I wanted to stress today and
question the panel on, as we put these new tools in this trade
policy, and as we go after that even, level playing field that
we are looking to achieve--and I hear pretty much consistent
agreement from the panel, that is, kind of, the outcome
everyone is looking for here--as we go into that future
negotiation possibly with China--and I was glad to see the
president of China indicate a willingness in his public
comments to engage in a conversation, I think that is critical
to being successful here--what would you offer us, from your
perspectives?
When we sit down at some point in time in the future--
because I do believe we will sit down with these
representatives from China and other trading partners--to
address that even and level playing field, what are the
priorities? How do we take on the overcapacity issue of steel
coming out of China?
What are you looking for, what would you say to us as we
build that next trade agreement? What would you say are the key
provisions that have to be in that agreement to make it
enforceable and ensure that American workers have that
opportunity to compete on that even and level playing field?
Anybody like to go first in regard to that? Go right ahead.
Mr. PAUL. Sure, Mr. Reed, I would be happy to. And I
appreciate your leadership on manufacturing----
Mr. REED. I appreciate that.
Mr. PAUL [continuing]. I know you have done a lot of policy
work on that. You can start with the Section 301 report. There
are a number of commitments that China has repeatedly made to
protect intellectual property, to stop cyber-hacking, to
eliminate forced technology transfers, and to eliminate other
anticompetitive practices that they have failed to implement.
And there have to be, again, consequences for that, whether it
is a loss of market access or tariffs or some other mechanism,
there needs to be consequences for that lack of market norms.
The second thing, and this is the more troubling and
difficult thing, is that China wants to be treated like a
market economy, yet, it is fundamentally an authoritarian state
capitalist regime that has resisted both bilateral and
multilateral efforts to conform to world trade rules.
There is not an easy question for--or, there is not an easy
answer for that, particularly with President Xi, kind of,
doubling down on the desire to build national champions, and as
I mentioned, Made in China 2025, which is targeting the next
generation of our industries. It is steel today, it is robots
tomorrow. We have a lot at stake here with respect to American
innovation and American jobs.
But fundamentally, what hasn't worked is simply kicking the
can down the road. We have been willing in the past--and I do
not want to touch on it like you suggested--but we have been
willing in the past to simply accept China's word and move on
to get to the next negotiation. That has been a failed
strategy. It has not worked. I am----
Mr. REED. Sanctions, so I am hearing----
Mr. PAUL [continuing]. I am glad, in a way, that the
President has laid the cards on the table because----
Mr. REED. I appreciate that.
Mr. PAUL [continuing]. This is a long overdue conversation.
Mr. REED. And that is exactly where I am not going to go.
And one of the things that I have not heard a lot of
conversation on today, because we are talking about steel and
aluminum: currency manipulation, to me, is one of the biggest
things that is sticking out there unaddressed and is the
elephant in the room.
So does anybody want to touch on that in my short time
left? I would appreciate it. But are there any other comments?
When we negotiate this with China, what are we looking for?
Ms. WILSON. I do not necessarily disagree with Mr. Paul. I
think we have long been a champion on IP rights with our
manufactured products. But I think what we are hearing from our
suppliers is because we have cast a wide net, we are bringing
in product and we are having consequences that are going to
affect U.S. workers.
Mr. REED. And I appreciate that short-term consequence----
Ms. WILSON. That is the reason that has brought me here.
There is no----
Mr. REED. I am looking at the long-term----
Ms. WILSON [continuing]. Yeah, I understand.
Mr. REED [continuing]. The long-term effects. Anyone else--
--
Ms. WILSON. The short-term would hurt us.
Mr. REED [continuing]. Want to offer anything, especially
on currency? Yes, sir.
Mr. WOLFE. Yes, I would just encourage us to look at
leveraging the export opportunities and some of our small- and
mid-sized business and the growth markets in China.
Mr. REED. Perfect, thank you. Well at that, my time has
expired. Thank you, Madam Chair. And thank you to the
witnesses.
Ms. JENKINS. Mr. Smith.
Mr. SMITH OF MISSOURI. Thank you, Madam Chairwoman. Thank
you all for being here. I definitely appreciate the
conversation. I represent Southeast Missouri. We have been
devastated by the illegal dumping practices of the Chinese when
it comes to aluminum. In March of 2016, I saw 900 jobs vanish
because we could not smelt aluminum the way we had for decades,
because of the illegal subsidizing of the Chinese government of
aluminum.
Let me give you some interesting numbers that need to be
reiterated, because some people may not understand it, based on
the conversations I have heard today. In 2000, the Chinese
produced roughly 10 percent of the world's aluminum. This was
in the recent report that was put out by Secretary Ross at the
Department of Commerce.
As of 2015, they produced over 55 percent of the world's
aluminum. In 15 years, they went from 10 percent to 55 percent,
roughly. In that same timeframe, in 2000, we had just under 20
aluminum smelters in the United States. Up until just recently,
we had two fully operational aluminum smelters.
High-purity aluminum is very important for our national
defense efforts. We all know that. That is what came out in the
report. But we only had one plant doing it. Now we are going to
have two. The day after the President issued his aluminum
tariffs, I stood in New Madrid, Missouri, with the announcement
of 450 new jobs that were opening up.
My district is an agriculture-based district. The largest
community is 38,000 people. We grow more soybeans in Southeast
Missouri in seven counties than the entire State of Missouri.
But we also have an aluminum smelter.
Granite City, Illinois, is 50 miles from my congressional
district. We have been hit hard by the illegal Chinese
practices. When we talk about a trade war, and people talk
about a trade war, Mr. Paul, do you know how many tariffs the
Chinese impose on products that come into their country? How
many different tariffs? Could you guess?
Mr. PAUL. The Chinese have significant tariffs on virtually
every American product coming into its country.
Mr. SMITH OF MISSOURI. They have over 19,000 tariffs on
goods coming into China. We need to remember that as U.S.
citizens, that the Chinese are not looking out for the American
citizen. The Chinese are not looking out for the American
worker. The Chinese are not looking out for the American
farmer. That is why they have all kinds of tariffs on added-
value soybean products. And that is why they decided to go
after the soybean farmers in Southeast Missouri with a 25
percent tariff.
I hope that the president of the Chinese government will
decide to work and negotiate with President Trump. That is what
he is asking for, that is what we are needing. We are needing
fair agreements, fair deals, to look out for the Americans.
They are pulling out billions, hundreds of billions of dollars
of our wealth by unfair trade practices, by over 19,000 trade
tariffs. Whether it is steel, aluminum, soybeans, corn,
biodiesel, pork, or beef. All of it. And we need to do
everything we can in supporting the President to make sure we
get the best agreement possible so that we are treated fairly
and appropriately.
And so I thank you for the conversations, but I think we
need to understand that the true problem that we have to look
at are these countries that are not treating us fairly. We just
want to be treated fairly. We want to be good neighbors,
whether it is Canada or Mexico or China or South Korea. We want
to be good trading partners and good neighbors, but we want to
be treated fairly and appropriately.
We want to make sure the soybean farmers in Southeast
Missouri are getting the best, best value for the products that
we grow. We want to make sure that the aluminum industry and
steel industry are thriving and surviving.
But we have to do that by making sure we are not taken
advantage of. And we have been taken advantage of for way too
long. And it has been on the backs of American farmers,
American workers, and American manufacturers.
And let me just point out, the Wall Street Journal, on
April 6, talked about aluminum decreasing since March 1 by 4
percent. They got a 10 percent tariff, but the price of
aluminum has decreased by 4 percent. That is the opposite of
what everyone said prior to the President proposing that. We
just need to make sure things are fair and free, but when
19,000 tariffs are imposed by one country, that is not fair.
Let's look at the Chinese. Thank you, Madam Chairwoman.
Ms. JENKINS. I, too, would like to thank our panelists for
appearing before us today. Please be advised that Members 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 hearing record. With that, the Committee stands
adjourned.
[Whereupon, at 1:16 p.m., the Committee was adjourned.]
[Submissions for the Record follow:]
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