U.S. GOVERNMENT PUBLISHING OFFICE

33–807 WASHINGTON : 2019

U.S. TRADE POLICY AGENDA 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

MARCH 21, 2018 

Serial No. 115–FC08 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

DARIN LAHOOD, Illinois 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

iii 

C O N T E N T S 

Page 

Advisory of March 21, 2018, announcing the hearing .......................................... 2 

WITNESS 

Honorable Robert E. Lighthizer, Ambassador, United States Trade Representative ....................................................................................................................... 6 

QUESTIONS FOR THE RECORD 

Question from Ways and Means Committee Chairman Brady to Ambassador 

Lighthizer ............................................................................................................. 92 

Questions from Ways and Means Committee Ranking Member Neal to Ambassador Lighthizer ............................................................................................. 93 

Questions from Trade Subcommittee Chairman Reichert to Ambassador 

Lighthizer ............................................................................................................. 98 

Questions from Trade Subcommittee Ranking Member Pascrell to Ambassador Lighthizer ................................................................................................... 99 

Questions from Representative Nunes to Ambassador Lighthizer ...................... 109 

Questions from Representative Lewis to Ambassador Lighthizer ....................... 110 

Question from Representative Roskam to Ambassador Lighthizer ..................... 114 

Question from Representative Larson to Ambassador Lighthizer ...................... 114 

Questions from Representative Paulsen to Ambassador Lighthizer ................... 115 

Questions from Representative Black to Ambassador Lighthizer ....................... 120 

Questions from Representative Sa ́nchez to Ambassador Lighthizer ................... 123 

Questions from Representative Sewell to Ambassador Lighthizer ...................... 124 

Questions from Representative Meehan to Ambassador Lighthizer ................... 125 

Questions from Representative DelBene to Ambassador Lighthizer .................. 126 

Question from Representative Chu to Ambassador Lighthizer ........................... 127 

Questions from Representative Jason Smith to Ambassador Lighthizer ........... 128 

Questions from Representative Walorski to Ambassador Lighthizer ................. 129 

Questions from Representative LaHood to Ambassador Lighthizer ................... 131 

SUBMISSIONS FOR THE RECORD 

American Farm Bureau Federation ....................................................................... 133 

American Fuel & Petrochemical Manufacturers (AFPM) .................................... 138 

Air-Conditioning, Heating, & Refrigeration Institute (AHRI) ............................. 144 

Berry Global, Incorporated ..................................................................................... 150 

Center for Fiscal Equity .......................................................................................... 152 

Consumer Technology Association (CTA) .............................................................. 156 

Flexible Packaging Association (FPA) .................................................................... 158 

Learning Resources, Incorporated (LR) ................................................................. 164 

National Association of Home Builders (NAHB) ................................................... 170 

National Foreign Trade Council (NFTC) ............................................................... 174 

National Lumber and Building Material Dealers Association (NLBMDA) ........ 176 

Precious Metals Association of North America (PMANA) .................................... 182 

Small Business & Entrepreneurship Council (SBE Council) ............................... 185 

Association for Accessible Medicines (AAM) ......................................................... 189 

(1) 

U.S. TRADE POLICY AGENDA 

WEDNESDAY, MARCH 21, 2018 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:05 a.m., in Room 

1100, Longworth House Office Building, Hon. Kevin Brady [Chairman of the Committee] presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Wednesday, March 21, 2018 

FC–08 

Chairman Brady Announces Hearing on 

U.S. Trade Policy Agenda 

House Ways and Means Chairman Kevin Brady (R–TX), announced today that 

the Committee will hold a hearing on the U.S. trade policy agenda with U.S. Trade 

Representative Robert Lighthizer. The hearing will take place on Wednesday, 

March 21, 2018, in room 1100 of the Longworth House Office Building, beginning at 10:00 a.m. 

In view of the limited time to hear the witness, oral testimony at this hearing 

will be from the invited witness only. However, any individual or organization may 

submit a written statement for consideration by the Committee and for inclusion in 

the printed record of the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate 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 Wednesday, April 4, 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 official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for 

written comments must conform to the guidelines listed below. Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

All submissions and supplementary materials must be submitted in a single document via 

email, provided in Word format and must not exceed a total of 10 pages. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

All submissions must include a list of all clients, persons and/or organizations on whose behalf 

the witness appears. The name, company, address, telephone, and fax numbers of each witness 

must be included in the body of the email. Please exclude any personal identifiable information 

in the attached submission. 

Failure to follow the formatting requirements may result in the exclusion of a submission. All 

submissions for the record are final. 

3 

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 accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available at 

http://www.waysandmeans.house.gov

f 

/ 

Chairman BRADY. Good morning. The Committee will come to 

order. Before we get started this morning I just wanted to take a 

moment to express my sincerest condolences on the passing last 

week of our friend and colleague, Representative Louise Slaughter. 

She was truly an institution within this body, and her candor, intelligence, her humor, and her passion will be deeply missed. 

Today our Committee is honored to welcome back U.S. Trade 

Representative Robert Lighthizer to testify on President Trump’s 

trade policy agenda. Ambassador, thank you so much for joining us. 

Our country was born because of trade. We have led the world 

in commerce and trade for the last century. Trade is part of everything we do as Americans. The freedom to trade is our greatest economic freedom. So freedom to buy, sell, and compete anywhere in 

the world with as little government interference as possible. 

Through trade America has built roads and bridges, towns and cities. We have brought peace, freedom, and hope to our people and 

the nations of the world. 

At this moment we stand at a crossroads. If we stand still or 

worse take the path of isolationism we will abandon our greatest 

freedom in the very DNA of what makes us Americans. There is 

a better path. We are already seeing benefits from the historic tax 

cuts that President Trump just signed into law, which is increasing 

America’s competitiveness and making us the best place on the 

planet to do business in. Our trade policy must build on that 

growth. 

In the competitive world it is not enough to merely buy American, we have to sell American to billions of customers outside 

America. That is how we help our local businesses and farmers create American jobs and spur American economic growth. Mr. Ambassador, America must continue to lead. And we lead and Americans win when we open up markets for our products and services 

through high standard, ambitious and enforceable trade agreements. This has to be our top priority. 

If we don’t break open new markets through trade agreements 

with countries like Japan, the U.K., and the Trans-Pacific Partnership 11 we will be left behind. China and Europe will write the 

rules, and they will cut American producers and workers out of 

other markets. We can’t wait any longer while others pass us by. 

I strongly support President Trump’s request for TPA renewal. I 

look forward to your report showing how you will use it to negotiate agreements that are consistent with congressional objectives 

and good for America as you have set out to do, Mr. Ambassador. 

I am pleased with your progress to modernize NAFTA, the largest and most successful trading relationship in the world. U.S. 

Trade Representatives’ office and you, Ambassador, your team have 

4 

worked tirelessly to achieve bold and ambitious standards. I am 

hopeful we will be able to vote on and pass a new modern NAFTA 

for America by year end. 

That said, the road ahead isn’t easy. Congress wants strong protections for intellectual property, increased market access for our 

dairy farmers and an end to Canada and Mexico’s harshly restrictive customs barriers, such as unreasonably low de minimis levels. 

We need workable solutions on rules of origin and procurement 

that recognize how Americans benefit from global supply chains, 

otherwise we lose out to China. I also caution that any agreement 

without a binding dispute settlement, including investor state dispute settlement, won’t find sufficient support in Congress. Congress explicitly set out this requirement in TPA knowing it is the 

only way to hold trading partners accountable to make sure that 

strong agreement you negotiate, Mr. Ambassador, our trading partners will be held accountable. 

America must also lead on China. China’s chronic oversupply in 

steel and aluminum has put many Americans out of work and companies out of business. It is a blatant theft of our company’s technology and intellectual property, and it can’t be tolerated. I believe 

strong enforcement is needed, and I appreciate President Trump’s 

leadership on holding China accountable. But we can’t do this 

alone. If we hurt our allies America will ultimately lose. 

Our challenge—every President’s challenge is to target remedies 

to address true national security risk to eliminate unfair trade and 

take into account our entire economy. The wrong remedy puts significant American jobs at risk. We have to make sure we don’t punish American families and workers for China’s misbehaviors. Oftentimes indiscriminate tariffs are not the right approach, and before 

the Administration puts those in place it also should provide a 

strong opportunity for public comments so the effect of these tariffs 

on our economy can be properly assessed. It is not about backing 

down, it is about hitting the target, which is China and its bad 

practices, not our allies or other U.S. sectors. 

And finally, I want to be clear, the Constitution vests Congress 

with the authority of the U.S. trade policy agenda. The relationship 

between Congress and executive branch is a true partnership in 

implementing that agenda. We want to partner with you, Mr. Ambassador, to ensure that America continues to choose the freedom 

to trade. America must continue to lead the world and to find what 

it means to have an open and free economy our jobs and our values 

depend upon it. 

Again, Ambassador Lighthizer, thank you so much for being here 

today on a snow day. We look forward to your testimony. 

And I now yield to the distinguished Ranking Member, Mr. Neal, 

for the purposes of his opening statement. 

Mr. NEAL. Thank you, Mr. Chairman, and for those of us from 

New England, we don’t even consider this a snow day. 

Thank you, Mr. Ambassador, and I want to welcome you on behalf of Committee Democrats. Today’s hearing is an opportunity for 

us to hear from you and you to hear from us about all of the activity that is happening on the trade front. 

Over the past year we have seen a great deal of activity and commentary from the Administration. We are currently in the process 

5 

of renegotiating NAFTA to update it, and more importantly, to rebalance it. You are also renegotiating the U.S.-Korea Free Trade 

Agreement to improve it and to ensure that it delivers more reciprocal outcomes for U.S. workers, exporters, and businesses. 

The Administration has recently decided to impose tariffs on 

steel and aluminum imports under Section 232 and is currently in 

the process of deciding on country exemptions and product exclusions. As we are reading in news reports in a matter of days the 

Administration will announce its findings in the Section 301 investigation into Chinese intellectual property abuses and may also be 

prepared to impose substantial tariffs on imports from China. 

The President certainly has tapped into raw feelings in some important communities about our economy and trade policies. We 

have seen in the past months that this Administration and you 

personally, Mr. Ambassador, have not been shy about challenging 

the status quo. 

For many of us we have taken notice of the promises that the 

Administration has made to improve U.S. trade policy and to make 

it work for all Americans. Many of us in the past have been skeptical about the promises that have been made for better enforcement because oftentimes they are big promises, and we must say 

we have heard them before. But we have seen evidence of your 

commitment. For example, we hear that when you say that your 

task is not just to renegotiate NAFTA but to update it and to fundamentally restructure it to fix important flaws of the original 

agreement, flaws that prevented Members of Congress like me 

from supporting it originally. 

In the tariffs on steel and aluminum imports we recognize the intention of providing much needed relief to industries and workers 

that have called for action for a very long time. But we also have 

a lot of questions, and we are watching closely to determine whether the promises the Administration has made will be delivered 

upon, whether that is in NAFTA, the 232 tariffs, the Korean agreement, or China’s 301 investigation. 

Finally in the bigger picture, I think it should be clear to all of 

us that some of the greatest challenges facing our economy and our 

values are being posed by countries that rely heavily on state intervention and do not operate, despite what they say on market-based 

principles. We should all be on the same team in talking about 

these challenges. In fact, if we want to be really effective it seems 

to me that it will make a good deal of sense that we should build 

upon what already has been happening between Democrats and 

Republicans as we address many of these challenges. 

I look forward to hearing from you today about your vision and 

plan for delivering this Administration’s promises on trade about 

how we take on global competitive challenges effectively and how 

the Administration partners with Congress. 

Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, Mr. Neal. 

Today’s sole witness is Ambassador Robert Lighthizer, U.S. 

Trade Representative. The Committee, Mr. Ambassador, has received your written statement. It will be made part of the formal 

hearing record. We have reserved 5 minutes to deliver your oral remarks. You may begin when you are ready, and again, welcome. 

6 

STATEMENT OF HONORABLE ROBERT E. LIGHTHIZER, 

AMBASSADOR, UNITED STATES TRADE REPRESENTATIVE 

Ambassador LIGHTHIZER. Thank you very much, Mr. Chairman and Ranking Member Neal, and Members of the Committee. 

I’m pleased to be here today. 

We at USTR greatly appreciate the expertise of the Members of 

this Committee. We’re grateful for all the time you give us in working up truly bipartisan trade policy, the efforts you’ve helped us 

with on NAFTA and the many issues we face. 

Before I continue with my statement let me just say since I generally when I come here complain about the fact that I have no 

deputies I, in fact, have deputies now. So I thought it would be appropriate since they’re all going to be senior members I believe but 

members of your staffs that I probably ought to at least have you 

know who’s working for you now besides me. 

Jeffrey Gerrish, maybe if you would stand up, Jeff, is our deputy 

for Europe, the Middle East, and Asia. C.J. Mahoney is our deputy 

for Africa, China, the western hemisphere, and he’s also going to 

do investment and services. And he will be our transparency officer. You’ll recall that we selected an appointed official as our transparency officer. So those are the two people that I wanted you to 

focus on, if you would, since they’re brand new. 

First I would like to draw the Committee’s attention to the fact 

that this year the trade deficit in goods and services rose to $565 

billion and in goods alone it was $811 billion. Of course these numbers there are lots of causes for these numbers, but the President 

believes and I also agree that longstanding trade deficits to some 

extent reflect market distortions and that they’re having a negative 

effect on U.S. workers and businesses. 

We also, of course, have a massive trade deficit with China which 

we ought to speak about at some point of $375 billion so the numbers essentially got worse last year. I know that Members have a 

variety of views on these figures, but the President believes that 

they raise significant concerns. They indicate that sometimes the 

global rules of trade make it harder for U.S. companies to compete 

and specifically to export. Trade deficit also indicate that the 

United States—that in the United States the cost of globalization 

are falling more heavily on blue-collar workers, and this is something that is bad for the economy and bad for the society. Finally, 

they tend to undermine the support for the global trading system, 

so trade deficits are a problem. 

Quickly I would outline the President’s trade agenda. First, we 

at USTR will support the President’s national security strategy. If 

you haven’t looked at that I would recommend it to you. That 

means that our trade policy will help to build a stronger America, 

preserve our national sovereignty, respond to hostile economic competitors, recognize the importance of technology and seek opportunities to work with other countries that share our goals. 

Second, for U.S. companies and workers to be competitive in 

overseas markets we need a strong and robust economy at home, 

and I commend the Committee for the work they did on the tax cut 

bill. 

Third, we are negotiating trade deals that will work for all Americans. As Members of this Committee well know, the President diVerDate Sep 11 2014 05:57 Mar 20, 2019 Jkt 033807 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33807.XXX 33807
7 

rected us to seek significant changes to NAFTA. We have already 

had seven rounds with our partners in Canada and Mexico, and I 

believe that we’ve made a great deal of progress. We’ve also begun 

discussions, as most of you know, with South Korea on updating 

KORUS. Now that we have a full team of deputies, we intend to 

aggressively pursue other potential free trade agreements. We have 

a trade working group with the United Kingdom. We have told 

Japan that we’re interesting in having a free trade agreement with 

them at the appropriate time. We are prepared to explore the possible countries in Africa and South Asia who might be appropriate 

for us to enter into free trade agreements, and as you said, Mr. 

Chairman, the President has asked for the extension of trade promotion authority to accomplish this. 

Fourth, we are enforcing our trade laws. The President indicated 

he would use all available trade laws to defend U.S. workers, farmers, and ranchers against unfair trade, and he is, in fact, doing 

that. 

Finally, we seek to reform the multilateral trading system. For 

too long the WTO has failed to promote trade liberalization. Too 

many WTO members view it as a litigation forum and not as a negotiation forum. In short, USTR under the direction of President 

Trump is seeking to build a better, fairer system of global trade 

that will lead to higher standards for all Americans. 

Thank you, and I look forward to taking your questions, Mr. 

Chairman. 

[The prepared statement of Ambassador Lighthizer follows:] 

8 


33807A.001

TESTI1\10NY OF AMBASSADOR ROBERT E. LIGHTHIZER 

BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS 

MARCH 21, 2018 

Thank you very much for the opportunity to testify this morning. Mr. Chairman, 

Ranking Member Neal, I am grateful for the advice and cow1sel that you have provided 

throughout my period at USTR. I also want to thank all the Members of this Commitlee for the 

time you have given to me and my staff in recent months. We at USTR greatly appreciate the 

expertise of Members, and the etlort you put into working with us on NAFTA and the many 

other trade issues facing the nation. 

Before taking your question, I would like to mention two important topics. 

First, I would draw the Committee's attention to the fact that last year, the U.S. trade 

deficit in goods and services rose to $568.4 billion, while the trade deficit in goods alone rose to 

$81 1.2 billion. Of course there are a number of causes for these deficits but the President 

believes - and I agree - that long-standing trade deficits to some extent refle.ct market distortions 

around the world that put U.S. workers and businesses in an unfair position compared to their 

international competitors. It is widely known, of course, that we have a massive trade deficit in 

goods with China - $375.2 billion last year. But we also had a goods trade deficit of$151.4 

billion with the European Union, $68.8 billion with Japan, and almost $90 billion with our 

NAFTA partners. 

I know that the Members here have a variety of views on these figures. But for the 

President they raise significant concerns. They indicate that sometimes the global mles of trade 

make it harder for U.S. companies to export. The trade deficit also indicates U1at in the United 

States, the costs of globalization are falling most heavily on blue-collar workers in those parts of 

1 
9 


33807A.002

the economy exposed to trade. And they undermine U.S. political support for the global trading 

system. 

I would also like to discuss the President's Trade Agenda, which we released a few 

weeks ago. We are focused on five major priorities. 

First, we at USTR will support the President's National Security Strategy. That means 

that our trade policy will help to build a stronger America, preserve our national sovereignty, 

respond to hostile economic competitors, recognize the importance of technology, and seek 

oppornmities to work with other countries that share our goals. 

Second, for U.S. companies and workers to be competitive in overseas markets, we need 

a strong and robust economy at home. The Congress has passed, and President Tmmp signed, a 

major tax refonn bill. The Administration has also begun making regulatory changes that will 

strengthen the U.S. economy. 

Third, we are negotiating trade deals that will work for Americans. As the members of 

this Committee well know, the President has directed us to seek significant changes to NAFTA. 

We have already held seven rounds of talks with our partners in Canada and Mexico, and I 

believe that we have made a great deal of progress - but we still have a ways to go. I have urged 

our trading partners to recognize that time is short if we are to complete a deal in tin1e for 

consideration by this Congress. We have begun talks with South Korea to discuss potential 

improvements in our free trade agreement with them. 

Now that we have a full team of deputies, we intend to aggressively pursue other 

potential free trade agreements. We have a trade working group in place with the United 

Kingdom to lay the groundwork for when they are eligible to enter into a free trade agreement 

following their fonnal exit from the European Union. We have told Japan of our desire to 

2 
10 

f 


33807A.003

negotiate a free trade agreement with them at the appropriate time. We also have hopes for 

potential IT As in Africa and Southeast Asia. Given this agenda, the President will soon ask the 

Congress for an extension of Trade Promotion Authority until 2021. We look forward to 

working with you on these new deals. 

Fourth, we are enforcing and defending U.S. trade laws. During the Presidential 

campaign of2016, President Trump said that he would use all available tools to defend our 

national interest and our national security- including Sections 201 and 30 I of the Trade Act of 

1974, and Section 232 of the Trade Expansion Act of 1962. Those promises are being fulfilled -

and our trading partners are on notice that tlus President will act when necessary to address 

unfair trading practices that disadvantage American workers, fanners, and businesses. We are 

also aggressively defending our trade laws in litigation at the World Trade Organization. 

Finally, we seek to reform the multilateral trading system. For too long, the WTO has 

failed to promote trade liberalization. Too many members remain committed to an outdated 

Doha Round Agenda that is incapable of addressing modem issues like digital trade. Too many 

members also think that they can get their way through litigation, rather than negotiation. 

Perhaps most worryingly of all, the WTO has proven to be wholly inadeqltate to deal with 

China's version of a state-dominated economy that rejects market principles. 

In short, USTR - under the direction of President Tnm1p - is seeking to build a better, 

fairer system of global markets that will lead to higher living standards for Americans. I am 

excited about our efforts, and am happy to take your questions. 

3 
11 

Chairman BRADY. Thank you, Mr. Ambassador, and thank you 

for introducing your chief negotiators. Mr. Neal and I did send a 

letter to the Senate after your last testimony discussion with us 

urging the Senate to move, so we are pleased to in a bipartisan—— 

Ambassador LIGHTHIZER. Let me just say that I view that as 

unprecedented and extremely helpful, so I am very grateful to the 

Committee for intervening in that matter. 

Chairman BRADY. You need a full team. USTR is a very small 

and nimble agency. It needs everyone on board at this critical moment. So congratulations on that. 

So I am convinced NAFTA done right can create incredible job 

growth and paycheck growth for America, our farmers, our workers, our local businesses. I think a modern NAFTA is our number 

one economic priority this year, and I believe not only will it grow 

jobs in America but when combined with our trading partners can 

make our American businesses and farmers more competitive as 

China, Europe, and the rest of the world. I want to ask you a question about that in a moment. 

But first let’s start with the steel and aluminum tariffs. We 

strongly support President Trump’s efforts to target unfairly traded 

steel and aluminum, but as you know we have made it clear it is 

important that we allow fairly traded steel and aluminum to move 

forward. It is critical for nearly every economic sector in America. 

In the President’s determination was included an exemption 

process for countries to negotiate with you, Mr. Ambassador, and 

the President directly in order to address transshipment issues, 

multinational efforts against China’s unfair trade practices, and 

strengthening America’s national security footprint. Can you give 

us an update on the exemption process? 

Ambassador LIGHTHIZER. Thank you, Mr. Chairman. As you 

say, the President did set in force a process that would allow products to get out in specific circumstances, and that is something 

that’s being handled by the Department of Commerce. And then 

USTR working with all the appropriate agencies including the Department of Commerce is working on this question of country exemptions. So initially the NAFTA countries are out of the 232, subject to certain conditions and subject to a successful NAFTA negotiation, so that’s the first part of it. 

We have a similar circumstance with respect to Korea because 

we’re in the process of renegotiating KORUS. I guess I have to be 

careful because we’re not using TPA, I won’t say renegotiating but 

refurbishing, perhaps, KORUS, but we’re talking about the Koreans about KORUS. 

There have been other countries that have come up and that I 

believe we are in the process of talking to now, Australia, Argentina and the EU I would put in those categories. There are a couple 

of other—there have been a number who have asked—a great number as you can imagine. Another one that we will I think soon 

begin talking to is Brazil, but there are a number of countries that 

have come forward and they’re in various levels of the process. The 

kinds of things we have talked about—well, maybe I will let it go 

at that, Mr. Chairman, and then follow up on the criteria later if 

you—— 

12 

Chairman BRADY. Great. Thank you. What is the timeframe for 

those discussions and ultimate decisions roughly? 

Ambassador LIGHTHIZER. I believe that countries will get out 

as we come to agreement that some countries will be in a position 

where the duties will not apply to them during the course of the 

negotiation just so that you don’t have—for example, Canada and 

Mexico but others, so that you don’t have a situation where you 

have the status quo, 25 percent tariff and then they get out and 

there’s this kind of bump and it changes real commercial relationships. 

So but our hope is that by the end of April we have this part of 

the process resolved. Having said that, the President has the authority at any time during the course of the program to let people 

out if he thinks it’s in the national economic interest of the United 

States. 

Chairman BRADY. And those discussions are ongoing? 

Ambassador LIGHTHIZER. Yes, sir they are ongoing. 

Chairman BRADY. Thank you. So let me turn to NAFTA for a 

final question. You know, I am confident you and your team are 

going to negotiate a progrowth NAFTA that makes America stronger economically. To do that and to maximize the economic growth 

from our now one of the most competitive tax codes in the world 

to maximize on that we need more customers, and many of those 

customers live outside the United States. Many of them are in 

Mexico and Canada and when we compete and win on a level playing field we grow American jobs here, but to do that we oftentimes 

have to invest in those home countries to compete and win against 

China, Europe and the rest of the world. 

But if that investment in those countries is to benefit America, 

our investors have to receive fair treatment from other governments, and many countries don’t provide basic, substantive, or procedural protections for American businesses. That means American 

investors have to rely on the investor-state dispute settlement process to ensure that they are treated fairly and they aren’t discriminated against in these other countries, that the rule of law, the 

property and investment is protected as it is in America and without ISDS Americans’ property is left unprotected against discrimination, foreign seizure, regulatory abuses and other forms of unfair 

action. 

This issue is basically a question, when other countries treat 

American investment unfairly who has their back? The answer 

should be America has their back. I am deeply concerned about reports Mexico and Canada have begun negotiating bilateral ISDS 

provisions without us. Because USTR has said it doesn’t want to 

participate in that. Mr. Schweikert from Arizona has wrote a letter 

that many of us have signed now signed by 103 Republicans affirming that inclusion of a strong ISDS is essential in the NAFTA 

agreement. 

Mr. Ambassador, we have had many discussions about that. This 

is a key part of passing the strong NAFTA agreement that we are 

convinced you will negotiate well for us, so how do you square 

USTR’s current proposal against the congressional objectives that 

are in law and that 103 of us have as of today said are crucial for 

passage of this agreement? 

13 

Ambassador LIGHTHIZER. Well, thank you, Mr. Chairman. Yes, 

I’m aware that there is some controversy surrounding ISDS. 

Chairman BRADY. You picked up on that? 

Ambassador LIGHTHIZER. Yes, I have picked up on that. I 

would say this about it, first of all, that whatever happens on ISDS 

the kinds of issues that Members are concerned about in terms of 

U.S. investment overseas will be able to be handled within the context of what we call Chapter 20 or the State-to-State dispute settlement. So it isn’t like we will be in a position where there will be 

no recourse. So that is the first thing I would say. 

The second thing I would say that we have proposed an opt-inopt-out-proposal. We are skeptical about ISDS for a variety of reasons, which I would like to go into if I have a second to do it. 

Number one, on the U.S. side there are questions of sovereignty. 

Why should a foreign national be able to come in and not have the 

rights of Americans in the American court system but have more 

rights than Americans have in the American court system? It 

doesn’t strike me—it strikes me as something that’s at least we 

ought to at least be skeptical of and analyze. 

So a U.S. person goes into a court system, goes through the system, and they’re stuck with what they get. A foreign national can 

do that and then at the end of the day say I want three guys in 

London to say we are going to overrule the entire U.S. system. So 

on the inward bound it strikes me as a question of sovereignty, and 

I view myself as a conservative and a sovereigntist so this is troubling in that respect. 

On the outgoing side there are many people who believe that in 

some circumstances, and I can discuss the varieties of them, in 

some circumstances it’s more of an outsourcing issue. So what is 

it? It’s a situation where somebody says I want to move a plant 

from Texas and I want to put it in Mexico, and when I go down 

there I don’t want to take the political risk that AMLO is going to 

win in Mexico and change my bargain, so I want the U.S. Government essentially to buy political risk insurance for me. 

Our view tends to be that if you want to move a plant from the 

United States to Mexico, and the economics suggest that, that you 

should go with the economics and it’s too bad, and your responsibility as a Congress is to make the United States more competitive 

so that that isn’t a problem. But if you are going there because we 

are underwriting the investment, we are putting our finger on the 

scale, we’re encouraging you to move your plant down there that 

is not the job in my opinion at least of the United States Government. 

I would say, also, this is an area that’s not without controversy. 

The National Association of States Attorney General think this is 

a mistake. The Cato Institute, an issue which I don’t always agree 

with, all indications, they think ISDS is something that we 

shouldn’t have. 

The National Association of State Legislatures, which is controlled by Republicans is on record as against ISDS. So there are 

a whole variety of issues. I can go on and on and on. There are people who respond, well, we haven’t lost cases in the United States 

in our position, and while, in fact, that is the case we have come 

close to losing some, but more importantly, we’ve had situations 

14 

where real regulation which should be in place which is bipartisan 

and everybody’s interest has not been put in place because of fears 

of ISDS. 

So I think it is something we have to think about very carefully. 

Our view was that rather than have this mandatory ISDS provision, which we think is a problem in terms of our sovereignty in 

the United States, encourages outsourcing and losing jobs in the 

United States, and by the way, lowering standards in a variety of 

places, that we should be very careful before we put something like 

that into play. 

So you say what are the alternatives for these companies? The 

first alternative, as I say, is State-to-State dispute settlement. The 

second alternative is if you go to any one of these companies and 

ask them why do you need this, why don’t you put in place an arbitration provision in your contract? They’ll all say, well, we can do 

that, and indeed, they did do it. They did it before we had ISDS. 

And in a country like Mexico they subscribe to all the conventions, 

and they have to enforce those. 

If they put that contract, an arbitration provision in their contract, these things are then resolved in a similar manner but without the United States ceding sovereignty in order to encourage people to outsource jobs. It’s just not a good trade in my opinion. I realize, however, that it is controversial provision and that my view 

is in the minority in some very intelligent caucuses. 

Chairman BRADY. Mr. Ambassador, thank you for that defense. 

A couple quick thoughts before I turn to Mr. Neal. 

Secondly, there is no threat to sovereignty. Foreign investors 

have no more rights than American investors because American— 

in our country you have the greatest standards and protections for 

property rights, investment rights in the world, bar none. 

Secondly, your client is Congress in speaking out for our ag community that wants you to have America’s back when they have to 

invest in other countries to win customers, energy, manufacturing, 

technology services, every key industry in America that has to compete against China and the rest of the world and other countries 

is saying we need to have their back when they make their investments. 

And so you are right there is a disagreement there. We are going 

to continue to work together with you, Mr. Ambassador, to get to 

a good place and make sure we are keeping this in the trade agreement and we have the backs of our American investors. 

Mr. Neal. 

Ambassador LIGHTHIZER. Just briefly the strongest argument 

in favor of ISDS, Mr. Chairman, is that you’re in favor of it. That 

is the strongest argument in my opinion. 

Chairman BRADY. Some would disagree with that, Mr. Ambassador. 

So Mr. Neal, you are recognized for your questions. 

Mr. NEAL. Thank you, Mr. Chairman, and thank you, Mr. Ambassador. In Massachusetts and in New England trade and energy 

with Canada is critical to powering our engines of innovation, manufacturing and indeed people’s lives. In renegotiating NAFTA to 

ensure the reliable and preferential terms of that trade is a priority 

certainly for communities across New England. 

15 

In trade I understand that there are some issues with verifying 

origin right now that are having the effect of burdening trade and 

making power more expensive for people across New England. Is 

this something that is on the radar screen and are you willing to 

prioritize the resolution of these burdens as part of the renegotiation? 

Ambassador LIGHTHIZER. Yes, Mr. Neal, they are, and free 

flow of energy is something that I’ve testified about before, and I 

know—I believe that the Committee is universally in agreement on 

that provision, and we certainly support it, and we’re aware of your 

situation, and it is something that we’re concerned about. 

Mr. NEAL. Thank you. China. As I mentioned earlier we are 

reading about substantial tariffs on a wide variety of consumer 

product imports from China that apparently will be announced before the week is over. Can you talk about the goals of the Administration and what you are trying to achieve through Section 301, 

and do the goals in China’s abusive practices correspond to the 

types of products that you are thinking of subjecting to tariffs. 

Whether it is an electronics or toys iconic companies in many of 

our districts and consumers that rely upon them and enjoy these 

goods are profoundly concerned that some of these penalties will 

end up penalizing them as well. And can you talk about from your 

perspective what makes sense for our economy or are we simply 

proposing to discipline China? 

Ambassador LIGHTHIZER. That is a great question and one 

that is—— 

Chairman BRADY. Mr. Ambassador, could you touch that microphone? 

Ambassador LIGHTHIZER. I am sorry. I am sorry. That is a 

great question, and one that is quite topical as you suggest. The 

President is going to make a decision, I believe, in the very near 

future on this issue of this 301, which we started in August and 

which we have—has been very thoroughly examined at USTR. 

We’ve studied it. We’ve had hearings. We’ve spent thousands of 

hours reading tens of thousands of pages in Chinese. We have 

studied with American companies. 

And our view is that—and once again there is no decision until 

the President makes it, but our review is that we have a very serious problem of losing our intellectual property, which is really the 

biggest single advantage of the American economy in my opinion 

is our intellectual property and our ability to generate new intellectual property. We are losing that to China in ways that are not reflective of the underlying economics. 

So it’s an enormously important issue. I’m happy to talk about 

it at some length. We think it is perhaps the most important thing 

that will have been done in a long time in terms of rebalancing 

trade and trade specifically with China. 

This problem of intellectual property with China has been something that has been going on for a long, long time. If you look back 

in George Herbert Walker’s presidency in 1992—1991 there was a 

301 on the Chinese basically not protecting intellectual property in 

China and taking the technology—1991. We had another one in the 

Clinton administration, both of which really didn’t amount to 

much. 

16 

We had a third one in the Obama administration where there 

was cybertheft in an agreement. Of course none of this changed 

any of the activity in my judgment. So the question becomes, one, 

do you think there’s a problem that strikes me as without question 

clear that there is. Do you thoroughly study it, which I believe we 

did. If there is a problem if it’s so important to the economy, what 

are the likely remedies that you would have? The remedies in my 

judgment at least would be, one, doing something on the tariff 

front, and, two, doing something on the investment front and then 

perhaps other things because these are the crucial areas where it 

comes together. 

In terms of what you would do on the—on the tariff front, which 

was your specific question, the USTR has the power, at the direction of the President, to raise tariffs in these circumstances. The 

way we would approach it if the President should make this decision is, one, to study it. We have an algorithm which will decide 

the extent to which there is a problem among things that are quantifiable because it is a huge number of things that are not quantifiable but are worth hundreds of billions, but you take what you believe is quantifiable and you come up with a number. Then you 

apply tariffs to that number. 

The process that you would use presumably would be, one, you 

would develop an algorithm that will put maximum pressure on 

China, minimum pressure on U.S. consumers and then there are 

certain products which are clearly high tech products, which are in 

the focus point of this. And the combination of those two would be 

the kinds of things that you would decide to put tariffs on if you 

were going to do it, and then you would take additional action. 

Now, I can go through at some detail if the Committee wants to 

do it now or at another time, I know this is a matter of great interest to the Committee, and I am happy to talk about it now or just 

beyond that or just go on and wait for other Members to ask questions. 

Mr. NEAL. Thank you, Mr. Ambassador. 

Chairman BRADY. Thank you, Mr. Neal. Mr. Johnson, you are 

recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Ambassador, welcome. As you know, I flew F–86s in Korea and 

had my share of dog flights over there, and that is a dangerous 

area of the world, and one of our allies in South Korea needs to 

know that we have their back. As you may know, I voted for the 

U.S.-South Korea Free Trade Agreement back in 2011 and since 

that time hundreds of thousands of jobs have been created right 

here in America from the trade agreement. In fact, over 40,000 jobs 

in Texas are directly tied to that agreement. 

By the way, according to your own agency, exports of goods have 

increased as a result of the agreement. So as the President looks 

to renegotiate this trade agreement I would like to express my support for doing it in a way that strengthens the alliance with South 

Korea. 

Mr. Ambassador, can you give me an update on the South Korea 

negotiations and when will they wrap up, do you think? 

Ambassador LIGHTHIZER. Thank you very much. 

17 

So we are in the process of having discussions, but the President 

announced his desire to update and rebalance to the extent we cannot using TPA, so it’s a more limited kind of a negotiation. Several 

months ago we spent the first several months with the Koreans 

going through their process to get a mandate from their own legislature to discuss it. We’ve now had several rounds with the Korean 

minister. 

Minister Kim is in town right now. I think we are down to the 

last few issues. I’m hopeful that we will be able to come to some 

agreement that will make the Committee happy, and in addition to 

KORUS of course we’re also talking about steel and aluminum because it has now come up, and in the opinion of many people Korea 

is a particular problem in the area of steel primarily. But we’re trying to work our way through all of those things. 

I’m hopeful that we can make headway on it, and it certainly is 

my objective would be to get a good agreement—let me say to have 

amendments to the agreement that will satisfy this Committee, 

and I think we’re moving in that direction right now, Congressman. 

Mr. JOHNSON. Thank you, sir. I would like to take my remaining time to highlight the importance of NAFTA for Texas and the 

Nation as whole. As you know, over a million jobs in Texas are 

supported by trade with Canada and Mexico, and nationwide this 

trade supports nearly 14 million American jobs. That is a lot of 

American workers, and while I support the efforts to update 

NAFTA I am concerned by the proposed sunset clause. I don’t 

think that is a good policy necessarily. Businesses need certainty. 

Can you tell me what the status of the proposed NAFTA sunset 

clause is and what are you trying to accomplish with it? 

Ambassador LIGHTHIZER. Absolutely, Congressman. So the 

way the sunset clause works is that at the end of 5 years the President would make a decision as to whether or not the agreement 

should continue. It would not require congressional action. It would 

not be a difficult decision. The thought behind it is, number one, 

we have a number of Members in this Committee particularly on 

the Republican side that believe we ought to be sunsetting things, 

so I would have thought this would have been something that 

would be consistent with that. 

The idea is if it’s such a good agreement then we’ll naturally roll 

it over. If it’s not a good agreement, we won’t. So after a period of 

time—the idea is that after a period of time we ought to be sitting 

down and reviewing what happens to these agreements. There is 

nothing about trade in my opinion that makes it above all other 

logic in the way we approach a legislation. 

So the basic idea of an agreement like this is that you have baseline WTO trade, and then we’re giving someone a benefit, a benefit 

versus the rest of the world, and they’re giving us approximately 

similar benefits, and that’s how you create an FTA. If you find 

yourself in a position at some point, and I would suggest 5 years 

is a reasonable period of time, where the—what we gave and what 

we got is so out of balance it is reasonable to suggest that we ought 

to try to rebalance it. Things change, the economy changes. 

Indeed, I would think that NAFTA is a classy example of why 

we have this problem. We have a 24-year—we have a 24-year 

agreement and that agreement, the whole economy has changed. 

18 

We’ve gotten way out of whack in terms of what our deficits are. 

It’s having a peculiar effect on various industries, and it’s reasonable to sit back and take a look at it. But if the agreement is as 

business people tell me going to be so spectacular it strikes me that 

the President looking at it after 5 years won’t be a particularly 

large hurdle, but it’s a reasonable thing to expect people to do, and 

that is the nature of it. 

Chairman BRADY. Mr. Ambassador, I apologize, time has expired. We will be able to discuss I think some of this further as we 

go through. Mr. Johnson, thank you. 

Mr. Levin, you are recognized. 

Mr. LEVIN. Ambassador, welcome. The two major trade issues 

NAFTA and steel have a major common attribute. The clash over 

both of them has been decades in the making. 

After the failure to act by the U.S. Government and to be acknowledged as a problem by traditional trade theorists. Outsourcing in manufacturing to Mexico increased dramatically lured by 

Mexico’s industrial policy of cheap labor. During much of this same 

period, as you know so well, China undertook a massive increase 

in steel production often using state-owned enterprises reaching 10 

times that of U.S. production in contrast to their equal amounts of 

production nearly 20 years earlier. 

The impact in the industrial sector from these two developments 

was loss of middle class jobs and suppression of wages. In both 

cases the response was the lack of any coordinated action in this 

country either handcuffed by allegiance to theories ill-equipped for 

the realities of rapidly advancing globalization by a willingness to 

settle for talk in conference after conference or by putting profits 

over the personal impact on working families. This created a vacuum. Like any problems left to foster it has made it more difficult 

to remedy them effectively and responsively. They must be. 

As to steal and aluminum I suggest we all look at a recommendation in the recent remarks of AFL–CIO president Rich 

Trumka where he said, and I quote, These tariffs will be most effective if used strategically targeting China and other countries 

that are the source of the problem. 

In fact, instead of retaliating against the United States as some 

have threatened our allies should work together with us to address 

this global glut that threatens our economic and national security. 

As to NAFTA there cannot be a successful renegotiation, Mr. 

Ambassador, which I believe most Democrats want unless the central problem as we have discussed is fixed. Mexico must tear down 

its structures of an industrial policy, built on suppressing its workers that impacts American jobs and wages. Instead there is evidence that in its Congress Mexico is now moving backward. 

Mexican workers today often make less in real dollar terms than 

they did 25 years ago and less on the average now than those in 

China. I recently met two workers in Mexico from the auto parts 

industry who said their take-home pay was 75 cents an hour in one 

case and $1.25 in the other. The President has spoken about this 

suppression; now he must deliver. 

Mr. Ambassador, we have talked about this and are you now addressing this problem? Steel we will talk about tomorrow with the 

Commerce Secretary, though you are an expert. In terms of Mexico 

19 

and their industrial policy, their endless so-called protection agreements, where are the discussions? 

Ambassador LIGHTHIZER. Well, thank you, Congressman 

Levin. As you know, every time I’ve testified here I’ve taken the 

position that wage increases in Mexico are in the U.S. interests. 

It’s better for our own competition. It also creates customers for us, 

so it’s something that we have as a priority. 

I think that in the Mexican political system there are a number 

of people who agree completely with that process. So I mean with 

that thought. We are in the process of having these negotiations 

really even as of today. 

My focus has been on trying to get to a position where Mexican 

workers actually vote on—have real secret ballot votes on their collective bargaining agreements, and if Mexican workers have real 

votes and they decide for bad contracts that’s none of our business, 

but it’s reasonable for American workers to expect that there would 

be a process whereby Mexican workers have this. 

Mr. LEVIN. Good. Let me just say on ISDS, and I will finish 

with this and there will be discussion, it is an important issue, and 

when we raised it in TPP Republicans just sat doing nothing. 

But it isn’t the basic problem in terms of Mexico. They are using 

moneys to lure industry, not cracking down on American investment. 

Chairman BRADY. The gentleman’s time has expired. 

Mr. Nunes, you are recognized. 

Mr. NUNES. Thank you, Mr. Chairman. 

Ambassador, welcome and congratulations on finally getting your 

deputies in place. I want to go first into another region of the world 

and that is Asia. You have talked a little bit about what you may 

do in the coming weeks, and I can assure you that we have tremendous concerns about investment that is being made here in the 

United States buying up companies, stealing our intellectual property. A lot of that is not actually being done through trade it is just 

the way they make investments into the United States. 

And on the Intelligence Committee we continue to investigate 

that and we have legislation pending in the Congress now on 

CFIUS reforms as it relates to some of these concerns we have with 

what China is doing here in the United States. 

I would also submit that I heard you—I think you have talked 

a little bit about the Philippines, possibly Vietnam, perhaps another direction that we can go in the coming weeks and months 

would be to look at is it possible to do bilateral agreements with 

the Philippines, Vietnam, fixing the South Korean agreement possibly Japan, and I don’t know if you can comment on any of those 

negotiations because I know you are in the middle of them, but in 

terms of planning for the Philippines and Vietnam I would be very 

interested in. 

Ambassador LIGHTHIZER. Thank you, Congressman. 

First of all, the issue of Chinese investment in the United States 

is as I say in the 301 is something that we’re completely focused 

on. In my judgment this is going to help to define whether or not 

we have all succeeded or failed in terms of what we were sent here 

to do, and any Members who are not on the Intelligence Committee 

I hope they access themselves of the information the Intelligence 

20 

Committee has because I think in making these judgments it’s 

really important that you know the basic facts. 

Having said that, now that I have a deputy I’ve spoken generally 

about the idea of having a bilateral agreement or an FTA with 

some of these people and that in that part of the world, in the Pacific part of the world. Some of the TPP countries but also some 

others who weren’t in the TPP like the Philippines. 

So Ambassador Gerrish, my deputy, is going to undertake to do 

a thorough study of that both within the Administration, but as importantly within Congress to find out where the targets are. We 

have spoken and thought ourselves about the Philippines as a reasonable first step in that direction. It’s extremely important that 

we have a positive agenda. It’s extremely important that we show 

that part of the world that we’re very interested in them. 

Besides the Philippines, which is kind of a smaller kind of a deal 

generally, smaller economy, you mentioned Vietnam, Vietnam is 

one that there’s been a number of Members and people in the Administration that also thinks we ought to be moving there. Each 

of these has their own kind of complications, of course. 

Japan we have indicated that we are interested in at the appropriate time having an FTA with Japan. Right now I believe is not 

that time. Japan is in the process of having the TPP become implemented, and it was just signed on the 8th of this month, so there 

is kind of a process there, but they are very much aware that we 

think having a closer economic relationship with them is in our interest and is in their interest. 

Mr. NUNES. Well, Ambassador, thank you for that, and I appreciate that and I would be willing to work with you on any of the 

countries in Asia that you would be interested in making bilateral 

agreements or beginning the discussions at least. 

Let me switch quickly to NAFTA. The NAFTA renegotiations, 

and then the Chairman mentioned in his opening statement but for 

a long time Canada has been getting away with murder in their 

dairy industry. It is causing tremendous problems for farmers here 

in the United States. They have a very protectionist program, have 

for a long time. They are dumping in product into this country and 

if anything it is one of the reasons why you are trying to update 

NAFTA. 

And I don’t know if you can update us on the process and where 

we are at in the negotiations on specifically on dairy, but we would 

be interested to hear what you have to say. 

Ambassador LIGHTHIZER. Well, this is something that we have 

focused on. It was one of our objectives, their dairy program but 

also their agriculture programs and other areas, eggs and poultry 

is another one where they have what you would consider to be very 

not market oriented, very protectionist approaches on these things. 

It’s difficult for them to change their policies in these areas because they’re sensitive just like they are in every single district in 

America. Having said that, it’s a very high priority to make 

changes in the Canadian dairy programs so that we have the kind 

of access that U.S. farmers did have and even greater access. 

So it’s a high priority. I am hopeful that when we put the final 

deal together it’s something that we make real headway on. 

Mr. NUNES. Thank you, Mr. Ambassador. 

21 

Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, Mr. Nunes. 

Mr. Doggett, you are recognized. 

Mr. DOGGETT. Thank you, Mr. Chairman, and thank you, Ambassador. 

NAFTA is very important in Texas. It was signed in the district 

that I currently represent in San Antonio, and I sincerely appreciate your efforts to significantly improve it learning from the experience of the last two decades. Though I personally continue to support more trade through a NAFTA and around the world, one of 

the major reasons that I have voted against a number of previous 

trade agreements is the way they have been subverted by various 

special interests to serve their own selfish agenda to the detriment 

of our public health. 

Big tobacco, Big Pharma have been examples of that in the past, 

and I am very troubled by this morning’s New York Times front 

page story that advises that your office is currently involved in 

NAFTA negotiations to serve the obesity lobby. You are aware, Ambassador, that the Center for Disease Control reports that almost 

a third of American youth between the ages of 17 and 24 are too 

overweight to serve in our military, that the defense department 

reports that one in 13 American servicemembers is clinically obese. 

Now, I know there is no panacea for this problem, and I don’t 

endorse every action taken by a foreign government, but I think 

that it is wrong to limit the power of American States and local 

governments, as well as foreign governments to address this challenge. 

I want to draw your attention specifically to that Times article 

in which it is said, ‘‘The Trump administration’s proposal and the 

corporate pressure behind it hold the potential to handcuff public 

health interests for the decades. The American provision seeks to 

prevent any warning symbols, shape, or color that,’’ and this is apparently drawn from the documents you are advancing, ‘‘inappropriately denotes that a hazard exists from consumption of the food 

or nonalcoholic beverages.’’ 

Is it correct that your office is urging adoption of that provision 

as a part of the NAFTA renegotiation? 

Ambassador LIGHTHIZER. First of all, I would like to put my 

office on the record as being against obesity. 

Mr. DOGGETT. I am glad to hear it. The question is whether 

you are against things that prevent us addressing that problem, 

and if you are supporting this provision you are certainly not. 

Ambassador LIGHTHIZER. Well, I guess I would say, Congressman, that for us it is slightly more nuanced than that. 

Mr. DOGGETT. Well, just answer. First, is this a provision that 

is being advanced by the American government? 

Ambassador LIGHTHIZER. The idea is—yes. The idea of putting 

limits on the ability of countries to put warning labels or symbols 

or products is something that we are concerned about—— 

Mr. DOGGETT. So it is accurate that this provision, the language that I just read to you, is being advanced by our negotiators? 

Ambassador LIGHTHIZER. I mean, I can’t comment on the exact 

language in the statute, I don’t have that—I’ve looked in the article, I don’t have the article in front of me, but the issue is with one 

22 

that we are concerned about. The other—your point is an excellent 

one, and I agree with it. 

On the other side of it there are lots of examples of countries 

that are using this loophole to basically create a protectionist environment. So we have—that’s why I say it’s more nuanced from our 

point of view. We have companies that come in with products that 

literally they’re on shelves with no wrapping on them. There is a 

kind of an extreme between one way or another. This can be used 

as protectionism. To the extent it’s used as protectionism we have 

to be very careful of it that is—— 

Mr. DOGGETT. We certainly do, and I will welcome any further 

written answer you might have. I want to turn to investor state because there is one that I applaud your answer to the Chairman. 

When he asked the question who has our back, the corporate lobby 

basically wants it to be three lawyers operating behind closed doors 

as much as possible. 

We know from the Bilcon case that corporate interests went 

around Canadian law with rights they couldn’t have there, and 

they are only asking for half a billion dollars now because they 

were denied the right to expand a quarry. I hope you will stand 

firm for protection of American investors but not a mechanism that 

allows them to invade our sovereignty as you correctly noted and 

to subvert and undermine health and safety regulation. 

There is no reason foreigners should be given more rights than 

American citizens and American companies have, and that is what 

is happening through the investor state mechanism. You are right 

to be skeptical on it, and I hope you will continue to urge that position because if we don’t see some genuine reform of the investor 

state mechanism, renegotiation of NAFTA will not have met the 

objectives that we have set out initially. 

Thank you, and I look forward to your further response about 

this very troubling issue on obesity. 

Ambassador LIGHTHIZER. I will do that, sir. 

Chairman BRADY. Mr. Reichert, you are recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. 

Ambassador, thank you for your time today. 

Mr. DOGGETT. Mr. Chairman, may I just ask unanimous consent to put the Times article into the record, as well as the earlier 

stories from the Times about Mexico and Chile. 

Chairman BRADY. Without objection. 

[The submissions for the Record of Hon. Lloyd Doggett follow:] 

23 


33807A.004

New York Times 

In Nafta Talks, U.S. Tries to Limit Junk Food 

Warning Labels 

By AZAl'\1 AHMED, MAIT RICHTEL and ANDREW JACQBS 

MARCH 2018 

Mexicans drink on average more than 44 soda a year per person. A family 

shopping at a supermarket in San Crist6bal de las Casas, in Chiapas, last year. 

CrcditAdriana Zchbrauskas for The New York Times 

MEXICO CI'IY- The contentious negotiations over the fate of the North 

American Pree Trade Agreement have veered into one of the world's most 

pressing health issues: fighting obesity. 

Urged on by big American food and soft-drink companies, the Trump 

administration is using the trade talks with Mexico and Canada to try to limit 

the ability of the pact's three members - including the United States- to 

warn consumers about the dangers of junk food, according to confidential 

documents outlining the American position. 

The American stance reflects an intensifying battle among trade officials, the 

food industry and governments across the hemisphere. The administration's 

position could help insulate American manufacturers from pressure to 

include more explicit labels on their products, both abroad and in the United 

States. But health officials worry that it would also impede international 

efforts to contain a growing health crisis. 
24 


33807A.005

Obesity has at least doubled jn 73 countries since 1980. Many public health 

officials, worried about the rapid spread of highly processed foods, have 

found hope in a new tactic: the use of vivid warnings on foods with high levels 

of sugnr, salt and fat. 

Officials in Mexico and Canada - along with governments in Brazil, Peru, 

Uruguay, Argentina and Colombia -are discussing options like the use of 

colors, shapes and other easy-to-understand S}'mbols that warn consumers of 

health risks. They were inspired in large part by Chile's introduction of 

stringent regulations in 2016 that include requirements for black stop-sign 

warnings on the front of some packages. 

But the Office of the United States Trade Representative, which is leading the 

Nafta talks on the American side, is trying to head off the momentum. It is 

pushing to limit the ability of any Nafta member to require consumer 

warnings on the front of sugary drinks and fatty packaged foods, according to 

a draft of the proposal re,.iewed by The New York Times. 

The American pro,.ision seeks to prevent any warning symbol, shape or color 

that "inappropriately denotes that a ha:tard exists from consumption of the 

food or nonalcoholic beverages." 

Some experts have likened the fight over food labeling to that over tobacco -

and the fierce if ultimately unsuccessful opposition and lobbying that 

industry waged to prevent the imposition of health warnings on packaging. 

The Trump administration's position on food labeling reflects the desires of a 

broad coalition of soft-drink and packaged-foods manufacturers in the United 

States. 

A kiosk in downtown capital, in January. Some food products with high 

levels of sugar, salt or fat are required to carry black warning labels in Chile. 

Credit Victor R.tiL Caballero for The ~e" York Times 
25 


33807A.006

The Grocery Manufacturers Association, a food industry trade gmup that sits 

on the advisory hoard to the trade talks, says it favors voluntary labeling 

programs. The group says it "supports a modernized Nafta that will ensure 

standards are based on science, minimize unnecessary trade barriers, and 

benefit consumers in all three countries." 

The organization is fighting to keep Chile's model from being adopted more 

widely. Roger Lowe, a spokesman for the group -whose board members 

include executives from Coca-Cola, PepsiCo a nd Mondelez International, 

which owns brands like Oreos, Chips Ahoy and Ritz crackers - said it was 

concerned ahout the "evidence and impact" of Chile's laws. 

Emily Davis, a spokeswoman for the United States Trade Representative, said 

she could not comment on what she called "alleged negotiating documents." 

In general, she said, "the United States supports science-based labeling that is 

truthful and not misleading." 

Proponents of more explicit labels said the Trump administration's proposal 

and the corporate pressure behind it hold the potential to handcuff public 

health interests for decades. 

"It is one of the most invasive forms of industrial interference we have seen," 

said Alejandro Calvillo, the founder ofEl Poder del Consumidor, or 

Consumer Power, a health advocacy group in Mexico that was illegally 

targeted with government spyware when it fought for a soda tax in Mexico. 

"The collusion between the industry and the government is not only at the 

level of spying - it reaches the level of the renegotiation of Nafta and the 

nation's own policy against obesity." 

The American proposal conflicts ·with the guidance from Mexico's national 

health institute and from the World Health Organization. Both have 

recommended that Mexico pass regulations to help combat diabetes, which 

claims 8o,ooo lives a year there. That is one of the highest rates in the world 

-and more than double tl1e record number of homicides in the nation in 

2017. 

Mexico's Ministry of Health, which is directly involved in the trade 

negotiations, said it was revie\,~ng the American proposal with the nation's 

health authorities. 

Public health experts have hailed Chile's rules as a new standard. They 

include a ban on the use of cartoon characters like Tony the Tiger, but the 

package w11rnings are considered the most aggressive of the tactics. 

"We have sho'm that a simple message and a symbol is enough to 

communicate that you should be consuming less of certain foods,· said Dr. 

Camila Corval{m, a nutritionist at the University of Chile who helped develop 
26 


33807A.007

the logos. "There's noLhing misleading about a warning logo, and clearly this 

is what worries the industry." 

Dr. Sim6n Barquera, the director 

Public Health. 

CreditAdriana 7..ehbrauskas for ThE' :\c" York rimes 

Food companies have been forced to take note. Over the past two years, more 

than 1,500 products have been reformulated to make them healthier and to 

avoid having to carry a waming logo, according to AB Chile, a food industry 

association. 

But passage ofthe regulation in Chile did not happen "~thout a fight. Eleven 

countries, led by the United States, raised issues with the proposal before the 

World Trade Organization. 

The Chilean government successfully argued that the measures were a 

necessary tool to fight the nation's mounting obesity crisis. Today, Chile's 

success has inspired nutrition advocates around the world, including those in 

Mexico. 

"The fact that the industry is freaking out is reassuring, but at the same time 

it's worrisome that the U.S. government is trying to defend the position of the 

food industry; Dr. Corvahin said. 
27 


33807A.008

All told, at least 23 countries use some version of front-of-label consumer 

education. Some of the warnings already adopted or proposed include black 

boxes or red octagons that draw attention to foods that regulators deem 

unhealthy, using less intense imagery but the same approach as cigarette 

packaging. 

Still, public health experts consider most of the labels other than those 

required by Chile to be relatively weak or ineffective. 

"Chile's warnings are the new frontier," said Alexandra Jones, a lawyer at the 

George Institute for Global Health in Australia. "They represent a potentially 

much more effective public health intervention: Warn people away from the 

ubiqttitous junk foods." 

Heading off pressure for more explicit warnings through the Nafta 

negotiation is especially appealing to the food and beverage industry because 

it could help limit domestic regulation in the United States as well as avert a 

broad global move to adopt mandatory health-labeling standards. 

"It kind of kills a law before it can be written," said Lora Verheecke, a 

researcher at the Corporate Europe Observatory, a group that tracks lobbying 

efforts. "And once you put it in one trade agreement, it can become the 

precedent for all future deals with future countries." 
28 


33807A.009

A f'ast-food shop in downtown Santiago in january. 

Credit\'ictor Ruiz Caballero for The ~ ''' York Times 

In mo~i cases, trade law allows governments to retain the right to make rules 

in the interest of public health, experts say, but the proposal by the United 

States appears to be aimed at curbing that. 

Ms. Jones of the George Institute said rcs<:anili. found that trade policy had 

also been used to try to block efforts to adopt warnings in Ecuador, Peru, 

Thailand, Chile and Indonesia. Chile has mo,·ed forward as has Ecuador, but 

with a less aggressive labeling system, Ms. Jones said. 

Thailand and Indonesia "appear to have been deterred, • she said, adding, 

"We call this 'regulatory chill.'" 

One reason that the warning labels are seen as so vital to the efforts to curb 

obesity is that consumers appear to heed them. 

Mexioo's current labeling rules allow for- but do not require- the display of 

daily intake reoommendations of salt, sugar and fat. But they are 

"indecipherable to oonsumcrs" and "totally useless to people," Ms. Jones said. 
29 

f 


33807A.010

Government researchers at Mexico's National [nstitute for Public Health 

recently found that only 17 percent of consumers bothered to look at the 

front-of-pack labels mandated by law. 

In separate research, scientists asked college students to try and crack the 

current labeling system, which, to use effectively, requires mathematics. 

"These college kids couldn't even do it," said Dr. Simon Barquera, the director 

of health research and nutrition policy at the Mexican public health institute. 

After starting a campaign several years ago to impose a tax on soda, Dr. 

Barquera and two other backers of the soda tax were targeted by 

sophisticated spyware sold only to governments on the explicit understanding 

that it be used strictly against terrorists and criminals. 

Mexicans drink on average 167liters -more than 44 gallons - of soda a year 

per person, eclipsing what are considered high consumption rates in the 

United States. In some remote areas ofthe country, soda is more readily 

available than clean drinking water. 

Azam Ahmed reported from Mexico City. Matt Richtel from San Francisco, and Andrew 

Jacobs from New York. 
30 


33807A.011

NYT: In Sweeping War on Obesity, Chile Slays Tony 

the Tiger 

New regulations, which corporate interests delayed for almost a decade, 

require explicit labeling and limit the marketing of sugary foods to children. 

By ANDREW JACOBS, FEB. 7, 2018 

SANTIAGO, Chile- They killed Tony the Tiger. They did away with Cheetos' 

Chester Cheetah. They banned Kinder Surprise, the chocolate eggs with a hidden 

toy. 

The Chilean government, facing skyrocketing rates of obesity, is waging war on 

unhealthy foods with a phalanx of marketing restrictions, mandatory packaging 

redesigns and labeling rules aimed at transforming the eating habits of 18 million 

people. 

Nutrition experts say the measures are the world's most ambitious attempt to 

remake a country's food culture, and could be a model for how to turn the tide on a 

global obesity epidemic that researchers say contributes to four million premature 

deaths a year. 

"It's hard to overstate how significant Chile's actions are - or how hard it has 

been to get there in the face of the usual pressw·es," said Stephen Simpson, director 

of the Charles Perkins Centre, an organization of scholars focused on nutrition and 

obesity science and policy. The multibillion dollar food and soda industries have 

exerted those pressures to successfully stave off regulation in many other 

countries. 

Since the food law was enacted two years ago, it has forced multinational 

behemoths like Kellogg to remove iconic cartoon characters from sugary cereal 

boxes and banned the sale of candy like Kinder Surprise that use trinkets to lure 

young consumers. The law prohibits the sale of junk food like ice cream, chocolate 

and potato chips in Chilean schools and proscribes such products from being 

advertised during television programs or on websites aimed at young audiences. 

Beginning next year, such ads will be scrubbed entirely from TV, radio and movie 

theaters between 6 a.m. and I 0 p.m. In an effort to encourage breast-feeding, a ban 

on marketing infant formula kicks in this spring. 
31 


33807A.012

Such sobering statistics helped rally a coalition of elected officials, scientists and 

public health advocates who overcame fierce opposition from food companies and 

their allies in government. 

"It was a hard-fought guerrilla war," said Senator Guido Girardi, vice president of 

the Chilean senate and a doctor who first proposed the regulations in 2007. "People 

have a right to know what these food companies are putting in this trash, and with 

this legislation, I think Chile has made a huge contribution to humanity." 

From India to Colombia to the United States, countries rich and poor have been 

struggling to combat rising obesity- and encountering ferocious resistance from 

food companies eager to protect their profits. 

In Chile, corporate interests delayed passage of the law for almost a decade, and on 

two occasions there were so many lobbyists crowding Congressional hearings for 

the bill that the Senate president was forced to suspend the sessions and clear the 

room. 

But the industry rarely faces opponents like Senator Girardi. A trained surgeon 

with a flair for the theatrical, he is a key figure in the governing coalition of 

President Michelle Bachelet. During the long fight over the food law, Senator 

Girardi, 56, publicly assailed big food companies as "21st century pedophiles" and 

before Ms. Bachelet took office, spent weeks protesting outside the presidential 

palace with placards that accused her predecessor, Sebastian Piftera, of destroying 

the nation's health by vetoing an earlier version of the legislation. 

"Sugar kills more people than terrorism and car accidents combined," he said in an 

interview as he shook a box ofTrix cereal for effect. "It's the poison of our time." 

There were other factors that made the legislation possible, including a legislature 

determined to address the rising economic costs of obesity and support from Ms. 

Bachelet, a socialist who also happens to be trained as a pediatrician. 

In the end, industry pressure succeeded in easing some measures in the original 

legislation, including loosening the advertising restrictions and quashing a 

proposed ban on junk food sales near schools. 
32 


33807A.013

Ben Sheidler, a spokesman for Coca-Cola, said the company had created 32 new 

beverages in the last 18 months, and that 65 percent of its drinks portfolio in Chile 

could now be described as having low or reduced sugar. 

A spokesman for PepsiCo said two-thirds of its beverage brands in Chile also 

qualified as low or sugar-free and that more than 90 percent of its snack offerings 

were now low in both sodium and saturated fat. 

Other companies have embraced the logo system as a way to tout healthy 

offerings. Soprole, a Chilean dairy company, produced a commercial that features 

child newscasters explaining the label system in a way their peers can understand. 

"Originally we didn't believe the logos would make much of a difference but in 

focus groups, we've discovered that kids really do look at them," said Dr. Camila 

Corvalan, of the University of Chile who has been assessing the impact of new 

label system. "They'll say 'Mom, this has so many logos. I can't bring them to 

school. My teacher won't allow it." 

Soon after the labels began appearing, AB Chile, the industry association, released 

an online ad using Chilean celebrities to attack the new regulations. In one scene, a 

well-known television presenter propped up in his putative sick bed considers a 

tray of soup, crackers and marmalade - items he said the new law has deemed 

unhealthy. "This is what my mom gave me all my life and I can no longer eat it?" 

he asks indignantly. In another, an actress pulls a mound of mints from her 

pocketbook. "It's obvious that they are high in sugar," she says. "But I only eat 

two or three." 

Pedro Cortes gets help to try and control his weight with help from Katherine 

Vasquez, a nutritionist at the Vida Sana program. Credit Victor Ruiz Caballero for 

The New York Times 

The ad prompted a fierce backlash online that went viral. In one counterattack, the 

Chilean actor Pablo Schwartz posted a video of himself pondering a mound of 

white powder. "Everyone says cocaine is bad, of course, but would you snort a 

quarter kilo at once?" he asks before inhaling a bump and then adding "It's all 

about portion." 

The association killed their ad criticizing the new regulations. 
33 


33807A.014

In the meantime, other countries in Latin America, among them Ecuador and 

Brazil, are seeking to borrow elements of Chile's initiative. Dr. Carlos A. 

Monteiro, a professor of nutrition and public health at the University of Silo Paulo 

in Brazil, said leaders throughout the region could no longer ignore the rising 

medical costs of diet-related diseases like diabetes and hypertension. 

"The epidemic of obesity is so clear and harmful to the whole population, 

including the political elite, and no country is succeeding to control it without 

regulation of the tood envirorunent," he said. "Doing nothing is no longer an 

option." 

Monitors from a nonprofit, Educaci6n Popular en Salud, giving information on 

healthy and cheap food to the residents of the low-income El Bosque neighborhood 

of Santiago. Credit Victor Ruiz Caballero for The New York Times 

Matt Richtel contributed reporting from New York, and Pascale Bonnefoy from 

Santiago. 

Follow @NYTHealth on Twitter. I Sign up for the Science Times newsletter. 

NYT: A Nasty, Nafta-Related Surprise: Mexico's 

Soaring Obesity 

Few predicted when Mexico joined the free-trade 

deal that it would transform the country in a way 

that would saddle millions with diet-related illnesses. 

By ANDREW JACOBS and MATT RICHTEL, DEC. II, 2017 

SAN CRIST6BAL DE LAS CASAS, Mexico - William Ruiz Sanchez spends 

his days grilling burgers and slathering fried hot dogs with pepperoni and cheese at 

his family's restaurant. Refrigerators and fire-engine red tables provided by CocaCola feature the company's logo in exchange for exclusive sale of its drinks. 

Though members of the Ruiz family sometimes eat here, they more often grab 

dinner at Domino's or McDonald's. For midday snacks, they buy Doritos or 

Cheetos at Oxxo, a convenience store chain so ubiquitous here that nutritionists 

and health care advocates mockingly refer to the city as San Crist6bal de las 

Oxxos. 
34 


33807A.015

The phenomenon is not limited to Mexico. Research shows free trade is among the 

key factors that have accelerated the spread of low-nutrient, highly processed foods 

from the West, "driving the obesity epidemic in China, India, and other developing 

countries worldwide," according to the T.H. Chan School of Public Health at 

Harvard. 

But Jaime Zabludovsky Kuper, Mexico's deputy chief negotiator on the pact, said 

Nafta didn't cause obesity. Instead, he said, it lowered food prices and reduced 

malnutrition. Tn 2012, 1.6 percent of Mexican children suffered from severe 

malnutrition, a sharp drop from 6.2 percent in 1988, according to government data. 

Mr. Zabludovsky said that Mexicans had long been enticed by American food, and 

that high tariffs used to make it expensive, not unavailable. The economy is now 

more stable, he said, and Mexicans are living longer - which is partly why more 

people are dying fTom noncommunicable diseases Like diabetes and heart disease. 

"It's a symptom of relative prosperity," he said. 

The broader pros and cons ofNafta have come under increasing scrutiny given 

President Trump's threats to dismantle it. Among its chief champions are 

American farm and food-retailing interests whose fortunes have benefited 

tremendously &om the open market. Mexican exports to the United States have 

surged, and a more stable economic structure has evolved in Mexico. The 

country's unemployment rate has stayed mostly constant, but average wages have 

fallen to $15,311 in 2016 from $16,008 in 1994, according to the Organization for 

Economic Cooperation and Development. 

Critics ofNafta acknowledge the complex causes of obesity, but argue free trade 

intensified the problem by opening Mexico's largely isolated economy. 

In addition to dramatically lowering cross-border tariffs, Nafia let billions of 

dollars in direct foreign investment into Mexico, fueled the growth of American 

fast food restaurants and convenience stores, and opened the floodgates to cheap 

corn, meat, high-fructose corn syrup and processed foods. 

A school cafeteria in San Cristobal de las Casas. Soft drinks are prohibited, but 

many other high-sugar and high-calorie foods are available. Credit Adriana 

Zehbrauskas for The New York Times 

The surge in agricultural investment from the north modernized Mexican farming 

practices but it also displaced nearly five million people who worked on family 
35 


33807A.016

From Farm to Fast Food 

During a lull one recent evening at the their restaurant, Dogo Express, the mother 

of William and Gabriel, Maricela Sanchez Espino, 62, reminisced about her 

childhood. Her parents raised corn, zucchini, mushrooms, pigeons and rabbit, and 

the family ate what they grew. 

Her husband, Gabriel Ruiz Barbosa, 60, also grew up in rural Mexico. His father, a 

farmer and beekeeper, was murdered, and his mother made ends meet hawking 

homemade food. 

Mr. Barbosa studied agricultural engineering, but Mexico was moving away from 

its reliance on small family farms. 

Until the mid-1.980s, Mexico had been a protectionist, inward-looking economy 

but a financial crisis in the early 1980s spurred talk of free trade to stabilize the 

country, attract foreign investment and spur growth. 

Jn 1986, Mexico gained entry into the General Agreement on Tariffs and Tradethe precursor to the World Trade Organization - which lowered tariffs and 

relaxed rules on foreign ownership of companies. 

To its supporters, Nafta would complete the transition. "It was a change in the 

economic model," said Mr. Zabludovsky, the deputy chief negotiator. "We started 

to seek the advantage of the geographical proximity to the United States." 

The agreement removed hurdles to cross-border investment and fully eliminated 

Mexican restrictions on foreign majority ownership in Mexican companies. The 

United States, Canada and Mexico became an open trading bloc. 

Mexican expotts of fruits and vegetables to the United States soared; enormous 

quantities of the raw ingredients of processed foods flowed in the other direction. 

Last year, more than half the agricultural products exported from Mexico to the 

United States were fruits, vegetables and juice, while these foods made up only 7 

percent of what the United States exported to Mexico, according to the United 

States Department of Agriculture. 

United States exports to Mexico have been dominated by meat, soybeans and com. 

The average annual value of grains crossing into Mexico jumped to $4.7 billion in 

2016 from $897 million before Nafta. Pork and beef exports also surged during the 
36 


33807A.017

They are in good company. A study published in 2015 found that Mexicans 

bought, on average, 1,928 calories of packaged food and beverages a day, 380 

more calories than in the United States and more than people in any other country 

tracked by Euromonitor International, a market research firm. 

While the causes of obesity are complex - involving genetics, lifestyle changes 

and other factors - multiple studies have linked weight gain to consumption of 

processed foods high in salt, sugar and fat that are staples of retail giants. 

In 1991, as negotiators hammered out Nafta's details, Walmart made its first 

foreign investment by partnering with Mexico's largest retailer, Cifra. 

In 1997, Walmart paid $1.2 billion for a controlling stake in Cifra. Walmart is now 

Mexico's largest food retailer. 

Oxxo is second in grocery market share. It is also the largest convenience store 

chain, with a 75 percent market share, according to Euromonitor. 

Although Oxxo is owned by Femsa, a Mexican company, it has significant outside 

investment. In 1993 Coca-Cola purchased one-third ofFemsa's soft-drink unit for 

$195 million, not long after PepsiCo had announced it would spend $635 million 

to expand in Mexico. Then, in 1994, the Canadian brewing company Laban 

invested $5 10 million in Femsa's beer business. 

The money gave Femsa capital to buy down debt, helping it grow. 

"Money flowed south. It's one of the reasons the growth of these foods is so fast in 

these countries," said Corinna Hawkes, director for the Centre tor Food Policy at 

City University London and an expert on trade policy and nutrition. "Oxxo is 

exactly the kind of thing we're talking about." 

Left, a cookie truck parked by a Burger King restaurant in San Cristobal. Right, 

pizza and soft drinks for lunch at a Sam's Club cafe. 

Credit Adriana Zehbrauskas for The New York Times 

Such products are core to Oxxo's success. In its 2003 annual report, for example, 

Femsa boasted that Oxxo had become "the largest vendor of beer and soft drinks, 

as well as telephone cards, cigarettes and bottled water." 
37 

f 


33807A.018

"American food and productS dominate our lives," said Mr. Gonzalez, who is also 

diabetic. "Everyone is sad about the changes but, at the same time, we still go to 

Sam's Club and McDonald's." 

The Ruiz family shared his sentiments. 

"I know this stuff is bad for me, but I can't stop," Gabriel Ruiz Barbosa said, 

glancing at a tray of McDonald's sundaes his son was carrying into the restaurant. 

"My cardiologist says I should look after myself but I'm very stubborn." 

His son drinks Coke compulsively and suffers from high blood pressure and achy 

joints. "1 'm afraid that one day I'm going to have a heart attack and die," he said. 

The family has mixed feelings about open trade. Their tenuous prosperity is buill 

on selling food from the United States, and their diet is both sustenance and curse. 

"Look at us," the elder Mr. Ruiz said, as he sheepishly polished off the remains of 

a chocolate sundae. "We're all educated people but we're hooked." 

Photo 

William Ruiz in San Cristobal. Obesity has tripled in Mexico since the early 1980s, 

but malnutrition has declined sharply. Credit Adriana Zehbrauskas for The New 

York Times 
38 

Mr. DOGGETT. Thank you. 

I am sorry, Mr. Reichert. 

Mr. REICHERT. That is okay, Mr. Doggett. 

Ambassador, thank you for being here today, and welcome to Jeffrey and C.J. I look forward to working with all of you and your 

team. 

I know that you and I have a few shared priorities, including 

successfully updating NAFTA and combatting unfair trade practices, and just I want to continue to work with you to accomplish 

both. In doing so we should build upon our work done during tax 

reform to boost the competitiveness of American workers and businesses. 

Even though I am very appreciative of your, as some have defined, unconventional approach I still have concerns about several 

actions that have been taken by the Administration that I believe 

could undermine the good work that we have accomplished through 

the tax reform effort. To successfully update NAFTA our farmers 

and manufacturers require certainty. I know you are keenly aware 

of that and accountability. They need to know their investments 

will be protected and the agreement will be enforced. They need to 

know that they can rely on this agreement. 

In targeting unfair trade practices we must take a targeted approach and work in cooperation with our global partners. We cannot take actions that put our consumers, manufacturers, and exporters at risk. 

I am deeply troubled by the questions that remain with Section 

232 exclusion process and the possibility of tariffs from Section 301 

investigation. It is American manufacturers and consumers that 

will be hurt by an ineffective exclusion process and the placement 

of tariffs on imports. 

I implore you to think about my constituents, for example, the 

family in Maple Valley who will face higher prices, the manufacturer in Auburn who will pay more or will lose access to imported 

parts, and the apple exporter in Wenatchee who will suffer from retaliation. 

We must also begin to focus on opening markets. As our trading 

partners move forward without us our farmers, workers, and businesses fall behind. Whether it is dairy, wine, potatoes, wheat or 

tree fruit, Washington’s producers will lose market share to their 

foreign competitors without new trade agreements. 

Trade agreements ensure Washington’s businesses are treated 

fairly and can sell their high quality products around the world. I 

believe the U.S.-Korea Free Trade Agreement is an example of a 

successful agreement for America and for the State of Washington. 

I do agree with you, however, that Korea’s implementation of the 

agreement has been disappointing and that any remaining issues 

related to Korea’s implementation need to be resolved quickly. I am 

glad to see the KORUS Committee system being used for this purpose. Of course the downside to using the joint Committee is that 

there is less transparency surrounding these discussions, and 

maybe with Jeffrey and C.J.’s help we can lend some transparency 

to the process. 

So I recommend and would strongly suggest, Mr. Ambassador, 

that USTR publish detailed negotiating objectives in KORUS to 

39 

signal to the public the changes that you are seeking within that 

agreement and those talks. 

Can you comment on the transparency of the process and maybe 

providing those detailed negotiating objectives? Do you have a 

timeline on that? 

Ambassador LIGHTHIZER. Well, first of all, I agree that 

KORUS is an important agreement. On the issue of transparency 

I guess I would say since we’re not using TPA we don’t have that 

statutory umbrella. What I’ve tried to do is to the extent possible 

talk to Members, and I’m happy to talk to any Members individually or in groups to talk about this. It’s not always a good idea 

to talk openly about negotiating objectives and certainly negotiating tactics. 

But from the point of view of the United States we are troubled 

by implementing a whole variety of implementing issues. We are 

troubled by the speed with which some tariffs are going to come off 

on important products in the automotive industry but also in others. We have issues with currency. We have a variety of issues. I’m 

happy to talk to Members about this. In terms of publishing something it’s probably unlikely that I am going to do it. My hope is 

what we will do is talk privately to Members and have some kind 

of an agreement in principle quickly. 

My objective is to try to do this as quickly as possible with as 

little disruption as possible, and it really is why we decided we are 

better off limiting what we were going to do, not go through the 

TPA process and overload the system and just try to work with 

Members and deal with this on a smaller level and a smaller way 

than a normal big agreement would be. 

But to the extent Members view themselves as not knowing what 

our specific objectives are I’m happy to talk to the Members and 

look forward to doing that, and my hope is this is a process that 

comes to a conclusion fairly quickly because I think it’s having negative effects in a lot of different ways. 

Chairman BRADY. Thank you, Mr. Ambassador. 

Mr. Thompson, you are recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. Ambassador, thank you for being here this morning and taking our questions and hearing our concerns. 

Mr. Ambassador, I am pleased that you acknowledge not only my 

colleague Mr. Nunes’ issue regarding dairy but also went on to talk 

about other agricultural problems: eggs and poultry. 

I want to ask you, though, about the U.S. wine exports because 

they continue to face some highly burdensome trade barriers in 

Canada. Canada’s discriminatory policy in British Columbia, Ontario, and Quebec are restricting market access for American wine, 

and giving Canadian wine producers a real competitive advantage 

against us. 

As you know—you and I have talked about this before, USTR requested WTO dispute settlement consultations with Canada on the 

British Columbia matter last year, but that really hasn’t yielded 

any resolve or any benefit. And since then, Australia has also 

launched its own complaint on discriminatory practices affecting 

Australian wine exports. 

40 

In addition to that, we have another agricultural problem with 

China. That is our ongoing effort to get exported U.S. rice into the 

Chinese market. For 10 years, we have been trying to find some 

equitable resolve to that issue. We have had promise after promise, 

but still those markets haven’t been open to us. 

So I would like to know what it is you are doing to make sure 

that U.S. wine exports are treated fairly in Canada and what you 

are doing to make sure that U.S. rice exports are treated fairly in 

China. 

Ambassador LIGHTHIZER. Thank you, Congressman. 

I would say, first of all, the wine problem is exactly as you say: 

it’s just rank protectionism at the provincial level in Canada. And 

it is something that, in fact, is spreading. 

As you say, we brought a WTO case against them. WTO cases 

take time, and we’re in the process of aggressively litigating that 

action. 

Having said that, we are far better off trying to resolve this issue 

in the context of a NAFTA negotiation. It’s more likely to have a 

near-term solution that is satisfactory to the industry. 

So it is something that we are negotiating on. Our hope is, with 

respect to that, we can see improvement in the NAFTA talks. 

Mr. THOMPSON. Other than telling us that you are working on 

it, are there any specifics? Is there any progress that you can report? 

Ambassador LIGHTHIZER. Well, it’s one of these issues that— 

and there are a number of them in this category—you won’t know 

whether you’re making progress until you get to the end. 

If you look at the kinds of issues, generally, it’s the tough 

issues—it’s IP issues, and it’s agriculture issues—that are sort of 

brought together at the end of an agreement, because no one is 

going to say they are going to do anything in that area. 

So you go through and you make progress in 30 or 33 chapters, 

and when you get to the ag one, there’s just no progress. You talk 

it through, and the reason is that no one is going to make any concessions here, other than as part of a final agreement. 

Having said that, I believe we will make headway in this area. 

Mr. THOMPSON. How about China and the rice? 

Ambassador LIGHTHIZER. Well, on China and rice, we have two 

WTO cases, as you know, on China and rice. It’s another example 

of both, on the subsidy side, but also on the market access side, 

they are not doing what they, in our judgment, are obligated to do. 

We’re pursuing those, and we’ll retaliate. We’ll do whatever is required. There are limitations on the WTO process to solve these 

kinds of issues, and you are seeing it just heads up in the issue 

of all of those products. 

Mr. THOMPSON. Well, I guess it is certainly frustrating to have 

been trying to deal with this for quite some time now, and even 

more frustrating now to hear that we don’t know until we fix it. 

As I point out, the China problem with the rice has been going on 

for 10 years. The wine issue has been going on for quite some time 

too. Both, in my view, are pretty obvious and pretty blatant violations. 

I guess I would like to hear more about what we can expect. And 

if things start to go better in your negotiations, if you could let us 

41 

know, if you could circle back and let me know how that is going, 

I would appreciate it. But, to date, it just doesn’t look like we are 

making much progress. 

Ambassador LIGHTHIZER. On the wine thing, I’m happy to talk 

to you. 

On the rice and other WTO issues, that’s a difficult process. It’s 

a slow difficult process, which is seriously flawed. 

Chairman BRADY. Thank you. Your time has expired. 

Mr. Roskam, you are recognized. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Ambassador, just a personal word and then two questions. 

The personal word is: I appreciate the candor with which you approach things. My wife tells me that the older I am getting, the 

more direct I am becoming. I find your ability to engage us on 

these things really refreshing. I am not trying to embarrass you, 

but I just find it refreshing. 

Two questions. Let me give them both to you, and then if you 

could just respond, I would appreciate it. 

The first is, shifting gears on 232, and press is reporting—and 

I don’t need you to comment whether this is true—but they are 

saying: Well, there is all this criterion by which you are evaluating 

these country decisions. And they are all rational, as far as I can 

tell. You know, a country’s participation in other questions as it relates to trade and so forth. 

Here is my question: With Ukraine, for example, are you considering the strategic interest of the United States as it relates to 

changes for Ukrainian steel? Ukraine is in a situation under incredible pressure and incredible duress. It is a country that has 

been invaded by Russia. We have sanctions on Russia. You know 

the whole story. So is there a national security element to your 

consideration? That is question number one. 

Then shifting gears entirely, question number two is, as it relates to catfish—this is not an unfamiliar issue to you—we have a 

situation in the United States where there is double evaluation. 

USFDA has a program, and Ag has a program. It is pretty ridiculous. And there is a number of us that are trying to correct that. 

So my question is, can you speak to how the catfish issue, in particular, has an impact on the negotiations? 

Ambassador LIGHTHIZER. Let me say with respect to the first 

element, I’ve outlined—and we didn’t put it on our website. We find 

that if we say something to anyone, it is in the paper. So it saves 

the issue of having to actually type things on your website. Everything becomes public in 5 minutes. We have criteria, and one of the 

elements, of course, is the national security interest of the United 

States. So we do have that as an issue. 

The final criteria is that the President makes that judgment. 

And that’s a kind of a broad decision on his part. He defines national security in the conventional way, but also more broadly, as 

affecting U.S. economic security as part of national security. You 

will see that is a theme that runs through the National Security 

Strategy. It’s run through our trade agenda, and it’s run through 

the entire Administration. National security is defined broadly, and 

the United States can’t defend its allies or itself unless it has a 

strong economy. So that’s something the President has broadened. 

42 

The issue of the Ukraine, specifically, there clearly are national 

security issues why that would be a consideration. I would say the 

likelihood at this point right now is that we’re starting to focus 

more on trade and economic issues once you get below a threshold 

of national security interests. And, of course, it’s clear that the 

Ukraine meets that threshold, but there are a lot of other issues 

that are probably more difficult for them to do it. So I guess that 

answers that. 

On the question of catfish, catfish is a problem in our trade negotiations in some areas. We do have a complicated regulatory process in the United States. We’ve had cases involving people critical 

of our system as being basically a protectionist system. On the 

other hand, we do have a situation where, in some other countries, 

there are legitimate health issues. So it’s kind of a complicated 

issue. It is one that we are familiar with. I would be misleading 

if I suggested it rose to the level of some of these other things. But 

to the extent it does for you, then it does for us, and we’re happy 

to work on it. And to the extent we can have influence on your effort to sort your way through this to try to clean it up, we’re happy 

to have our people do it and to work with you on it. 

Chairman BRADY. Thank you. 

Mr. Larson, you are recognized. 

Mr. LARSON. Thank you, Mr. Chairman. 

And thank you, Ambassador. 

Along the same lines with respect to section 232, with regard to 

aluminum tariffs, but, perhaps, as seen through the eyes of people 

downstream who are impacted, now, I represent a district that 

hails many manufacturers—including Pratt & Whitney, Hamilton 

Standard, Sikorsky, Command, General Dynamics—and, throughout the State of Connecticut, precision manufacturers to downstream people who will be impacted and have grave concerns about 

the impending tariffs. 

One such manufacturer, Jarvis Airfoil, in my district, makes 

compressor and turbine blades for jet engines. They were asking 

me this recently about what can they expect. And here is the questions—and I couldn’t agree more with Mr. Roskam about your candor and your ease of going through a number of these issues—but 

from their perspective not only is—and I appreciated the national 

security interests when you talked about what is the criteria for exempting countries—but what is the timeline for exempting countries, and what type of alternative arrangements are you seeking 

from those countries? 

And I say that in perspective of this perspective. Do you plan on 

making these decisions on all the exemptions by the time the tariffs go into effect, which, if I understand it correctly, will be Friday? 

And so you can imagine the intensified concern that creates about 

that large supply chain, not to mention, of course, the manufacturers themselves, in general. I am wondering if you might give us 

more clarity on that. 

Ambassador LIGHTHIZER. Yes, sir. 

First of all, these matters are a balance, in terms of the consumer impact and the producer impact. This is something the 

President and people in the Administration have tried to balance. 

43 

In terms of the aluminum, generally, it’s a pretty clear case that 

the U.S. industry is under assault and is really close to being completely destroyed. Ninety percent of the primary aluminum is coming in through imports. It’s a very, very serious problem. That’s not 

in any way to minimize the effect it is having on consumers. That 

is what the President tried to do with balance. 

In terms of the timeline, our hope is to get these things resolved 

by the end of April. 

Mr. LARSON. So I am to assume from that, with respect to making decisions on all exemptions, by the time tariffs go into effect on 

Friday that would not be the case, you are shooting for April? 

Ambassador LIGHTHIZER. That is correct. 

So there will be two categories of countries. And setting aside— 

your constituent may very well have a product exclusion issue—so 

setting that—I am sure he knows that. He’s doing whatever he is 

going to do, and he may very well not have a problem on that. 

Mr. LARSON. I will submit that to you in writing, and, if you 

can respond on that, I would appreciate it, that specific concern. 

Thank you. 

Ambassador LIGHTHIZER. And that’s important. That’s being 

done at the Department of Commerce. But we will certainly be a 

part of the process to the extent it helps your interest. 

So, in terms of the countries, you’ll have a certain group of countries, I believe. Now, once again, there has no decision, and there 

is no decision until the President makes a decision. As far as I am 

concerned, when he signs something, there’s a decision. 

But there are certain countries—the principal examples, of 

course, which would be Canada and Mexico—where during the 

process of this negotiation of trying to decide whether they’re going 

to get out of this—and I should say ‘‘get out’’ means they can’t be 

in a position where they get out and take advantage of all the benefit. It doesn’t go to U.S. producers, so there ought to be some limitation on their own shipments, but, presumably, not one that’s a 

problem. 

During the course of that process, with respect to certain countries, the tariffs will not go into effect. That’s how I envision it. 

Now, whether this happens is up to the President. But I envision 

it, during the course of this negotiation between now and the end 

of April, that those countries do not see their tariffs go into effect. 

There are other countries who think they should be excluded 

that it will go into effect, and it will go into effect on Friday. For 

those people, there’ll be more of a disruption. 

But in terms of access for your constituent, I don’t think you are 

going to see an enormous shortage of aluminum. Now, once again, 

I am not an economist, and we can all make our own guesses. But 

you’re going to have a variety of countries—in the case of aluminum, the very fact you’re negotiating with Canada is enormous, 

right, because they are such an important supplier. And the other 

countries I also mentioned, those countries will not see an increase, 

as I believe this will work out. 

But with respect to the others, you will see a 10-percent tariff increase as of Friday. 

Mr. LARSON. Thank you, Ambassador. 

Chairman BRADY. Thank you. Your time has expired. 

44 

Mr. Buchanan, you are recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman. 

And thanks, Ambassador, for being here today. I am excited to 

see you get some of your team put together. It has been a while, 

so it is great to have that. 

Like many of us, I have two situations in our district that I 

would like to have you just give some thought to in terms of 

NAFTA, one good and bad. But, kind of like the Chairman, my 

sense is I want it to be whatever we do pro-growth for the United 

States and jobs. 

But one company is Tropicana. It was founded in my district in 

the Manatee County, Bradenton area. It creates over 1,000 jobs. It 

was acquired by PepsiCo. But, in terms of NAFTA, it has been good 

for them and good for their industry, in terms of eliminating tariffs. So that is one thing I would like to have you just talk about 

a little bit: Tropicana. Basically, they are, as you know, an orange 

juice business. You can’t imagine Florida without orange juice. 

And let me just mention, also, on the second scenario, as you 

know, we have pretty much the same growing season as Mexico 

does. So, in terms of the second situation, unfair trade practices, 

a lot of people feel, in Florida, as it relates to tomatoes, strawberries, and peppers, it has cost that industry, that business, about 

$2 billion a year, $1 billion to $3 billion, in terms of unfair trade 

practices. 

So I would like to have you take a minute to address both of 

those, as quickly as you can, because I have one other question. 

Ambassador LIGHTHIZER. I’m not very good at the quick part, 

but I’ll try to be quick. 

Mr. BUCHANAN. I will let you know. 

Ambassador LIGHTHIZER. First of all, of course, there’s a big 

advantage in—I mean, one of the principal advantages in NAFTA 

is the reduction in those tariffs. I’m not sure exactly which tariff 

we are talking about and what the numbers are. But the reality 

is that if we end up with a successful agreement, the tariff benefit 

will be preserved. So I think that will probably be less of a problem, and it’s more in favor of them saying: We want to get NAFTA 

through. That’s a provision that I am aware of. 

The seasonality provision is an important, significant, and controversial provision. So I start with the proposition that with all 

the great things of sales in Mexico of agriculture products—and 

there’s a lot, whether there is $18 billion or $19 billion worth of 

sales by the United States in Mexico of agriculture products—the 

reality is that we have a trade deficit with Mexico on agriculture 

products. A good part of that are exactly the ones that you’re very 

familiar with. 

So the idea is that these producers, even if they are victims of 

unfair trade, can’t take advantage of the unfair trade laws because 

they really weren’t constructed to deal with products that are perishable. So the idea is to put in place some kind of a provision that 

shrinks the amount of time you look at, in terms of calculating 

dumping margins and injury so that these products—if you spread 

it out over a year or over three years on injury, are always going 

to lose—you give them a shot at proving unfair trade. That is the 

45 

nature of the proposal. It is extremely controversial with respect to 

a variety of people who don’t like it. 

Mr. BUCHANAN. We will take some time a little bit later and 

talk a little bit more about that. 

Let me just hit you quickly on, because you got some of your 

team here, your new team, is on TTIP. There was a lot of work 

that I think, or let’s say some work, that was being done by the 

last Administration in terms of Europe. And the thought is there 

we have a lot of the same values, a lot of the same background; 

it seems like it makes a lot of sense, and it is a real opportunity 

for America. Especially as you look at wages and benefits, there are 

a lot of comparable things with the United States. And, overall, it 

has been pretty fair both ways. So maybe you can comment on that 

now that you have a little bit more of your team in place. 

Ambassador LIGHTHIZER. Well, thank you. I will. 

It is something that we have looked at. Clearly making headway 

with Europe is a top priority. We have with the European Union 

a $150 billion trade deficit. After China, it’s literally our biggest 

problem. And it is, basically, Germany, 60; Ireland, 38; Italy, 30; 

and France, 15; and then everyone else we are basically, more or 

less, in balance with. So it is a problem. 

Making headway in that area is very important. It is something 

we are looking at. They’re a little bit in flux right now. But I think 

making headway on Europe is a high priority. It’s clearly something the President wants to do. Whether it is in the form of TTIP, 

which some people think is more cumbersome than we need, or in 

another form, your point is one that we completely endorse and 

think that we have to make headway on that front, and I believe 

we’ll make headway. 

Mr. BUCHANAN. Thank you. 

I yield back, Mr. Chairman. 

Chairman BRADY. Thank you, Mr. Buchanan. 

Mr. Kind, you are recognized. 

Mr. KIND. Thank you, Mr. Chairman. 

Mr. Ambassador, thank you for your time here today. I really appreciate it. 

Just a word of advice. When it comes to KORUS renegotiation, 

or however you want to call it, it is much better to have Congress 

with you on the takeoff rather than just the landing. We know that 

we are getting into sensitive discussions with them, but there have 

been many businesses in my district that have benefited under that 

agreement, too, and they are getting nervous about where the stage 

of these talks are going. 

And, secondly, I am all for NAFTA modernization and bringing 

it into the 21st century. The global economy has changed. I am all 

for aggressive enforcement of our trade agreements, 301 or otherwise. 

What I have a problem, with and what I hesitate about, is this 

go-it-alone attitude with this Administration in trying to promote 

a trade agenda by further isolating ourselves. America First does 

not mean America alone. There is a huge benefit to having friends 

and allies around the globe that we can work with in order to establish a trading system that works for all of us at the end of the 

day. 

46 

Either this President, or this Administration, has conveniently 

forgotten, or maybe never learned, the lesson of our preeminence 

since the Second World War. It was not only our military strength, 

but it was our willingness to take the lead in shaping a rules-based 

global trading system with countries across the globe with shared 

values. 

By isolating us and by demonizing many of our friends and allies 

with a broad scope of retaliatory action, I think makes our trade 

agenda that much more complicated. I am worried about the potential for retaliation when it comes to the steel and aluminum tariffs. 

I think the whole approach to that was ill-considered. It was chaotic. It was confusing. Now we are going on a business-by-business 

exemption basis. And now we are going to allow some of our 

friends and allies to apply for exemptions without clearly defining 

criteria. 

And I hope this Administration is thinking about what plan B is 

going to look like if there is retaliatory action taken against us. 

Back home in my State, in Wisconsin, my dairy farmers’ backs are 

up against the wall. If we lose market share down in Mexico, that 

could destroy our dairy industry in this country overnight because 

of the number one export market being taken away from us. That 

could cause a lot of problems in the heartland of our country. 

And dealing with steel and aluminum, for every job that is involved in steel or aluminum producing in this country, there are 

200 jobs that are involved in consuming this material. As we 

learned from the 2002 steel tariff case, which was quickly rolled 

back under the Bush administration, the unintended consequences 

can be pretty severe for many workers and for many businesses 

and industries throughout our country. So I ask you to consider 

that as we move forward, including the 301 approach to China, and 

what type of action they could take against us. 

But what troubles me, perhaps, more than anything today, sitting here, is this love affair that our President seems to have with 

Vladimir Putin. And I come to a very fearful conclusion that the 

President of Russia owns the President of the United States. That 

manifested itself in a telephone call yesterday, where the President 

called to congratulate Vladimir Putin on a completely bogus and 

fraudulent election and then failed to even raise the issue of a 

chemical weapons attack on one of our allies’ soils—Great Britain— 

and failed to raise the issue of Russia’s direct meddling in our 

democratic process as a Nation. 

And so it leaves us scratching our heads, just what is going on 

with this President and this Administration in our relationship 

with Russia. We passed enhanced sanctions last year, almost 

unanimously, through the House and the Senate, only to see it sat 

on with the Administration for months before any action was taken 

with it. And that was problematic and very troubling as well. 

And, right now, I couldn’t think of Vladimir Putin having a better straw man occupying the Oval Office, given all the missed opportunities that this President has passed up when it comes to 

standing up and defending our values and our strategic interests 

throughout the globe against Russia, who is not our friend, and 

they are not our ally, and yet somehow the President misses this 

important ingredient. 

47 

So I was just wondering whether you were part of the economic 

team involved in the application of sanctions against Russia that 

was passed almost on a unanimous basis last year by this Congress 

and why it took so long before any action was taken on it. 

Ambassador LIGHTHIZER. Thank you, Congressman. 

I only have 18 seconds. So I’ll just say: With respect to the stuff 

you are talking about on trade, yes, we’re worried about retaliation, 

and, yes, we don’t want to go it alone. And with respect to all this 

Russian stuff, I completely disagree with every single thing you 

said. 

Mr. KIND. Were you a part of that decision, as far as the application of sanctions? 

Ambassador LIGHTHIZER. I’m the U.S. Trade Representative. I 

do trade work. I don’t do sanctions work. It has nothing to do with 

me at all—not for 5 minutes in my entire life. But I appreciate you 

bringing it up. 

Chairman BRADY. The gentleman’s time has expired. 

Mr. Smith, you are recognized. 

Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman. 

Thank you, Mr. Ambassador, for your time here today, as we 

have very important discussions, whether it is NAFTA, whether it 

is KORUS or whether it is various trade issues that we know are 

important to American producers, particularly Nebraska ag producers. That is my focus. But we know that consumers live in every 

one of our districts, obviously, and we always want to be mindful 

of that. 

As it does relate to agriculture—and certainly I have expressed 

to you and I have expressed to the President, as well—that as we 

modernize our trade agreements—certainly I appreciate that—if we 

could also, obviously, do no harm to those areas we have done particularly well with, namely agriculture. Energy has been discussed, 

as well. 

Forty-five percent of Nebraska’s agriculture exports go to Canada 

and Mexico. So it is no surprise that NAFTA is important as we 

do move forward. And I just continue to strongly urge you to keep 

this in mind of how important these exports are, especially as I can 

appreciate the need to close the gap, the trade gaps that do exist. 

One thing, agriculture exports do help us on narrowing those gaps, 

and I hope that we can continue to expand our international reach 

and expand international markets for agriculture. 

Briefly, the President touched on the possibility of reengaging 

the countries in TPP. I have two questions. That would be one of 

them, is if you could elaborate, perhaps, or reflect on the potential 

of reengaging a TPP that, as you know, has moved forward without 

the United States. 

And then, also, the President has touched on the bilateral trade 

agreements that he would like to pursue, perhaps. And if you could 

also reflect on that and how we might be able to utilize that moving forward, whether it is with Japan or other countries, that we 

would like to see more exports of U.S. products heading in those 

directions. 

Go ahead. 

Ambassador LIGHTHIZER. Thank you, Congressman. 

48 

First of all, we appreciate your intervention on this issue of the 

importance of agriculture. We completely agree with it. Not only 

have you raised it repeatedly here, but in all other contexts. It’s 

very important to us, both in terms of the consequences of our 

other action on agriculture, but, more importantly, probably, using 

the trade agenda to promote agriculture. 

So we sit back and we talk about the fact that we have, whatever 

it is, $140 billion worth of agriculture sales. In most of the markets 

we go into, we could sell vastly more. And we’re really facing protectionism. I mean, Europe is a good example, and China is a good 

example. There is enormous, enormous opportunity. And a lot of 

things that we design, we design with that in mind. So agriculture 

is important. It’s crazy to sit back and be defensive in agriculture, 

however, because the reality is we’re being stopped in a lot of 

places from just local political pressure creating protectionism. 

On the issue of TPP, I guess I would say the following: It’s complicated to get in and renegotiate that. But if you analyze TPP, you 

have 11 countries in TPP. With respect to six of them, right now, 

we already have a free trade agreement. So the idea of upgrading 

that and getting those in a position where you think that what you 

want is fine. 

With respect to the other five, by far, the most important is 

Japan, which we already raised. I don’t know what the total 

amount is. Japan is maybe a $5 trillion economy. I bet all the rest 

of them together weren’t $1 trillion. Because the next biggest one 

is Malaysia, which is just over $300 billion. And then Vietnam is 

the next one after that. 

So I am saying, of the five, if you got an agreement with Japan, 

you’ve essentially solved the whole problem. Certainly, if you got 

one with Japan, Vietnam, which some people have suggested, or 

Malaysia, you have basically taken care of 95 percent of what is 

outside of the United States albeit right now that’s in the TPP 

sphere. 

I think when people think about TPP, sometimes they think of 

it as something that we are not a part of. We already have FTAs 

with six of these countries—not to say that they can’t be improved, 

and they should be improved. 

But the way I analyze it, I say, number one, you have a problem 

because you want to work it out with Japan, because they’re, by 

far, the biggest economy in the world, and by far the biggest of 

those. And then somebody has to sit down and decide, do you allocate resources to Malaysia, or do you allocate resources to Vietnam? And there are reasons for that. You can argue all of them. 

And our view is that is the job this deputy has to do. We have to 

come to grips with that. Japan is clear, but the next tier we have 

to kind of get to that, and we have to get the opinion of this Committee. 

Chairman BRADY. Thank you. The gentleman’s time has expired. 

Mr. Pascrell, just a reminder, after your questioning, we will go 

to two to one, so we can balance out the rest of the hearing. 

Mr. Pascrell, you are recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

Thank you, Mr. Ambassador. 

49 

I think it is clear, after Montreal and Mexico City, and thank you 

for your indulgences up there, that we are approaching, I think, a 

culminating part of the negotiations. That is my judgment. We 

have a lot of tough issues to address. I quickly went through the 

document that we are supposed to be talking about today. Part of 

it is NAFTA. 

Some of your NAFTA proposals have really challenged the status 

quo of U.S. trade policy and I think have been creative in trying 

to make the agreement work for the many and not just the few. 

All the boats have to rise. And I have confidence, still, that you are 

working to ensure the labor chapter of NAFTA is fully enforceable, 

building on the strength of the May 10th agreement as a floor and 

not a ceiling. And I want you to interrupt me if I say something 

that is not in place. Please feel free to do that. 

Enforceable labor standards alone will not entirely solve the key 

driver of outsourcing under NAFTA. We all know that. 

For 25 years, Mexico has engaged in a purposeful strategy of 

labor and wage suppression in order to attract investment at the 

expense of the United States and the expense of Canadian workers 

in ways that have expanded poverty for Mexican families instead 

of—the record is clear on this, the numbers are clear—building a 

middle class market for U.S. exports. 

You identified in the trade agenda report—you identified. You 

said this: Since NAFTA went into effect, the gap in Mexican wages 

and labor productive with the United States has widened. The 

OECD, the organization that we know about for many years, reports that the average annual wage in Mexico fell from $16,008 in 

1994 to $15,311 in 2016, unquote. 

I met with the workers in Mexico City just a few weeks ago because reading about it and looking at statistics is very different 

than hearing anecdotal stories about actual situations that are tangible. And no Democrat and no Republican can deny these. 

They are in the auto parts factory, many of them, and were making less than a dollar an hour. No options to bargain for better 

treatment. Both the labor rules in NAFTA and in Mexico—Mexico’s 

own labor law and practice—must be upgraded to make real 

changes for workers, both in Mexico and my district. 

Do you agree that Mexico has failed to live up to its obligations 

with respect to NAFTA’s labor side agreement, yes or no? 

Ambassador LIGHTHIZER. Yes. 

Mr. PASCRELL. So please explain how USTR is working to solve 

the problem of low wages in so-called protection unions, which you 

identified yourself—not I—you, in Mexico, and I agree with you 

wholeheartedly. How are we working to get this done? Explain. 

Ambassador LIGHTHIZER. I would say, first of all, that while 

wages have been stagnant—and that was not our expectation at all 

when we entered into this agreement. If you look at the way it was 

sold, it was clearly sold as wages go up in Mexico, they became customers for us and we get to sell a lot more stuff, and that has not 

happened. 

I would say, from the point of view of Mexico, it has created a 

lot of jobs, though—low-income jobs, in our opinion, but a lot of 

jobs. And a lot of those have been in the auto industry. And I 

would suggest many of those at the expense of U.S. jobs. 

50 

Mr. PASCRELL. And that is important, isn’t it, Mr. Ambassador, 

to understand the relationship between how low wages—I am putting it as simple as possible—in Mexico do affect jobs—can I at 

least finish what I am saying? 

Chairman BRADY. I am sorry, Mr. Pascrell, all time has expired. 

Maybe another Member can yield to you. 

Mr. PASCRELL. I don’t want anyone to yield. 

I am asking a question. Can I answer finish my question? 

Chairman BRADY. I am sorry, Mr. Pascrell. 

Mr. PASCRELL. Well, do you know what? That stinks. 

Chairman BRADY. Thank you. 

Mr. PASCRELL. You are welcome. 

Chairman BRADY. Ms. Jenkins, you are recognized. 

Ms. JENKINS. Thank you, Mr. Chairman. 

And thank you, Mr. Ambassador, for being here. 

I want to reiterate my support for the continuation of strong investor protections, like Investor-State Dispute Settlement in 

NAFTA. And I have grown concerned about reports to weaken, remove, or make protections optional. 

ISDS ensures U.S. investors in foreign countries benefit from the 

same process and due compensation rights that foreign investors 

enjoy in the United States under our Constitution. That sounds a 

lot like the reciprocity and trade deals that this Administration 

wants. 

Foreign investment by U.S. companies also creates and supports 

U.S. jobs. For example, the family farm and ranch operations in my 

district who depend on exporting their products to Mexico utilize 

Kansas City Southern Railroad to provide that vital link to reach 

these crucial markets. This cross-border infrastructure will not be 

possible without the $4.5 billion in Kansas City Southern invested 

in Mexico over the past 20 years. 

Additionally, when the House and the Senate last passed trade 

promotion authority, it established ISDS as a negotiating objective. 

So not including ISDS in NAFTA would be a direct rebuke to Congress’ explicit direction and could undermine critical support for a 

renegotiated NAFTA lacking such protections. 

Ambassador Lighthizer, I urge you to reconsider your position on 

ISDS. Continuing to include ISDS in NAFTA makes good policy 

and political sense. 

And to speak just a little more broadly, Ambassador Lighthizer, 

I can’t overstate the importance of NAFTA for the farmers, ranchers, and manufacturers in my district. In fact, about two-dozen 

county Farm Bureau members from eastern Kansas were just in 

my office yesterday to hammer this point home. They depend and 

rely on being able to sell to Mexico and Canada as though their 

livelihoods depend upon it, because they do. 

The message I received is the need for certainty that NAFTA 

benefits, which have allowed Kansas exports to surge, remain in 

place. This certainty is paramount to providing desperately needed 

assurance to all aspects of the Kansas economy. 

The small towns across my district that make up America’s agriculture heartland are depending on the Administration getting this 

modernization right and moving on to expanding into new markets 

and joining new trade deals. That is why I strongly support 

51 

NAFTA and why I encourage this Administration to follow through 

on its promise of doing no harm. 

With that, Mr. Chairman, I yield back. 

Chairman BRADY. Thank you, Ms. Jenkins. 

Mr. Paulsen, you are recognized. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

And thank you, Mr. Ambassador, for being here, and also for 

your work and progress on the NAFTA renegotiations, particularly 

in the area of regulatory practices, anticorruption issues, customs 

issues, and digital trade. Modernizing NAFTA with a digital chapter is essential, not only to protecting American innovation but also 

access to markets through e-commerce that many of our American 

products and services are sold from. 

But I have to tell you: The President’s decision to invoke a very 

little used 1962 law to impose these broad tariffs is creating a lot 

of uncertainty, and it does threaten to derail some of the economic 

gains and benefits that we have seen recently in our economy. And 

it seems like every time now that I speak to a Minnesota company, 

they have a lot of questions about some of this uncertainty to the 

current trade climate that we have. 

I usually begin the conversation by talking about the real economic benefits that they have already seen right now from the Tax 

Cuts and Jobs Act. And they tell me how they are investing more 

in new equipment, they are reinvesting in their employees, and 

that is a good thing. But then they also will talk about some of the 

bad news regarding the new tariffs and maybe pulling—the threat 

to pull out of NAFTA, for instance. 

There was one Fortune 500 company in Minnesota recently that 

produces engines and generators. They said that half of their economic benefit made by tax reform will be wiped out by the steel 

and aluminum tariffs that are being imposed. 

And it is not just large employers that are being impacted or putting these projects on hold now. We have small manufacturers and 

small businesses, like R&M Manufacturing that shared their 

thoughts with me directly, saying they are opposed to the steel and 

aluminum tariffs that are under section 232, saying it would be 

disastrous for them as well as other small metal-forming companies, because raising their prices means they are going to no longer 

be competitive, and they are going to get clobbered. 

So I support the President’s objective, and your objective, of really fighting for the American worker that needs that support in 

helping employees of U.S. steel companies. But some of those gains 

are going to be swamped by some of the larger losses that could 

be felt by much larger losses at metal-consuming companies and 

other areas across the economy if we have those retaliation tariffs. 

Economists now are saying, with the trade partnership, for instance, the study says, the United States would lose five jobs for 

every job created in steel and aluminum savings. And that is without retaliatory tariffs. If you take in retaliation, it could be a net 

loss of 18 jobs for every job gained, and it is not even close. That 

is 470,000 jobs. Most of those jobs are production. They are blue 

collar. They are exactly the type of jobs that I think you and the 

President are intent on protecting. 

52 

And I think we are on pins and needles with the upcoming potential announcement later this week because retailers like Best 

Buy in Minnesota are concerned about the upcoming section 301 

tariffs. And I am all for targeting Chinese intellectual property violations and holding them accountable, but let’s be targeted in what 

we want China to change and let’s go after that, because consumer 

electronics don’t have domestic production. 

And I hope we won’t be seeing tariffs imposed on products that 

a lot of American families and consumers and small businesses 

purchase every day. It wouldn’t make sense to raise the cost of a 

laptop for a college student or a couple of hundred dollars on a 

computer for a small business, for instance. I would say, I would 

ask: How is that going to help change the Chinese minds? 

And I know, in Minnesota, we have 800,000 jobs now that rely 

on trade. It is one of the reasons that we weathered the economic 

storm a lot better than most States: we have a lot of high-value 

manufacturing. And those jobs, by the way, pay a lot higher than 

average salaries. 

So let’s just not shoot ourselves in the foot. I don’t believe any 

country wins a trade war. I think all countries lose. And, Mr. Ambassador, I think every one of the companies I highlighted and I 

have heard from, they share the exact same goal that you have: to 

change China’s behavior. 

I just want to ask, would you be willing to meet with some key 

industry leaders or make sure some folks are sitting down and we 

continue to work together on solutions that are really going to be 

effective in that capacity? 

And I will ask some more followup targeted questions that are 

more specific in the written record, Mr. Ambassador. 

Ambassador LIGHTHIZER. Well, there’s a lot there. 

First of all, with respect to that trade partnership study, I 

haven’t looked at this one particularly. I’ve looked at those in the 

past. The accuracy of them is so slow that I wouldn’t let it keep 

me awake at night. That is not to say that the basic point that we 

have to balance downstream effects is very important, and we understand that. 

Nobody wins from a trade war. We certainly don’t want a trade 

war. On the other hand, you have to ask yourself, can we go on 

with an $800 billion, and growing, billion dollar trade deficit? 

There is only a handful of countries in the whole world that have 

a GDP the size of that. So we have to do something. 

And the people who are benefiting from the status quo are always going to be against it. And we understand that, and we have 

to balance their interest. But the reality is, if you are on a course 

that is unsustainable, you have to figure out something to change. 

Am I willing to sit down and meet with business people? I am 

happy to do that. And I would say I and my deputies do it every 

day. We have had an enormous amount of contact with business 

people, and I think it’s an extremely important part of what we do. 

Mr. PAULSEN. Thank you, Mr. Ambassador. 

Chairman BRADY. Thank you. The gentleman’s time has expired. 

Mr. Higgins, you are recognized. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

53 

Ambassador Lighthizer, what is your view of the U.S. trade relationship with Canada? Does the United States have a trade deficit 

or a trade surplus, in your view? 

Ambassador LIGHTHIZER. One of the great questions of all 

times. 

This is something on which I have spoken about for years. Here 

is the situation, and the numbers are all confusing, and when I am 

finished it will be appropriate to ask, ‘‘If you are not confused, then 

you are not paying attention,’’ all right, so you will be confused. 

Mr. HIGGINS. Quickly. I only have 5 minutes. 

Ambassador LIGHTHIZER. I’m sorry. But you can’t ask a 2-hour 

question. I’ll give you the shortest version of it. 

The fact is that, if you look at goods on a customs basis, yes, we have a $17 billion deficit with Canada. 

If you look at a customs basis, what does Canada say their sur- plus is, which should be the contrary, that turns out to be $97 billion. 

So Canada thinks on a customs basis, they have a $97 billion 

surplus with us whereas the number is somewhere in between. 

And what’s the cause? The cause is a lot of things. But the biggest 

one is it is products that come into the United States and go up 

to Canada, in many cases, we count them as a U.S. export, even 

though they are not U.S. exports. If they are duty free, they can 

just be trucked up there and have nothing. 

The Canadians, however, look upon it as an import from the appropriate country. Now, if you look at it on a balance of payments 

basis, then the numbers are different. 

And if you look at it on a customs basis for goods only at 17— 

and then people sometimes will say, what’s the services surplus, 

because we do have a services surplus—but on a customs basis, 

there is no services number, so you have to take a services number 

from another dataset. And if you do that and you use our number, 

then we have a small surplus. If you use that and use their number, we still have an enormous deficit. 

Mr. HIGGINS. Okay. Has the strong-arm tactics of the President 

as it relates to tariff threats, have they helped or hurt the negotiations? 

Ambassador LIGHTHIZER. Well, first of all, I don’t buy your 

premise. I don’t think there’s been any strong-arm tactics. I would 

be interested to know specifically what you are referring to. 

Mr. HIGGINS. Specifically, I am referring to tariff threats. In 

other words, the President in published reports has stated that he 

is issuing tariff threats against Canada and Mexico as leverage to 

get a better deal in NAFTA negotiations. It is pretty simple. 

Ambassador LIGHTHIZER. Oh, I see what you are saying. You 

are saying, does the 232 affect the negotiations? 

Mr. HIGGINS. No. I am saying, does the strong-arm tactics of 

the President threatening tariff threats help or hurt the negotiations? It is a very simple question. 

Ambassador LIGHTHIZER. Well, then the answer is I have seen 

no strong-arm tactics, so they’ve had no effect on the negotiations. 

Mr. HIGGINS. Ninety-three percent of the heroin seized by the 

United States Drug Enforcement Agency came from Canada—or 

from Mexico—81 metric tons of heroin today. The President has deVerDate Sep 11 2014 05:57 Mar 20, 2019 Jkt 033807 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33807.XXX 33807
54 

manded that Mexico do more to prevent drugs from entering the 

United States as a condition for lifting steel and aluminum tariffs. 

Is that something that has found its way into the negotiations? 

Ambassador LIGHTHIZER. Well, in the first place, there is a lot 

going on between the United States and Mexico to try to deal with 

the heroin problem. It is a legitimate problem on which no one can 

disagree. And there is a lot of stuff going on, and it’s not something 

that I am the slightest bit involved with. But I know it’s going on. 

I sort of hear about a lot of important stuff, and I think it will 

make a significant difference. 

Mr. HIGGINS. So there is discussion going on. 

I have a final question because this is important. 

What, in your opinion, optimally and realistically, will be in the 

renewed NAFTA discussion outcome, final agreement? What will it 

look like as it relates to net benefits to the United States? Specifically, name three net new provisions that will benefit American 

workers. 

Ambassador LIGHTHIZER. Well, I mean, there are so many of 

them, some of which would be controversial, so I won’t mention 

them. 

But, clearly, rules of origin would be an enormous increase in 

benefit to the United States. 

The IP provisions are going to be an enormous and just an 

unarguable benefit to the United States. Huge improvements will 

be made in digital trade, which will be extremely important to the 

United States. And I could literally go down. There is services 

trade. We have 33 chapters. And of all those chapters, I personally 

don’t think there is a single one that won’t be a significant improvement for the United States. And I would say that, of the 33, 

the Members here would agree that 90 percent of them are huge 

improvements to the United States, assuming we get an agreement. But, yes, I think it’s a very powerful, very, very important 

improvement in a whole variety of areas. 

Chairman BRADY. Thank you. The gentleman’s time has expired. 

Mr. Marchant, you are recognized. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Thank you for being here today, Ambassador. 

My district is in north Texas. It is the home of the Dallas-Fort 

Worth Airport. So our area basically is involved more in the administration, distribution, marketing, and storage of NAFTA goods and 

services more than the production of the actual product. That has 

created just a boom-town type economy in Dallas. 

And so my home builders have come to me since we gained 

90,000 jobs last year. It has put a lot of pressure on our home 

building and our apartment building and our whole building community. So they are concerned because of the tariffs that are involved in lumber, mainly with Canada, I think, and have provided 

me with charts that show that the lumber prices have escalated 40 

to 60 percent in just the last year. 

And I would like to just have a discussion with you about maybe 

just the purpose of the tariffs. Are they serving a purpose? Is there 

some relief in sight? Is the NAFTA agreement going to address 

55 

these tariffs? Are they separate? And just general information for 

my home builders back home. 

Ambassador LIGHTHIZER. Thank you, Congressman. 

So, if we are talking about the softwood lumber tariffs between 

the United States and Canada, those are the result of sometimes 

people talk about those as if there’s some kind of Administration 

policy. There’s no Administration policy on this, other than the policy that everyone here believes, which is that you have to enforce 

your laws against unfair trade. 

So you have affected U.S. companies, who bring cases. They get 

duties. They go through and prove what the level of the dumping 

economy and subsidies are. Then they go and they prove that 

they’ve been injured at the ITC, and then they get orders put into 

effect. That is the process that has gone on, and it will go on. 

And then, in the past, and to some except ongoing, there is an 

effort to try to get the U.S. industry to give up their rights under 

those in exchange for some kind of a package or something that 

will sort of smooth things out. That’s a process which goes on every 

now and then. In the past, there have been a number of memorandums of understanding and numerous attempts to kind of work 

this out, that have worked it out. 

Right now, I would say there’s probably not much going on in 

terms of those negotiations. Are they part of NAFTA? Not as far 

as I’m concerned, they’re not part of NAFTA. As far as I’m concerned, this is a function of the trade laws working the way Congress designed them to work. When this happens, sometimes prices 

go up, and sometimes it’s unfair to people, and sometimes the fact 

is they were just taking advantage of an unfair situation before 

and making money on low prices. And I don’t know which it is in 

this case, but they could both be a factor. 

But, to me, it is unlikely, I think—I wouldn’t put it at zero—but 

it is unlikely that I am going to end up solving this issue or trying 

to resolve this issue. Right now, the positions are kind of intractable. And the people that brought the litigation have the right, 

just like anyone else here, and any your constituents are who bring 

a case and win it, have the right to get the benefit of a lawsuit. 

Mr. MARCHANT. Okay. I appreciate your answer. Thank you. 

Chairman BRADY. Mrs. Black, you are recognized. 

Mrs. BLACK. Thank you, Mr. Chairman. 

And thank you, Ambassador, for being here today. 

My district and my State of Tennessee has really benefited greatly from NAFTA because it has helped to bring some of the largescale manufacturing automobiles to the State of Tennessee. It is 

quite an operation there across our entire State. These operations 

are tremendously important to our communities, especially one 

right there in the middle of Tennessee, Smyrna, which is the home 

of the Nissan plant that produces more than 150,000 automobiles 

in that plant annually. So it is a big issue for that middle Tennessee area. 

There has been considerable press regarding USTR’s auto rules 

of origin proposal, which, if the press reports are accurate, appears 

to be wholly unworkable for the industry and could have some perverse effect of costing American jobs rather than creating them, 

56 

which, again, is a real concern for us there in middle Tennessee, 

in particular. 

I understand that Canada presented a framework of ideas as a 

counterproposal during round six in Montreal, but that Canada’s 

proposal could result in less regional content than we have now. So 

can you update us on whether Canada has been able to provide additional details regarding their proposal or whether Mexico has 

provided its own proposal on the autos rules of origin, because it 

is really critical for our communities like Smyrna, and we need to 

get it right? 

Ambassador LIGHTHIZER. Thank you, Mrs. Black. 

I would say this. First of all, the auto plants, particularly what 

we used to call transplants, coming to Tennessee and other places 

has been an enormous boon, very important not only to Tennessee 

but for the country. So I think we have to acknowledge that, number one. 

Number two, the rules of origin will have no effect on cars made 

in Tennessee and sold in the United States. They are kind of irrelevant to that whole equation. They have no effect on them at all. 

What Nissan was worried about is that Nissan would say: I have 

a plant in Mexico that wants also to sell in the United States, and 

that plant, in fact, has very, very little U.S. content, so that plant 

has a problem. But it will have no effect on anybody working in 

Tennessee for a Nissan plant for any car sold in the United States. 

I want to make that point because sometimes when they go around 

and talk about this, they kind of conflate those two things, and 

they’re completely separate. 

In terms of our working, we are working with the industry very 

closely on rules of origin. We want to be in a position where more 

of these jobs that are in Mexico right now come back to the United 

States. The basic model that Mexico has had—and there has been 

reference to it over here. It is a smart model from their point of 

view. They want to lure companies to come to Mexico to make cars 

and sell them in the United States. Take advantage of their low 

wages, but take advantage of other things, too, like subsidies and 

like duty drawbacks and the like. 

So that’s a strategy, which is buy from Mexico, that is not necessarily a strategy that is smart for the United States. So our objective is to have more U.S. content, but even really Canadian content. The idea is it shouldn’t just be a model where you come in, 

you are subsidized, you make stuff in Canada—I am sorry—in 

Mexico, and sell it to 80 percent the United States. That’s not a 

very good model from our point of view. 

So our objective is to try to find the line where we can encourage 

them to move some of that production parts—cars, but also parts— 

back to the United States. And we’re in the process of talking to 

the companies and trying to do that. Our hope is that we get something that at least some of the large manufacturers will find useful. 

With respect to others, I suspect they’re going to be in a position 

where any change is going to move them to the point where they 

will have to pay the 2.5 percent tariff. But none of those will involve companies’ workers who are in Tennessee or in the United 

States. I wanted to make that clear. 

57 

If we are going to improve the situation in NAFTA, we have to 

get rules of origin to get more jobs to come back to the United 

States. Will they all come back? No, of course not. Not a chance. 

But a lot of them can come back, and that’s our objective. 

And the Canadians, to be honest, have a similar objective. They 

also have been seeing a diminution in their auto industry, and they 

have a similar objective. And the Mexicans are in a position where 

they have to balance. But we are trying to work our way through 

that. 

Mrs. BLACK. Thank you. I yield back. 

Chairman BRADY. The gentlelady yields back. 

Ms. Sewell, you are recognized. 

Ms. SEWELL. Thank you, Mr. Chairman. 

And welcome, Mr. Ambassador. Thank you for joining us. 

I want to spend my time, limited time, focusing on the current 

U.S.-South Korea trade agreement renegotiations. As you know, 

auto manufacturing is critical in Alabama’s economy. I have a 

Hyundai plant in my district that employs 3,000 workers and provides many of my constituents with high-paying jobs. Therefore, 

the U.S.-Korean relationship is very important to Alabamians and 

especially to the Seventh Congressional District. 

I understand that this Administration has concerns about the 

implementation of the original agreement, and I can appreciate 

those concerns. I, like many of my colleagues who have spoken earlier, really just want to reemphasize the importance of transparency. I share with my colleagues the concerns about lack of 

transparency in this renegotiation process, and my question really 

is, as I understand it—the reason why I would assume that you are 

invoking TPA for NAFTA but not doing so for the KORUS agreement you have stated was because there are only minor amendments, and I guess I am questioning the unilateral decision that 

the executive branch can make as to, you know, to keeping the legislative branches and Members of Congress out of the loop. Can 

you talk a little bit about, you know, your ability to not come before 

us for TPA on KORUS? 

Ambassador LIGHTHIZER. Sure. And that’s an excellent question. The bottom line is that TPA creates a process that has a number of steps that Congress is involved, as are cleared advisers and 

the like, and it takes more than a year to do realistically and, in 

fact, probably a lot more than a year. So, if you are in a negotiation 

like we had with KORUS—like we have with KORUS—you’re in a 

position where there is a real price to the uncertainty of waiting 

for the negotiations to go forward. 

Ms. SEWELL. Well, I appreciate it takes a lot of time obviously 

to go through the TPA process. I really was questioning what the 

ability of this Administration or any executive to actually make 

that decision versus, you know, coming before Congress and asking 

for our blessings on this renegotiation. 

Ambassador LIGHTHIZER. Sure. So there is an amendment 

process within the agreement, and to the extent you follow the 

amendment process within the agreement, there are certain things 

you can do and certain things that you can’t do. Things that require changes of law, for example, you probably cannot do, and that 

58 

is why you would almost in that circumstance say: Okay, fine, we 

are going to have to go to TPA. 

But there are a number of things that you can change. You can 

speed up tariffs. There is a whole variety of things you can do, and 

it was I would suggest contemplated by Congress when they passed 

the law implementing that agreement but also of similar agreements. It was contemplated that this process could be used for certain things and not for other things. So—— 

Ms. SEWELL. Well, I just want to reclaim—I am running out of 

time. I wanted to reclaim my time. I just really wanted to reiterate 

what you have heard from lots of my colleagues that this agreement, the KORUS renegotiation is just as important as NAFTA, 

and there are lots of Members of Congress who will be directly impacted by any changes in that agreement, like my district, and we 

obviously would want to be kept abreast and in the loop as to the 

changes that are going to be made and asked our consideration as 

to how will it affect our districts. 

The other thing I wanted to discuss is this Administration has 

shown a link between national security and trade, and I also sit 

on the Intelligence Committee, and I see the threats that this country faces every day. I also have commerce—have seen how commerce can foster international cooperation and bolster national security. So I agree that the trade and national security are linked, 

but President Trump recently alluded to the possibility of pulling 

out American troops out of South Korea if South Korea doesn’t give 

into our demands on the Korea negotiations. I just want to make 

sure that and know your thoughts about how it is we can threaten 

strategic allies in the process of this renegotiation. I think that 

there is a balance, sir, that must be maintained when we are renegotiating with our strategic allies, and threats like that, I don’t 

think help. Your thoughts about that? 

Ambassador LIGHTHIZER. Well, I mean, we are in the process 

of doing a lot of things. We certainly agree with you that South 

Korea is a very important ally, and they are not only an important 

ally but an important ally at a particular spot right now where 

there is a great deal of vulnerability. And in terms of my negotiations with my counterpart on the Korean-U.S. agreement, troops 

and the like have nothing to do with what I am talking about. I 

don’t get involved with it at all. 

Now, there are other people who would say that, in other parts 

of the strategic relationship, from the point of the United States, 

that worry about who’s paying for what and all these kinds of 

things, and I know there is a whole world of stuff there that’s very 

important that somebody has to sort out—— 

Chairman BRADY. Mr. Ambassador, I apologize, the time has 

expired. 

Ambassador LIGHTHIZER. I am sorry. 

Chairman BRADY. Mr. Kelly, you are recognized. 

Mr. KELLY. Thank you, Chairman. Mr. Ambassador, thanks for 

being here, and I am glad your team is starting to get filled. I know 

you have been doing yeoman’s work on this. Look, you know, where 

I am from in western Pennsylvania—and I am going to go through 

this as quickly as I can because I know there are others waiting 

to talk—but at one time, steel and aluminum were such a big part 

59 

of that area and now our mills are shuttered; our towns are decimated. And I think the President’s talking about putting tariffs on 

aluminum and steel has been a big boost to those folks that live 

there, giving them hope again, because for so many years, people 

talked about it. And if you can repeat, what is the trade imbalance 

right now, because I think people talk about us getting into a trade 

war? And the imbalance right now, is it, what, $800 billion? 

Ambassador LIGHTHIZER. Correct. 

Mr. KELLY. So I guess that is considered a skirmish, not really 

a war. 

Ambassador LIGHTHIZER. $800 billion is the goods numbers, 

the goods and services number is like 565 or some number like 

that. 

Mr. KELLY. Well, we are in a real battle right now to maintain 

our jobs. One of the things I understand that you are going to be— 

you are going to be leading the country exemption process for the 

President, and it has been reported that there will be roughly five 

criteria for granting tariff exemptions for countries related to fighting over capacity, blocking dumped steel from this market, participating in the global forum on steel excess capacity, and supporting 

antidumping and countervailing duty disputes lodged by the 

United States at the WTO. One of the things I want to bring up, 

one of the companies in the district that I represent is a company 

called NLMK. They are in Farrell, Pennsylvania. They have 600 

people that work at the Farrell plant, and down in Sharon, they 

have another 150. And I think they are pretty much on board with 

what is going on with the tariffs, but they are a Russian-owned 

company, and I know this disturbs so many people; any time the 

word ‘‘Russia’’ comes up, we go running around with our hair on 

fire. What they are feeling is that any of these tariffs should be applied to overseas companies that have been dumping steel or manipulating currency for years, and one of the men up there who 

represents the steelworkers, Terry Day, has said that let’s go after 

the people that have been the bad actors. They get the Russian 

steel in, but then they reheat it, and then they roll it out, and they 

make coils with it. I think that some people put everybody in the 

same category. So I just want to make sure that, when we go after 

these folks and these exclusions are granted, there are some people 

that do have a model already in place; they have not been taking 

advantage of a bad trade situation, but they have actually, in fact, 

worked to get through it. These are, by the way, American workers 

that are actually producing this product. So, if you can, can you 

just give me an idea on how the country exemption discussions are 

proceeding at this point, and how would a company like NLMK and 

the rest of the foraging companies, because we have a lot of foraging companies, too, in Pennsylvania that are looking at all this, 

so how that would work out and how—would they or would they 

not be included in the exclusions, and how would it work? 

Ambassador LIGHTHIZER. Let me say, first of all, that there 

are two levels of exclusion. There are product exclusions, and I 

don’t know if in their case they have a product coming in that is 

somehow unique in a way that it doesn’t reduce the efficiency of 

the program. So there will be—there are—there will be a number 

of countries, and when we’ve done this in the past, because I have 

60 

been around this before, there’s always a process where somebody 

comes in and says this is a unique process and a unique product 

and that price should be excluded, so there is that. 

With respect to the countries, I would say there is a cognizance 

on our part that some countries are bigger contributors to the problem than others, and a number of people believe that Russia is in 

that group of countries that are contributors. So, if you look at 

when this was originally set up, you had option one, which was 25 

percent across the board; you had option two, which picked out 12 

countries, and those countries would have higher duties, but others 

would not. So that’s the options; the President went with option 

number one. 

With respect to option number two, one of the countries that was 

viewed to be a significant contributor to the problem was Russia, 

so I’m not exactly sure that, in all cases, people would say they are 

basically operating in clean hands. That is not to say that, in your 

situation, that it is necessarily reflective of that. So what these 

countries tended to be were people that imported product from 

China and exported product to the United States. So you even had 

basically like Costa Rica, you had places where you think, what, 

where does that come from? And the presumption was that they 

were taking in steel from China and shipping either that or their 

own steel and replacing it with—to the United States. So I would 

suggest that Russia is at least, in the opinion of some people, is a 

problem. I would say—and there’s a number of others who I can 

go through. I would say that there is an effort made to try to separate out these things. I don’t think you are going to see a lot of exclusions done in any event, but I would say this, that to the extent 

exclusions are offered and product exclusions come in, it does have 

a dampening effect in terms of the effect on prices and the product, 

which would have a dampening effect on any negative consequences that go down the road. 

Chairman BRADY. Time has expired. 

Mr. Renacci, you are recognized. 

Mr. RENACCI. Thank you, Mr. Chairman. Ambassador 

Lighthizer, from one Ohioan to another, thank you for being here. 

Ashtabula says hello. And thank you for your testimony. I would 

like to tell you about two Ohio farmers I have recently spoken to 

Jerry Bambauer and Dave Dotterer. Jerry and his son farm nearly 

900 acres in Auglaize County, Ohio. He is the third generation of 

his family to farm the land and hopes his grandson eventually 

steps up to be the fifth generation farming the land. His family 

started with owning 8 acres back in the 1930s. Through hard work 

and dedication, the farm eventually grew to its current size. The 

main crop farmed on this land is soybeans. 

Jerry’s friend Dave Dotterer lives over in Wayne County, which 

is in my district, and also farms soybeans. Dave grew up on a dairy 

farm but didn’t really care for milking cows as much as his older 

brother. He knew he wanted to farm land and wanted to own his 

land, so he made it happen. He eventually purchased 1,100 acres 

that he farms with his son. His current focus is on building up the 

farm a bit further before he passes it along to his son. 

I am telling you about Dave and Jerry because both of these men 

personally identify the American Dream that many farmers in Ohio 

61 

can relate to. But I am also telling you about them so you are 

aware of their concerns. 

As you know, U.S. soybean farmers are very concerned about recent suggestions from China that it may target soybeans if trade 

disputes escalate. Given that the United States is one of the 

world’s largest exporters of soy and China is one of the largest importers of soy, their concerns are valid, especially since Ohio is the 

ninth largest producer of soybeans in the United States. So my 

questions for you, Ambassador, are threefold. 

First, in your conversations with other countries, how are you addressing the devastating effect that these types of retaliatory measures could have on the U.S. farmers? Also, what steps might the 

United States take to prevent this potential issue from becoming 

a real problem? And, finally, is there any message you would like 

to relay to all the concerned soybean farmers back in Ohio? 

Ambassador LIGHTHIZER. Well, thank you, Congressman. First 

of all, we’re very much aware of the problem, and I made this point 

from the beginning, not only in the context of the steel and aluminum but in the context of anything we do with China. We clearly 

have a problem with China. We’re clearly going to have to do something to stick up for our own interests and to prevent ourselves 

from further seeing our national wealth eroded. And when they do, 

one of the first things they always talk about and what we always 

think about is $14 billion worth of soybean sales. They are by far 

our biggest market, and if you look at what they import, even 

among agriculture product, it is sort of like 14 and then the next— 

14 billion—the next falls down to about a billion and a half. I 

mean, it is enormous spike. It’s extremely important, and it is a 

real vulnerability. 

I would say also that, even without any of this going on right 

now, the Chinese are cutting back. They’re limiting their soybean 

imports, nothing to do with any of this. They’re doing it for their 

own reasons because they find that there are advantages to Brazilian soybeans, and they have their own bureaucracy doing whatever it is going to do. 

So it is a major concern. It’s something that we worry about. I 

would say I’m focusing on soybeans because you brought it up, but 

it is all agricultural products that are vulnerable in this kind of circumstance. So it is something we have to be very, very cognizant 

of as we take any steps. I don’t think it’s a sufficient worry that 

you would say, therefore, we are not going to stand up for American intellectual property or do the kinds of things that we have 

to do. But we are trying to do everything in a measured—appropriate and measured way. And if there is retaliation, then the 

United States is going to have to take action to stick up for our 

farmers because we can’t be in a position where when we do something that is not crazy or radical but is necessary to keep the 

United States’ economy going, that somebody threatens farmers, 

and therefore, you don’t do it. Right? We can’t have a $375 billion 

trade deficit and not do anything to defend ourselves. But I think 

it’s extremely important that we’re aware of it and that we have 

to be prepared, working with Congress and others, to take countermeasures if it turns out that they are acting unfairly with respect 

to retaliating with respect to soybeans but also other agricultural 

62 

products and other products too, but we generally tend to focus on 

agriculture. 

Mr. RENACCI. Thank you, Mr. Ambassador. 

Mr. Chairman, I yield back. 

Chairman BRADY. Thank you. 

The gentleman yields back. 

Ms. Sewell, you are recognized. 

Excuse me. Ms. DelBene, you are recognized. 

Ms. DELBENE. Thank you, Mr. Chair. 

And thank you, Mr. Ambassador, for joining us today. Digital 

trade is an important part of our trade agenda and should be a 

major focus area as we look to modernize our trade agreements. 

But digital trade is also making trade work for Americans across 

the country. We know that many small sellers, constituents in my 

district but across the country, are harnessing the power of the 

internet to reach customers abroad in ways that were really impossible a decade ago. In 2015, the United States led an effort to expand the information technology agreement, and 53 countries, including China, agreed to remove 201 tariffs on information and 

communications technologies, ICT, products, products like nextgeneration semiconductors that are manufactured in America and 

used in products around the world. 

So your trade agenda acknowledges the importance of digital 

trade. However, the foundation of a strong and a vibrant digital 

economy includes access to affordable ICT products such as 

smartphones and tablets. The biggest beneficiaries of low tariffs or 

low tariffs on ICT products are our students, entrepreneurs and 

small businesses who use these devices to innovative and to sell 

their goods and services around the world. 

So recent press reports, as we have discussed today, indicate the Administration is considering a $60 billion tariff package on consumer products, including consumer electronics from China, as part 

of the section 301 investigations enforcement actions, and so I wondered if you could explain for us how these tariffs would help make 

it easier for our businesses and entrepreneurs around the country 

to compete in a global economy. 

Ambassador LIGHTHIZER. So I guess the question is, will the 

301—because we are not putting tariffs on for any reason other 

than the assault on the U.S. information technology industry. So 

we have an issue that China has a policy of, one, forcing technology 

transfer in the case of inward bound investment; two, forcing companies to license technology at less than the economic value of it; 

three, state-subsidizing and directing massive amounts, and I think 

in some of these sectors $300 billion worth of investment to take 

over U.S. technology firms; and then, four, the absolute theft of 

technology through cyber theft. So those are kind of the premises 

of the—the reason we have launched the 301. 

Now, the question is, if you go through this, you have the study, 

and you decide there’s a serious problem there, the issue then is, 

what do you do? One of the things that you would do is impose tariffs. The way you would impose the tariffs, and I tried to allude to 

this at the beginning, is there are certain technology products that 

are under assault. You have to give consideration as to whether or 

not you would put tariffs on those products. Another issue is you 

63 

would create an algorithm that would maximize the pressure on 

China and minimize the pressure on U.S. consumers. And the combination of those two would be the way you would get to the 

amount you have. So you would come up with the economists’ 

study and say, ‘‘Here is a measured amount of what the relief 

should be,’’ and then you try to find a system that allows you to 

impose it in a way that is most rational. 

And if the President makes the decision to do this—and he has 

not made that decision; we haven’t done anything, but it is imminent that he will come to a decision—that’s the way we are going 

to approach it. So you say, how does U.S. technology—my view is 

this whole system vastly benefits U.S. technology companies, vastly, because it protects their intellectual property, which is the very 

heart of what they are. There is no set—— 

Ms. DELBENE. Excuse me, before we run out of time, are you 

saying then that you are taking into account in any enforcement 

action that you take that the impact it would have on consumers, 

the impact it would have on small sellers across the country and 

on innovation and entrepreneurs across our country? 

Ambassador LIGHTHIZER. Yes, we certainly have a logarithm 

that tries to minimize the negative effect on us and maximize it on 

them. It is a logarithm that is created, and it is the kind of thing 

that you would expect us to do, and if we do this, that’s the kind 

of thing we will do. So, for sure, that is right. 

Ms. DELBENE. Thank you. 

Mr. Chair, I yield back. 

Chairman BRADY. Thank you. 

Mr. Meehan, you are recognized. 

Mr. MEEHAN. Thank you, Mr. Chairman. 

And thank you, Mr. Lighthizer, for being here today and for all 

of your continuing work in this space. I want to, for the record, 

have an opportunity to express an issue. I know we have talked 

about it, but I represent a district in which QVC is a business 

which it broadcasts around the country and is able to take advantage of sales of goods. Canada prevents that broadcast from going 

across the borders using something called a cultural exemption, 

and it is not clear to me that the basis upon which they claim a 

cultural exemption would apply to something like this. It looks 

really more like a way in which they are effectively preventing, you 

know, what we would hope would be the fair competition working 

to, you know, the distinct disadvantage of QVC. 

I know you have a lot of big issues with NAFTA, but I hope when 

we get to the crossing the t’s and i’s, that something important like 

this is an issue that is also on the negotiating table, that and the 

idea that products of small people that have small products, there 

is a cost associated with moving goods into Canada for the small, 

you know, producer; somebody in the same way may have a knickknack that they are selling in Canada, but there are exclusions on 

getting those things in there. I hope those kinds of things will be 

part of the negotiations but get to conclusions. 

Let me just switch, as well. I appreciate the work that you are 

doing holding China accountable for what they are doing dumping 

steel on the global stage. What concerns me and I am hoping that, 

with your language about flexibility, that there is a recognition 

64 

that there are countries out there who are going to be impacted by 

the tariffs. And, you know, the EU can speak as a block. We have 

done things with Mexico and Canada. I do a lot of work with Brazil 

in the sense of my responsibilities here on the Committee and 

studying their circumstances. I look at that as the kind of a country with a trade surplus with the United States or the United 

States has a trade surplus with them. This question about the 

transshipment of steel, you know, this is a country who I do not 

believe is engaged in that. We have a parallel trade in the sense 

that a lot of United States coal goes to Brazil in order to be used 

in some of the, you know, the preparation of that steel, which 

comes in as a semifinished product which augments manufacturing 

here. So there are a lot of characteristics which are, I think, speaking to the idea that, even though people have been identified, that 

these are the kinds of considerations that I would hope would qualify for, you know, exclusions. I know that you said that there was 

going to be flexibility in that, and so I am asking if you believe that 

those are the kinds of criteria that will be relevant in the determinations about whether or not there is a basis for exemptions for 

countries like Brazil. 

Ambassador LIGHTHIZER. First of all, on your first point cultural—— 

Chairman BRADY. Mr. Ambassador, if you can hit that microphone. 

Ambassador LIGHTHIZER. Sure. On the first point, the cultural 

exemption really is very often just cultural protectionism, and you 

noted their de minimis standards are another example of just raw 

protectionism. And when we talk about wanting to limit people 

using standards and warning labels and the like, I always think all 

these things can be—I mean, there is a legitimate case for some 

cultural exceptions, but it’s not this kind of thing, and this is another example of protectionism, I fear. 

In the case of Brazil, there are a lot of things that would make 

Brazil an unusual circumstance. As we talked about before, you 

and I, yesterday and prior, the fact that they are a huge semifinished producer and the fact that they have—a lot of their production is basically a model, which is they send slab, which we 

would call semifinished steel, to related countries—companies in 

the United States, and then that’s made into steel. So there are 

things that are unique about the Brazilian situation that at least 

we know is going to be taken into consideration. That isn’t to say 

that they would be successful in getting a remedy, of getting an exclusion. I mean, that ultimately is going to be a question for the 

President, but there are factors there that are important. 

Chairman BRADY. Thank you. 

Mrs. Noem, you are recognized. 

Thank you, Mr. Meehan. 

Mrs. NOEM. Thank you, Mr. Chairman. 

And thank you, Mr. Ambassador, for being here today. I represent the State of South Dakota. And this time of year, there is 

a lot of snow, it is really cold, and we watch a lot of basketball 

games, so—and my son plays basketball, so that is what we end 

up doing on a lot of winter evenings when I happen to be back in 

the State. But recently I was sitting at one of those basketball 

65 

games and I had something happen that has happened all too often 

recently. A local farmer came up and sat beside me and said: 

Kristi, do you know what the Administration is thinking on trade 

right now? It seems like every time they take a position, soybeans 

drops 40 cents a bushel, and we can’t hardly pay our bills today. 

And so it happens over and over again where a lot of farmers 

and ranchers are very concerned based on comments that come out 

of the Administration or positions on what could happen to their 

commodity markets. It is because 73 percent of our commodities 

that are grown in South Dakota are exported to Mexico or Canada, 

and times are hard in farm country, a part of America that really 

strongly supported President Trump. They have endured a 45-percent drop in net farm income over the last 3 years, and its only indication is that it is going to get worse. So these farmers are very 

worried that the Administration that they supported is going to 

lose them a trade deal over provisions that may be widely unpopular. 

A perfect example might be the sunset provision, which requires 

the deal to be renewed every 5 years. In my opinion, trade deals 

are meant to foster trust between nations and eliminate uncertainty in order to create more opportunities to sell our goods overseas, and the sunset provision undermines a trade deal’s ability to 

develop necessary certainty to encourage businesses to invest. So I 

am curious, Mr. Ambassador, if you would accept a final trade deal, 

a trade agreement without the provision in it? 

Ambassador LIGHTHIZER. In the first place, I’m not going to sit 

here and negotiate with you in public. So that is not going to happen. I don’t think that a sunset provision has any negative effect 

at all on farm sales. 

Mrs. NOEM. You don’t think it creates uncertainty every 5 

years? 

Ambassador LIGHTHIZER. No, I don’t think it has any effect at 

all. In fact, I think exactly the opposite. I think when you get close 

to that fifth year, what you’re going to see is what you saw this 

year with Korea. That is to say another billion dollars’ worth of 

sales. So what we did is the President created this so-called uncertainty in KORUS, and you saw a billion dollars of additional sales 

of agricultural products in Korea and in—because what they want 

to do is get the deficit down, and in my opinion, what you are going 

to see is, as you approach that fifth year, you are going to see additional sales. So I think they are—the people who say that I think 

are exactly wrong. 

Mrs. NOEM. Do you have other examples besides that one instance? Because consistency, and that would be incredibly important that we have a background in historical examples of where— 

because all indications historically is, when there is uncertainty in 

a trade provision, that you have commodity prices fluctuating and 

uncertainty for producers, and many producers market their grain 

a year in advance, or they may have to hang on to it waiting for 

better markets, and uncertainty causes them a lot of heartburn. So 

is that the one instance that you could point to where it was actually advantageous, or is there more—— 

Ambassador LIGHTHIZER. Well, to be honest, we have only renegotiated two agreements. We’re in the process of KORUS, and we 

66 

are in the process of NAFTA. So it’s a fairly small universe. But 

clearly there is a desire on behalf of people, when you are going 

to look at the trade deficit, to get the trade deficit down. That is 

number one. 

Number two, I don’t see it as an enormous amount of uncertainty. The idea is to have you look back at an agreement after 5 

years and determine whether or not the agreement is in the interest of the United States. If it is going to be as popular as everyone 

says that it’s going to be, and if it is going to be as great for farmers as everyone says it is going to be, why would we get rid of the 

agreement? 

Mrs. NOEM. As far as adding clarity to how important the sunset provision is, you don’t want to be more specific on if you would 

sign an agreement or agree to finalize an agreement that did not 

have it in it? 

Ambassador LIGHTHIZER. I think it is extremely important to 

me, and I am not going to negotiate with you here in this forum 

for sure on this or any other provision. 

Mrs. NOEM. All right. Okay. Thank you. 

I yield back, Mr. Chairman. 

Chairman BRADY. Thank you. 

Ms. Chu, you are recognized. 

Ms. CHU. Ambassador Lighthizer, I know that you want to close 

NAFTA negotiations soon, but the IP chapter still has many outstanding issues. Stakeholders are worried that, in trying to quickly 

close the chapters, the United States will not honor its commitments to reform and modernize the IP chapters or that it may even 

negotiate away some of the key IP provisions for U.S. exporters 

that would in turn harm the U.S. economy. 

Now I represent the Los Angeles area, the heart of the creative 

industries, and I am co-chair of the Creative Rights Caucus, and 

so strong intellectual property protections are very, very important 

to me and really important to the United States. When movies, television shows, and songs are consumed around the globe, the royalties are injected back into the U.S. economy, and, in fact, the 

United States is widely recognized as the leader for the creative industries, the IP-intensive industries, these particular ones account 

for $6.6 trillion in value added and more than 38 percent of the 

U.S. GDP, and it supports 45.5 million jobs. 

While, unfortunately, Canada and Mexico don’t place the same 

value on strong intellectual property, particularly copyright protections, as the United States does, since the NAFTA IP discussions 

have remained at an impasse for months now, what assurance can 

you give me that USTR is working to ensure Mexico and Canada 

protect U.S. intellectual property in their markets? 

Ambassador LIGHTHIZER. So, first of all, I would say, with respect to what progress has gone on until now, there has been an 

enormous amount of time spent, people have talked back and forth, 

so we understand each other. This is one of those issues that is 

never resolved until the very end of a negotiation, as I am sure you 

know. The reality is exactly as you say: Canada and Mexico are 

both takers of intellectual property. They are not protectors of intellectual property. Most people are not surprised about that with 

respect to Mexico, but it is surprising with respect to Canada. CanVerDate Sep 11 2014 05:57 Mar 20, 2019 Jkt 033807 PO 00000 Frm 00070 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33807.XXX 33807
67 

ada has third world intellectual property protection, and getting 

them to accept first world is not easy. However, the speed with 

which we close NAFTA, and many people would say, if we close it 

in the next few months, it would still not have been fast, but that 

won’t have any effect on where we come out on this. This is a very 

important issue. We understand it’s an important issue. 

I believe there are forces in Canada who understand that they 

have to at some point become a fully developed country on this 

issue because they certainly have a lot of intellectual property potential. So I am inclined—there are people there who think they 

should be on our side of this issue, but I can’t give assurances. It 

certainly is our position that we want to have strong protection for 

intellectual property. We think it’s not only important for the 

United States but important for all the rest of these countries to 

do it. It’s in their interest to do it. 

Ms. CHU. Well, you are saying that this is one of those chapters 

that might be saved for the last, but can you show me that the intellectual property provisions, historically some of the most technically and politically sensitive free trade agreement provisions, 

will not be negotiated away or conceded in the final hours of 

NAFTA renegotiations? 

Ambassador LIGHTHIZER. Well, it is certainly not my intention 

to do that, but I can’t very well negotiate with you. I wouldn’t negotiate with her; I can’t negotiate with you either. It just wouldn’t be 

fair. But this is a very important issue for us. We are completely 

in your camp, and we hope that you call and say what a great job 

we did when the time is over. I know you’ll call. 

Ms. CHU. Okay. Well, on another subject, one of the keys to ensuring our trade agreements is strong enforcement particularly of 

our labor obligations. Now, we have agreements with Colombia, the 

Dominican Republic, Peru, and Honduras, and there have been 

labor violations that have been filed in each one of these countries. 

In fact, there are numerous violations that include violence against 

unionists, inadequate labor inspections and enforcement actions 

and so forth, and yet, in most of these cases, there hasn’t even been 

an update from the Administration. What are you going to do to 

enforce these labor agreements? 

Ambassador LIGHTHIZER. Well, we have provisions in each of 

the trade agreements with these people that have labor provisions, 

and we are in the process of following the process that we have to 

follow for dispute settlement in those cases. It’s clearly something 

that we brought to their attention. It’s very troubling. It’s a very 

troubling trend, and unfortunately, it is not just these countries. 

It’s in a lot of other countries in that part of the world. So it’s 

something that we agree with you on, and we are in the process 

of prosecuting these cases following the process that is set out in 

the agreement. 

Ms. CHU. Thank you. I yield back. 

Chairman BRADY. Thank you, Mr. Smith. You are recognized. 

Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman. 

Thank you, Ambassador, for taking your time out and being here 

today. The folks in southeast and south central Missouri are very 

optimistic about the future. If you look at the past year under 

President Trump’s leadership, we passed a $5.5 trillion dollar tax 

68 

cut for American farmers and small businesses. We have repealed 

hundreds of burdensome regulations and created over 1.6 million 

new jobs. Speaking of new jobs, as of just the day after the President did his tariffs on aluminum and steel, I was in southeast Missouri announcing 450 new jobs with a new aluminum smelter opening up. So these are real changes and real aspects that are affecting real people that have not always been on the right side of victory. 

The next step for us is to go out and negotiate the best possible 

trade deals so that American farmers, businesses, and workers win 

around the world. We couldn’t have a better person leading the 

way. The President wrote a book on creating great agreements. In 

the book he quoted: The worst thing you can possibly do in a deal 

is to seem desperate to make it. The best thing you can do is to 

deal from strength, and leverage is the best strength you can 

have—on page 53, in fact. The President knows where our 

strengths are. They are in our hardworking people, our superior 

goods, and our world-leading services. 

Mr. Lighthizer, you know this as well, and the task before you 

in NAFTA and potentially KORUS and other deals is not an easy 

one. While those are the hot topics, I want to talk to you about 

some unfair trading practices. 

I do want to applaud you and the President for its trade enforcement actions in the World Trade Organization. Like I mentioned 

before, America is ready to compete as long as the playing field is 

level. But unfair trading practices disadvantage American farmers. 

To ignore violations of trade agreements does not strengthen free 

trade. In fact, it weakens free trade. There has been mounting evidence that certain countries are ignoring WTO obligations by providing price supports to farmers well above the commitments they 

agreed to. It results in surplus production that ends up in the 

world markets displacing sales of U.S. farmers. It is not conservative to allow for rampant breaches of contracts. It is just wrong. 

In what ways is this Administration leaning into the WTO to ensure that these countries play by the rules? 

Ambassador LIGHTHIZER. First of all, I agree with everything 

you’ve said. 

Mr. SMITH OF MISSOURI. Well, then I must be right. That is 

great. 

Ambassador LIGHTHIZER. There are some people that disagree 

with me from time to time in this Committee. So I completely 

agree. You are absolutely right. We are seeing a proliferation of agriculture subsidies. We just have. In the last ministerial round we 

had in Bueno Aires, I ended up hanging up the round or the negotiations because people wanted to—their idea of an ag negotiation 

was a negotiation wherein countries could have more subsidies 

rather than fewer subsidies. They called this food programs, but 

the reality is what it was going to do was going do nothing but encourage more subsidies in agriculture. So we have gone all this far 

to try get ourselves in a market environment, and we said: No, we 

are not going to be in a position to change that. 

And it really was India who was very much a new subsidizer. 

Mr. SMITH OF MISSOURI. With their rice and the grains? 

69 

Ambassador LIGHTHIZER. You’re exactly right. And they were 

very much in favor of having negotiations really, in my judgment 

at least, about increasing subsidies. So we said: No, we are not 

going to do that. 

Every time we find a situation, we bring a WTO case. The WTO, 

however, is not the greatest forum for enforcement of these kinds 

of actions, and it’s always a problem if somebody does subsidies or 

dumps. In our market, we have tools to deal with that. If they’re 

hurting us because they are doing something as a result of subsidies in their market or in a third market, the tools are not that 

good so you have to go to the WTO, and it is a cumbersome far 

from flawless forum. So we are aggressively bringing these cases. 

We completely agree with you. We are using the tools we have at 

hand, and hopefully we can improve those tools and make a difference. 

Mr. SMITH OF MISSOURI. Please continue. Thank you. 

Chairman BRADY. Thank you. 

Mr. Rice, you are recognized. 

Mr. RICE. Thank you, Mr. Chairman. 

Thank you, Ambassador Lighthizer, for being here today. I have 

told you publicly and privately that your presence in the Administration and Mr. Ross’ are two of the main reasons I have so much 

faith in this Administration. I appreciate a man of your experience 

taking on this job, and it is so important for the American worker. 

I am a big believer in American competitiveness. I think our Tax 

Code went a long way toward helping our economy be competitive 

in the world, and trade is very important in American competitiveness; obviously also infrastructure, a lot of the things that the 

President—immigration, a lot of the things the President is trying 

to work on. If we can get two or three more of those notched, our 

economy would be well poised in the world. 

With respect to the tariffs, my opinion is, as you said, nobody 

wins in a trade war, but nobody disagrees that there are people 

who have been bad actors in the world, China particularly, and we 

have ignored it for too long to the destruction of the American middle class, and so we just can’t accept that anymore. We have to respond, and it needs to be targeted, and I appreciate your efforts in 

that regard. 

But I wanted to talk a little bit more about NAFTA. You know, 

I have been to Montreal. I mentioned Montreal. I have been to 

Mexico City. I met with Mexican officials and regulatory people 

and business people and chambers of commerce. And in Canada, 

the same. And in America, the same. And I haven’t met anybody 

who doesn’t think that NAFTA doesn’t need to be continued and 

that it doesn’t need to be modernized. Everybody is pretty much on 

board. And the same topics are brought up, the same four or five 

things you have raised today: rules of origin and de minimis rules 

and all these things. So it sounds like you are making great 

progress there, and I just am comforted having been in both of 

those places that everybody recognizes that this modernization 

process is a good thing and needs to be pursued. 

But I wanted to zero in on one question that was asked to you 

at the American Chamber of Commerce in Canada, and I loved 

your response to it. And I just wanted to ask you so you could reVerDate Sep 11 2014 05:57 Mar 20, 2019 Jkt 033807 PO 00000 Frm 00073 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33807.XXX 33807
70 

spond publicly to everybody. What would you see as a win in 

NAFTA? What is your goal? What are you shooting for when you 

are trying to renegotiate this? Can you explain that to the public? 

Ambassador LIGHTHIZER. Can you give me a hint what I might 

have said? If it was such a good answer, I don’t want to change 

it at this point. Look, from our point of view—first of all, we have 

to have—we have to have an agreement that is good for all three 

countries, right? I mean, we have to have that. 

Secondly, we want an agreement that is going to end up getting 

these trade deficits down. We have large trade deficits, and it has 

to move, has to move more jobs to the United States and create 

better jobs, not only more jobs but higher paying jobs. You know, 

I am in the group that thinks what we really need is a little bit 

of wage inflation. So I want to do something—in the first place, I 

think it has to be in everyone’s interest, or you won’t get an agreement, but I want it to be something that gets the trade deficit 

down. I want it to be something that creates jobs, that moves some 

of these jobs back to the United States, and they’re all not coming 

back. We all understand that completely. But this notion that none 

of them are coming back has been proven wrong by all of you because you have seen what happened after your tax bill. It has 

moved jobs back. It has. So jobs, wages are what the President is 

focused on, that’s what I am focused on, and I think that this 

agreement will lead to efficiency, and it will lead to higher wages 

and more jobs in the United States. 

Mr. RICE. That is pretty much the same answer you gave in 

Canada, except you said one other thing: I want to eliminate incentives to offshore. 

All those are great objectives. I want to point out one anecdotal 

thing when we were in Canada having lunch with the Canadian 

American Business Council. And a tax consultant from Canada 

said: Where we have clients that have positions in America and in 

Canada, we are advising them to ramp down in Canada and ramp 

up in America because of the tax reform bill; it seems we have lost 

our competitive advantage. 

And under my breath, I said: Yes. So I appreciate very much 

your efforts to lift the American middle class. It is smaller. It 

hadn’t had a raise since 1990, and I think tax reform and your efforts will change that. 

Thank you, sir. I yield back. 

Ambassador LIGHTHIZER. Thank you very much. 

And I would like to think—going to get credit, you know, some 

of the credit for this tax bill. They are going to say: Look, the trade 

deficit went down, and I am not going to give you any credit when 

that happens. It will be entirely the trade policy. 

Chairman BRADY. We know how that works, Mr. Ambassador. 

So, Mr. Blumenauer, you are recognized. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

Mr. Ambassador, thank you. I appreciate your patience here for 

the last 3 hours dealing with our questions and comments. I must 

say that I appreciate the role that USTR has assumed on an area 

that I have been working on for the last 10 years dealing with illegal logging, particularly what is going on in Peru. It has been sort 

of a struggle. I thought it was harder than it should have been in 

71 

the last Administration, but I appreciate the work that you and 

your team have done. This, as you know, is not just an issue of enforcing trade obligations. Illegal logging damages the environment. 

It undercuts the rule of law in developing countries, and it has negative impacts on Americans who play by the rules, and I just wanted to say how much I appreciated that. And I do want to identify 

myself with comments that my friends Mr. Thompson and Mr. Doggett mentioned earlier. I won’t take my time or yours, but I am 

concerned about having American wine industry, particularly in 

the Pacific Northwest, on a level playing field, and I am concerned 

about American interference with the ability of other countries to 

protect the health of their citizens, and I appreciate there are nuances there, but historically, I think we could have done more to 

be more open. I think it is a larger issue, and I hope that we can 

collectively focus on this because I think it is very significant. 

I listened to—my friend from Missouri referenced ‘‘The Art of the 

Deal’’ or some such publication by the President. I think there is 

a pretty significant difference when you are negotiating in real estate when you can, as he states in his book, exaggerate as you can 

go bankrupt and leave other people holding the bag when things 

collapse and move onto the next project. We are talking about the 

American economy. We are talking about our role in the world, and 

I think, for example, exaggerating or making things up in a discussion with the head of the State of an ally and admitting it publicly 

doesn’t help us on the world stage. And I identify with some of my 

colleagues who say we feel more comfortable knowing that you are 

in the role that you are in. You have broad experience and I think 

understand some of these dynamics. 

And it is in that context I would like to just raise one point with 

you, and that deals with some of the impacts of the imposition of 

tariffs under the 301 with China, particularly as it affects retail 

trade. And Mr. Reichert and I have some involvement with companies that are involved with apparel and footwear, and we have 

been working for a long time to try and see if we can have some 

more rational policy as it relates to tariffs. 

As you well know, tariffs are not just magically imposed on somebody else. It is a cost of doing business. It affects what happens 

with American manufacturers and retail. And they are ultimately 

paid by the consumer, and we have a system now that is tilted 

against low- and moderate-income people. When you look at clothing and footwear, the percentage that is paid at the lower end is 

really quite outrageous, and I am hopeful that we don’t rush into 

something with China that ends up actually making it worse. So 

I am hopeful that this is an area that can be entered with great 

sensitivity. 

Mr. Chairman, I would request unanimous consent to enter into 

the record correspondence addressed to the White House but also 

to the Ambassador and the Committee that speaks to this in terms 

of tariff, understanding the dynamic, and I wondered if you had 

any observations—— 

Chairman BRADY. Without objection. 

[The submissions for the Record of Hon. Earl Blumenauer follow:] 

72 

f 


33807A.019

¥ cromhi~ &'Fitch AMERICAN EAGLE OUTfTfTI'Jt5 

Bitt.. LOTSf CO FR~ 

U'taN ;:::: ~ • r"'umbia ~'"( . ..,.,_. 

~ DOU.ARma C pill< A~.~!.Y5 JCPenney JOANN K OHL"S 

LEV1STRAUSUCO. ~h; QX~'()I{J> Q_~r_?~ SEARS HOLDINGS (!)TARGET .,..,....n.sco...._, ~ 

President Donald J. Trump 

The White House 

1600 Pennsylvania Avenue NW 

Washington, D.C. 20500 

Dear Mr. President, 

Walmart , wo~v•A•• a w 

March 1 9, 201 8 

The undersogned represen1 the world's largest and most innovatiVe retail companies, accounting for more 

than s 1.5 trillion In annual sales and tens of m•lhons of American JObs. The retail sector, along with our 

domestic supp:iers and solution providers, all contribute to a healthy economy and meet the needs of 

American families as the cornerstone of our nation's communities. 

Millions or Americans are going back to work as unemployment is falling. wages are rising. and econom1c 

growth is reaching highs not seen in over c1 decade. We support holding our trading partners accountable 

and using targeted trade remedies against intellectual property theft, illegal dumping or subsidies, and 

other proven trade violations. After all, our companies and the workers we employ thrive in a rules-based 

globalized economy where markers are open, 1rade rules and obligations are met and governance is fair and 

transparent. 

At the same time, we are concerned about the negaltve impact as you consoder remedoal act;ons under Section 

301 of the Trade Act could have on Amenca's wor1ong families. tnvestogattng technology and intellectual 

property pohcies and practices is critically Important to our innovative economy. Yet were this investogatoon 

to result in a broadly applied tariff remedy on om ports from Chona, it would hurt American households with 

higher prices and exacerbate a U.S. tariff system that is already stacked against working families. 

In the U.S., those who can afford less pay more because the u.s. levies the highest tariffs on basic consumer 

goods. for example, families shopping in our stores pay higher prices because America already levies Import 

taxes as much as 32 and 67 percent on basic clothes and shoes. Applyong any additional broad-based tariff 

as part of a Section 301 action would worsen this Inequity and punish Amencan working families with higher 

prices on household basKs like clothong. shoes, e:ectronics. and home goods. 

We look forward to workong wtth you on a pro-grovlth agenda that benefits Amencan workers and their 

families. As you continue to tnvestigate harmful technology and intellectual property practices. we ask that 

any remedy carefully consider the impact on consumer prices. we must do right by American families whtle 

also addressong harmful technology practices. 

Signed: 

Abercrombie & fitch Co 

American Eagle Outfitters. Inc. 

AutoZone 

Best Buy 

Big lots 

Chico's fAS, Inc 

Columbia Sportswear 

Costco 

Dollar Tree 

Gap tnc 

Havert)l's Furniture Co 

JCf>enney 

JOANN Stores LLC 

Kohrs Department Stores. Inc 

lkea North America Services, LLC 

levi Strauss and Co 

Macy's 

Oxford Industries, Inc 

Qurate Retail Group 

Sears Holdings 

Target 

The Michaels Companies 

VF Corporation 

Walmart 

Wolverine Worldwide 
73 

f 


33807A.020

FfJRA 

((.., 

\:::::::)Ju venile Produ c ts J P.VlA ...... f'oii,_IJ':A('.lUf1:"R~ A$SOC•Ali0N NRF' NMIONAI. R£TAJLFt;O(R,.\lia.'\" 

(.~DA 

GEM

~ INI SHIPPERS GROUP' C<wJ«<Ing Cago Globol1y 

OUTDOOR 

INDUSTRY 

ASSOCIATION 

nCJt1!!1£1 __ ,_ R I LA ~!::~ 

The President 

The White House 

~e Travel Goods ASSOC IATION 

March 20, 2018 

1600 Pennsylvania Avenue, N.W. 

Washington, DC 20500 

Dear Mr. President, 

UNITED STATES 

FASHION INDUSTRY ASSOCIATION 

We are writing to express our very strong opposition to any tariff increases on U.S. imports of consumer 

products, such as clothing, shoes, home goods, fashion accessories, or travel goods from China. Such 

tariff increases would hurt U.S. consumers, U.S. workers, and U.S. companies, and would not address 

the underlying concerns regarding illegal technology transfer and intellectual property rights theft In 

China. 

Please consider the following: 

The United States alreadv imposes a significant bord er tu on these products. Average tariff rates on 

most of these products range from 10.8% to 14.2%, even though the average rate the U.S. Imposes on 

all products is less than 1.4%. Some tariffs are extraordinarily high. For example, ski jackets, baby 

garments, and tennis shoes face U.S. duties as high as 27.7%, 32%, and 67.5%, respectively. We impose 

these tariff rates - originally set during the early days of the Great Depression- even though there is 

very little or no commercial production of these items in the United States. 
74 

f 


33807A.021

March 19, 2018 

The Honorable OonaldJ. Trump 

President of the United States 

The White House 

Washington, DC 20500 

Dear Mr. President: 

As leading American footwear companies and brands, with hundreds of thousands of 

employees across the U.S., we write to express our strong concerns over reports that the 

Administration may consid encreases on footwear-as crpotentlal·srn1on 301 remedy 

We support efforts to streilgmermnellec!ual property protections around the world~d this 

has been one or the top priorities of our industry for many years. However, we reject the idea 

that the soiutio?-to.lhis important issue Is new hidden taxes on every American who buys_!!ld 

sells shoes. 

U.S. footwear imports already face astr micaii high tariff rates that fall disproportionate! 

on working class individuals and families. While U.S. tari son a consumer goo s average just 

1.3 percent, they average 11 perc.ent for footwear and reach rates as high as 67.5 percent. In 

2017 alone, u.s. footwear companies and U.S. consumers paid nearly $3 billion in these hidden 

taxes. This amounts to billions upon billions of dollars paid since these tariffs were first enacted 

in the 1930s. U.S. footwear tariffs stifle innovation and job creation and raise the cost of shoes 

for every American. 

Adding even more tariffs on top of this heavy burden would mean higher costs for footwear 

consumers and fewer U.S. jobs. Given the rice sensiti · n a 1 1ona 

increa 1n o os s wou d strike right at the heart of our ability to keep product competitively 

priced for our consumers. 

In addition, footwear is a very capital-Intensive industry, with years of planning required to 

make sourcing decisions, and companies cannot simply move factories to adjust to these 

changes. Any action taken to increase duties on Chinese footwear wi ll have an immediate and 

long-lasting effect on American individuals and families. 

Our companies design and develop the most innovative and sought-after footwear in the world 

and often face challenges in protecting their designs, patents, and trade dress. We want to 

work with the Administration to address these challenges and ensure adequate protections for 

the integrity of our brands. However, increasing tariffs on U.S. companies and consumers 

penalizes those that are seeking relief. 
75 

f 


33807A.022

President Donald Trump 

The White House 

Washington, DC 20500 

March 18,2018 

Dear re.~idcnt Trump, 

As representatives of the U.S. business community, we continue to have serious concerns 

regarding China's trade policies and practices, including market access barriers and statedirected investment policies, technology transfer and data localization mandates, policies and 

practices that prevent setting markct-b<lsed terms in licensing and technology-related 

negotiations, nnd theft of trade secrets und other intellectual property. These persistent problems 

jeopardize U.S. global eompetitivene.'!S, innovation, productivity, and cybersecurity. We 

recognize the U.S. Government's examination of these issues through the 301 process, and 

support an effort to address China's discriminatory practices. -

!:J.s>' ever, we urge the Administration to take measured, commercia y meaiirilgful ac io~s /consistent with international obligations thut benefit U.S. exporters, importers, and investors, 

rather than penalize the American consumer and jeopardize recent gains in American 

competitiveness. 

The imposition of sweeping tariffs would trigger a cbain reaction of negative consequences for 

the U.S. economy, provoking retaliation; stining U.S. agriculture, goods, and services expons; 

and raising costs for businesses and consumers. The Administration should n01 respond to unfatr 

Chinese practices and policies by imposing tariffs or other measures Lhnt will barm U.S. 

cornpanics, workers, farmers, ranchers, consumers, nod investors. 

Tariffs would be particularly harmful. 

Tariffs on electronics, ap are!. and other consumer pr~n.cr.ease.prJccs..for 

U.S. consume an businesses, He-d~dress the fundamental challenges 

posed by unfair and dL~riminatory Chinese trade practices. These increased costs would 

effectively levy a tax on U.S. consumers and busine.~scs. negating gains for American 

workers from U.S. lax reform. 

---- • Tar~ would not only affect Chinese shippers but also harm U.S. --compa ~hat sell 

cqftlp~ oUinaLp.rod cJ~ina..-------

• Tariffs would harm community service providers-including American health care, 

education, and emergency responders. These essential services rely heavily on 

consumer electronics and other imported goods, and would be negatively affected by 

increased costs. 

• Tariffs on product components would hun U.S. manufacturing cxpons by making it more 

expensive to obtain key inputs and disrupting existing supply chains. This would have 
76 

f 


33807A.023

National Customs Brokers and Forwarders Association of America 

National Foreign Trade Council 

National Retail Federation 

NY/NJ Forwarders and Brokers Association 

North American Meat Institute 

Outdoor Industry Association 

Pacific Northwest Asia Shippers Association 

Promotional Products Association International 

Retail Industry leaders Association (RILA) 

Snowspons Industries America 

Software & Information Industry Association (SliA) 

Specialty Crop Trade Council 

Sports and Fitness Industry 

Tea Association of the U.S.A., Inc. 

TechNet 

Telecommunicatio ns Industry Association (TIA) 

The APP Association (ACT) 

The Pac ific Coast Council of Customs Brokers and Freight Forwarders 

The Toy Association 

Travel Goods Association (TGA) 

U.S. Chamber of Commerce 

U.S. Council for International Business 

U.S. Fashion Industry Association 

U.S. Hide, Skin, and Leather Association 

Wine and Spirits Shippers Association 

CC: U.S. Trade Representative Robert Lighthizer 

Secretary of Commerce Wilbur Ross 

Secretary of Treasury Steve M nuchin 

National Economic Council Director Larry Kudlow 
77 

Mr. BLUMENAUER. Thank you, sir. 

If you could offer any observations that might make some of my 

constituents feel better. 

Ambassador LIGHTHIZER. I would say, first of all, when you 

talked about the quote from ‘‘The Art of the Deal,’’ all I was thinking was I hope I don’t look desperate, so I had a different take on 

it than you did. We understand and I kind of went through this, 

if there are tariffs, one, you have to establish through an algorithm 

what the amount is and use as much science as you can; and, two, 

when you pick the products on which you would put a tariff, you 

start with a logarithm that tries to maximize the effect on China 

and minimize the effect on U.S. consumers. And if you think about 

products on a—you have kind of a line over here of products where 

they are minimally a problem for U.S. consumers and maximally 

a problem for Canada. Now you can’t always follow that, but that 

is one of the big factors, and that is part of the logarithm, and we 

are very—we are aware of that and are cognizant of it. And if we 

end up doing this, it won’t be perfect, but you will see a methodology which you will say, yes, that is a sensible—— 

Chairman BRADY. Time has expired. 

Mr. Schweikert, you are recognized. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. Mr. Ambassador, 

first, just a quick comment on sort of a global basis and particularly more for even some of your newer staff. Long term, some of 

us have a fascination of what worldwide trade can do, particularly 

considering our demographic issues. You know, as a country, as we 

are getting much older, we are going to need populations of folks 

in the prime consumer ages for us to sell stuff to. So that is always 

in a long term, there are some great articles about, you know, 

trade actually may help us with some of our demographics that we 

are facing, and it is just math. 

Mr. Ambassador, I first want to thank you on the de minimis. 

The last time you and I had an opportunity to talk about it, you 

not only got it; you were an amazing advocate. Particularly, as 

some of the other countries we are presently negotiating with are 

listening to this hearing right now, there are many of us on this 

Committee that are absolutely just fixated on the de minimis value 

with Mexico and Canada and the inequities that creates. Do you 

think they are hearing that part of the discussion? 

Ambassador LIGHTHIZER. I certainly hope so. It’s one of those 

issues where anybody who starts focusing on it, it becomes more 

and more important to them because it doesn’t—it affects a lot of 

product, and the more you study it, the more it’s bothersome of 

products coming into other countries in bulk, being broken up into 

smaller things and being shipped. The fact that most of the Canadian—one of the articles I read is most of the Canadian online sellers sell far more in the United States than they do in Canada, and 

we can’t go in that direction essentially at all. I mean $20 versus 

$800 is just ridiculous. It’s a hugely important issue. It affects an 

enormous number of sectors. So it is something that is very important to us. And I—look, everybody knows the right answer is to be 

above $20. There’s no one that can argue that. You can argue 800, 

but it has to go up. 

78 

Mr. SCHWEIKERT. And you make a—look, for those of us being 

a border State, Arizona, where we are trying to set up trade hubs 

and inland ports, and yet if you look at the current de minimis, 

particularly with our trading partner of Mexico, it is all going to 

be inbound because our ability for small retailers, for high-tech 

commerce to go upbound, it just doesn’t work. 

Just because time is so precious, I am one of those States, communities, because being in the desert Southwest, has intense concern on seasonal tariffs just because, if you actually sort of game 

theory it, it creates distortions and then retributions on the distortions. And if you actually start thinking about when certain crops 

come in and the seasonalities, it ends up becoming very, very ugly. 

And particularly for those of us who do a lot of cash crop growing 

because we—Arizona provides the winter lettuce crop for the country, and if you are doing seasonal tariffs, the tails of those tariffs 

end up creating some real pricing distortions, particularly for our 

consumers on both sides of the border. 

Ambassador LIGHTHIZER. So you are against the proposal. 

Mr. SCHWEIKERT. Absolutely livid. 

Ambassador LIGHTHIZER. There are an enormous number of 

products that would be subject to these that come in from Mexico 

through Arizona, and so it’s basically—it is the interest of importers in that State, and I just wanted to make sure that I was understanding. I have heard the argument, you know—— 

Mr. SCHWEIKERT. It actually gets a little more complicated. If 

you are doing certain types of cash crops and you have just had a 

seasonal tariff that benefitted the growing season in one part of the 

country and then it falls off, all of the sudden, you are on the pricing fall side, and so it is just that if you think of that constant moving of that sort of bell curve. 

Last thing, and, look, you have spoken about this elegantly, 

though I substantially disagree with some of the characterization, 

ISDS. And I know so often rhetorically we have speakers that will 

say, ‘‘Well, it is sovereignty,’’ but if you actually really walk 

through the mechanisms, it absolutely is not. It is to that issue. It 

doesn’t rewrite our laws or the Mexican laws or the Canadian laws. 

It is not—it is not a precedent for the next case. Ultimately, it is— 

think of it more like, if we were to ever lose, which we have not, 

you would have to pay compensation, but it does not rewrite your 

sovereign statutes. And so when people use the sovereignty quotes, 

I think it is an absolute distortion of how it actually works. 

Thank you, Mr. Ambassador. 

Chairman BRADY. Time has expired. 

Mrs. Walorski, you are recognized. 

Mrs. WALORSKI. Thank you, Mr. Chairman. 

Ambassador, it is good to see you. It will come as no surprise to 

you I want to talk about 232, just a couple of—point of clarifications. So it is my understanding, and I just wanted you to confirm 

this, that you are considering participating in the Global Forum on 

Steel Excess Capacity that is under consideration? 

Ambassador LIGHTHIZER. I mean, we do participate, and one 

of the things we’ve asked people who might get an exclusion is that 

they participate and help us with that, and most of these countries 

do, by the way. 

79 

Mrs. WALORSKI. The recent Global Forum on Steel Excess Capacity held a first minister-level meeting last November, but you 

were not there, correct? 

Ambassador LIGHTHIZER. That’s correct. I had no deputies in 

place at that time, so I was staying here. 

Mrs. WALORSKI. I understand. Will you in the future attend 

those yourself since the rest of the world is looking at this with incredible significance and bringing their ministerial level folks to 

the table? 

Ambassador LIGHTHIZER. Well, I mean, I wouldn’t guarantee— 

I would say I think, at that meeting, I think there were maybe 

three ministers. So it might have been a ministerial level, but I 

think about 30 countries did not send ministers and about three 

did. And the three that did—— 

Mrs. WALORSKI. But the one that I am concerned about is you 

and this country. 

Ambassador LIGHTHIZER. Well, I understand, but I just want 

to suggest—the idea was that it was like this ministerial level. So 

you had Europe send one because it was basically around the corner; you had the German minister who doesn’t have competence in 

the area, but it was good to be there; and I think there may have 

been one or two others. 

Mrs. WALORSKI. Yes, but the reason I am asking the question, 

Ambassador, is because while all of those countries have irons in 

the fire here, you are the Ambassador that is going to go forth 

under all these rules in 232, and I want you to do as best as you 

can for our Nation and for my district, and that is my concern. And 

I believe that you can, and I believe that you will. 

I want to switch gears, though, really quickly to this issue of retaliation. In my district in northern Indiana, with the second largest concentration of manufacturing jobs in the country, there is a 

whole host of ag that I am concerned about: corn, soybeans, dairy, 

pork, poultry, beef, eggs, tomatoes, and the list goes on. 

But half of the soybeans grown in Indiana are exported to China. 

Honeywell makes brakes and avionics in South Bend that go into 

Boeing airplanes. China is threatening retaliation against both. In 

fact, today China’s state-run Global Times ran an article alleging 

that the United States is dumping soybeans into China and calling 

for strong restrictive measures. 

Corn and motor boats are exported from my district to the EU. 

Both of those are the EU’s retaliation list. 

Setting aside the tariffs, there is an incredible amount of anxiety 

in my district over the threat of retaliation. That anxiety is shared 

regardless of industry because manufacturers, suppliers, farmers, 

and workers will be affected. Are you considering the devastating 

effect that retaliatory measures could have, especially on small 

business and family farms that absolutely do not have the resources to absorb big losses? 

Ambassador LIGHTHIZER. Yes. 

Mrs. WALORSKI. In what way? 

Ambassador LIGHTHIZER. We are gaming out what would happen, what the most likely areas are that you would have retaliation, what kind of things that you would do. We can’t be in a position where we take no action because of threats of retaliation. That 

80 

is how you end up having an $800 billion trade deficit, which cost 

literally millions and millions of jobs in America. 

But there is a legitimate threat. And as I have said a few times 

here today and many times in the past, agriculture is always on 

the front line of retaliation. I said that when I first testified. Members would say to me: Do you think we should be concerned? I said: 

If you’re in agriculture, you always have to be concerned. 

Anything that happens, they are going to figure we can get it 

and do something on agriculture. 

It’s an unfair situation, but it’s one that we have to come to grips 

with. You have to think about counterretaliation. You have to think 

about programs for farmers who are in this situation. There are a 

lot of things that are outside of my realm that have to be considered. But it’s a serious problem, and we are very aware of it. 

Mrs. WALORSKI. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Chairman BRADY. Thank you. 

Ms. Sa ́nchez, you are recognized. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman, and to Ambassador 

Lighthizer for joining with us today to talk about the Trump administration’s trade agenda. 

For many years now, Democrats have been talking about the impacts that trade agreements have on American workers, and we lament the fact that they have caused countless good-paying American jobs to be shipped overseas, most notably in the manufacturing sector. Those jobs are really the bedrock of the American 

middle class and critical for our economy. Those jobs have been lost 

to countries whose labor standards are impossible for our workers 

to compete with on a level playing field. 

I think that a lot of us were really hopeful when the President 

talked about bringing American manufacturing jobs back and creating new jobs through renegotiating our existing trade deals. This 

Administration time and time again has said that they want a level 

playing field for American workers, but I have yet to hear the Administration lay out a clear vision for how you plan to achieve this 

goal. 

It is no secret that we met with Secretary Ross last year. When 

I pressed him on that issue, ‘‘What is your strategy for bringing 

back American jobs or maintaining American jobs here,’’ the only 

answer that he provided us was that they are going to renegotiate 

the rules of origin for autos. That was it. That was his single sole 

idea or plan for bringing back manufacturing jobs. 

I think we have to do a lot more than that if we are going to create the kind of jobs that we want here and ensure that American 

workers and industries are not on an unlevel playing field, first of 

all, and, second of all, in a race to the bottom for wages and working conditions. Workers in Mexico earn a pittance of what U.S. 

workers make, and is it any wonder that we are losing jobs to Mexico? I think Canada, as well, as a vested interest because their 

labor standards are similar to ours. 

Mr. Ambassador, I would like to know, the President has said 

that he will bring back jobs through renegotiating trade deals, 

what pieces of NAFTA specifically are you negotiating that you 

think is going to deliver on that promise? 

81 

Ambassador LIGHTHIZER. Well, first of all, the most important 

thing that has been done so far is to pass the tax bill, so that was 

a very important part, in terms of bringing jobs back. 

Ms. SA ́ NCHEZ. I am not talking about the tax bill. I am talking 

about renegotiation of NAFTA. 

Ambassador LIGHTHIZER. I understand that. 

Ms. SA ́ NCHEZ. I want to know, specifically, what parts of 

NAFTA would you renegotiate to ensure that U.S. jobs stay in this 

country or that we bring back jobs that we have lost? 

Ambassador LIGHTHIZER. I think the regulatory improvements 

you have made helped also. 

Ms. SA ́ NCHEZ. I am not talking about regulatory—can we stick 

to the subject matter of this hearing, please. 

What pieces of NAFTA will you renegotiate to ensure that we 

keep U.S. jobs here and bring back manufacturing jobs that we 

have lost? 

Ambassador LIGHTHIZER. Well, I would say the first thing is 

the rules of origin. The rules of origin not just for—— 

Ms. SA ́ NCHEZ. Okay. Aside from auto rules of origin, what is 

the plan? 

Ambassador LIGHTHIZER. We have a plan for labor standards. 

We have a plan for—— 

Ms. SA ́ NCHEZ. What is the plan for labor standards? Lay that 

out for me. Specifics. 

Ambassador LIGHTHIZER. Well, in the first place, there is a 

limit to how much I am going to talk about this in a public forum. 

I’m sure you can understand that, since I am involved in negotiations with two countries. 

Ms. SA ́ NCHEZ. I understand that. 

Ambassador LIGHTHIZER. All right. Good. 

I have already talked about this a couple of times, but I’ll do it 

again. 

It is our view that U.S. workers have the right to expect that collective bargaining agreements in Mexico are the result of secret 

ballots and legitimately verified to be such. There’s a whole series 

of processes that were involved with in negotiating that element, 

including even today. So that’s a hugely important issue. And the 

objective is to try to get wages up in Mexico, which makes the 

United States more competitive, but also creates customers for the 

United States. 

Ms. SA ́ NCHEZ. So would it be fair to say that you are seeking 

labor standards with our trading partners that are on the level 

with U.S. labor standards, or do you intend to bring U.S. labor 

standards down to the lowest common denominator? 

Ambassador LIGHTHIZER. Did I say anything at all about U.S. 

labor standards? If I did, I misspoke. We’re doing nothing about 

U.S. labor standards. 

Ms. SA ́ NCHEZ. I am just asking a simple question. 

Ambassador LIGHTHIZER. And the answer is we are dealing 

with the Mexican labor standards. We are not dealing with the 

United States labor standards. 

Ms. SA ́ NCHEZ. So is it fair to say you are trying to raise the 

standards of our trading partners comparable to that of the United 

States? Is that what I am hearing? 

82 

Ambassador LIGHTHIZER. No. What I’m trying to do is raise 

the standards in Mexico. 

Ms. SA ́ NCHEZ. So you raise it, but not to U.S. standards, not 

that high, somewhere in between? 

Ambassador LIGHTHIZER. It is not my point. 

What I’m focusing on is the basic elements of what you expect 

in basic labor law. That’s what I am talking about. I am not talking 

about U.S. standards. 

Ms. SA ́ NCHEZ. ILO conventions of labor law? 

Chairman BRADY. All time has expired. 

Ms. SA ́ NCHEZ. Mr. Chairman, if I could simply just make the 

request that we receive the answer to the last question in writing. 

Chairman BRADY. In writing, absolutely. 

Ms. SA ́ NCHEZ. Thank you. I yield back. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you, Ambassador. 

I will tell you, I see significant wins for the United States in energy, agriculture, telecommunications, digital trade, services, technology, and manufacturing because you are being so aggressive in 

these areas, and we appreciate the work there. 

Mr. Curbelo, you are recognized. 

Mr. CURBELO. Thank you, Mr. Chairman. 

Welcome, Ambassador. Thank you so much for your time. 

I first want to say I was thrilled to hear earlier your statements 

regarding engagement with Argentina and Brazil. I think that our 

country, in many ways, has been absent in our own neighborhood 

over the last few decades. And I think in both those countries, we 

are seeing very positive developments. This is very exciting for 

south Florida, as you can imagine, because we are poised to grow 

and to benefit greatly from further engagement in the region, specifically with countries like Brazil and Argentina. 

On a couple issues that have been discussed extensively here, I 

want to associate myself with the comments made by Chairman 

Brady and others on ISDS. I think it is an important tool for American companies, for American stakeholders, and also with Chairman Johnson on the sunset clause. 

I do believe that one of the major components to a successful 

business and to enterprise generally is certainty. And I think that 

if companies are operating under the threat of the expiration of a 

deal, that could inhibit their ability to invest. And, by the way, it 

is not just American companies’ investments abroad, but the investments of Canadian and Mexican companies in the United 

States. 

So I really hope that we have a strong provision to review the 

deal, to revisit the deal, to make sure we keep it up to date, which 

we haven’t done over the last 25 years, but certainly not always to 

have the threat of a potential expiration. 

Another issue I wanted to bring up is the effect trade agreements 

have on the farmers of my south Florida district. Many people not 

from south Florida might be surprised to know that Miami-Dade 

County is one of the largest ag producing counties in the State. We 

have avocados, mangos, tomatoes, and hundreds of specialty crops. 

And because south Florida is significantly warmer than even central parts of the State, crops can be grown year-round. For examVerDate Sep 11 2014 05:57 Mar 20, 2019 Jkt 033807 PO 00000 Frm 00086 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33807.XXX 33807
83 

ple, Ambassador, it is not snowing in south Florida today, something that we are very pleased with. 

So, as we renegotiate NAFTA, I am concerned with how the deal 

will affect the farmers across Florida, but specifically with how it 

will impact the agriculture community I am honored to represent 

in south Dade. I know the Administration has been advancing a 

seasonable and perishable proposal that could help provide relief to 

our growers from Mexican dumping by making it easier to prove 

entry. 

Could you give us a brief update on where we are and what the 

nature of the Administration’s commitment with this provision is 

at this time? 

Ambassador LIGHTHIZER. Well, it is a provision that’s very important and not without its controversy. 

The point that I try to make is that while we have a lot of agricultural sales in Mexico—with Mexico, we have an agricultural 

sales deficit of about $5 billion. So we’re not on the positive side 

of our agricultural sales with Mexico. 

The area that is most affected negatively are the seasonable and 

perishable fruits and vegetables, as you suggest. So we have a provision that we have designed that allows those people, only in cases 

where there is unfair trade, to take advantage of the unfair trade 

statutes. Until now, they are essentially precluded by the nature 

of the way the statutes are taken up. 

So we have put forward this proposal. It has not been wildly popular with our trading partners, I would say in all candor at this 

point. But it’s an important provision, and one that we are negotiating on right now. 

Mr. CURBELO. Thank you, Ambassador. I encourage you to do 

the best you can in this area. We know that the specific proposal 

you have put forward may not be able to make it, but I think anything that improves the status quo for these farmers, which have 

been decimated, quite frankly, would be something that we would 

welcome. 

And I am more concerned with fairness and less concerned with 

this deficit issue. I always tell people: I have a deficit. My family 

has a trade deficit with the supermarket, and we want to keep it 

that way. We are not interested in changing that. 

I think the key question is: Is it fair? And are American companies, in this case American farmers, being given the same opportunities to compete as Mexican farmers and as Canadian farmers? 

And I think in this area of seasonable products, it is certainly not 

the case. 

So I appreciate your commitment to this provision and your commitment to the farmers of south Florida, which are counting on us 

to improve the status quo. 

Thank you, Ambassador. 

I yield back. 

Chairman BRADY. The gentleman yields back. 

Mr. Bishop, you are recognized. 

Mr. BISHOP. Thank you, Mr. Chairman. 

And thank you, Mr. Ambassador, for being here today, and for 

your time and effort. I know this is a long hearing, and you have 

waited all this time. I appreciate it. 

84 

NAFTA is vitally important to the State of Michigan, the State 

that I represent. It is important to our economy, and it is important to the U.S. automakers. 

I want to applaud your efforts for the way you have conducted 

yourself. I had the opportunity to attend the last round in Montreal. It is evident to me and to all of us that you have done a spectacular world-class job in representing the United States and in 

preserving, to the extent that you can, the great relationship that 

we have with Canada and Mexico, so I want to thank you for that. 

I also want to thank you for your efforts to update and improve 

NAFTA so that it better represents the 21st century global economy. 

I would like to continue, if I could—the subject has been raised 

ad nauseam here, but important—it has to do with the rules of origin. And the concern I have specifically, on behalf of the U.S. automakers, is that there is substantial concern that the proposed rules 

of origin will jeopardize their global competitive position and that, 

furthermore, will likely cost vital U.S. manufacturing jobs. And 

that is especially true in the State of Michigan. 

Now, I know this is high on your mind. You have indicated it in 

your original testimony. You said that the purpose of the rules of 

origin proposal was to move more jobs back to the United States. 

But are you concerned that the aggregate impact of the proposed 

rules of origin might have the exact opposite effect than what you 

intended? And also, we are also aware that the Canadian Government introduced, in the last round in Mexico City, a modified 

version of their proposed rules of origin. I wonder if you might elucidate on that proposal and also whether or not Mexico has its own 

proposal regarding the rules of origin. 

Thank you, sir. 

Ambassador LIGHTHIZER. Thank you, Congressman. And 

thank you for your kind remarks. 

The rules of origin are extremely important, as you say. Our objective is to bring more jobs back to Michigan, and we think that 

the direction that we’re moving will have that effect. 

The United States had a proposal. Canada had a proposal, I 

think, and Mexico has been engaged on the issue. And I think we 

are in a position where we’re finally starting to converge. We are 

working very closely with the U.S. industry. I had people on Monday, and I think maybe even until yesterday, in Detroit trying to 

work out the details of this kind of an agreement. 

Once again, I can’t really say exactly what is going to end up 

happening, but I think we’re in a pretty good place. But our objective is to stop the hemorrhage of jobs from the United States and 

to bring jobs back to the United States. That’s our objective. 

The way we analyze this thing is that Canada and Mexico basically sell their cars to the United States. So, in the case of the 

United States, we sell 900,000 cars to Canada, and they sell almost 

2 million to us. In the case of Mexico, they sell us, I don’t know 

what the numbers are, but maybe 2.3 million, and we send them 

200,000. So basically these are industries that are designed to sell 

cars in the United States. 

85 

It is not unreasonable for us to say: If you are going to do that, 

we ought to have rules of origin to get some fair share of that manufacturing in the United States. 

So how much are you actually working with? In the case of 

trucks, it’s 25 percent. We have an enormous amount of leverage. 

In the case of cars, it is 2.5 percent. So that is $900 a car. That 

is what we are talking about. Our view is that if you are going to save $900, it is not unreasonable to say some part of that should come back in employment in 

the United States. At some point—you’re right—you make it to the 

point where they can’t compete, and clearly, we are aware of that. 

That’s not our objective. Our objective is to sort of find that sweet 

spot where we get some of these jobs back. 

We are the market—we can’t forget that—we are the market for 

all these cars. It is not like they are going north and south, except 

in small numbers. 

Mr. BISHOP. Thank you, sir. I appreciate your sharing that information with us. 

I agree with you 100 percent, the goal is to try and get as many 

jobs back to the United States. We like to hear that in Michigan. 

The number one part of our economy is our manufacturing sector, 

especially in autos. So we appreciate your efforts, and we appreciate your attention to this. And I am glad to hear that your team 

has been in Detroit to talk to our folks. 

Thank you, sir. 

Mr. Chairman, I yield back. 

Chairman BRADY. The gentleman yields back. 

Mr. LaHood, you are recognized. 

Mr. LAHOOD. Thank you, Mr. Chairman. 

And thank you, Ambassador Lighthizer, for your service to our 

country. 

Ambassador, my district is the eighth largest ag district in the 

country in terms of corn and soybean production. We have some of 

the most fertile farmland in the entire world. 

There is real concern with farmers and agriculture folks on the 

Administration’s position on NAFTA and withdrawal. A couple statistics that I think are important: 98 percent of the corn that Mexico imports comes from the United States, much of it from the Midwest; about one-third of the products produced in Illinois go to Canada or Mexico; about 35,000 jobs tied directly to NAFTA. And that 

is just in agriculture. By the way, agriculture is the number one 

industry in the State of Illinois. 

And when I have heard repeatedly about withdrawal, the groups 

that I work with—National Pork Producers Council, American 

Farm Bureau Federation, National Cattlemen’s Beef Association, 

National Corn Growers Association, Corn Refiners Association, 

American Soybean Association, Americans for Farmers & Families—all agree that withdrawal is not an option here. 

I guess my question to you, Ambassador, is, do you know any ag 

groups that think withdrawal is the right approach? 

Ambassador LIGHTHIZER. Our objective is not to withdraw. 

Our objective is to get a good and improved agreement. I don’t 

know of any ag groups that want to withdraw, but I don’t know. 

There may be some out there. I am not aware of them, no. 

86 

But our objective is not to withdraw either. Our objective is to 

get the best agreement we can. It’s an important agreement. It’s 

whatever it is—we always say, Mr. Chairman, it’s a tradeoff. The 

reality is, last year, it was like $1.1 trillion or $1.2 trillion worth 

of trade. There is an enormous amount of trade between those 

three countries, and our objective is to figure out a way to have disagreements be more beneficial to the United States, and that certainly means more benefits to American agriculture. 

Mr. LAHOOD. Thank you. I appreciate those comments on that. 

And I, for the record, will submit an article from Farm Week in 

February that is titled ‘‘NAFTA is American farmers’ Lifeline.’’ And 

in there, they talk about, if the United States quits on NAFTA, it 

quits on its farmers. 

And the other thing is, I know the President recently tweeted: 

‘‘NAFTA is a bad joke!’’ 

Do you agree with that sentiment? 

Ambassador LIGHTHIZER. I have no idea about that quote. 

Mr. LAHOOD. Well, it was a tweet. 

Ambassador LIGHTHIZER. I have no knowledge. I didn’t see 

that. 

Mr. LAHOOD. Well, I would just tell you: That causes a lot of 

concern, Mr. Ambassador, when farmers—and, by the way, the 

farmers in my district and in rural America overwhelmingly support the President and continue to support him, particularly in all 

the things we have talked about today. But I can’t emphasize 

enough the concern with farmers in rural America when it comes 

to NAFTA. 

Let me switch subjects here. 

Rules of origin has been talked about a lot here. And when we 

think about the constituencies that we all deal with, Mr. Ambassador, can you name a constituency that agrees with your position 

on rules of origin? For instance, Chamber of Commerce, National 

Federation of Business, Heritage Foundation. 

Ambassador LIGHTHIZER. How about the AFL–CIO, do they 

count? 

Mr. LAHOOD. Okay. That is fair. So AFL–CIO. Any business 

groups that you can cite? 

Ambassador LIGHTHIZER. Listen, I don’t know. There are business groups all over the place. I have no idea where they are on 

rules of origin. 

Mr. LAHOOD. Could you submit those for the record, whatever 

those are? 

Ambassador LIGHTHIZER. No, I can’t. I don’t have the resources. If the Chairman wants me to go out and have my people 

use resources to find out where business groups are on rules of origin, I will do it, but otherwise, I won’t. 

Mr. LAHOOD. Well, I guess the concern is, as we look at the 

trade agreements we have in place in FTAs, when we look at these 

provisions—ISDS, we have talked about, rules of origin, sunset provision—these all appear to be very unorthodox and unconventional 

as we negotiate NAFTA, as we look at our other trade agreements. 

And so I think there is real concern, Mr. Ambassador, with the 

position that we have had there and having a trade policy. With 

that, I want to just mention, last year, when you had gone through 

87 

your Senate confirmation, the Administration quoted: You will be 

shocked by the speed at which bilateral trade agreements will 

begin to materialize. 

And so I am a supporter of bilateral trade agreements. Many of 

us are. But we are 15 months into this Administration, and we 

have not seen a template or a model for bilateral trade agreements. 

And I understand you haven’t had people in place, and I am cognizant of that, but when we look at, well, is there a model, is there 

a mechanism out there, particularly with your position on ISDS, 

rules of origin, and sunset, can you comment on that? 

Ambassador LIGHTHIZER. Well, I will comment on all of it, but 

I am not going to do it in 9 seconds, however. 

Number one, of course, we are going to have different policies 

than the Chamber of Commerce. Their policies are what have gotten us $800 billion worth of trade deficits. So, of course, we’re going 

to have unconventional policies if we are going to have a different 

result. If we do exactly the same thing, nothing is going to change. 

This is an unsustainable trade deficit. We have a $560 billion goods 

and services trade deficit. We have a deficit with China which can’t 

go on. It’s $375 billion. We are going to do things differently, absolutely. 

I personally believe that these people who voted for the President 

voted for him because they didn’t want it to be exactly like half of 

those groups want it to be. So, of course, it’s going to be different, 

number one. 

Number two, in terms of—I am out of time. 

Chairman BRADY. Way out of time. 

Thank you, Mr. Ambassador. 

Ambassador LIGHTHIZER. Thank you. 

Chairman BRADY. Mr. Reed, you are recognized. 

Mr. REED. Mr. Ambassador, way over here. 

It is a pleasure to have you here today. I want to just follow up. 

The unconventional nature of what this Administration is doing 

is something I applaud, and I have stood with, because I agree that 

we just cannot maintain the status quo, because, as to your point, 

this policy is unsustainable. 

But I think we all want to get to the same outcome, and that is 

where I think we have broad agreement in regard to the issues before us today. 

Mr. Ambassador, I would be remiss not to go on the record to 

raise the issues of dairy and wine coming from western New York. 

The Finger Lakes wine industry is blossoming. And the access to— 

and our dairy farmers in western New York. The access to Canada, 

obviously—and I have shared this with you and I shared this with 

Prime Minister Trudeau directly, is very critical to our future. So 

I just put that on the record. 

But what I want to do is ask some questions that maybe haven’t 

been covered here. And one of the issues that I have been very concerned about in my entire tenure as a Member of Congress on the 

issue of trade is currency manipulation and state-owned enterprises. My understanding of the negotiations that you are having 

right now with Canada and Mexico are that those issues are being 

discussed; those issues are being potentially put on the table in regard to updating NAFTA. 

88 

And, one, do you agree that there are issues of currency manipulation across the world with other trading partners, such as China, 

Japan, European Union members, and, if that is the case, how do 

you see the present negotiations being a tool to put us in a position 

where we can take on truly what I believe is one of the unfair practices that is out there that has gone unaddressed for decades? 

Ambassador LIGHTHIZER. First of all, Congressman, I completely agree with you. I think it’s one of the absolutely fundamental problems, is this issue of currency manipulation. And it’s 

China, which everyone agrees to. 

If you go to the auto companies, they are going to tell you it is 

Japan, and it varies, but it’s 6, 7, 8, 9 percent. We are worried 

about 2.5 percent on our auto tariffs. If the currency manipulation 

is 6 percent, then it is multiples of that. 

It’s also an issue we believe with Korea. 

So the Administration is dealing with this on a variety of areas. 

And I tell you that I sit down with the pros who do this who work 

for me, my professional people who have done this for 30 years, 

and I will say: Well, what did you do the last time you had this 

or that kind of conversation with the Treasury Department on the 

issue of currency manipulation? 

And do you know what they say? ‘‘We’ve never had a serious conversation with any Treasury Department before this Treasury Department.’’ 

Secretary Mnuchin is completely engaged on this in a way that 

no former—literally, my career people, Republicans and Democrats, 

are like: We have never had a conversation like this where people 

really have to come to grips with the issue of currency manipulation. 

So we are dealing with it in the context of NAFTA, even though 

we realize these countries are not really currency manipulators. 

But they have the same interests we do in tackling this problem. 

And where you go, we’ll see. Clearly, a huge, huge impact is, or 

factor, is transparency. We start with the position we don’t even 

know what these people are doing. And competitive currency devaluation is going to be something that is unacceptable. 

It is a complicated issue. It is something that we are involved 

with, but it is a Treasury issue more than it is ours. And we have 

Treasury officials, besides the Secretary, David Malpass and the 

Secretary are completely locked in on this issue, and they are going 

to get absolutely as much as you can get on it. 

But I don’t think you can overstate how important it is. And I 

think it will be more important in 10 years than it is now if we 

don’t do something about it. 

Mr. REED. Well, I totally agree with you, Mr. Ambassador. I 

look forward to working with you, as well as the Treasury Secretary, as I have raised this issue with prior Treasury Secretaries 

in our tenure here. 

The other issue that I wanted to just highlight and stress to you 

is, as we deal with intellectual property, and I know it has been 

touched on a little bit here across the panel, but coming from an 

area with some interests that have really been a bright spot in regard to our innovation economy and the development of technology, 

I just wondered what your commitment or thoughts are on how we 

89 

can best protect our intellectual property, our innovation, in the 

next generation of the economy, opportunities I see coming down 

the pipeline for us? 

Ambassador LIGHTHIZER. First of all, you understate the importance of intellectual property in your district. It is extremely important, and we understand that. Because it is important, those 

companies—particularly, one company is important for the whole 

economy. 

So we are completely committed, both in NAFTA, where I have 

talked about what our provisions are. Until now, there has really 

been a movement away from protection of intellectual property. In 

the last Administration, there was a movement away from the protection of intellectual property. We are recentering that, in our 

opinion. 

But even more importantly, I would suggest the whole 301, the 

whole IP protection with China, that is the absolute front line of 

protection of intellectual property. 

Mr. REED. I appreciate the hard work, Mr. Ambassador. I look 

forward to working with you. 

I yield back. 

Chairman BRADY. The gentleman yields back. 

Mr. Holding, you are recognized. 

Mr. HOLDING. Thank you, Mr. Chairman. 

Ambassador, thank you for being here. You have missed an incredible winter wonderland that is going on outside today. You will 

be glad you are going down the hill after this, rather than having 

to come up the hill. 

Regarding the tariffs on aluminum steel, I just encourage you to 

move expeditiously to determine which of our trading partners will 

be exempt from these new tariffs. There are countries that we, obviously, know are routinely engaged in unfair trading practices, but 

there are other countries which are undeniable allies to the United 

States, not only economically but for our national security, as well. 

You and I have talked before about the special relationship the 

United States has with the United Kingdom, and we have discussed the tremendous opportunity that is presented to the United 

States as the United Kingdom exits the European Union. The 

United Kingdom and the United States have a longstanding relationship. It goes without saying: it is certainly one of our closest 

allies. 

So, as you go through the exclusion process for specific countries, 

I had hoped that the United Kingdom is quickly identified by your 

office as being exempt. 

And I am sure you are also aware that, on Monday, there was 

a draft agreement put forward between the United Kingdom and 

the EU, so they are another step forward to finalizing their exit. 

And, in my opinion—and I think the opinion of a number of my colleagues—this is a time when we need to be encouraging the United 

Kingdom. They are undeniably a defense partner, they are a NATO 

partner, and I think not exempting them would be a step in the 

wrong direction. 

A potential free trade agreement would be particularly good at 

services. But I would say that not only are they a NATO partner, 

but if you look at how we are aligned with them in the promotion 

90 

of capitalism, very few countries promote it the same way the 

United States and the United Kingdom do. Promotion of free markets. 

And perhaps, most importantly of all, is entrepreneurism. 

Entrepreneurism is alive and well in the United States, and it is 

alive and well in the United Kingdom, and it is not really alive and 

well, in our sense of the word, in a lot of other places around the 

world. 

So I would encourage you to work on that as expeditiously as 

possible. I know that Liam Fox was here last week, the Minister 

of International Trade. I am sure that you all had several meetings. I will just give you a minute or so if you wanted to recap and 

have anything to say about those meetings and about any thoughts 

that you and the Administration might have on our potential bilateral trade agreement. 

Ambassador LIGHTHIZER. Well, I would say, first of all, it is exactly as you say. I have met many times with Dr. Fox and found 

them all to be informative and enjoyable. We have an enormous 

amount in common. They clearly are—I think that it is probably 

the universal view in the Administration that we should, at the appropriate time, have—explore the idea of an FTA with the U.K. 

When that time is, is more up to them than it is to us. In the 

meantime, what we are trying to do is do the kinds of things that 

are in areas where they haven’t seen the competence of the EU. So, 

for example, certifications of professionals. There are a lot of things 

we can do. 

We have a working group that we started, I guess, just about a 

year ago, that has had a number of meetings, a number of stafflevel meetings. So we are getting a lot of the work done that would 

have to be done in advance of an FTA so that, at the right time, 

we can move quickly. 

The issue of the U.K. and 232 is a complicated one because of 

the fact that they are in the EU. So that is something that sort of 

has yet to be worked out. But, clearly, an FTA with them. Clearly 

other examples of working together or something is very high on 

our priority list, and I see no impediments at all to moving in that 

direction at the appropriate time. 

Mr. HOLDING. I am glad to hear you say that. I believe that a 

bilateral agreement with the United Kingdom could be a signature 

accomplishment of this Administration and would be the first time 

that we have encapsulated in writing what the special relationship 

means. It is a great opportunity for this Administration to leave a 

lasting mark, not only on geopolitical politics but on trade and 

trade policy. 

So thank you, Mr. Ambassador. 

Chairman BRADY. Thank you, Mr. Holding. 

Mr. Ambassador, thank you for being our witness today. 

Clearly, there is strong bipartisan support that the best way to 

lower our trade deficits are not to buy less but to sell more. We are 

confident in your ability in renegotiating NAFTA and other agreements to create a level playing field for American farmers and 

workers and businesses because when you do, we win. And there 

is no doubt there is strong support for your very aggressive stance 

91 

in opening these markets and modernizing NAFTA in a significant 

way. 

That is why 103 Republicans—your strongest supporters—are 

encouraging you, urging you, to include strong accountability provisions because we want your strong new trade agreement for America to be accountable and to be supported here in Congress. We 

look forward to being your partners and your clients as we go forward. 

Ambassador, please be advised, Members of the Committee have 

2 weeks to submit written questions to be answered later in writing. Those questions and your answers will be made part of the formal record. 

With that, Mr. Ambassador, thank you. 

The Committee stands adjourned. 

[Whereupon, at 1:40 p.m., the Committee was adjourned.] 

[Questions for the Record follow:] 

92 


33807A.024

HOUSE WAYS AND MEANS COMMITTEE ON 

WEDNESDAY, MARCH 21, 2018. 

QUESTIONS FOR THE RECORD 

Question from Chairman Bradv: 

l ) The need fo1· binding dispute settlement in on trade agr eements 

Binding dispute settlement mechanisms in our trade agreements, including the WTO agreement, 

are a powerful tool when other countries break the mles and seek an unfair advantage over 

American producers. Dispute settlement has been largely successful tor America, and we have 

brought - and won - more cases against unfair trade than any other nation on earth. I was 

pleased by your recent decision to use the WTO dispute settlement system to challenge India's 

export subsidies, which violate WTO mles and hurt American workers and producers. Your 

action proves j ust how important it is for America to be able to hold countries accountable for 

their commitments. 

But I can't understand why the Administration would want to take away this important tool in 

NAFT A. A dispute settlement system that allows a country to "set aside" any decision that it 

does not like is barely worth the paper that it's written on. I understand your concerns about 

sovereignty, Mr. Ambassador, but only Congress can change U.S. law. I don't want to ask: 

another country for pennission to take action when it violates our rights. A "voluntary" 

approach weakens every one of the conunitments across the agre~ment and would be a 

significant step backwards for American workers and producers from the original NAFTA. If 

we cannot hold Canada and Mexico accountable for the new, ambitious, and high-standard 

commitments that we are negotiating, then what have we actually accomplished for the 

American people? 

A: Mr. Chairman, I agr ee stJ·ongly with your view that we must hold our trade agreement 

partners accountable and that h·ade agreements need to deliver the benefits we obtained 

through negotiations for our workers and fil-ms. Dispute settlement i.s one of the tools we 

have to ensure this is the case. Dispute settle under NAFTA simply has not worked. To be 

effective, dispute settlement pt·ocedures must be timely and efficient, and the resultst·epot·ts by three-person panels- must be clear, well-reasoned, based on the fa cts presented, 

and not add obligations that the parties dido 't themselves agree to in the relevant 

agreement. Unfortonat('ly, the experience of the United States under some of out· 

agr eements has been vet·y diffet·ent. One of out· goals in renegotiating the NAFT A has been 

to strengthen the dispute settlement process so that it operates t·eliably, and to ensu e mot·e 

accountability for the decisions that the panels rende.-. Ultimately, it is my expet·ience that 

the resolution of significant disputes that are brought under any trade agt·eement will be 

t·esolved by negotiations between the parties. I believe our approach properly focuses the 

govemments on resolving problems, not playing out the legal pt·ocess for as long as 

possible. 

1 
93 


33807A.025

Questions from Ranking Member Neal: 

1) Consultations witb Congress 

As you know, consultations between the Administration and Congress are critical not j ust 

because ofTPA's mles but primarily because of the authority that the Constimtion assigns to 

Congress in matters of trade and international commerce. There continue to be lapses in 

CQnsultation between the Administration and Congress on important trade matters. For example, 

in 2017, many Executive Orders and Memos on important trade topics were drafted, signed, and 

issued that Members of Congress first learned about from the press. Many of the trade-related 

reports that the President ordered in 2017 have either never been produced or have not been 

made public - and have never been made available to Congress. This is not how ExecutiveCongressional consultations on trade are supposed to work. What are you doing, as the U.S. 

Trade Representative and the statutorily designated principal spokesma11 of the President on 

international trade, to address these problems? 

A: As the United States Trade Representative, I place great importance on the both the 

history of the agency's rela tionship with Congress and its r·equirements under statute. This 

Administration is committed to following the guidelines for consultations with ongn~ss fo•· 

trade agreement negotiations that were developed in 2015. 

As the USTR, I have made it a habit of personally calling the Chairman and Ranking 

Member, or in some circumstances theit· senior staff, to d elivet· news on upcoming actions, 

and it is my intent to continue persona lly relaying importa nt messages in this 

way. Furthermore, by my own appt·oxi.mation I have personally conducted over 85 

meetings and calls with Congressiona l members, while my staff has conducted ovet· 649 

such meetings a nd calls. In total, we estimate that USTR has spent over 2,496 man hout·s 

in consultations with Congressional staff and membet·s. Moving fonvat·d, I can assure you 

that USTR will continue to consult with Congressional members a nd staff in a timely 

fashion. 

2) KORUS Consultation 

The Administration has chosen to forgo the consultation and transparency requirements ofTPA 

with respect to the renegotiation of KORUS. Under what authority is USTR invoking to 

renegotiate KORUS without TPA? What authority will USTR use to implement the outcome of 

the renegotiation? Please provide the legal citations and/or references to the particular 

provisions in the existing free trade agreement, implementing legislation, or other sources of 

authority. 

A: USTR has been completely tJ·ansparent with Cong•·ess on Ibis issue. We have given 

numerous briefings, pt·esented text fot· review, and kept Members and Tt·ade committee 

staff up to date on KQRUS. And, most importantly, we have achieved an improved 

agreement. As a r esult of the negotiafions, the United States and Ko•·ea have agreed in 

principle to modifying six tariff lines in the U.S.-Korea Ft·ee Trade Agreement 

(KORUS). Autbot·ity to proclaim such modifications is provided to the President by 

Section 20l (b) of the KORUS implementing legislation, subj ect to tbe consultation and 

layover pt·ovisions of Section 104 of the in1plementing legislation. USTR has •·ecently 

2 
94 


33807A.026

begun this consuJtation and layover process, which includes obtaining advice f•·om the 

International Trade Commission and app•·opriate advisory committees, as well as 

submitting a r eport to and consulting over a 60-day pe1iod with the Committee on Finance 

of the Senate and the Committee on Ways and Means of the House of Representatives. 

3) U.S.-Cbina Dialogue 

It is my understanding that the Administration has not met with China in a formal economic 

dialogue since 2017. As a result of the recent actions on the Section 232 steel and aluminum 

investigations and Section 30 I intellectual property and forced technology transfer investigation, 

the U.S.-Chinese economic working relationship appears to be deteriorating. Will USTR be 

launching a formal economic dialogue with China in 2018? If not, what is USTR's plan to 

resolve the longstanding, systemic challenges posed by China that underlie the global 

overcapacity and intellecrual property abuses that led to these investigations and enforcement 

actions? 

A: As explained mo•·e fully in USTR's 2017 Repo1·t to Congnss on China's WTO 

Compliance, the Administration bas carefully reviewed the past 15 yea rs of the United 

States' formaJ high-level trade diaJogues with China, including the newest one launched by 

this AdministJ·ation in 2017, the U.S.-China Comprehensive Economic Dialogue. The 

Administration has found that these dialogues did not lead to fundamental changes in 

China's t.-ade, investment and intellectual p•·operty rights r·egimes. Through these past 

dialogues, all hough China made commitments for changes in Chinese policies and 

practices, it repeatedly failed to delive•· on those commitments. Currently, despite the 

absence of a formal high-level dialogue, the Administmtion is communicating with China 

about the systemic problems that have given rise to enforcement actions such as USTR's 

section 301 investigation and the types of steps that China needs to take to make the U.S.-

Chi.na trade r·elationship fair, balanced and •·ecip•·ocal. 

4) U.S.-EU Covered Agreement 

On September 22, 2017, the United States and EU signed the U.S.-EU Covered 

Agreement. Please provide an update on implementation of the Agreement. 

A: The United States and the EU held the first meeting of the Joint Committee, established 

by the U.S. - EU Covered Agreement on Pr·udential Measu•·es Rega rding Insm·ance and 

Reinsurance, in early March 2018. This meeting was largely organizational and p1·ovided 

an opportunity for both Parties to p•·ovide updates on the steps being taken to implement 

lh(' Ag•·eement's provisions. Both Par·ties have completed lbeh· domestic p•·ocedues and 

the Agreement entued into force as of early April2018. Both the United States and the EU 

a1·e making good progress in implementing the Agreement's provisions within the relevant 

timeft·ames established by the Agr eement. 

5) Steel and Aluminum Tariff Exemptions 

3 
95 


33807A.027

l11e Administration has temporarily exempted Canada, Mexico, South Korea, Brazil, Argentina, 

Australia, and EU countries from the Section 232 steel and aluminum tariffs until May I. USTR 

recently armounced that South Korea will be pennanently exempted from the tariffs as long as 

Korean imports do not exceed 70 percent of the average annual total from the past three years. 

The President has also linked Canadian and Mexican exemptions to a successfully renegotiated 

NAFT A. The proclamations also provide that any other countries that agree to "satisfactory 

alternative means" to address the national security threat may also be exempted in future. The 

Administration appears to be considering a wide range of factors in detennining whether a 

country will be exempt from the steel and aluminum tariffs. Please provide further clarity 

regarding how the Administration is analyzing which countries it will exempt from the steel and 

aluminum tariffs. 

A: In recent proclama tions, the Pr·esident identified criteria for· determining whether to 

exempt a country from the tariffs he procla imed pursuant to Section 232 of the Trade 

Expansion Act of 1962, as amended. These criteria include whether the United States has 

an impor·tant security relationship with a countJ·y, and whether· the United States and that 

counh-y can arTive at satisfactor·y altemative means for addressing the thr·eatened 

impairment of national secur·ity caused by imports from that country. The President's 

recent proclamations r elating to Section 232 describe the issues the United States is 

discussing with pa rtner· countries relating to satisfactory alternative means, including 

measur·es to reduce global excess capacity by addressing its r oot causes, and to increase 

domestic capacity utilization. 

6) NAFT A Ener·gy Tr ade 

In Massachusetts and New England, trade in energy with Canada is critical to powering the 

engines of innovation, manufacturing, and people's lives. Renegotiating NAFT A to ensure the 

reliable and preferential tem1s of that trade should be a priority for the modernization agenda in 

the NAFT A renegotiation. In the trade of oil and gas, there are issues with verifying origin right 

now under the current NAFT A's rules that are having the effect of burdening ibis trade and 

making power more expensive for New England. Are you optimistic that these issues can be 

successfully resolved in the NAFTA renegotiation? Are the NAFTA partners and your U.S. 

interagency partners providing the cooperation you feel is needed to successfully resolve these 

issues as part of the NAFTA renegotiation? 

A: USTR is aware of the issues the oil and gas trade ar·e having with the current NAFT A 

rules and the vel'ification of origin. USTR has been wor·king with the tr ade and U.S. 

Customs and Border· Protection (CBP) to address these issues in the NAFTA r·enegotiation. 

We will continue to work with our· NAFT A and interagency partners to addr·ess these 

issues in the NAFTA renegotiation. 

7) Africa 

You noted the Administration's desire to launch bilateral trade negotiations with an African 

country in your testimony. The United States already has one bilateral trade deal with an African 

country- Morocco- and it also bas the African Growth and Opporrnnity Act, which allows for 

4 
96 


33807A.028

duty-free treatment of particular goods from eligible Sub-Saharan African nations. Have you 

identified with which African country the Administration intends to pursue a bilateral 

agreement? What is the timeline for tbe launcb of those negotiations? What criteria is the 

Administration considering in detennining which African country trade relationship is ripe for 

FT A negotiations? What are the advantages to a trade agreement with an African country? 

What special challenges do you anticipate in the negotiation of such a trade agreement? 

A: The Administration is still at an eat·ly stage of identifying a potential African partner 

with which to negotiate a free tJ·ade agreement. Any such negotiations would be pt·eceded 

by exploratory talks to clarify mutual expectations and, of course, by consultations with 

Congress. We have no set timeline for this initiative, as that will bl' dictated by the 

circumstances. We are also in the process of defining the range of critet·ia for selecting an 

African negotiating counterpart, and we welcome your views. The advantage of such an 

Ff A to the United States would be ensuring free, fail·, and reciprocal access to a growing 

African market, and for the African pat·tner it would rept·esent an important step beyond 

the African Growth and Oppot·tunity Act. In terms of challenges, we are likely to face 

some capacity issues on the part of the African partoeL 

8) U.S.-EU Trade Agreement 

During your testimony, you described a trade deal with Europe as a top priority since the U.S. 

has trade deficits with many European countries. Could you provide an update on how you plan 

to proceed with negotiating a trade agreement with the EU and your timeline for doing so? 

A: Reducing ban·iers to U.S. exports to the EU is a priority of this administt·ation. We 

continue to reflect on whethCI' T-TIP is the appt·opri.ate vehicle for· addressing out· concerns 

in the EU, and note that the Eu1·opean Commission bas made clear that it is not interested 

in a renewal of those negotiations at this time. Before we decide whet bet' to resume 

negotiations on a comprehensive trade agreement, we will want to be confident that there 

ar·e p1·omising paths to resolution of the most sensitive issues. In the meantime, we are 

actively engaging with the EU and its member states to addr·ess EU-Ievel barriet·s that 

contribute to our longstanding deficits with certain member· states and strengthen our 

cooperation on global issues of common concern. 

9) The WTO and Multilateral Institutions 

In the 2018 Trade Agenda Report, the Administration noted the impo11ance of the World Trade 

Organization and at the WTO II tl> Ministerial Conference in Buenos Aires last December, the 

Administration joined other WTO members in a dialogue on digital trade. What is the 

Administration's view on reengaging in other plurilateral negotiations? Over a year ago, you 

testified that the Administration was considering tbe Trade in Services Agreement (TiSA). 

Could you please update the Committee on whether USTR will reengage in that negotiation and 

also, in particular, the Environmental Goods Agreement (EGA)? 

5 
97 


33807A.029

A: USTR continues to evaluate the va1·ious options available to pursue these objectives and 

looks fonvard to continuing to consult with you as we chart the best cou1·se forward. 

Specifically with regard to the TiSA and EGA, the Administration's review is ongoing and 

we will continue to evaluate it and othe1· initiatives, ultimately seeking to advance the 

interests of manufactut·ers, service pt·oviders, and workers that produce environmenta l 

goods nationwide. 

10) Other U.S. FTA Renegotiations 

In 2017, the Administration initiated the renegotiation of both the NAFT A and the U.S. -Korea 

trade agreement (KORUS). Last October, in comments at the Latin American Summit in 

Florida, you noted that many of the U.S. trade agreements with countries in Latin America need 

to be modernized and that those trade agreements have not worked in favor of U.S. interests. For 

many Congressional Democrats, the perfonnance and implementation by many U.S. trade 

agreemem partners in Latin America (including CAFTA-DR cotmtries, Peru, and Colombia) of 

their labor and envirolllllental commitments has been sorely disappointing. As you make plans 

for the trade agenda in 2018, do you imend to look at modemizing and rebalancing any of the 

existing U.S. trade agreements in Latin America? Which ones would be priorities for a 

renegotiation? 

A: This Administration is committed to maintaining and expanding export markets rot· out· 

farmers, ranchet·s, and food processing industries. The Pt·esident has stated that the United 

States is open to negotiating trade agreements with any like-minded country that is willing 

to trade on fair and reciprocal terms. USTR has begun a process of identifying candidate 

countries. I look forwat·d to working with you, other Members of Congress, and 

agricultural stakeboldet·s, consi.stent with Trade Pt·omotion Authority, to identify ptiorities 

fot· opening new markets ot· updating other existing agreements, including those in the 

Westem Hemisphere. I expect pt·ovisions on labor and envit·onment would be among those 

most important in any new ot· updated agreements. Regarding CAFT A-DR, we had a 

goods trade surplus of over than $7 billion last year. We'•·e exploring ways of 

strengthening our trade relationship and improving the Agreement to address the next 

wave of 21st centut-y issues such as digital trade, state-owned entet·prises, small and 

medium enterprises and good t·egulatot·y practices. 

11) Other Chinese Industrial Policies 

In the context of the Section 301 investigation on China's abusive intellectual property, forced 

tech transfer, and cyber intmsion practices, USTR has identified a number of Chinese industrial 

policies aimed at disadvantaging, exploiting, or ripping off U.S. JPR holders. In proposing 

products to be subject to Section 30 I tariffs, USTR has focused on sectors identified by the 

Made in China 2025 industrial strategy. However, China's industrial planning reaches nearly 

every aspect of China's economic and strategic developmem goals. Even Chi.t1a 's recently 

implemented import ban on waste, scrap, and recyclable materials- which has led to significant 

backups for waste disposal in the United States, as well as Canada and Europe- is part of a 

strategy to develop more advanced Chinese teclmologies and facilities for recycling. How does 

6 
98 


33807A.030

the Administration intend to tackle Chinese industrial policies in other sectors that are leading to 

negative consequences for U.S. economic interests? 

A: ln the Fed er al Registe1· notice setting out the list of Chinese products p1·oposed to be 

subj ect to section 301 ta1·iffs, USTR expla ins that the Administntion is targeting products 

that benefit f1·om China's industrial plans. Secto1·s of China's economy that p1·oduce these 

goods include industi·ies such as aerospace, info1·mation a nd communication technology, 

robotics and machinery. While many of the targeted products are manufactured by 

industries suppo1·ted by China's Mad e in China 2025 industrial plan, other products that 

benefit from Chinese industrial policies are targeted as wen. 

In the section 301 repor t that USTR posted on its website on Ma1·ch 22, 2018, USTR makes 

clear that while Made in China 2025 is emblematic of the p1·oblematic industrial plans 

being pursued by China, it is by no means the only one. The Administration is focused on 

securing systemic changes to China's trade, investment and inteUectual property rights 

reg:imes that will benefit industries, companies a nd workers across the U.S. economy. We 

a1·e also actively reviewing othe•· p1·actices, such as the import bans you mention. 

Questions fl·om T rade Subcommittee Chaimtan Reichert: 

1) Vietnam 

In October, I chaired a Subcommittee on Trade hearing on U.S. trade policy in the Asia-Pacific. 

One of the markets that featured prominently in that discussion was Vietnam. In particular, we 

bad one witness who discussed the challenges U.S. suppliers of electronic payment services are 

facing when doing business i.n Vietnam. 

When President Trump visited Vietnam last November, the Government of Vietnam agreed to 

suspend the most problematic provision of their new payments regulation and to revise their 

policies so that U.S. suppliers could continue to operate without any advantage given to NAP AS, 

a state-owned Vietnamese payments company. But since then, Vietnam has not fulfilled that 

commitment to President Tn•mp. Instead, NAP AS is moving full speed ahead with its plans to 

cut off U.S EPS suppliers as soon as the suspension expires at the end of this year. 

This is deeply troubling. I appreciate the work you and your team have done already on this 

issue, and I am committed to supponing you ti.~rther in your efforts to address the actions of 

NAP AS. 

How do you plan to ensure that U.S. EPS suppliers can continue to operate on a level playing 

field in Vietnam? 

A: T he Adminisll·ation •·ecognizes the seriousness of this issue and continue to engage the 

government of Vietnam to try to find a solution that ensures U.S. electronic payment 

companies are not disadvantaged and are permitted to build their ove1·seas businesses 

without disr·u ption OI" harm to their existing commercial an·angements. 

7 
99 


33807A.031

2) Kor·ea 

r congratulate you and your team on your work to improve the U.S.-Korea free trade agreement, 

or KORUS. I look forward to continued work to ensure this agreement is fully implemented. 

Currently, there are still some remaining implementation issues in the services sector that must 

be addressed. For example, U.S. electronic payment services (EPS) companies continue to face 

persistent regulatory discrimination that has significantly diminished their market position over 

the past five years. This issue has been raised in USTR's National Trade Estimate Report for the 

past several years but the pallem contitmes. 

How can we best help you to keep the pressure on Korea to make progress on omstandiog 

implemematioo issues moving forward? 

A: The Administration has a number of KORUS implementation concem s, including on 

electr·onic payment services as well as other issues pertainiog to financial services. USTR 

and the ~asUJ·y Department continue to press Kor·ea on these issues under our KORUS 

Financial Services Committee, as well as thr·ough ongoing work through the KORUS J oint 

Committee. As we move towa rd finalizing the KORUS modification and amendment 

outcomes, with respect to both these and other· implementa tion concer·ns, we have made 

clear that continued, meaningful progress on U.S. concem s r emains of vita l importance. 

3) NAFfA 

While U.S. dairy producers have long faced prohibitive tariffs in Canada, they now must deal 

with Canada's Class 7 dairy pricing program. This program is distor1ing global markets and 

severely culling into certain U.S. dairy exports. 

How do you plan to eliminate these trade barriers through the NAFf A negotiations, so that U.S. 

dairy can finally enjoy the fi.1ll benefits ofNAFr A and have its global markets restored? 

A: The Administration understands that Canada's pricing policy (Class 7) is harming U.S. 

dairy exports and is working at the highest levels to address this critical issue in NAFf A 

renegotiation. The Administration is also seeking to open up Canada's market to the full 

r·ange of U.S. dairy (and poultry and egg) products through NAITA r·enegotiation. These 

ar·e both high pr·ior·ities for· the United States. 

Questions from Trade Subcommittee Ranking Member· Pascrell: 

1) Labor· 

How are you ensuring that the labor language in the May IO'b Agreement is fully enforceable, 

and is a floor-- not a ceiling -- in NAFr A? 

What is the Administration doing in the NAFTA renegotiation to ensure that Mexico will 

actually comply with the labor obligations in the agreement and that workers in Mexico have 

rights and the ability to see their wages rise over time? 

8 
100 


33807A.032

Given that Mexico bas taken no effective actions in the past 25 years to live up to its obligation 

even to adequately enforce its own labor laws, please explain USTR's strategy to improve 

monitoring and enforcement of labor obligations. In particular, bow can I explain to my 

constituents, some of whom believe NAFT A is dirty word, that a new NAFTA will actually stop 

outsourcing, support their jobs, and raise their standards of living? 

A: Among our top priorities for NAFT A n e improvements that c1·eate incentives to 

innease manufacturing in tbl' United States, lowe•· om· IJ·ade deficit, and imp•·ove expo•·ts 

oppo1·tunities for U.S. producers and workers. To suppo1·t these pl'iorities in our 

negotiations, we ar e ensuring that the updated NAFf A strengthens our trading partners' 

labo•· standards. In accordance with the objectives Congress set out in TPA, we a•·e 

modernizing and incorporating labor obligations into the core of the agreement rather than 

in a side ag•·eement, and a1·e wo•·king to ensure that the labor obligations a1·e subject to the 

same dispute settlement mechanisms and trade sanctions as the rest of the agreement. 

Regarding labor standards in Mexico, we are closely monito1ing the implementation of 

Mexico's landmark constitutional reforms that will overhaul the system of labo•· 

justice. NAFf A provides an opportunity to lock i.n this progress. We understand the 

concem s that have been rai.sed •·ega•·ding thl' pending legislative package Mexico bas 

proposed, particularly on coUective bargaining and protection contracts. We are 

consulting with Mexico on these issues and on ways to address these concem s. 

2) Currency 

Last year, you came before the cotlltllittee and said, "If you are negotiating with someone who 

really isn't a currency manipulator it is easier to get a high standard on currency and then set the 

standard." Mexico and Canada do not have problems with manipulating their currency, correct? 

So wouldn't NAFTA be a good oppornmity to get a high standard on currency? What are you 

going to propose to make sure the currency provisions in a renegotiated NAFT A have teeth and, 

in your words, "set the standard"? 

A: Currency manipulation is an issue on which President T1·ump campaigned, and this 

Administration •·emains focused on this issue. Thl' Administration, with the Department 

of the T1·easury in the lead, is examining the full an·ay of policy tools available to combat 

CUITency manipulation, including trade commitments. I fully support that effort and 

believe in the NAFf A •·enegotiation we have an opportunity to work with strong partners 

and allies to set a very powerful standa1·d going forward. 

3) NAFfA Timing 

You originally hoped to have negotiations wrapped up by the end of March. Can you update us 

on what your expected timeline is for completiJ1g these negotiarions, and what does that mean in 

tenns of compromising on some of your unconventional proposals? Can you tell us specifically 

if you are compromising on ISDS, or rules of origin, for instance? 

9 
101 


33807A.033

I think it's critical to have a " rebalancing" and new NAFT A, not just tweak around the edges, not 

just an expedient deal. How will you measure the success of a new NAFTA agreement - by what 

metrics and on what time line will you judge its success? 

A: We are seeking to conclude a modernized and rebalanced NAFT A as soon as 

possible. However, the substance will determine the pace of this negotiation. We will not 

conclude a bad deal fot· the sake of expediency. 

4) NAFT A Hearing 

I have called on the committee multiple times both publicly and privately to hold hearings on 

NAFTA. On Febmary 22"d, fifteen of us Democrats on the committee sem a lener to the Trade 

Subcommittee Chairman calling for NAFT A hearings. 

We have had seven negotiating ro1111ds and no public meetings with witnesses from the 

Administration. Would you commit to c.oming before the hearing to testify in a NAFTA-specific 

hearing? 

A: Since the Tt·ump Administr·ation gave its 90-days' notice bt!fore the negotiations began, 

my staff and I have completed hundreds of hours of consultation meetings, seeking 

Congressional guidance on specific objectives and proposals. Jn Novembet·, USTK also 

updated its negotiating objectives oullining the Administration's pt·iol"ities for the NAFT A 

negotiations, the first time USTR has revised its objectives document after negotiations 

began. Fut·thermore, during my public hearing before the Ways and Means Committee last 

month, a vast majol'ity of the questions pertained to the ongoing negotiations. I take the 

transparency guidelines as laid out in TPA very setiously and am commilled to following 

TPA t·equirements. 

5) La bot· enfot·cement 

I am interested in hearing your thoughts about enforcement of the Labor obligations. Under the 

US Dispute Settlement proposal, especially Section 18 et seq (Set Aside, Implementation, NonImplementation), how do you foresee labor disputes will be sen led? 

A: I am committed to vigorously enforcing our tude agreements, including by 

incorporating high standard labor provisions into the core oft he agreement rather than i.n 

a side agreement as is currently the case with the NAFT A. In consultation with Congt·ess, 

we are considering a number of options in NAFT A 2.0 that will allow us to enforce 

vigorously the new labor obligations, as well as ensuring that the obligations u e subject to 

the same dispute settlement mechanisms and trade sanctions as the rest of the agreement. 

We will also ensure that U.S. sovereignty is respected in NAFTA trade disputes. 

6) Cross-border Trucking 

10 
102 


33807A.034

Last year, I asked you about national treatment for cross-border long-haul tntcking services and 

my concerns about safety standards, certifications, and the potential impact on jobs and wages in 

the U.S. 

I want to commend you for the language you tabled in Round Six - a creative Annex II NCM 

that invites Congress to protect highway safety and American long-haul truckers. What 

assurance can you provide that this proposal will survive in the fmal NAFTA deal? 

A: The AdministJ·ation continues to prioritize its recent proposal on ct·oss-bot·der trucking 

services in the NAFTA negotiations, which was de\•eloped after consulting widely and 

hening significant concerns from the Congress and stakeholders, including on the 

protection of U.S. jobs, small business, and highway safety, as well as ensut·ing efficient 

distribution networks fot· U.S. ftrms. We continue to work with out· Canadian and 

Mexican counterpat·ts to ensure that the upda ted NAFI A gives the United States sufficient 

flexibility to address these concerns. 

7) China 301 

There has been concem raised by stakeholders of the possible downstream effects of the tariffs 

on consumers and retaliation by China. What is tbe rationale and evidence that in1plementing 

tariffs will have the effect of pressuring China to change its unfair trade policies? 

Have you considered cooperating with like-minded partners in addressing the ongoiJ1g issues in 

China? What eff011 has been made to work with trading partners on this effort? What kind of 

responses have you received from our trading partners? 

A: We have made it plain to China that we have set·ious concem s about the matters 

disclosed in our investigation. The imposition of tariffs is a statutorily authorized action 

undet· section 301 of the Trade Act and has been used numet•ous times in the past. China 

should take steps to addt·ess these serious concem s. 

Most of out· allies and tt·ading pat·tners share the same concerns about China's statedriven, met·cantilist policies on tt·ade and technology transfer. 

Many countries also agree that China continues to game the WTO's international rulesbased trading system and the openness of om· economies in ways that thrl'aten all of our 

economies and our long-tet·m competitiveness. 

In addition, we have maintained a sustained engagement effort with ou1· allies and othet· 

like-minded countt·ies in confronting China. 

8) Plan for China 

l11e Tmmp Administration has suspended the high-level bilateral dialogues between the U.S. and 

China. Does tbe Administration plan to engage in an economic dialogue witb China? When? 

11 
103 


33807A.035

What is this Administration's vision for the fun1re of US-China trade relations? How does the 

301 investigation and/or the 232 investigation figure into that plan? 

A: As explained more fully in USTR's 2017 Report to Congress on China's WTO 

Compliance, the Administration has carefully r eviewed the past 15 years of the United 

States' formal high-level trade dialogu es with China, including the n ewest one launched by 

this Administration in 2017, the U.S.-China Compreh ensive Economic Dialogue. The 

Administration ha s found that these dialogues did not lead to fundamental changes in 

Chi.na's t.-ade, investment a nd intellectual prop erty •·ights regimes. Through these p ast 

dialogues, China rep eatedly failed to d eliver on ils commitments. Currently, d espite the 

absen ce of a formal high-level dialogu e, the Administration is communicating with China 

about the systemic problems that have given rise to enfo1·cement actions su ch as USTR's 

section 301 investigation and the ty p es of steps th at C hina n eeds to take to make the U.S.-

China tJ·ade relationship fair, balanced and •·ecip•·ocal. 

9) Intellectual Prop er ty 

I. The U.S. is widely recognized as a leader in innovative and creative industries. Our artistic 

and cultural products, as well as inf01mation technology and phannaceutical products, are 

widely consumed around the globe. I am concerned that Canada and Mexico may seek 

weaker intellectual property (lP) protections than the U.S. What is USTR domg to ensure 

Mexico and Canada protect U.S. intellectual property in their markets? 

A: I understand that innovation and c1·eativity are key drivers of p•·oductivity, 

employment, and economic g•·owth in the United States, and r •·ovide a comparative 

advantage in many secto1·s. We a1·e aggressively pursuing high standards of IP p1·otection 

and enforcement in Canada and Mexico, including th1·ough tile negotiations of the IP 

chapte•· of the NAFT A. This includes commitments on d isciplines that are essential to 

innovative and creative industJ·ies, including patents, trademarks, cop yright, tJ·ade seu ets 

and commitments to p•·ovide a full complement of enfo•·cement mecha nisms for intellectual 

p1·op erty rights. 

2. One of the President's first official acts was to pull the United States out of the Trans-Pacific 

Partnership (TPP) agreement. In many ways, the IP chapter ofTPP was weaker than prior 

FTAs and U.S. law. I believe that part of the problem was that the IP chapter was one of the 

very last chapters to close and the U.S. evidently did not have enough leverage left to get the 

best deal. I am concerned you may be setting up the same dynamic in NAFTA - the IP 

chapter will be one of the last to c lose and we won 't have enough leverage to get a good 

deal. IF-intensive industries account tor over 27 million jobs, almost 40% of U.S. GDP, and 

over $800 billion in merchandise exports and another $115 billion in licensing revenue. Will 

you commit to ensuring the U.S. thoughtfully and carefully negotiates with its Canadian and 

Mexican colleagues tO cra!i an IP chapter with strong copyright and enforcement 

protections? 

A: I have p ersonally and •·epeatedly made it clea1· to Canada and Mexico that a •·obust IP 

Chapter is essential to having a successful Agreement. I understand the importance ofiP12 
104 


33807A.036

intensive industries to the U.S. economy and I am aggr essively put·suing a high standard of 

IP pt·otection and enforcement in the NAFTA negotiations. This includes, but is not 

limited to, protections related to tndemarks, patents, copyright and related rights, 

undisclosed test ot· othet· data, and trade secrets. 

3. According to llPA's 16th Economic Study, in 2015 the value added by the total copyright 

industries to the U.S. GDP approached $2. 1 trillion, accounting for 11.69% of the U.S. 

economy; and employed nearly 11.4 million workers, accounting for 7.95% of all U.S. 

employment and nearly I 0% of all private employment in the U.S. Increasingly these 

industries are digitally distributing their works to consumers. At the same time, infringing 

commercial streaming is growing in popularity, undermining these new online business 

models. What is the U.S. government doing to protect American workers in these industries? 

A: Comba tting infringing stt·eaming and other forms of piracy is a top priority of out· 

intellectual property tude agenda. With respect to inft·inging streaming of U.S. 

copyrighted content in foreign mar·kets, USTR encourages our trading pa rtnet·s to make 

available civil and criminal tools to combat online pira cy. USTR a lso conducts an annual 

out-of-cycle t·eview (t·esulting in the Notorious Markets List) that identifies tt·ends in online 

pit"acy, good practices that governments can employ to address these challenges, and 

sp ecific examples of pir ate sites. O ur most recent Notorious Markets List, for example, 

included an issue focus on illicit strt>aming devices, highlighted voluntary initiatives to cutoff advertising funding to pirate sites, and included some of tile most popular illicit 

streaming sites in the world in the List, one of which has since shut down. 

4. This Administration bas made reducing trade deficits a priority. The U.S. television and film 

industry is one of the most highly competitive around the world e of the few that 

consistently generates a positive balance of trade in virtually every country in which it does 

business. In 2015, the industry had a positive services trade surplus of$13.3 billion, or 5% of 

the total U.S. private-sector trade surplus in services. Despite this success, this surplus is 

being chipped away at by weak copyright protections abroad as well as the export of 

loopholes. Can you commit that the U.S. will protect American property abroad and work 

toward more robust protections for creators in a renegotiated NAFTA? 

A: Yes. USTR is comm.itted to pt·otecting American intellectua l propet·ty abt·oad, and 

recognizes the contribution of this and other creative industries to U.S. exports in goods 

and set·vices. We are seeking a robust IP outcoml' in NAFT A, including pr·otections for· 

copyt·ight and related rights and civil, crintina l, administrative and bot·det· enforcement of 

these t·ights. 

5. An important aspect of copyright law is "secondary liability" imposing liability on entities 

that do not directly infringe, blll induce or actively facilitate infringement by 

others. Secondary liability has been critical for copyright enforcement on the 

Internet. Without it, notorious piracy platforms Like Grokster, Limewire, and Groovesbark 

would still be in business. Despite the critical importance of 5econdary liability, and 

widespread online piracy stea ling from America's creators, our free trade agreements have 

not explicitly required our trading partners to enact it. I know America's creative industries 

13 
105 


33807A.037

have asked you to put secondary liability in NAFT A modemization. Will you commit to 

including explicit secondary liability provisions in the NAFTA modemization? 

A: I understand the importance of ensuring effective enfor·cement of copyright and related 

r·ights, including in the online environment. One of our negotiating objectives in NAFT A is 

to seek provisions governing intellectual property r·ights that ar·e similar to the standards in 

U.S. statutes, including protections r·elated to copyright and related r·ights. We are seeking 

a robust outcome for the IP Chapter in the NAFTA negotiations. 

6. USTR will soon release its first Special 30 I Report under your leadership. Special 30 I gives 

the Adminisu·ation a critical tool to resolve intellectual property and market access baniers 

abroad. But USTR has not named a Priority Foreign Country since 20 13. There are plenty of 

candidates this year - from Canada and Korea to Malaysia and Saudi Arabia. Under your 

leadership, can we expect USTR to deliver a strong report that fully leverages Special301 to 

level the playing field for American innovators? 

A: Ensuring that U.S. owners of intellectual proper·ty (IP) have a full and fail· oppor·tunity 

to use and pr·ofit from their IP uound the world is one of the trade pr·ior·ities outlined in 

the Pr·esident's trade agenda. Toward this end, the Special 301 Report r·efiects the r esolve 

of the Administration to call out for eign counh·ies and expose the Jaws, policies, and 

practices that rail to proVide adequate and ellective II' pr·otection and enrorcement for U.S. 

inventors, u eator·s, br·ands, manufacturers, and senice provider·s. The identification of the 

countries and IP-related market access barriers in the Report and steps necessary to 

address those barTien are a critical component of the Administration's aggressive efforts 

to defend Americans from harmful IP-related trade harrier·s. This year's Report will be a 

product of a r·obust review pr·ocess undertaken by the Trade Policy Staff Committee, led by 

USTR, that takes into account numer·ous U.S. stakeholdo.> r contributions, as well as 

information collected by Embassy-based personnel a round tbe world. 

1 0) Role of Services 

The New York Times recently published an article 1 outlining the United States' surplus in 

services trade, a helpful reminder about the role of services. How does your office take into 

account the role of United States' services fim1s, which represent approximately 75% of US 

economic output and about 80% of US private sector employment? 

A: The U.S. sen •ice sector is highly innovative and a key driver· of the U.S. economy. 

Maintaining a vibrant U.S. ser·vices sector and expanding U.S. se1·vtces exports is vital to a 

healthy economy and a cor·e objective of U.S. trade policy. USTR is pursuing robust 

services outcomes in the ongoing NAFTA negotiations and otber ongoing bilateral 

efforts. USTR is also evaluating the var-ious options available to pursue these objectives in 

other· fomms and will continue to consult with you as we chart the best cour·se forwar·d. 

1 Irwin Neil. 2018. Most Americans Produce Services, Not Stuff. Trump Ignores That in Talking 

About Trade. The Upshot. 

14 
106 


33807A.038

11) E-commerce & WTO 

Can you provide a status update and list your priorities on the e-commerce discussions in the 

WTO? 

A: Australia, Japan and Singapore have o•·ganized a g•·oup of 70 WTO Membe•·s to explo•·e 

the possibility of negotiations in the WTO of trade provisions r elevant to digital 

trade. Discussions are at a very preliminary stage, so it would be premature to predict how 

this initiative will unfold. The United States is an active participant, and last week made an 

initial contribution to the group, outlining our views on the range of elements that we view 

as helpful to a chieving a comp•·ehensive, high-standard ag•·eement. Key elements 

at·ticulated in the U.S. s ubmission include rules •·elating to cross-h01·der data flows, location 

of computing facilities, discrimination against digital pt·oducts distributed electronically, 

and other provisions similar to those tabled in the NAFT A 2.0 negotiations. 

12) NAFTA & customs (including de minimis) 

Can you talk about your plans surrounding high-standard customs policies with a NAFT A 

modernization, including how you plan to build on existing provisions in earlier U.S. free trade 

agreemems by ensuring that electronic transmissions and the value of data being transmitted 

remain free of customs duties and customs fonnalities·? Can you also share your views on 

Canada's and Mexico's de minimis thresholds for low-value goods and how you intend to work 

with those countries to achieve de minimis parity with our $800 US threshold? 

A: The United States put forth very ambitious negotiating objectives in the Customs 

Administration and Trade Facilitation Chapter and is seeking commitments that meet this 

level of ambition. We have bee n seeking new commitments on fastet· and less but·densome 

relea se of goods, tr·ansparency and automation in customs procedures; and in bow the 

govemment works with and interacts with tr·adCJ"s. By meeting the chapter objectives, the 

Administration nill level the playing field for U.S. expot·ten and companies, as we are 

seeking from tbe otbe•· NAFT A Parties tbe same fundamental fail- and efficient bo•·de•· 

treatment that out· partners experience at the U.S. bot·der for our U.S. 

companies. Included among the vet-y d etailed objectives is an inueased de minimis value 

offered by our trading pa1·tners, so that U.S. exporters and companies \viii also benefit 

from increased oppo1·tunities and new job growth. 

13) TiSA 

The United States bas driveu the effort for governments to adopt new rules for trade in services 

and provide market access through the Uruguay Round under the General Agreement on Trade 

in Services (GATS), and subsequently through our FT As and the Trade in Services Agreement 

(TiSA) negotiations. Eliminating services barriers could increase U.S. services exports by as 

much as $1.4 trillion, supporting as many as 3 million new j obs in the United States. What are 

your plans for TiS A? 

15 
107 


33807A.039

A. The U.S. sea·vice sector is highly i11novative and a key driver of the U.S. economy. 

Maintaining a viba·ant U.S. sea·vices sectoa· and expanding U.S. sea-vices exports is vital to a 

healthy economy and a coa·e objective of U.S. trade policy. USTR is cun·ently pursuing 

robust sea·vices outcomes in the ongoing NAFf A negotiations and other ongoing bilater al 

effoa·ts. More broadly, USTR is evaluating the various options available to pursue these 

services t.-ade objectives and will continue to consult with you as we chart the best course 

foa·ward. 

14) The WTO and Multilaterallnstitutions 

ln the 2018 Trade Agenda, the Administration noted the importance of the World Trade 

Organization and at the Ministerial Collference -II in Buenos Aires, the Administration joined 

other WTO members in a dialogue on digital trade. What is the Administration's view on 

reengaging in other plurilateral negotiations? Over a year ago, you testified that the 

Administration was considering the Trade in Services Agreement (TiSA). Could you please 

update the Committee on whether USTR will reengage in that negotiation and also, in particular, 

the Envirornuental Goods Agreement (EGA)? 

A. USTR continues to evaluate the various options available to pursue these objectives and 

looks forward to continuing to consult with you as we chart the best course 

roa·ward. Specm caUy with regard to the J<:GA, the Administ.-ation's review is ongoing and 

we wiU continue to evaluate it and othea· initiatives, ultimately seeking to advance the 

interests of manufacturers and workers that produce environmental goods nationwide. 

15) Africa 

You noted the desire to launch bilmeral trade negotiations with an African country in your 

testimony. The United States already has one bilateral trade deal with an African country, 

Morocco, and it also has the African Growth and Opportunity Act, which allows for duty-free 

treatment of particular goods from eligible Sub-Saharan African nations. Have you identified 

with which African country tbe Admit~ist ation will pursue a bilateral agreement? Wbat is the 

timeline for the launch of those negotiations? What criteria is the Administration considering 

upon determining which African country trade relationship is ripe for FT A negotiations? 

A: The Adminisu·ation is still at an eaa-ly stage of identifying a potential African partnea· 

with which to negotiate a free trade agreement. Any such negotiations would be preceded 

by exploratory talks to clarify mutual expectations and, of course, by consultations with 

Congress. We have no set timeline for this initiative, as that will be dictated by the 

circumstances. We are also in the process of defining the .-ange of uiteria foa· selecting an 

African negotiating counterpart, and we welcome your views. The advantage of such an 

FT A to the United States would be ensuring fa·ee, faia·, and reciprocal access to a growing 

African maa-ket, and for the Afa·ican partner it would a·epa·esent an important step beyond 

the African Growth and Opportunity Act. In terms of challenges, we are likely to face 

some capacity issues on the part of the Afa·ican paa·tne.-. 

16) Asia Pacific 

16 
108 


33807A.040

With the recent signing of the Comprehensive and Progressive Agreement for Trans-Pacific 

Partnership (CPTPP) by the remaining II TPP Parties and the continuation of the Regional 

Comprehensive Economic Partnership (RCEP) negotiations led by China, the Asia Pacific region 

is moving on without the United States. What is this Administration doing to ensure that the 

United States stays not just relevant, but leads in the Asia Pacific region, particularly at a time 

when the United States seems to be isolating ourselves from our allies? 

A: Strong r·elationships with the countries of Southeast Asia and the Indo-Pacific region 

ar·e economically and stJ·ategically important to the United States. The United States will 

continue to lead in this important region by working to combat unfair trade practices and 

by building our tt·ade relationships with countries bilaterally and through our engagements 

with APEC and ASEAN. With rega rd to FTAs, the Pr·esident has made clear the 

willingness of the United States to t.>ngage with interested countries on ter·ms that will lead 

to free, fair, and reciprocal trade and significantly improved market outcomes. 

1 7) Colombia 

The AFL-CIO and a number of Colombian unions filed a petition highlighting a number of areas 

in which Colombia was still falling short of its commiunents under the U.S.-Colombia Trade 

Promotion Agreement. After reviewing the petition, the Department of Labor highlighted 

"signiticant concerns" with Colombran labor practices. Yet, to date, the current Admimstration 

has failed to take meaningful action on this petition or on Colombian labor issues generally. In 

January the Department of Labor issued a three-page progress repottnoting that much work still 

remained to be completed, while your office sent a letter to the Colombian government regarding 

its attempt to accede to the OECD that failed to even mention labor rights. Moving forward, what 

is your office's plan for ensuring that the Colombian government lives up to its labor 

commitments? 

A: USTR works closely with the U.S. Depar·tments of Labor and State, as well as other 

agencies, to monitor labor practices in all trading partnen, including Colombia. The 

Administration, including USTR, has engaged closely with Colombian officia ls on their 

efforts to addr·ess Jabot· concerns. With regard to the OECD, while USTR is the lt>a d for 

the OECD Trade Committee, the U.S. Department of Labor leads the Administration's 

effor·ts on the OECD Employment, Labor and Social Affairs Committee (ELSA C) and is 

the interlocutor with Colombia on OECD labor· issues. AI its meeting on March 21 and 22, 

the ELSAC formulated a unanimous r·ecommendaHon concerning acct.>ssion to the OECD 

Council of Minister·s that advocates putHng into place regular and rigorous post-accession 

repor·ting r·equir·ements for· key labor issues. We intend to continue close engagement with 

Colombia on labor issues and look forward to consulting with you and your· colleagues on 

Colombia issues in the fu ture. 

18) Softwood Lumber 

17 
109 


33807A.041

ls it not true that the largest lumber producing companies now operate tnills on both sides of the 

U.S.-Canadian border? Are these companies reaping the benefits of higher lumber prices, 

brought on by tariffs on Canadian softwood lumber, at the expense of the American consumer? 

A: The Adminisn·ation is committed to the robust enfot·cement of U.S. trade •·emedy laws. 

Ensuring that U.S. softwood lumber· producers compete on a level playing field against the 

injut·ious effects of unfairly subsidized Canadian impot·ts is an important priot·ity fot· the 

Tt·ump Administration. In Novembet· 2017, the U.S. Depa rtment of Commer ce imposed 

antidumping and countet·vailing duties on impot·ts of Canadian softwood lumbet·, following 

a petition from U.S. softwood lumber producers and a full investigation of the complaint by 

the U.S. Inte.-national Trade Commission and the Department of Commerce. 

These ta riffs are in place to remedy the harm that was caused by the unfair trade practices 

of the Canadian industry. In the United States, the majority of timberlands are privately 

owned. In conu·ast, 90 percent of timberland in Canada is owned by pt·ovincial 

govemments, most of whom set the price fot· hat·vesting timber t·athet· than allowing the 

market to determine such pt·ices. Unfait· trade practices such as this are ha rmful to U.S. 

jobs and intpose high costs on the economy. 

Questions from Rep. Nunes: 

1) NAFf A Sunset Clause 

On NAFT A, you and your team have proposed an automatic sunset clause that would terminate 

NAIT A after 5 years absent re-approval by each country. It is my understanding that both 

Canada and Mexico are opposed to this proposal, and that most members of our committee are 

opposed. Given Congress must approve a renegotiated agreement, can you explain why you are 

continuing to pursue an automatic sunset given the opposition? 

A: Given its wide-.-anging effects on the U.S. economy, it is impo1·tant that a renegotiated 

NAFT A include a robust mechanism to ensure that all three Parties assess its benefits on a 

periodic basis and affirmatively agree to continue it. If we achieve an agr eement that is 

bette•· fot· America, there will be an incentive to keep it in place. We have addressed this 

impot·tant issue in our pt·oposals, and in the detailed summa ry of our negotiating 

objectives. 

2) Tariff and Non-Ta riff Baniet·s 

Over the last few months, I have heard that the Adtninistration may consider NAFTA withdrawal 

should renegotiation fail. Can you explain what would happen to tariffs and non-tariff barriers 

should the US withdrawal from NAFTA? 

A: The Administration bas been clear about the problems with NAFT A - and we a re doing 

something about it. We ar e committed to successfully concluding the NAFTA 

•·enegotiation, and to improve the NAFTA by: (1) rebalancing it to address the United 

States' trade deficit and manufacturing losses; and, (2) updating it to •·eOect 21st century 

18 
110 


33807A.042

standards-for digital trade, intellectual p1·opcrty, labo•·, environment, financial services 

and mo•·e. 

Questions f•·om Rep. Lewis: 

1) P•·otecting Marginalized Communities in U.S. Trade Policy 

Congress expects for the U.S. Trade Representative (USTR) to collaborate with the Department 

of Labor's Bureau of International Labor Affairs (ILAB); the Department of State's Race, 

Ethnicity and Social Inclusion Unit (RESIU) and Bureau of Democracy, Human Rights, and 

Labor (DRL); the Department of Justice; and other appropriate agencies on the questions of 

labor, human and civil rights, and the rule of law with our trading partners. 

Sadly, Afro-Colombian, Indigenous, labor, civil, and human rights leaders continue to face 

threats and violent anacks. 

Please detail how and when USTR coordinated with RESIU, ILAB, DRL, and the Department of 

Justice to address ongoing labor, human, and civil rights challenges that face Afro-Colombians 

and Indigenous communities under the U.S.-Colombia Free Trade Agreement. 

A: USTR works closely with the u.s. Uepntments or Labor and State, as well a s othe•· 

agencies, such as the U.S. Depa•·tment of Justice, to monitor !abo•· p•·actices in IJ·ade 

partner countries, and to document any potential brea ches of FT A obligations, as 

necessary. When DOL •·eceives a public submission •·egarding labor concerns under a 

trade ag•·eement, as it did in the case of a Colombia submission in 2016, the Bureau of 

International Labor Affai.-s (ILAB), in coordination witb USTR and Stale, is responsible 

for r eviewing, •·eporting on the issues raised, and participating in dialogues with the 

country in question to address the issues. The Administration has engaged closely with 

Colombian officials on their efforts to add•·ess labor concerns, including issues affecting 

Af•·o-Colombians and indigenous communities, and we look forward to consulting closely 

with you and your colleagues on Colombia issues in the future. 

2) P•·otecting Marginalized Communities in U.S. T•·ade Policy 

Please explain how USTR collaborates with these offices in ensuring that U.S. labor, human and 

civil rights, and the rule oflaw are core components of U.S. strategy in the North American Free 

Trade Agreement (NAFTA) renegotiations. 

A: USTR wo•·ks clost>Iy with I be U.S. Depa•·hnents of Labo•· and State, as well as olbe•· 

agencies, to monitor labor practices in trade partner countries, and to document any 

potential b•·eacbes of FT A obligations as necessary. Wben DOL r eceives a public 

submission •·ega•·ding labor concerns unde•· a trade ag•·eement, as it did recently in the ca se 

of a Mexico submission in January, the Bureau of International Labor Affairs, in 

consultation with USTR and State, is •·esponsible for •·eviewing, repo•·ting on the issues 

.-aised, and participating in dialogues with the countJ·y in question to add•·ess the 

issues. Since the sta1·t of the NAFT A •·enegotiations, the Administration bas engaged 

19 
111 


33807A.043

closely with Mexican officials on theiJ· efforts to addnss labor concerns, including Mexico's 

pending legislative reforms to r evamp the entire system of labos· justice 

administration. NAFTA 2.0 is an opportunity to lock in these s·eforms and incorporate 

high standard labor ps·ovisions into the core of the agreement rathes· than in a side 

agreement as is cusTently the case with the NAFf A. We look forward to consulting closely 

with you and your colleagues on Mexico issues in the futus·e. 

3) Buenaventus·a and labos· s·igbts 

Buenaventura is the major port city that is ceorralto Colombian trade. Last year following 

strikes that received international attention, there was finally progress on an agreement to 

improve the labor and living standards of port workers - and especially Afro-Colombian, 

Indigenous, and other marginalized workers in Buenaventura. 

Given the central role ofBuenavcntura to international commerce and the historic, gross denial 

of basic worker's rights, please explain bow USTR is working with Colombian authorities to 

ensure that full and timely implementation of the 12-point June 2017 agreement. 

A: USTR i.s in close and continual contact with the U.S. Departments ofLabos· and State 

on the over aiJ situation in Colombia, including the situation in Buenaventus·a. The U.S. 

Uepartment or Labos· has a Labor Attache based in Colombia who has been working 

closely with labor leades·s and civil society stakeboldes·s on the situation, including meeting 

with members of the Afro-Colombian Labor Council. USTR is coor dinating with the U.S. 

Departments of Labor and State to monitor developments, and we will consul! with you 

and key stakeholdes·s here and in Colombia, including with relevant Colombian 

govemment officials, as implementation of the June 2017 agreement continues. 

4) Buenaventus·a and labor s·igbts 

Did USTR visit Buenaventura, Colombia in the past year, meet with labor and civil rights 

leaders, and raise these concerns directly with the Colombian govenllllent and pon officials and 

companies? 

A: USTR bas not visited Buenaventura in the past year but bas met with labor and civil 

s·ights leadei'S and has s·aised concems on the situation in Buenaventura and on working 

conditions and workers' rights in all of Colombia's ports directly with the Colombian 

government. 

5) Colombia's Accession to the Organisation for Economic Co-opes·ation and Development 

(OECD) 

Colombia's application to join the OECD is another opportunity to make meanjngful progress in 

the many labor, civil, human rights, and mle of law challenges. The USTR plays a key role 

representing U.S. interests and concems at the OECD. 

20 
112 


33807A.044

Please may you provide an update on USTR's work regarding outstanding labor issues and 

Colombia's accession to the OECD? 

A: The U.S. Depa rtment of Labor leads the Administration's efforts on the OECD 

Employment, Labo1· and Social Affairs Committee (ELSA C) a nd is the interlocutor with 

Colombia on OECD labo1· issues. At its meeting on March 21 a nd 22, the ELSAC 

formulated a unanimous recommendation concerning accession to lh<' OECD Council of 

Ministers that advocates putting into place •·egular and •·igorous post-a ccession •·epo•·ling 

requirements fo•· key Jabot· issues. USTR is the lead for the OECD Trade Committee and 

is working with Colombia on issues it needs to address to secure U.S. support to close the 

Trade Committee's •·eview. 

6) Labo•· Enforcement and Tude Agenda Strategy 

L'lst year, USTR conducted a comprehensive review of U.S. trade agreements. One of the 

chaHenges of U.S. trade policy is the need for strong enforcement especially as it relates to labor 

and human rights. l11e CAFT A-DR panel in the Guatemala labor dispute was extremely 

disappointing. Similarly, many continue to believe that an updated plan to address Colombia's 

ongoing labor, human, and civil rights challenges is necessary. 

Following the review, how did USTR adjust its labor enforcement strategy and the NAFTA 

renegotiations to build upon the lessons of the Guatemala labor dispute and the Colombian Labor 

Action Plan? How does the 2018 U.S. Trade Agenda reflect the review's findings? 

A: Enfo•·cement is a key a spect of this Administration's trade agenda. T his includes 

ensuring that trading partners comply with the labor obligations in ou1· IJ·ade 

agreements. USTR wo•·ks closely with the U.S. Departments of Labor and State, as well as 

otbe•· agencies, to monitor labor practices in counh·ies with which we bave FT As and to 

work with those countries whe•·e labor practices have fallen short of expectations. That 

work can include negotiating action plans, engaging in consultations with high-level 

officials, and undertaking monitoring IJ·ips to meet dinclly with stakeholders, among otbe•· 

actions. Through a ctions like these, my staff works to ensure that all of ou1· trading 

partne•·s maintain fair labor practices to help level the playing field fo•· American 

workers. 

With regard to Guatemala, we strongly disagree with some of the interpretations d eveloped 

by this panel, including with •·espect to wbethe•· Guatemala's failures affected trade. [n 

NAFT A 2.0 we intend to address the G uatemala panel's erroneous interpretation of 

CAFT A I abo•· obligations, and will continue to consult c.losely with you on Ibis issue. 

7) Tra de, J obs, and Outsou•·cing 

Following the adoption ofNAFTA, my home state of Georgia, Metro Atlanta, and other 

communities across the country lost many quality jobs to outsourcing. It is critically important 

that workers, in the United States and in the countries with which the U.S. trades, earn living 

21 
113 


33807A.045

wages in safe working conditions, with protection from discrimination and abuse. The most 

direct way to address these trade-related issues is in the text of any agreement. 

How are you working to develop new bold solutions on enforc.eable labor and human rights 

within the text of any proposed NAFT A renegotiation? 

A: Among our· top priorities for· the NAFTA, are improvements that create incentives to 

inuease manufactur·ing in the United States, lower our trade deficit, and improve exports 

oppor·tunities for U.S. pr·oducers and workers. We n e vigor·ously pursuing these goals 

throughout the Agreement, including by re-thinking rules of origin and bringing strong 

labor· and environment pr·ovisions into the cor·e of the Agreement and subjecting them to 

the same dispute settlement mechanisms as other pr·ovisions in the Agr·eement. 

With r·espect to labor specifically, we are addressing this serious issue. Lower labor· 

standar·ds in Mexico, including wage issues, affect American workers and businesses. I am 

committed to ensuring that NAFTA strengthens our trading pntners' labor standar·ds and 

meets the negotiating objectives that Congr·ess bas set out in TPA. I will continue to work 

with you and other· Members of Congress as we update and NAFTA. 

8) U.S.-Africa Trade Agenda 

Your testimony briefly mentioned the possibility of free trade agreements with countries in 

Africa, and the 2018 U.S. Trade Agenda referenced extending economic "partnerships to 

countries that are committed self-reliance." 

Please may you explain what "self-reliance" entails and which African countries are under 

consideration for a possible bilateral or multilateral free trade agreement? 

A: The Administration is stiU at an early stage of identifying a potential Afr·ican pa1·tner 

with which to negotiate a free IJ·ade agreement. Any such negotiations would be preceded 

by explorato1·y talks to clarify mutual expectations and, of cou•·se, by consultations with 

Congress. With •·espect to sclf-•·eliancc, we intend to work with countries that seck to move 

beyond assistance to pa•·tnerships that pr·omote prosperity, including free, fait·, and 

mutuaUy beneficial trade. 

9) P•·otecting Access to Medicines 

A key component of the May IO'h Agreement is ensuring that U.S. trade policy does not 

undermine access to medicines and health care systems both in the United States and especially 

in the countries with which the U.S. trades. There are recent reports that the administration is 

attempting to shift the balance away from supporting country's public health care systems and 

ensuring continued access to affordable medicines. 

Please explain bow USTR incorporates and applies the principles of the May IO'h Agreement 

into presetving access to medicines in U.S. trade policy-- especially in countries like Colombia 

and South Africa - through both bilateral and multilateral fora discussions 

22 
114 


33807A.046

A: The President's goal to J"ationalize drug prices in America is completely consistent with 

our iote1·national obligations. USTR is fil"mly of the view that intemational obligations sucb 

as tbose in the TRIPS Agreement have sufficient llexibj]jty to aU ow trading parlneJ"S to 

address the se1·ious public health problems that they may face. USTR and other U.S. 

govemment agencies work to ensu1·e that the provisions of its bilateral and regional trade 

agreements, as weU as U.S. engagement in international organizations, including the UN 

and 1·elated institutions such as WIPO and the WHO, a1·e consistent with U.S. policies 

concerning IP and health policy and do not impede its trading partne1·s from taking 

measu1·es necessa1·y to p1·otect public health. 

Question from Rep. Roskam: 

1) Rules of Origin fo1· NAFT A 

Ambassador Lighthizer, as you know the rules of origin within NAFT A for heavy-duty trucks 

are different than those for passenger cars. To qualify for p referemial treatment, the largest 

commercial vehicles are required to contain Nonh American content e.qual to at least 60% of 

their value. Light duty vehicles must meet a 62.5% benchmark. The 2.5% variance refle.cts the 

significant differences between the two industries. For example, in 20 17, when passenger cars 

and light duty trucks sold a combined 17 million new units, the market for new heavy trucks was 

a mere 300,000 vehicles. The average sale price of such tmcks is approximately three times that 

of passenger vehicles. And due tO their robust manufacture and challenging service lives, heavy 

trucks include significantly more steel than their smaller counterparts. 

Would you please assure this committee that, when you have c.oncluded renegotiating the mles 

of origin provisions with our North American partners, the new rules will continue to reflect the 

differences between the heavy truck and passenger car industries, including a lower regional 

value number for trucks? 

A: USTR understands that there are differences between the heavy truck and passenge1· 

car industries and we are worhlng with our heavy truck indush·ics to unde1·stand bow such 

differences should be reflected in tbe rules of origin p1·ovisions. QUI" undeJ"Standing is that 

heavy IJ·ucks often contain greater amounts of U.S. and North American content than 

passenge1· cars. 

Question from Rep. Larson: 

1) Section 232 

My district is home to a large manufacturing base that is comprised of hundreds of small and 

medium sized manufacturers who make up the supply chain. Many of these companies are 

downstream users of sreel and aluminum. One such supplier, Jarvis Airfoil in Portland, CT, 

manufactures fan, compressor, and turbine blades and vanes for jet engines. They currently buy 

aluminum from the United Kingdom and have expressed concerns about the effect the tariffs will 

23 
115 


33807A.047

have on their company. These manufacturers are anxious for clarity on the timeline for when the 

tariffs will take effect and how the exemption process will work. 

During the hearing, Mr. Ambassador, you testified that it was your hope that all of these issues 

would be resolved by the end April. Since the hearing, the tariffs went into effect on March 23rd, 

but were suspended for Canada, Mexico, Australia, South Korea, Argentina, Brazil, and E.U. 

countries until May I 51• 

Can you provide additional details on how the exemption process will proceed moving forward? 

In particular, will the Administration continue to negotiate country exemptions after May I"? 

How will the AdmiJJistration ensure that the tariffs are continuing to provide relief to the steel 

and aluminum industry after longer-term country exemptions are issued? 

How does the Administration plan to address tariff exemptions for the United Kingdom over the 

long term? If European Union countries receive a tariff exemption beyond the May I, 2018 

suspension, how will the U.S. approach the U.K. afterthey leave the E.U. in March of2019? 

A: The tariffs proclaimed by the Pt·esident undet· Section 232 of the Tt·ade Expansion Act 

of 1962, as amended, entered into effect on Mat·cb 23 for all countries otbet· than 

Ar gentina, Australia, Brazil, Canada, Mexico, South Korea, and the membet· countries of 

the European Union. Fot· these countries, the l't·esident has proclaimed that the tarills will 

enter into effect on May 1, unless the President detemlines by fur·ther· pr·oclamation that 

the United States bas reached satisfactory alternative means to remove the threatened 

impairment to the national secur·ity posed by the impor·ts from those countries. USTR is in 

contact with these countries on the Section 232 tariffs. The President bas noted that in the 

event be decides to exclude a particular· country from the tariffs on a long-tet·m basis, he 

will consider whether· it is necessar·y and appropriate in light of our national secur·ity 

interests to make corresponding adjustments to the tariffs as they apply to other countries. 

With •·egard to discussions between the United States and the European Union (on behalf 

of its member countr·ies, including the United Kingdom), I would refer you to the 

Department of Commerce. 

Questions from Rep. Paulsen: 

1) India's Price Controls on Medical Devices 

Over the last 12 months the Govenunent of India has imposed deep price controls on coronary 

stents and artificial knees sold in India. The Govemment of India has not worked in good faith 

with the medical device industry to implement a framework that achieves the twin objectives of 

making healthcare more affordable while preserving the enviromncnt for innovation. How will 

this Administration work with the govermnent of India to ensure that US companies are not 

driven out of the market by arbitrary price caps that make it impossible for innovative companies 

to compete? 

24 
116 


33807A.048

A: The United States bas r·epeatedly stressed to the Gover·nment oflndia the importance of 

responding to U.S. concerns regar·ding the lack of differentiation in its price contl·ols for 

cor·onary stents and knee implants and has highlighted the potential negative implications 

for India in discouraging medical device companies from offering the most innovative 

products in the Indian market. With the USTR acceptance of the GSP petition on medical 

devices, our engagement on this issue will include a public GSP review process. 

2) India's GSP Status 

The Advanced Medical Technology Association cum:ntly has a petition pending at the USTR to 

withdraw India as a beneficiary country from the GSP, which allows developing countries to 

benefit from duty free imports on thousands of products. Given India's behavior as an unfair 

trading partner, what steps are you willing to take to utilize existing tools to address this 

untenable situation? 

A: USTR announced on April 12th that it has accepted the petition and will be launching a 

public review of India's GSP eligibility based in par·t on the concerns raised in this 

petition. USTR has also raised this issue bilaterally with the Indian govemment in the 

context of tbe U.S.-lndia Trade Policy For um. 

3) WTO Cases Addressing indian Export Subsidy l' rograms 

I applaud the WTO case USTR filed last week against India on that country's export subsidy 

programs. There have been concerns for years with respect to India's protections on intellectual 

property, tariff increases on technology products in violation of the lnfonuation Technology 

Agreement, draconian price controls on medical devic~s, and other issues. I appreciate the 

attention the Administration is paying to India's unfair trade practices, but l would be curious to 

know why the Administration chose to move forward with this action first and whether we can 

expect to see other actions against India's unfair trade practices, either in the WTO or through 

other means? 

A: The Administr·ation's filing of a r·equest for consultations in the WTO on export 

subsidies followed yea rs of engagement with India on this issae multilaterally in the WTO 

Subsidies and Countervailing Measures Committee and bilaterally in the Trade Policy 

Foi'Um (TPF). We moved fon vard with this action because India is providing over $7 

biUion in annual expor·t subsidies, advantaging thousands of Indian companies acr oss a 

wide spectrum of industries including producers of steel products, phan naceuticals, 

chemicals, information technology pr·oducts, textiles, and apparel. Instead of removing 

these subsidies to add•·ess the concer·ns the United States expressed, India continues to 

expand the size and scope of these pr·ogums. 

We intend to continue to address ou•· concem s with India on a r·ange of trade restrictive 

measures through the TPF and the WTO and will also consider additional tools, as 

appropr·iate, such as the GSP review that was announced on April 12. 

4) Support for ISDS & Agriculture Expo1·ters 

25 
117 


33807A.049

Even though NAFT A promises free trade for most goods, NAFTA partners sometimes put 

erroneous anti-dumping or countervailing duties on US exports. NAFT A currently allows 

illegally targeted industries to fight these duties under Chapter 19 dispute resolution. However, 

USTR has proposed to eliminate Chapter 19 in the NAFT A negotiation. Is this still the position 

of USTR, and if so, what are my food and agriculture-producing constituents supposed to do the 

next time Mexico slaps illegal or politically-motivated duties on ihem? Do you expect them to go 

to court in Mexico? 

A: The Chapter 19 dispute resolution mechanism that applies to the AD/CVD p1·oceedings 

("Chapter19") of the NAFTA Parties is something we have not replicated in any free trade 

agreement since NAFTA. This Administration does not believe that Chapter 19 is an 

appropriate mechanism to resolve issues that arise in trade remedy p1·oceedings. Chapter 

19 is a mechanism that is outside of ou1· judicial system and has often been utilized by 

parties to try to undemline or weaken the application of U.S. h·ade •·en1 edy law. This 

should not be a position that the United States should continue to support. We have a 

fundamental interest in maintaining a sh·ong, t·obust trade t·emedies regime so that when 

U.S. industt·ies are being injUI·ed by dumped ot· subsidized imports, an appt·opriate remedy 

can be put in place to addt·ess the situation. 

As fot· Mexico, the Chapter 19 system was created pt·ior to the creation of the dispute 

settlement system at the WTO. Today, if U.S. pt·oducers/exporte.-s believe that anothe•· 

counh-y's investigating autho.-ities have imposed a •·emedy that is inconsistent with its 

WTO obligations, they can approach their government to challenge the measure before a 

WTO panel. The United States has already demonstrated that it would put·sue such 

challenges when wan·anted, as evidenced by our recent victory involving China's 

iniposition ofWTO-inconsistent measures on U.S. expot·ts of chicken bt·oiler pt·oducts. 

5) Support for ISDS i.n NAFT A Negotiations 

One ofUSTR's principal negotiating objectives under Trade Promotion Authority is " to secure 

for investors important rights comparable to those that would be available unde1· United States 

legal principles and practice, by ... providing meaningful procedures/or resolving investment 

disputes." However, USTR is reportedly pursuing the opposite of''meaningful procedures for 

resolving investment disputes" such as in NAFT A renegotiations, where USTR has advanced 

proposals to significantly weaken Investor-State Dispute Senlement (ISDS) and to eliminate 

Chapter 19. How can American producers export effectively if they do not have meaningful 

procedures for resolving disputes? And why is USTR reportedly advancing a proposal that is 

completely opposed to your Congressionally-mandated negotiating objectives? 

A: The AdministJ·ation is committed to put·suing an outcome in the NAFT A negotiations 

that puts the inte1·ests of Amet·ican farmers, t·anchers, wo•·kers and businesses. The 

Administration is advocating for an approach to ISDS in the NAFIA that safeguards U.S. 

sovereignty and avoids incentivizing the off-shot·ing of U.S. jobs and manufactut·ing. I look 

forward to continuing to work with the Congress on this issue, consistent with the 

negotiating objectives set forth in the 2015 Trade Promotion Authority legislation. 

26 
118 


33807A.050

6) NAFf A Re-Negotiation & Its Effects on the Economy 

Many of us agree very much with the importance of updating and modernizing NAFT A. It was 

an agreement completed more than two decades ago. Not only has the world changed a lot since 

then, but we have also learned a lot in our trade negotiations about what works and doesn't. 

NAFT A has produced a North American commercial envirolllllent that supports a lot of goodpaying American jobs. There are more than 12 million jobs tied to N AFT A and more than two 

million of them are good paying manufacturing jobs across the country. Our common objective 

is to use these NAFT A talks to grow the U.S. economy and grow good-paying jobs. Mr. 

Ambassador, is your goal in these talks actually to grow the U.S. economy and good-paying 

jobs? And how will creating uncertainty, adding to the cost to manufacture in the United States 

and weakening the ability to hold Canada and Mexico accountable for unfair actions, actually 

promote that goal? 

A: Absolutely. The Administration's priority in the NAFf A renegotiations is maintaining 

and expanding ma•·kets for U.S. farme•·s, ranchers, and ag•·icultural processors, and fair 

treatment of theiJ· products by our t1·ading pa1·tne•·s. Ou1· aim is improve the NAFf A by: 

(1) rebalancing it to address the United States' trade deficit and manufacturing losses; and, 

(2) updating it to •·enect 21'' centm·y standards-fo•· digital trade, intellectual property, 

financial SeJ"vices and more. 

7) Canada's Unfah· Dai•·y Policies & NAFf A 

Canada's unfair dairy trade policies are harming American dairy producers and suppliers. How 

are these concerns being addressed in the ongoing NAFTA negotiations? 

A: The Administration unde•·stands that Canada's p•·icing policy (Class 7) is harming U.S. 

dai•·y exports and is working to address tllis c•·itical issue in NAFf A •·enegoliation. The 

Administration is also seeking to open up Canada's market to the fuU range of U.S. dairy 

(and poultry and egg) products th1·ough NAFT A •·enegotiation. These are both high 

p•·iorities for the United States. 

8) 301 Tariffs & Supply Chains 

Has USTR conducted any kind of analysis of the supply chains that will be affected by the 30 I 

tariffs, and did this analysis include an evaluation of available capacity in other markets to 

produce covered goods? 

A: The proposed list of products was based on an extensive interagency economic analysis 

that targeted products that benefit from China's indusiJ·ial plans while minimizing the 

impact on the U.S. economy. The list of products covered by the p1·oposed action was 

developed using the following methodology: Trade analysts from several U.S. Government 

agencies identified products that benefit from Chinese industl'ial policies, including Made 

in China 2025. The list was refmed by removing specific products identified by analysts as 

likely to cause disruptions to the U.S. economy, and ta1·iff lines that are subject to legal 01· 

27 
119 


33807A.051

administrative constraints. The r·emaining products were raaked accor·ding to the likely 

impact on U.S. consumers based on available tJ·ade data involving altemative country 

sources for each product. The proposed list was then compiled by selecting products from 

the r·anked list with the lowest consumer· impact. 

9) Economic Concerns regarding 232 Tar·iffs 

I am concemed that the tariffs could potentially wipe out the benefits of the recently enacted tax 

refonn. Has USTR undertaken any economic analysis to analyze this potential impact? 

A: Conceming the benefits of the tax r·efor·m, please r·efer· to chapter l "Taxes and 

Gr·owth" of the Economic Report of the President. CEA estimates that " by lower·ing the 

cost of capital and reducing incentives for· corporate entities to shift pr·oduction and profits 

overseas, the corporate provisions of the Tax Cuts and J obs Act will raise GDP by 2 to 4 

percent over the long run, and incr·ease average annual household income by $4,000." (pg 

18). 

On the impact of the effe·cts regar·ding the section 232 tariffs on steel and aluminum, I 

would refer you to the U.S. Depar·tment of Commerce. 

10) NAJ<TA Kules of Origin Consultation 

As USTR bas developed its proposed Rules of Origin framework within NAFT A 

negotiations, did it consult with representatives of affected industries in the United States'? If so, 

which industries and which companies'? And if not, why did you not consult with them? 

A: Tbr·oughout the NAFT A renegotiating process USTR bas consulted extensively with 

stakeholder·s in our· for·mulalion of the Rules of Or·igin framework. This began with a 

public bearing last June where 142 witnesses testified over· three days, and over 12,000 

public comments wer·e r·eceived. We have sought guidance and consulted with aU of our 

advisory committees, including the Industry Technical Advisory Committees, which 

i.nclude autos, aerospace, chemicals, and other· industry sectors affected by the ROO 

negotiations. We have also, whe•·e appropriate, consulted with industry stakeholders to 

understand their supply chains and relevant processes for Rules of Origin compliance. 

This is particularly true with respect to the auto and auto parts industry. 

11) NAFfA Rules of Origin & Economic Effect on Supply Chains 

In developing the Rules of Origin proposal, did you conduct any analysis or develop any 

economic modeling to evaluate how that proposal would affect current supply chains and 

employment for American factories'? 

A: Yes. USTR has been analyzing rules of origin and their effects on automotive supply 

chains in all three NAFTA countries and closely analyzed the potential effects of the 

improvements to the mles of origin. 

28 
120 


33807A.052

Questions ft·om Rep. Black: 

1) Pt·oposed Rules of Origin Requirement for Autos 

Ambassador Lighthizer: 

I wanted to follow-up on a question I posed to you during the House Committee on Ways and 

Means hearing March 21, 2018 regarding changes to NAFT A's Rules of Origin (RoO) and the 

impact it could bave on auto manufacturing. 

Auto manufacturing bas been a success story in Tennessee, and I am concemed by potential 

changes to NAFTA's RoO that would disrupt the North American supply chains that make auto 

manufacturing in my state competitive. 

During the hearing, you stated that the proposed RoO will have no effect on cars made in 

Tennessee and sold in the United States. This seems to directly contradict the sentiment of 

domestic automakers. For example, at a Senate Finance Commiuee field hearing in San 

Antonio, the CEO of the Alliance for Automobile Manufacturers noted the following: 

"With regards to rules of origin, it warrants emphasizing that the existing mle (62.5 

percent regional vehicle content requirement} is rhe highest of any ji-ee trade agreemenr 

in rhe world. Jr has been effective in srriking rhe righr balance to ensure rhere are no free 

riders and that to take advantage of the NAFTA tariff preferences, manufacturers musr 

source significantly from the Norrh American region. During rhe previous round, if is our 

undersranding rhatthis Adrninisrrarion proposed rhefollowing changes ro rhe auto rules 

of origin: 

1) Increasing rhe RVC requiremenrfrom the e.\·isting 62.5 percent to 85 percent. 

2) Establish a U.S. content requirement of 50 percent. 

3) &panding the "tracing list" to include all parts and materials using in the produclion 

of a vehicle or part. 

Each element alone would have a negative impact on the auto sector. But, raken in its 

entirety, rhis proposal is unprecedented and would have significant ramifications on ow· 

indus fly and rhe U.S. economy, as a whole. No vehicle produced today could meer such 

an onerous standard. It is unlikely that any vehicle eve1· could, even if sourcing changes 

were made in an a/tempt to do so. Adding ro the compliance challenge is the insuj]icienr 

hvo-year phase-in of the requirements. Auto manufacturing is a ve1y capital-inrensive 

process with long lead-time requirements for production changes. Sourcing new 

components and implementing the necessmy changes would certainly be a lengthy, multi· 

year process. 

Rather than attempt to comply with such sfl'ingent mle of origin requirements, it may 

make more economic sense for manufacturers to pay rhe 2.5 percent vehicle tariff when 

exporting within NAFTA and/or shift production to other low-cost regions. This will 

29 
121 


33807A.053

increase an automaker 's vehicle costs, bmthat increase is less than the cost of complying 

with the proposed U.S. rule of origin. 

While we wholeheartedly support/his Administration's goal of growing U.S. 

manufachlring and jobs, making NAFTA 's auto rules of origin more stringent will have 

the opposite effect. By increasing vehicle costs and/or causing production to shift, the 

proposed rules of origin would reduce demand for U.S. b11ilt vehicles. This shift will have 

a cascading effect - leading to reducrions in U.S. producrion, componem sourcing, 

investment, exports and auto jobs, and ultimately increase vehicle costs for American 

consumers. " 

Ambassador- I know you are keet\ly aware of the impact changes in trade policy can bave on 

the everyday lives of workers and families. I share your desire to create economic growth here at 

home. But I am concerned for the 134,0002 workers in Tennessee who are employed in the 

automotive industry when the stakeholders who have made significant investments in plants and 

infrastructure raise these kinds of concerns- concerns that directly contradict your remarks on 

the impact the RoO proposals you have tabled in the NAFTA negotiations. 

How do you reconcile your position on this issue with the concerns that have been raised by 

automakers? Please provide spe.cific examples of steps you are taking or plan to take to modify 

your RoO proposal to make it more consistent with the interests of U.S. automakers and the 

134,000 workers they employ in my state? Thank you in advance. 

A: Autos that are built and sold in the United States are not subject to U.S. import tariffs. 

Our aim is to ensure that rules of origin under the NAFT A oaly benefit vehicles and parts 

that are genuinely made in Tennessee and in the United States and that support good jobs 

here, rather than pt·ovide benefits fot· producers to outsource production and send jobs to 

othe•· countries. \\1

hile we •·espect AAM's concem s, we have not received supporting data 

o•· analysis to back up tbeh· claims, and stronger l'llles of o•·igin are highly unlikely to have 

such drastic effects. We understand that many U.S. vehicle aad parts companies in fact 

meet higher thresholds and stronget· wles than what is sufficient undet· the current rules, 

and we have been working "ith such companies on developing a revised rules of origin 

proposal that would balance the interests of our domestic pt·oducet·s and out· desire to 

ensure that rules primat'ily benefit pt·oduction and jobs in Tennessee and in the United 

States. 

2) Digital Trade- Electronic Payments 

I understand that the CPTPP appears to include language that would expressly allow Vietnam to 

discoJlllect U.S. payment companies from their customers in Vietnam, and replace U.S. 

companies with a domestic competitor. This kind of measure would not have been permissible 

under the Trans-Pacific Partnership (TPP). When the Administration withdrew from TPP, it said 

that it was doing so because it would allow the United States to negotiate a bener deal with tbe 

TPP countries. Can you tell me how the Administration intends to recapture the benefits that the 

2 Source: Tennessee Department of Economic and Community Development 

30 
122 


33807A.054

United States had under TPP, and expand those benefits, with respect to electronic payment 

services? 

It is vitally impot1ant that the Administration address barriers in digital trade. New mles are 

needed to prevent our trading partners from requiring data to be stored in their country and 

creating obstacles for cross-border data flows, and new commitments are needed on related 

services, such as electronic payments. In your testimony last year, you indicated that addressing 

barriers to digital trade, such as restrictions on cross-border data flows and other data localization 

requirements by foreign governments, can help achieve the objectives of maintaining a vibrant 

U.S. services sector and expanding U.S. services exports. Can you please explain what progress 

has been made in addressing barriers to digital trade, and what is the Administration's current 

strategy for dealing with those issues? 

I appreciate your anention to this important issue and look forward to your response. 

A: The Administration •·ecognizes the seriousness of govemment policies in Asia to limit 

competition in the at·ea of electronic payment set·vices and will continue to engage with the 

govemments of the Association of Southeast Asian Nations (ASEAN) including Vietnam to 

try to find a solution that ensu es U.S. electt·onic payment companies are not 

disadvantaged and are permitted to build their ove1·seas businesses without disruption or 

hnm to their existing commercial ar..angements. 

The Administration is addressing barriers to digital trade in a robust and multifaceted 

manner, reflecting its high priority on this important aspect of trade. For example, the 

Administration is pursuing high standard digital t..ade rules in ongoing negotiations in 

NAFT A and exploring the possibility of initiating digital trade negotiations in the 

WTO. The Administration is also prioritizing the monitoring and enforcement of digitaltrade •·elated provisions i.n existing trade agt·eements, engaging in policy development on 

digital trade issues in fora such as the OECD and APEC, and conducting t·egulat·, bilateral 

engagement with trade partne1·s whose p1·actices undemline ot· threaten to undemline 

digita l trade opportunities for U.S. supplie1·s. 

3) US-China solat·/polysilicon tJ·ade 

Chinese antidumping and countervailing duties on U.S. polysilicon block exports to the Chinese 

market, which constitutes SO-percent of global demand. According to industry stakeholders, the 

U.S. polysilicon industry bas already lost several-lnmdred high-skilled manufacturing jobs in 

Tetmessee, Michigan, Montana, and Washington, along with billions of dollars in cumulative 

exports. 

Tennessee is home to hundreds of workers in high-tech manufacturing of polysilicon. However, 

Chinese duties on U.S. exports ofpolysilicon pose a significant competitive challenge and failure 

to reopen the Chinese market places these workers at risk. 

As part of his decision in the Section201 solar case, the President has directed you to engage in 

discussions to resolve the U.S.-China solar/polysilicon trade disputes, which would reopen the 

Chinese market to U.S. polysilicon. 

31 
123 


33807A.055

I would like to bear what remedies are being discussed to promptly fulfill this directive and help 

the workers in Tennessee and across the country. I appreciate your attention to this important 

issue and look forward to your response. 

A: When President Trump announced safeguard relief for U.S. manufactur·ers of solar cells 

and modules, be committed that " (t(be U.S. Trade Repr·esentative will engage in 

discussions among interested parties that could lead to positive r·esolution of the separate 

antidumping and counter·vailing duty measures cunenlly imposed on Chinese sola•· 

products and U.S. polysiUcon. The goal of those discussions must be fair and sustainable 

trade throughout the whole solar energy value chain, which wouJd benefit U.S. producers, 

worket·s, and consumers." The Office of the U.S. Trade Representative bas been engaged 

in such discussions with U.S. stakeholde.-s in an effort to find a solution that is beneficial to 

both the U.S. solar industry and the U.S. polysilicon industJ-y, and which would be 

acceptable to China. Those discussions at·e ongoing. 

Questions ft·om Rep. Sanchez: 

1) La bot· Standards 

Will you commit to holding other countries to the highest labor standards so that American 

workers can compete fairly? 

A: Enfo•·cement is a key aspect of this Administration's tJ·ade agenda. This includes 

ensuring that trading partners comply with the labor obligations in our trade agreements 

and trade pt·eference pt·ogt·ams, such as GSP. USTR works closely with the U.S. 

Departments of Labor and State, as well as other agencies, to monitot·labot· practices in 

trade partner countries and to wot·k with those countries whet·e Jabot· practices have fallen 

sho•·t of expectations. That work can include negotiating action plans, engaging in 

consultations with high-level officials, and undertaking monitoring trips to meet dit-ectly 

with stakeholdt.>rs, among other initiatives. Tht·ough actions like these, my staff work to 

ensure that all of our trading partnet·s maintain fait-labor practices to help level the 

playing field for Amet·ican workers. 

2) Labo•· Standards 

How are you going to ensure that other countries are raising their labor standard and we are not 

lowering ours? 

A: Trade partners should be held to their obligations; lower Jabot· standards in othe•· 

countl"ies affect Amet·ican workers. My team wo1·ks daily with Labor SeCJ"eta1-y Acosta's 

team to monitot· and engage with FT A countries that have been identified through 

submissions as allegedly falling short of their of Jabot· commitments. For example, the 

Administration has bad and continues close engagement witb Colombia on concerns 

•·elated to its FIA Jabot· obligations. We also continue to work closely with Honduras on 

implementation of a monitol"ing and action plan that was agreed to and signed in the 

32 
124 


33807A.056

context of its labor submission. These countries have significantly increased resources to 

enforce theii· labor Jaws and/ot· implemented new laws and ngulations to address concerns 

raised by labor unions in the United States. I look forward to consulting closely with you 

and your colleagues on these issues in the future. 

Questions from Rep. Sewell: 

1) Section 301 

I am concemed about this Administration's Section 301 investigation into Chinese intellectual 

property practices, and .President Trump's decision 10 unilaterally impose tariffs. Our country 

needs to take a strong stance against dishonest Chinese trade practices; however, I am concemed 

that Chinese retaliation will hurt American families, fanners, and businesses. Is this 

Administration accounting for the possible negative impacts this action may have on our 

farmers? Are you accounting for the possible negative impact tll.is will have on the American 

footwear and apparel industries? Have any effot1s been made to protect the American consumer 

from the possible effect these tariffs will have on their pocketbooks? 

A: The pt·oposed tat·iff list was developed using a methodology designed to balance 

maximum pressure on China and minimizing economic impact on the United 

States. Footwear and apparel are not on the proposed Jist. 

Specifically, trade analysts from several U.S. Government agencies identified products that 

benefit from Chinese industrial policies, including Made in China 2025. The list was 

refmed by removing specific products identified by analysts as likely to cause disruptions to 

the U.S. economy, and tariff lines that are subject to legal or administrative constt·aints. 

The remaining pt·oducts wet·e ranked accot·ding to the likely impact on U.S. consumet·s, 

based on available tl·ade data involving altemalive country sources for each product. The 

proposed list was then compiled by selecting pt·oducts from the ranked list with lowest 

consume•· impact. 

The Federal Registet· notice issued by the USTR identifies the imported products on which 

these proposed tariffs may be imposed, and pt·ovides an oppot·tunity fot· the public to 

comment and testify at a bearing. We welcome any additional information on the proposed 

tariff list, including whethet· maintaining or imposing additional duties on a particulat· 

product would cause disp•·opo•·tionate economic bat·m to U.S. intet·ests, including small- 01· 

medium-size businesses and consumers. 

2) African ITA's and AGOA 

You have indicated that this administration is interested in entering into bilateral trade 

negotiations wit b. an African country. Do you have any specific countries in mind? What 

criteria will you be using to detennine which African country is best suited to entering into a 

Free Trade AgreemeDl with the United States? Also, I have always been a strong supporter of 

the African Growth and Opportunity Act, or AGOA. Since its inception, AGOA has helped a 

number of Sub-Saharan African cmultries open their markets, reduce poverty, combat com1ption, 

33 
125 


33807A.057

and improve worker rights. Can you confmn that AGOA will continue to be supported by this 

administration? How will AGOA interact with any other possible free trade agreements this 

administration will pursue with African countries? 

A: The Administration is still at an early stage of identifying a potential Aft·ican partner 

with which to negotiate a ft·ee IJ·ade agreement. Any such negotiations would be pt·eceded 

by explot·atot·y talks to clarify mutual expectations and, of course, by consultations with 

Congress. We have no set timeline fot· this initiative, as that wiU be dictated by the 

circumstances. We are also in the process of defining the range of ct·itet·ia for selecting an 

African negotiating counterpart, and we welcome your views. The Administration fully 

supports AGOA, and intends to continue to implement fully thl' AGOA statute. Whether 

an AGOA beneficiary would continue to receive benefits under the program upon entt·y 

into force of an FT A with the United States is a matter the Administration would discuss 

with Congress. 

Out.>stions from Rep. Meehan: 

1) NAFT A - Rules of Ot·igin 

Can you please provide an update on the status of negotiations regarding potential changes to the 

rules of origin that would or could affect chemicals and U.S. chemical manufacturing? 

A: We are continuing to discuss proposed changes to the rules of origin for chemicals with 

the othet· NAFTA countries that would promote more U.S. production and jobs, and 

ensure that only chemical products that at·e genuinely pt·oduced in North America are 

eligible for preferential tariff treatment. 

2) AFT A - Rules of 0.-igin 

What actions are you taking to ensure that any potential changes to exjsting rules of origin do not 

negatively affect U.S. chemical manufacturers, particularly U.S. manufacturers of benzoyl 

peroxide? (This would include any potential adoption of a chemical reaction rule or other new 

changes to the rules of origin that may be applicable in this regard.) 

A: We have been wot·king closely with U.S. chemical manufactUJ·ers, including U.S. 

manufacturers of benzoyl pet·oxide, to help ensut·e that any changes to the rules of origin 

would not negatively affect on manufactUJ·ers and would pt·omote m01·e U.S. pt·oduction 

and jobs. 

3) NAFTA- Sunset Provision 

l support expanding free trade and long rem1 reliability for US companies operatiJ1g on the world 

stage, however installing a "perfonnance review" every five years is contradictory to long tenn 

stability. This seems patticularly relevant as we've watched the cun·ent modernization process 

take much longer than expected. Can you detail why the Administration is pushing this proposal 

34 
126 


33807A.058

and what evidence there is to support the position that a sunset would not create uncertainty for 

American businesses? 

A: Given its wide-ranging effects on the U.S. economy, it is impo•·tant that a renegotiated 

NAIT A include a robust mechanism to ensure that all tbr·ee Parties assess its benefits on a 

periodic basis and make an affirmative decision to continue it. We have addt·essed this 

impo1·tant issue in ou•· p•·oposals, and in the detailed summary of on negotiating 

obj ectives. 

4) NAFI A- Dairy 

I have been hugely appreciative of USTR 's objectives to expand market access in Canada for 

U.S. dairy products. Has Canada been willing to negotiate this issue? Do you expect any 

progress to be made in a final agreement? 

A: The Administration is seeking to open up Canada's market to the full range of U.S. 

dail-y (and poultry and egg) products through NAFI A renegotiation, and wiJJ continue to 

press Canada on this high priority. 

S) NAFI A- Cultural Exemptions 

As a part of the NAFf A agreement, Canada is able to discriminate against American producers 

tmder the gttise of"cultural" exemptions. Tilis provision has been extremely harmful to QVC, a 

broadcasting company in my district. QVC is unable to broadcast into Canada, but Canadian 

teleshopping companies face no such restrictions in the U.S. Can you commit that the U.S. will 

resist any attempts by Canada to expand cultural exemptions in a renegotiated agreement? 

Furthermore, how can USTR address the specific problem that QVC is facing within a new 

agreement? Will USTR commit to negotiating a proposal that would fix this problem? 

A: Tbe Adminish·ation is wo1·king ve•·y bard to achieve improvements in NAITA, 

including with regard to services like those offer ed by QVC. U.S. television progt·amming, 

movies, music, and other audiovisual services arc a key export for the United States, and 

open mat·kets help ensure that the demand for U.S. creative content is not met thr·ough 

piracy. We have prioritized addressing Canada's traditional appt·oach to cultu.ral 

exemptions in ordet· to provide more faim ess fot· U.S. companies. We arc optimistic that 

we will be able to achieve U.S. objectives. 

Questions ft·om Rep. DelBene: 

1) Tabled Trade Initiatives 

In addition to new deals there were a number of important initiatives such as the Transatlantic 

Trade and Investment Partnership (T-TIP), and the Trade in Services Agreement (TiSA) that 

have been suspended. Your Trade Policy Agenda states that you would look at restarting these 

negotiations. When do you expect to make a decision on possibly pursuing these negotiations? 

35 
127 


33807A.059

I also noticed that the Trade Agenda made no reference to the Environmental Goods Agreements 

(EGA). This is an important initiative that seeks to eliminate tariffs on products that can help the 

United States and countries all around protect the environment and combat climate change. Are 

you considering restarting talks on EGA? If not, why not? 

A. We continue to reflect on wbethe•· T-TIP is the app1·opriate vehicle fo•· add1·essing ou•· 

concerns in the EU, and note that the E01·opean Commission bas made clear that the EU is 

not interested in negotiating a comprehensive agreement at this time. Before we decide 

whet he•· to •·esume negotiations on a comprehensive tJ·ade agreement, we will want to be 

confident that there are promising paths to resolution of the most sensitive issues. 

As fot· TiSA, USTR continues to evaluate the various options available to punue its 

objectives for set-vices. And with regard to the EGA, the Administration's t·eview is 

ongoing and we will continue to evaluate it and other initiatives, ultimately seeking to 

advance the interests of manufacturers and worke1·s that produce environmental goods 

nationwide. I look forwa1·d to continuing to consult with you as we chart the best cou1·se 

fonvard on these and othe•· initiatives. 

2) Canada Dairy 

As you know Canada introduced a Class 7 dairy pricing program last year. Last month, I met 

with dairy fanners throughout my district and they all cited this system as one of the biggest 

challenges they have to deal with. Already, we have seen that this system has led to a 200% 

surge in Canadian skim milk powder exports to markets around the world, and severely undercut 

U.S. exports of several dairy products in 2017. 

Have you or your te-am made any progress resolving this issue with Minister Freeland in the 

NAFT A renegotiation? This is a critically important issue. 

A: The Adminish·ation undet·stands that Canada's pt·icing policy (Class 7) is hamting U.S. 

dairy exports and is working at the highest levels to address this critical issue in NAFf A 

renegotiation. 

Question from Rep. Chu: 

1) U.S.-A•·menia Double Tax Treaty 

In the wake of the 201 5 signing of a U.S.-Annenia Trade and !nYestment Framework 

Agreement, there was an increase in U.S. commercial engagement in Annenia- including, as 

reported by U.S. Ambassador, Richard Mills, upwards of$500,000,000 in new American 

investments in Annenia's energy and mining sectors. 

Similarly, a new U.S.-Armenia Double Tax Treaty would facilitate the further expansion ofU.S.-

Annenia economic relations by eliminating the threat of double taxation and creating a clear 

legal framework for investors and individuals who have business activities in both jurisdictions. 

36 
128 


33807A.060

On February 6, 2018, Treasury Secretary Steven Mnuchin agreed to commit Treasury 

Department officials to pursue a new U.S.-Annenia Double Tax Treaty while testifying before 

the House Foreign Affairs Comminee 

Mr. Lighthizer, will you commit to engaging with the Secretary of the Treasury to ensure that 

our government negotiates a U.S.-Anneoja Double Tax Treaty? 

A: The U.S. Department of T reasut·y is responsible for tax treaties, and, as noted, Treasury 

Secretary Mnucbin bas agt·eed to purs ue a new U.S.-Armenia Double Tax Treaty. USTR 

does not have executive authority to negotiate tax treaties, so I cannot commit our 

resources to engaging in this matte.-. Howevet·, I will raise this mattet· with SeCJ"etary 

Mnucbin. 

Questions from Rep. Jason Smith: 

l) AUSFTA 

Ambassador Ligbth.izer, I understand that your office has fonnally requested consultations with 

Australia under Australia - United States Free Trade Agreement (AUSFTA) on behalf of 

aggrieved U.S. investors. Since the agreement was entered into in 2005, this is the frrst time that 

the investor state dispute seltlement provisions have been invoked by either party, which is truly 

a milestone. Given this historical significance, which will have a profound impact on any future 

disputes arising under the treaty, particularly state-sponsored expropriations, how does your 

agency intend to continue to pursue this matter? 

A: The Administntion places a high priority on ensuring full compliance with the 

obligations in our trade and investment agreements, including the Australia-United States 

Ft·ee Trade Agt·eement. Accordingly, we initiated consulla tions under the Investment 

Chapter of that Agreement to address a disnete investment dispute in the energy sector 

involving U.S. investors. We at"e continuing to engage with Aush·alia regarding this 

ongoing mallet·. 

2) Electt·onic Payment Set·vices 

Ambassador Lighthizer, the recent Comprehensive and Progressive Agreement for Trans-Pacific 

Partnership (CPTPP) includes language that would expressly allow Vietnam to disconnect U.S. 

payment companies from theiJ customers in Vietnam, and replace U.S. companies with a 

domestic competitor. In what ways, will your office be working to eliminate trade barriers with 

respect to American electronic payment services in southeast Asia and elsewhere? 

A: The Adminisu·ation •·ecognizes the seriousness of govemment policies in Asia to limit 

competition in the a1·ea of electronic payment se•·vices and will continue to engage with the 

governments of the Association of Southeast Asian Nations (ASEA!'f) individually and a s a 

group to try to find a solution that ensures U.S. eleciJ·onic payment companies at·e not 

disadvantaged and are permitted to buiJd theiJ· overseas businesses without dis•·uption or 

harm to their existing commercial atTangements. 

37 
129 


33807A.061

Questions from Rep. Walorski: 

1) Canadian Dairy in NAFT A 

Agricultural trade is critical to the economy of the United States, especially dairy exports to 

Canada which is our second largest trading partner. However, Canadian provincial policies for 

ingredient class milk pricing, adopted last year, are displacing U.S. exports in third-coulltry 

markets and costing American jobs. USDA estimates that each $1 billion of U.S. dairy exports 

generates over 20,000 U.S. jobs and almost $3 billion of economic output, and U.S. dairy 

suppliers are repotting that they are losing business because of these programs. Enforcement of 

cun-ent trade agreements, whether bilateral or multilateral in nature, is central to strengthening 

the U.S. economy. How are these concerns being addressed in the ongoing NAFT A 

negotiations? 

A: The Administ•·ation undet·stands that Canada's p1·icing policy (Class 7) is har ming U.S. 

dairy exports and is working at !be highest level to address this c•·itical issue in NAFT A 

renegotiation. 

2) Bilateral T..ade Ag•·eements 

USDA pr~jects that U.S. milk production will grow by 23 percent (about 48 billion pounds) over 

the next I 0 years. Given that today we are exporting 15% of our total production (about 30 

billion pounds), between expo.rts and rising production, there needs to be increased export 

opportunities for approximately 80 billion pounds of milk over the next ten years. Free trade 

agreements that open markets and lower trade ban-iers are crucial to support the growth of U.S. 

dairy exports. With more than 95 percent of our potential customers living outside our borders, 

expanding access to international markets is essential for our furore success. The Asia-Pacific 

region is one such market that is critical if we are to attain our future export potential and 

continue tO support American jobs. Therefore, the U.S. should pursue bilateral trade agreements 

with key markets in the region. Our competitors in the European Union (EU), New Zealand and 

Australia are already negotiating with key export markets like China and Japan. Has USTR 

plioritized which countries it intends to begin bilateral negotiations with and when will those 

bilateral negotiations begin? 

A: USTR is currently explo•·ing potential bilateral deals with several countries in ordet· to 

secure grea ter market access for Ame•·ican farme.-s, wo•·ke.-s, ranchers and businesses. As 

you know, USTR frequently e:~:plores these options through ou•· Trade and Investment 

Framework Ag•·eements a s weU a s through discussions that are more informal. Before 

USTR begins any bilateral negotiations, we will ensure to consult closely with you and your 

staff. 

3) Geographic Indica tors 

As negotiations with Canada and Mexico continue, it is essential that the NAFT A modernization 

efforts incorporate text on tbe issue of geographical indications (Gls) and common names. The 

38 
130 


33807A.062

trade agreement between Canada and the European Union was implemented last year. Tile 

protections the EU demanded from Canada impair market access for cheese and other food 

products from third countries and are i.n complete disregard of Canadian intellectual property 

laws. In addition, Mexico has been negotiating a FTA expansion with the European Union which 

will incorporate GI provisions. As the European Cotmnission seeks to incorporate GI provisions 

in all its FT As, it has been auempting to ltSe the negotiation with Mexico to impose de facto 

baniers to trade and competition on various common name products that the EU falsely claims 

as Gis. It is critical that the U.S. continue to reinforce that Gis are a type of intellectual property. 

Will Gl provisions similar to those in TPP that require due process procedures like opposition 

and cancellation of tenus be incorporated into NAFTA and future U.S. trade dea ls? 

A: We u e aware of and also have significant these concerns about the EU's p1·omotion of 

Gls. In the NAFT A •·enegotiation, a key objective is to ensure that market access for U.S. 

products is not undermined through the improper usc of Mexico's or Canada's system for 

protecting or •·ecognizing geographical indications. We n e seeking to ensure that such Gl 

systems are transpa•·ent, have fair procedUJ·e$, and adequately preserve the ability of U.S. 

producers to continue to use common names in those ma•·kets. 

4) NAFT A Intellectual P•·operty Chapte•· 

Ambassador, when the former Administration was negotiating TPP, officials decided to leave the 

1P chapter to last, which seemed to weaken our leverage on ensuring tbe strongest possible 

protections for innovators by precluding trading on other items. What is your strategy for closing 

out the toughest chapters and delivering a strong IP chapter for U.S. innovators? 

A: I have personally and •·epeatedly made it clea1· to Canada and Mexico that a •·obust IP 

Chapter is essential to having a successful Agreement. I unde•·stand the importance of IPintensive industries to the U.S. economy and I am aggr·essively pursuing a high standar·d of 

IP protection and enforcement in the NAFT A negotiations. This includes, but is not 

limited to, p•·otections related to trademarks, patents, copyright and •·elated rights, 

undisclosed test or othe•· data, and trade secrets. 

5) Canadian Intellectual Prope•·ty 

Canada is a good partner for the US, but we have disagreements on a number of fronts, including 

bow to best protect intellectual property in a way that rewards and incentivizes innovators. I'm 

concerned that they are undervaluing U.S. innovative medicines, by comparing pricing to less 

developed economies as a reference for their own. Should Canada pay their fair share? 

A: I agree that Canada shou.ld pay its fair share fo•· innovative medicines. In addition to 

pursuing high-standard disciplines to stimulate and protect innovation in the NAFT A IP 

Chapter, I have dh·ected my staff to also seek standa•·ds to ensure that govemment 

regulatory reimbursement regimes are tran.sparent, provide procedural fairness, are 

nondiscriminatory, and p1•ovide fail· market a ccess fo•· U.S. products. 

6) Special 301 Repo•·t Status 

39 
131 


33807A.063

USTR will soon release its first Special 30 I Report under your leadership. Special 30 I gives the 

Administration a critical tool to resolve intellectual property and market ac-cess barriers abroad. 

But USTR bas not named a Priority Foreign Country since 2013. There are plenty of candidates 

this year - from Canada and Korea to Malaysia and Saudi Arabia. Under your leadership, can we 

expect USTR to deliver a strong rep011 that fully leverages Special 30 I to level the playing field 

for American innovators? 

A: Ensuring that U.S. ownen ofintellectual pr·operty (IP) have a full and fair opportunity 

to use and profit fr·om their· IP nound the world is one of the trade priorities outlined in 

tbe President's trade agenda. Toward this end, the Special301 Report reflects the resolve 

of the Administration to call out foreign countries and expose the laws, policies, and 

pr·actices that fail to pr·o\'ide adequate and effective IP protection and enforcement for U.S. 

inventors, cr·eator·s, brands, manufactunrs, and service providers. The identification of the 

countdes and IP-related market access barrien in the Repor·t and steps necessar·y to 

address those barrier·s are a cdtical component of tbe Administration's aggressive efforts 

to defend Americans ft·om harmfullP-t·elated tnde ban·iers. This yeat·'s Report will be a 

product of a robust review process undertaken by the Trade Policy Staff Committee, led by 

USTR, that takes into account numerous U.S. stakeholdet· contt·ibutions, as well as 

information collected by Embassy-based personnel around the world. 

Questions ft·om Rep. LaHood: 

1) U.S.-China Trade Relations 

Much has been said about China's lack of conunitment to world economic policies championed 

by tbe World Trade Organization (WTO), and many have been rightfully critical of US-China 

trade relations when it comes to manufacturing, intellectual property, and technology. However, 

I would like to know bow the Administration views China's efforts to open market access to US 

companies in other sectors, such as financia l services? Is it possible 10 increase investment flows 

between the two countries in these sectors, while continuing to challenge negative practices in 

other sectors? 

A: The Administution continues to be concerned about severe t·estJ·ictions that China 

maintains on foreign companies seeking to access its services market, which contrasts with 

the high level of access that Chinese se1·vices suppliers enjoy in the U.S. market. Financial 

services is just one of many at·eas where U.S. companies continue to face market access 

barriet·s in China. The Administration will to continue to pt·ess China to take concrete 

actions to address all of these batTiers. 

2) Thai Restrictions on Impo1·ts of U.S. Pork 

n1ailand maintains an effective ban on the import of most US pork products, based on 

completely uojnstifiable import restrictions. Thailand maintains these restrictions while at the 

same time being the second largest beneficiary of US Generalized System of Preferences (GSP) 

tariff preferences in the world, with the US importing $4. I billion of Thai products under the 

40 
132 

[Submissions for the Record follow:] 


33807A.064

program in 2017. GSP statutes call on beneficiary countries to provide the US with "equitable 

and reasonable access" to their markets. What actions is the Administration taking to eliminate 

longstanding l11ai restrictions on the import of US pork? 

A: Thailand's continued ban on ractopamine is unacceptable. During our TIFA meeting 

with Thailand on AprillO, my team pressed the importance of Thailand adopting Codex 

standnds for ractopamine. During the TIFA, we agt·eed with Thailand on a bilateral 

dialogue to exchange technical information and assess Thailand's stated intent to estabUsh 

an acceptable ractopamine tolerance on pork, and we hope to see favorable results in the 

upcoming months. In addition, USTR bas received a petition from the National Pork 

Producers Council asserting that Thailand should be removed in whole or in pat·t from the 

GSP program, because it is not meeting the GSP criterion, which requires GSP beneficiary 

countries to provide equitable and reasonable access to its markets. USTR wiU be making 

a decision in the coming weeks whether to accept this petition for review. USTR will 

continue to work with otbet· U.S. agencies to •·esolve this issue as soon as possible in a 

manner consistent with international standards. 

41 
133 


33807A.065

... 

Statement of the 

American Farm Bureau Federation 

Statement to the House Committee on Ways and Means 

regarding the heal'ing: 

The Trade Policy Agenda 

Ma•·ch 21, 2018 

Submitted By: 

The American Farm Bureau Federation 
134 


33807A.066

The American Farm Bureau Federation (Farm Bureau) offers the 

following statement for the record on the hearing: 'The Trade Policy 

Agenda'. 

Trade is critical to the livelihood of the U.S. agricultural sector because 

it spurs economic growth for our fanners, ranchers and their rural 

commtmities. Agriculture suppoxts jobs in the food and agricultural 

industries and beyond. The fact is that ninety-five percent of the world's 

consumers live outside of the United States and over twenty percent of 

U.S. fann income is based on exports. Expanding opportunities for U.S. 

crop and livestock producers to access international markets will boost 

fann income in the United States, while presexving existing access is 

critical to maintaining fann income at current levels. U.S. agricultural 

expotts amounted to $140.5 billion in 2017. Imports, critical for certain 

products, especially out of season produce, totaled $119 billion in 2017. 

Trade agreements have significantly contributed to the decades-long 

positive growth in trade by U.S. agriculture. Between 2003 and 2017, 

U.S. agricultural exports to countries we have trade agreements with 

increased from $24 billion to $63 billion annually, forty-five percent of 

all agricultural expoxts. Existing trade agreements have proved 

successful in tearing down tariff and non-tariff trade baniers that hinder 

U.S. fanners' and ranchers' competitiveness and prevent us from taking 

advantage of consumer demand for high-quality U.S. food and 

agricultural products throughout the world. For consumers, trade 

agreements provide access to new varieties of food products and offseason supplies of fresh produce. 

NAFTA 

One of the most talked about trade agreements, the North America Free 

Trade Agreement (NAFT A), has been overwhelmingly beneficial for 

farmers, ranchers and associated businesses all across the United States, 
135 


33807A.067

Canada and Mexico for decades. With NAFTA, U.S. fatmers and 

ranchers across the nation have benefited from an increase in annual 

exports to Mexico and Canada from $8.9 billion in 1993 to $39 billion in 

2017. 

The NAFTA negotiations between the U.S., Canada and Mexico seek to 

modernize the agreement and provide greater benefits to the economics 

ofNorth America. Despite these numerous benefits, there are reasons to 

update and ref01m NAFTA from agriculture's perspective. 

Improvements that eliminate and reduce tatiffbarriers, eliminate 

redundant regulatory costs, expedite transit across borders and hasten the 

resolution of disputes between members would go a long way towards 

more efficient trade between NAFTA partners. The rules related to 

biotechnology, sanitary and phytosanitary measures and geographic 

indicators need to be improved in order to reflect the progress that has 

been made in these areas over the decades since NAFTA was enacted. 

U.S. agricultural exports to Canada would grow iftariff barriers to dairy, 

poultry and eggs were reduced or eliminated. The recent Class 7 pricing 

program instituted by Canada has eliminated an important export market 

for U.S. daity producers ofultra-filtered milk products and needs to be 

removed. 

While there are several areas where the NAFTA agreement could be 

modernized to improve trade in agricultural goods, however, it is critical 

that the modernization etTort should recognize and build upon the strong 

gains achieved by U.S. agriculture through the tariff eliminations, the 

recognition of equivalency of numerous regulatory issues, and the 

development of integrated supply chains that have arisen due to the 

agreement. 
136 


33807A.068

Trade in goods consists of not only final consumer products but also 

intennediate inputs and raw materials, as finns reorganize their activities 

around regional markets for both inputs and outputs, Splmed in part by 

greater foreign direct investment (FDI). 

This integration enables agricultural producers and consumers in the 

region to benefit more fully from their relative strengths and to respond 

more efficiently to changing economic conditions. The creation of a 

larger, single market has given producers access to cheaper suppliers of 

inputs, which allows U.S. producers to be more price competitive 

domestically and abroad. 

U.S. agriculture depends upon a growing international economy that 

provides opportunities for farmers and ranchers to sell their products. 

Modernization ofNAFTA will expand market opportunities for U.S. 

agriculture. 

Trans Pacific Partnership 

The eleven countries of the Trans Pacific Partnership, after the U.S. 

withdrawal in January, 2017, have agreed to form a new agreement. The 

CPTPP (Comprehensive and Progressive Trans Pacific Partnership) was 

recently signed and will be ratified by the participating countries in the 

next months. 

Fann Bureau was a strong suppOiter of the TPP and we encourage the 

Administration to engage with the TPP countries to discuss joining the 

CPTPP. Our analysis of the TPP found that U.S. agricultmal trade 

would increase by over $5.5 billion annually due to the removal of tariff 

and non-tariff barriers in the TPP region. 
137 

f 


33807A.069

Fann Bureau suppotted the Trans Pacific Partnership (TPP) agreement 

due to the gains for U.S. agricultural exports from the lowering of tariff 

and non-tariff barriers with the TPP partner countries. The majority of 

the export gains were with Japan, due especially to the lowering of 

Japanese tariffs on beef, pork, dairy and other products. We encourage 

the discussions by the Administration with Japan about trade concerns. 

We also support efforts by the U.S. to rejoin the TPP, now called the 

CPTPP (Comprehensive and Progressive Trans Pacific Partnership. 

The U.S. exported over $22 billion in agricultural products to China in 

2017, ranking as the #2 export market for U.S. fanners and ranchers. 

This market in China is especially critical for U.S. soybean growers as 

$14 billion of the $22 billion of soybean exports in 2017 went to China. 

Any effort to impose tariffs on Chinese imports by the U.S. nms the risk 

of retaliatory measures against U.S. agricultural exports. Previous U.S, 

government action against China on tires resulted in China retaliating 

against U.S. poultry expotts. The impact on American fatmers and 

ranchers, and the associated businesses, must be considered when 

pursuing trade actions. U.S. agriculture has strongly supported, for 

decades, efforts to open the world to our agricultural and other trade 

products. 
138 


33807A.070

House Committee on Ways and Means 

" Hearing on U.S. Trade Policy Agenda" 

~AFPM :;io"r ArnencM~ 

Fuel & Petrochemical Marcl!actl,rers 

Statement for the Record, American Fuel & Petrochemical Manufacturers 

March 21, 2018 

The American Fuel & Petrochemical Manufacturers ("AFPM") appreciates the opportunity to provide a 

statement for the record on the U.S. Trade Policy Agenda. AFPM is proud to represent 97 percent of the 

nation's refining and petrochemical manufacturing capacity, including 118 refineries and 248 

petrochemical manufacturing facilities. Our members are high-tech American manufacturers of virtually 

t he entire U.S. supply of gasoline, diesel, jet fuel, ot her fuels and home heating oil, as well as the 

petrochemicals used as building blocks for thousands of vital products in daily life. The refining and 

petrochemical industri es support more than 3 million U.S. jobs and add $568 billion each year to the 

U.S. economy. Our comments will focus on both global and North American trade. 

Free trade is a key element for continued growth in U.S. refining and petrochemical manufacturing. The 

U.S. imports significant volumes of crude oil from canada and Mexico and exports substantial volumes 

of refined petroleum products and petrochemicals to those countries. In addition, w ith access to 

abundant feedstocks and the lifting of the export ban, U.S. global trade of natural gas, crude oil, and 

petrochemical product has increased drastically. 

As a result of the North American Free Trade Agreement ("NAFTA"), the U.S. enjoys reduced costs on 

imported energy products such as crude oil, as well as billions in annual export revenues. The growth of 

energy infrastructure such as cross-border pipelines from the U.S. into Canada and Mexico has allowed 

for expanded market access for U.S. companies, greater investment, job growth and affordable energy 

costs. 

Trade policies that could upend the existing integrated North American energy market could greatly 

increase the costs of U.S. imports of key energy products from Canada and Mexico, driving up energy 

costs for consumers and impacting job growth and investment. 

Additionally, broadly applied trade restrictions, such as the recently announced Section 232 steel tariffs 

under the 1962 Trade Expansion Act, could compromise the economic benefits of expanded market 

access the U.S. refining and petrochemical manufacturing industry has experienced under NAFTA. 

Increased costs on steel would significantly undermine the supply structure and potentially compromise 

AFPM member companies' oil and natural gas production, and the refining and transportation of energy 

to consumers, including the U.S. military. 

I. North American Trade in Energy and Petrochemicals Under NAFTA is Significant and Growing 

North American trade in energy and petrochemicals plays an integral role in securing and preserving 

energy security and economic growth for the United States as well as for our trading partners, canada 

and Mexico. Bilateral energy trade between the United States, Canada and Mexico centers largely on 

crude oil, refined products, and natural gas. 

1 
139 


33807A.071

~~ Fuel & Petrochemical MarvlactvrttS 

Cross-border trade of energy and petrochem leal products between the United States, Mexico, and 

Canada has enhanced market access and bolstered the competitiveness of our domestic refining and 

petrochemical industries. Canada is the United States' largest energy trading partner and Mexico is the 

United States' second largest energy trading partner. 

Crude Oil. The North American supply of crude oil is vital for U.S. energy, economic, and national 

security. Canada and Mexico combined to supply 48 percent of the U.S. imported crude supply needs in 

2016. More specifically, in 2016, the U.S. imported 3.3 million barrels of Canadian crude oil per day, 

making Canada the largest supplier of imported crude oil to the U.S., representing 41 percent of U.S. 

crude oil imports. Similarly, the U.S. imported 582,000 barrels of crude oil per day from Mexico, making 

Mexico the fourth largest source of imported crude oil, representing 7 percent of U.S. crude oil imports. 

Petroleum products. In 2016, the U.S. exported 4. 7 million barrels per day of refined petroleum 

products, and one-third of those exports went to Canada and Mexico. Products include transportation 

fuels such as gasoline, diesel, and jet fuel, as well as heating oil, and other products such as naphtha, a 

petrochemical feedstock, propane that is used for heating and cooking, and light oils used to dilute 

heavy crude oils, which both Canada and Mexico produce. 

Both Canada and Mexico are vital markets for U.S. refined products. Mexico is the single largest export 

market for the U.S. refining industry; in 2016, almost 20 percent of U.S. petroleum product exports were 

delivered to Mexico. In fact, U.S. exports of gasoline to Mexico supplied more than half of Mexico's 

gasoline demand in 2016. 

Natural Gas. Natural Gas trade between the United States and Canada is dominated by pipeline 

shipments. In 2016, natural gas imports from Canada averaged 8.0 billion cubic feet per day (Bcf/d} 

(equaling 97 percent of all U.S. natural gas imports}, and U.S. natural gas exports to Canada averaged 2.1 

Bcf/d, (equaling 33 percent of all U.S. natural gas exports). 

Mexico is the U.S.'s largest recipient of natural gas exports. U.S. exports of natural gas to Mexico have 

increased dramatically as U.S. production of natural gas has increased. In 2016, U.S. exports of natural 

gas to Mexico totaled nearly 4 Bcf/d (equaling 60% of total U.S. natural gas exports} and are expected to 

increase in 2017 as pipeline infrastructure expands. Natural gas pipelines currently under construction 

or in the planning stages are expected to double the pipeline natural gas exporting capacity from the 

U.S. to Mexico in the coming years. The U.S imports very small volumes of natural gas from Mexico into 

Southern California and Texas. 

U.S. natural gas trade with Mexico and Canada is vitally important to balancing U.S. natural gas demand 

and supply. In 2016, the U.S. consumed more than 75 Bcf/day of natural gas, more than 10 percent of 

which was imported from Canada and Mexico. 

Petrochemicals. In total, trade in all chemicals, including substances outside of the petrochemical 

portfolio, many of which are made from petrochemical building blocks, has more than tripled over the 

last two decades since the enactment of NAFTA from $20 billion in 1994 to $63 billion in 2014. 

Petrochemical imports from Canada and Mexico totaled around $419 million in customs value, while 

exports to both countries totaled around $749 million in customs value. 

2 
140 


33807A.072

~AFPM :;io"r ArnencM~ 

Fuel & Petrochemical Marcl!actl,rers 

II. North American Trade in Energy and Petrochemicals Enhances the Competitiveness of U.S. Fuel 

and Petrochemical Manufacturers 

North American energy trade has led to significant and innovative changes in the energy and 

petrochemical sectors of the U.S., Canada, and Mexico. Innovation and technology have increased crude 

oil production in the U.S., leading to the lifting of the U.S. ban on crude oil exports in 2015. Likewise, in 

2013, Mexico changed its constitution to begin liberalizing its energy sector, allowing for direct 

investment by foreign companies for the first time. 

As a result of increased energy production and the increasingly integrated North American energy 

market, the International Energy Agency (lEA) now projects that North America will be energy secure by 

2020. North American energy security reduces U.S. reliance on unstable and volatile sources of energy, 

benefiting U.S. national security. Continued cross·border energy trade will only add to the increases in 

productivity and innovation that has played out the last two decades. 

With the liberalization of the Mexican energy sector, significant investments are now being directed 

from the U.S. into the Mexican energy infrastructure. For example, Andeavor, formerly Tesoro 

Corporation, was recently awarded a contract to lease storage and pipeline capacity in northwestern 

Mexico from Mexico' s state-run oil and gas company Pemex. Andeavor w ill supply refined products 

produced from their U.S. West Coast refineries to consumers in Mexico, providing an important market 

for U.S.-produced refined products. 

Andeavor is currently the first company to integrate sales of U.S. manufactured fuel at U.S. branded 

(ARCO) stores in Mexico. Andeavor has seen sales volumes at these stores exceed expectations. By 

2020, Andeavor projects sales of 30,000 barrels per day in Baja California and Sonora, and the potential 

for an additional 20,000 barrels of sales per day in Chihuahua, Sinaloa and Baja Sur. 

likewise, Valero Energy Corporation and Exxon Mobil recent ly announced hundreds of millions of 

dollars in investment in fuels logistics, product inventories, and marketing in Mexico. Exxon has said the 

company plans to invest $300 million over the next decade and is opening the first series of Mobil-brand 

stations in Mexico this year. Similarly, BP launched its first Mexican service station in March of 2017 with 

plans to have 1,500 in operation over the next five years. 

In August, Valero Energy Corporation signed a long-term supply agreement with IE Nova to supply 

gasoline, diesel and jet fuel to terminals operated by IE Nova at the Port of Veracruz on the Gulf of 

Mexico and inland in Puebla and Mexico City. Supply to the terminal at the Port of Veracruz w ill begin in 

2018 w ith products moving inland by rail through a separate, long-term Valero agreement w ith rail 

operator Ferromax. The Puebla terminal and Mexico City terminal is scheduled to begin operating in 

early 2019. These investments w ill provide an important and growing market for U.S. refined products. 

111. Future Opportunities for Growth and Investment Presented by North American Trade in Energy 

and Petrochemicals 

In addition to the current economic benefits of cross-border energy trade, opportunities for sustained 

trade benefits as well as future growth and investment between the United States, Canada and Mexico 

will continue. 

3 
141 


33807A.073

~AFPM :;io"r ArnencM~ 

Fuel & Petrochemical Marcl!actl,rers 

Exports to Canada of natural gas and other refined products will remain strong thanks in part to 

investments in energy infrastructure, primarily cross-border pipelines. Additionally, Mexican demand for 

U.S. exports of natural gas has grown and is expected to continue trending upward through 2030. 

In Mexico natural gas is the country's largest source of electricity generation, accounting for 54 per~.ent 

of the country's generation in 201S, up from 34 percent in 2005. According to Mexico's national energy 

minister (SENER), more than 600h of Mexico's electric capacity additions between 2016 and 2020 are 

projected to come from natural gas-fired power plants, and significant natural gas capacity additions are 

expected to continue through 2029. SENER projects natural gas-fired capacity will account for 24.9 

gigawatts (GW) of total capacity additions from 2016 to 2029, with 14.7 GW of new gas-fired capacity 

coming online by 2020. 

New natural-gas fired plants will increase Mexico's natural gas demand, specifically a projected increase 

from the power generation sector from 3.6 billion cubic feet per day (Bcf/d) in 2015 to 5.4 Bcf/d in 2029. 

This expected demand growth will be met primarily by increasing imports of natural gas from the United 

States and by large expansions of both cross-border U.S.-Mexico pipeline capacity and Mexico's 

domestic natural gas pipeline networks. 

In 2017 and 2018, natural gas pipelines currently under construction or in the planning stages are 

expected to nearly double the pipeline natural gas exporting capacity from the United States to Mexico. 

The expansion of U.S. pipeline export capacity to Mexico has been matched by a five-year plan to 

expand Mexico's domestic pipeline network, which includes 12 additional pipelines with a total capacity 

of 9.7 Bcf/d currently in development. The plan will expand existing networks and add more than 3,200 

miles of new pipeline through Mexico that will create new markets for natural gas in currently supplyconstrained regions. 

IV. Broad Trade Restrictions, such as Tariffs on Steel, will have Detrimental Impacts on U.S. 

Manufacturing and Infrastructure, Energy Security and American Competitiveness. 

The recently announced tariffs on steel imports, under Section 232 of the 1962 Trade Expansion Act, 

could result in adverse economic impacts including loss of jobs, increased new construction costs, 

delayed or cancelled projects, delayed maintenance, and potential service disruptions. 

AFPM members own and operate pipeline infrastructure and rail tank cars that transport crude, gas, and 

petroleum products to and from their refineries and facilities. In recent years, approximately 77 percent 

of the steel used in line pipe was imported as there is currently limited domestic production availability 

of the high-quality pipeline quality steel required under U.S. safety laws. Trade restrictions such as these 

would significantly undermine that supply structure of this important steel without viable alternatives 

and potentially lead to delay or canceled infrastructure projects. 

U.S. steel manufacturers have moved towards higher margin steels and away from high grade pipeline 

steels. As of March 30, 2017, there are 38 mills able to produce API Specification 5L Line Pipe (the 

required standard) in the United States whereas there are 536 worldwide. The availability of multiple 

domestic and foreign sources of steel has provided supplies that have led to the United States becoming 

the world's largest producer of oil and natural gas. In 2017 alone, the oil and gas industry accounted for 

10 percent of steel demand. 

4 
142 


33807A.074

~AFPM :;io"r ArnencM~ 

Fuel & Petrochemical Marcl!actl,rers 

While a steel tariff would likely positively impact the steel employment rates, it would be far off-set by 

losses in steel-using industries. Most recently the U.S. found this out in 2002 after former President 

George W. Bush imposed similar tariffs on imports of certain steel products. A 2003 study on the 

unintended consequences of the 2002 U.S. steel import tariffs found: 200,000 Americans lost their jobs 

to higher steel prices during 2002; more American workers lost their jobs in 2002 to higher steel prices 

than the total number employed by the U.S. steel industry itself; and every U.S. state experienced 

employment losses from higher steel cost, with some of the highest losses occurring in California 

(19,392), Texas (15,828), Ohio (10,553), Illinois (9,621) and Pennsylvania {8,400). 

Tariffs on steel imports could lead to potential trade retaliation and set a dangerous precedent for 

future trade policy. The U.S. trade deficit in goods and services was $566 billion last year, and in 

December widened to its highest since 2008. This deficit would have been much worse had we not seen 

the boom in U.S. energy production and significant gains in crude oil and petrochemical product exports. 

The U.S. trade deficit indicates the high level of exposure the U.S., and the energy industry, has to 

retaliatory policies that could be pursued by countries adversely affected by U.S. domestic content 

policies. 

Furthermore, following passage of the Tax Cuts and Jobs Act (H.R. 1), a number of AFPM member 

companies have announced billions in investments to build out operations, production, and increase 

employment. However, such investments could be compromised as a result of increased construction 

and material costs that could result from tariffs on steel imports. 

V. Recommendat ions 

An increasingly integrated North American energy market is a win for the U.S. refining and 

petrochemical i ndustries, the environment, and energy consumers. Strong trade relationships between 

t he United States, Canada and Mexico have led to reduced costs on key imported energy products, 

robust export markets in Canada and Mexico, and expanded market access. This in turn has allowed for 

greater industry investment and job growth, affordable energy costs and increased global 

competitiveness. 

AFPM appreciates the role North American free trade has played in fostering energy security, economic 

growth and American competitiveness, and support the continuation of NAFTA. As NAFTA negotiations 

continue in 2018, AFPM offers the following recommendations for modernizing the free trade 

agreement. 

NAFTA investment protections should be strengthened consistent with other U.S. free-trade 

agreements, or at the very least preserved. This specifically includes the Investor-State Dispute 

Settlement (ISDS) enforcement mechanism, which protects and promotes U.S. investments. 

AFPM also recommends that the U.S. support policies that enhance and modernize NAFTA, including 

those that streamline and modernize customs procedures to reflect the way modern energy and 

petrochemical trading moves across borders, and increase regulatory cooperation. 

Finally, AFPM recommends policies that help ensure we have modern and updated infrastructure in 

place to safely and efficiently move our products across the borders and further strengthen our 

integrated energy markets. AFPM strongly opposes a broad 25 percent steel tariff and recommends that 

5 
143 

f 


33807A.075

~AFPM ~r Ameocan 

fuel& PetlOCilemi<:al 

Manulacwrers 

the Department of Commerce implements a flexible and fair exclusion process from the steel tariffs that 

acknowledges the complex multi-modal supply chains of the U.S. energy sector. Any such exclusion 

process should recognize the need for specialty steel not available domestically. Broadly applied trade 

restrictions without a robust exclusion process would significantly undermine the supply structure, 

without viable alternatives, and potentially lead to delay or canceled infrastructure projects that are 

essential for energy production, processing, refining, transportation, and distribution. 

Policies such as broadly applied trade restrictions like tariffs on steel imports are counterproductive to 

this goal and could have a regressive impact on the growth in market access and resulting economic 

benefits the U.S. fuel and petrochemical manufacturing industry has enjoyed under NAFTA. 

Thank you for the opportunity to provide a statement for the record on the U.S. Trade Policy Agenda. 

Please contact Justin Sykes, AFPM Government Relations Manager, with any questions you may have. 

Justin Sykes 

Manager, Government Relations 

American Fuel & Petrochemical Manufacturers 

1667 K Street NW, Suite 700 

Washington, DC 20006 

202.457.0480 office 

202.457.0486 fax 

jsykes@af pm.org 

NOTE: AS OF MONDAY, APRIL gr•, WE WILL BE RELOCATING TO NEW OFFICES. WHILE OUR MAIN 

OFFICE PHONE NUMBER AND PERSONAL EMAIL REMAINS UNCHANGED, OTHER CONTACT 

INFORMATION IS LISTED BELOW: 

1800 M Street, NW, Suite 900, 

North Washington, DC 20036 

6 
144 


33807A.076

-IR.CONOITIONINC, HEAONO, 

& REFRIGERATION INSTITUTE 

we m.:tke hfe ben~r"" 

March 20, 2018 

The Honorable Kevin Brady 

Chairman 

Ways and M eans Committee 

U.S. House of Representatives 

Washington, D.C. 20515 

2111 Wilson Boulevard Suite 500 Arlington VA 22201·3001 USA 

Phone 703 524 8800 1 Fax 703 562 1942 

www.ahrinet.org 

The Honorable Richard Neal 

Ranking M ember 

Ways and M eans Committee 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Chairman and Ranking M ember: 

On behalf of the Air-Conditioning, Heating, and Refrigeration Institute {AHRI) I am writing in 

reference to the committee hearing on Wednesday, March 21, 2018 regarding the U.S. trade 

policy agenda with U.S. Trade Representative Robert Lighthizer. AHRI is the trade association 

representing over 315 manufacturers of residential, commercial, and industrial air conditioning, 

space heating, water heating, and commercial refrigeration equipment and components for 

sale in North America and around the world. The heating, ventilation, air-conditioning, 

refrigeration (HVACR), and water heating industry employs 1.3 million people and generates 

$257 billion in economic activity annually. 

Please find attached AHRI's comments regarding the National Trade Estimate on Foreign Trade 

Barriers (NTE) that were submitted on October 25, 2017. 

Please do not hesitate to contact me if you have any questions. 

Sincerely, 

Joe Trauger 

AHRI Senior Vice President 

Policy and Government Relations 
145 


33807A.077

National Trade Estimate on Foreign Trade Barriers (NTE) 

Comments Regarding Foreign Trade Barriers to U.S. Exports for 2018 Reporting 

October 25, 2017 

Mr. Edward Gresser 

Chair, Trade Policy Staff Committee (TPSC) 

Office of the United States Trade Representative 

600 17'" Street, NW 

Washington, DC 20508 

Ref: Docket No.: USTR-2017·0013 

Introduction to Air-Conditioning, Heating, and Refrigeration Institute (AHRI) 

The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) is pleased to submit comments to the 

United States Trade Representative (USTR) regarding the TPSC's request for information to consider in 

preparing the Annual National Trade Estimate on Foreign Trade Barriers as required by Section 181 of the 

Trade Act of 1974 and Section 1377 of the Omnibus Trade and Competitiveness Act of 1988. 

AHRI is the trade association representing manufacturers of heating, cooling, water heating, and 

commercial refrigeration equipment. With more than 300 members from North America•, Europe and 

Asia, AHRI member companies produce more than 90 percent of the residential and commercial air 

conditioning, heating, water heating, and commercial refrigeration equipment made in North America. 

AHRI is: 

an advocate for the Heating, Ventilation, Air-Conditioning and Refrigeration {HVACR), and water 

heater industries at the global, national, state/provincial, and local levels; 

an accredited (by the American National Standards Institute (ANSI) and the Standards Council of 

Canada (SCC)) Standards Developing Organization (SDO), producing over 100 standards that 

define testing and rating (for energy efficiency) practices; 

a voluntary, industry certification body that verifies the claimed efficiency of HVACR and water 

heater products in 44 certification programs with nearly 900 participants. This global program 

provides publicly available information that helps equipment and component manufacturers 

differentiate their products from competitors, and comply with government requirements. As 

the program administrator, AHRI is accredited as a Certification Body (CB) by the U.S. Department 

of Energy (DOE), the California Energy Commission (CEC), Natural Resources Canada {NRCan) and 

COFRAC (the national accreditation body of France), as well as by the Environmental Protection 

Agency (EPA) for the ENERGY STAR• program; and 

a robust pre-competitive research sponsor with programs that provide test data relevant to 

AHRI's three primary areas of activity. 

1 For purposes of this submission, North America will refer only to canada, Mexico, and the United States unless 

otherwise stated. 
146 


33807A.078

AHRI Comments 

AHRI's members either seek to actively compete fairly in global markets or, if they are not actively 

competing in those markets, they are affected by international trade issues. AHRI's members also 

understand that despite the intent of provisions of the World Trade Organization (WTO) and various 

United States bi- and multi-lateral trade treaties, trade barriers continue to confront our members and 

other parts of the U.S. industry. It is AHRI's understanding that in general, trade barriers are still being 

initiated, amounting to about 11 new trade barriers per month.~ 

AHRI's comments will address two categories of issues. The first is standards, conformity assessment and 

foreign regulations. Second, AHRI will identify emerging issues that may require greater attention in the 

following months. 

Standards 

Trade barriers related to standards, conformity assessment, and foreign regulations are increasingly 

important to this industry, and presumably others. Because of the technical nature of this category, trade 

barriers are not easily discernable, but because of that, they can be even more damaging than other, more 

easily noticeable types of non-tariff barriers. In addition, for the HVACR and Water Heating industry, 

governments are increasingly relying, in their regulations, on results of t esting the energy efficiency of our 

industry's equipment to determine if imported equipment meets M inimum Energy Performance 

Standards (MEPS). For example, in the United States residential and some commercial HVACR and water 

heater equipment has to meet minimum U.S. Department of Energy (DOE) standards to be sold.' 

The HVACR and water heating industry is global, operating in many countries and regions. In that context 

the industry often needs to use and comply with many different technical standards whose origin may be, 

for example, AHRI, ISO (The International Organization for Standardization), CEN (The European 

Committee for Standardization), China's GB standards, or Indian standards required by the Indian Bureau 

of Energy Efficiency. In this situation, industry must have the freedom of choice to use or comply with the 

standard best fit for purpose. This requires that a level playing field be available to t he industry in order 

to make the best choices. Standards capture, convey, and promote technology transfer and there is no 

single standards body globally that has the breadth of standards to meet all of the industry's needs. When 

appropriate, the industry works dil igently to harmonize differing standards to reduce the cost of multiple 

compl iance, and to prevent government mandated standards from impeding technology innovation and 

from being a barrier to trade. 

In this context, AHRI bel ieves that a serious non-tariff barrier to its members is presented by the European 

Union's policy of allowing the use of only CEN and ISO standards to be referenced in its directives and 

regulations, t hus un·leveling the playing field and preventing our industry the freedom to choose the most 

advanced and fit-for-purpose standards. The EU then seeks to exploit its special relationship with ISO to 

export Eurocentric standards through the Vienna Agreement•. 

2 World Trade Organization (WTO), "Trade Policy Review Body - Report to the TPRB from the Director-General on 

Trade-Related Developments (Mid-October 2016 to mid·May 2017)," August 10, 2017. Accessed at 

https://docs.wto.org!dol2fe/Pages/FE Search/FE S S006.aspx?Querr@Symbol=%20{wt/tpr/ov/w/11l&languag 

e=ENGUSH&Context=FomerScriptedSearch&languageUIChanged=true# 3 Code of Federal Regulations: 10 CFR 430, Subparts A, B, & C and 10 CFR 431, Subparts C, D, E, F, G, H, & R. 

• Agreement on Technical Co-operation Between ISO and CEN (Vienna Agreement). 
147 


33807A.079

The Vienna Agreement allows the EU's standards body, CEN, and ISO to engage in the joint development 

of standards and the fast-track adoption of CEN standards by ISO and vice versa. Those CEN standards 

adopted by ISO often are implementation tools for EU Directives and Regulations. Thus, the EU has a ready 

mechanism to advance its industrial, technological and regulatory "products" quickly into world markets 

and to non-EU regulators and legislators. 

Because no other region or country has such a relationship with ISO, the EU enters the ISO standards 

development arena in a favored position that severely inhibits effective participation by non-EU 

participants in developing ISO standards. 

Concurrently the EU complements this approach by attempting to discredit any non-ISO standards by 

erroneously insisting that only ISO standards are bona fide international standards. This assertion is 

incorrect. The WTO has given additional, definitive guidance> which lists the characteristics of 

international standards. These characteristics are consistent with ANSI's (American National Standards 

Institute) "Essential Requirements"6 policy with which ANSI accredits standards, including AHRI's. 

When the EU's erroneous characterization of ISO standards is successfully advocated, especially in 

developing economies, it puts non-EU standards bodies e.g. ASTM, ASME, AHRI, whose standards are 

globally used, in a weakened position regarding the promotion and use of standards t hat reflect the latest 

advances in American technology and expertise, and this mis-characterization can exclude them from 

regulatory reference in regulations pertaining to our industry. 

The effect of this approach by the EU is that the EU thus successfully links its regulatory and standards 

processes, and exports those standards and concepts while not allowing the use of non-CEN standards in 

theEU. 

At issue is the need for a global understanding of the definition of an "international standard" and the 

elimination of the EU's favored relationship with ISO. AHRI believes that the USTR and other U.S. 

government bodies, e.g. the Departments of Commerce and State, should work to eliminate the Vienna 

Agreement, and further, ensure that any trade treaties, bi-or multilateral, specifically stipulate that any 

technical standard meeting the requirements of the Agreement of Technical Barriers to Trade (TBT) and 

its relevant Decisions of the TBT is an international standard. 

Absent agreement on this definition, AHRI members will continue to face, for example in Mexico, 

resistance to citing AHRI standards in regulations on energy efficiency that is based on the Mexican Low 

on Federal Metrology and Standardization (LFMN) that considers U.S. domiciled standards developers as 

"foreign standards developers", whose standards are not "international standards." 

Conformity Assessment and Regulations 

Aligning conformity assessment (testing and certification) procedures with trading partners is vital to 

el iminating the costs associated with expensive, unnecessary, and duplicative testing of equipment by 

importing countries in order to assure compliance with the importer's regulations. These costs include 

those related to equipment testing, the shipping of samples, inventory costs, administrative costs, and 

certification costs under the parallel regime. These costs are first borne by the manufacturer of 

equipment, and eventually by consumers of the imported products. 

5 Agreement of Technical Barriers to Trade (TBT) and its relevant Decisions of the TBT Committee. 6 ANSI Essential Requirements: Due process requirements for American National Standards 
148 


33807A.080

Although Canada and the U.S. have had success in aligning conformity assessment procedures in the 

HVACR industry', Mexico has largely maintained a parallel conformity assessment system since the 

inception of NAFTA, which has led to a technical barrier to trade for Canadian and U.S. companies. 

The path to alignment of conformity assessment procedures begins with harmonization of technical 

standards for testing the efficiency of HVACR and water heater equipment. Mexico has created several 

Official Mexican Standards (Norma Oficial Mexicana, or NOM) for the rating of energy efficiency 

performance, some of which are based on AHRI standards. But even in these cases where a specific NOM 

is based on an AHRI standard, Mexican law dictates that equipment must be tested using the NOM, and 

a duplicative product performance test is performed, when in fact it is a redundant test, since equipment 

has already been tested before entering Mexico. Therefore, AHRI believes that in certain cases the 

foundation to realize the full potential of Article 9088 in fact already exists, and the Parties of the NAFTA 

agreement should act accordingly to prevent that redundant conformity assessment procedures continue 

to act as technical barriers to trade. 

Developed and developing economies are rightfully insisting that HVACR and water heater equipment 

become even more energy efficient. AHRI members do provide such equipment and support the concept 

of regulations such as Minimum Energy Performance Standards (MEPS) to meet energy efficiency goals. 

To avoid the expense of duplicative testing, as mentioned above regarding Mexico, the Kingdom of Saudi 

Arabia (KSA) recently issued regulations regarding the energy efficiency of commercial air conditioning 

equipment. Those regulations stipulate that products covered by its regulations and tested and certified 

as meeting or exceeding the KSA's efficiency levels in AHRI's Certification Program can enter into the 

Kingdom's commerce without additional testing. Non-AHRI certified equipment has to be tested and must 

provide the authorities with proof of compliance. This regulation and its recognition of the integrity and 

rigor of the AHRI cert.ification program demonstrate the value of being able to reference all applicable 

standards, not just ISO's. The KSA's regulation references both AHRI and ISO standards and offers a more 

efficient, less costly testing regime for AHRI certified equipment to enter the Kingdom. 

The KSA's recognition of the broader definition of an international standard as defined by the TBT allowed 

it to successfully build a regulatory regime that cites ill.! relevant standards. This is the model that best 

allows the regulator to access the latest innovations in the HVACR and water heater industry and therefore 

avoids creating non-tariff barriers to trade. 

Emerging Issues 

AHRI has identified emerging issues - issues that are in their nascent stage and as they mature may offer 

challenges in t he trade arena. AHRI notes them here as issues AHRI is involved in and that may provide 

trade related issues in the future. 

1. The Kigali Amendment to the Montreal Protocol. 

a. In October 2016, the 28th Meeting of the Parties to the Montreal Protocol adopted the 

Kigali Amendment on hydrofluorocarbons (HFCs), which commits the world's nations to 

significantly reduce consumption and production of HFCs. HFCs are the key components 

of refrigerants used by the HVACR industry. The Amendment provides a schedule for the 

7 Evidenced by AHRI's accreditation by the SCC as an SOO in Canada, and AHRI's accreditation as a CB by NRCan. 8 North American Free Trade Agreement, Pa rt Three: Technical Barriers to Trade, Chapter Nine: Standards-Related 

Measures, Article 908: Conformity Assessment. 
149 

f 


33807A.081

phasing down of HFC, and predecessor HCFC's usage as refrigerants by developing and 

developed economies. These refrigerants will be replaced by a new generation of 

refrigerants, many of which are flammable, toxic, and corrosive. 

b. Industry has been preparing for this transition for a long time and many alternatives have 

already been developed, to be phased in as availability, training, and revised laws, 

regulations, standards, and codes will allow. This transition may reveal issues such as 

intentional mislabeling, unnecessarily restrictive tariffs, or safety regulations that will 

have a negative trade effect. 

c. The recent court decision• regarding EPA's Significant New Alternatives Policy (SNAP) 

program leaves the U.S. without a refrigerant management program. How this issue 

develops may have negative trade implications. 

2. Intellectual Property Issues in a Changing Industry 

AHRI members have a history of vigilance and action to stop the theft of equipment designs. 

Increasingly members' equipment is refined to deliver better and more efficient heating and 

cooling by incorporating proprietary, innovative, new electronic technologies. It will be important 

to be alert to the theft of intellectual property related to those systems. 

AHRI appreciates the opportunity to comment on the National Trade Estimate. It will be happy to answer 

any questions arising from its submission and to provide additional information. 

Best Regards, 

James K. Walters 

Vioe President, lntemational Affairs 

Air-Conditioning, Heating, and Refrigeration Institute 

2111 Wilson Blvd, Suite 500 

A~ington , VA 2.2201 

Phone:+ 1 703-600-0338 

E-mail: jwalters@ahrinet.org 

• Mexichem Fluor Inc., v. Environmental Protection Agency. No. 15-1328. United States Court of Appeals for the 

District of Colombia Circuit. August 8, 2017. 

---- AHRI Certified® Over 50 Years of Leadership in Environmental Stewardship, Energy EffiCiency, 

Performance, and Customer Satisfaction. 
150 


33807A.082

Tom Salmon 

CEO 

Berry Global, Inc. 

I 0 I Oakley Street 

Evansville, IN 47710 

TeL 812-424-2904 

Fax. 812-250-08 13 

Letter for the Record of the U.S. House of Representatives Conm1i11ee on Ways and Means Hearing on 

U.S. Trade Policy Agenda 

Berry Global, Inc. ("Berry") is writing to express onr concems about the trade policy actions being taken 

by the current administration that impose additional oosts on our manufacturing inputs and reduce our 

global competitiveness. 

Berry is a manufacturer of packaging products supporting the conswner and industrial markets. Berry was 

established in 1967 and employs over 24,000 workers in 3 I states and 20 countries. Our customers rely 

on our ability to provide high-quality cost-competitive packaging solutions. In order to maintain our 

competitiveness and continue investment in U.S. manufacmriog and employees, we rely oo the 

availability of a global market for sourcing raw materials and industrial machinery. 

Any changes to the trade laws, done for the supposed purpose of protecting our national security or used 

as leverage when re-negotiating existing Free Trade Agreements, has unintended consequences that must 

be considered and weighed against any potential benefit. 

For example, Berry uses significant amounts of ultra-thin gauge alutninum foil in many products, 

including adhesive tapes and food packaging, and is being negatively affected by the imposition of Antidumping and Countervailing duties imposed on China. We are similarly affected by the Section 232 

tariffs on imports from many countries. 

Additionally, Berry purchases steel products used in injection-molding and other molding machinery. 

These purchases are significant investments in our U.S. plants. Berry's suppliers for these steel products 

and machinery require access to specific grades of steel not available in the U.S., yet likely subject to the 

Section 232 tariffs on steeL As a result, the tariffs impose hardship on our suppliers and us as we stntggle 

to identify alternate sources for these unique steel products. 

Manufact1mng companies develop their supply chains over time while considering many market and 

regulatory factors. Disntptions and uncertainty can detract from focus on investment and growth. The 

haste with which these actions have been implemented, the uncertainly around how they will be applied, 

and the mechanisms for exclttsion are causes of great concem for us. 

Without a clearly articulated, measured and sustained trade policy, Berry may hesitate to invest or may 

look toward other countries as potential sources for products currently manufactured in the U.S. In 

particular, the Section 232 tariffs on steel and aluminwn, with their potential for abundant exclusions 

extended to onr most significant trading partners seem to undermine the tariff's very intent. These tariffs 

do not apply for our largest trade partners. Instead of guarding against threats to our national security. 

they function as a tax on U.S. manufacturers who source from cotmtries where the exemptions do not 

apply. 
151 

f 


33807A.083

Berry, along with many companies in the S30 billion U.S. flexible packaging industry strenuously oppose 

these additional tariffs on aluminum foil and steel and request they be reconsidered in light of their 

negative impacts. More broadly, we hope that any future consideration for imposition of tariffs be more 

selective and targeted, considerate of the impacts on the domestic industry, and given ample time to 

address the underlying trade concem before resoning to ptmitive tariffs. We believe every side and every 

pany can win in an environment of fair and open trade. 
152 


33807A.084

Comments for the Record 

United States House of Rept·esentatives 

Committee on Ways and Means 

Hearing on U.S. Trade Policy Agenda 

Wednesday, March 2 1, 2018, 10:00 A.M. 

II 00 Longworth House Office Building 

By Michael G. Bindner 

Center for Fiscal Equity 

Chairman Brady and Ranking Member Neal, thank you for the opportunity to submit these 

comments for the record to the Committee on Ways and Means. This largely mirrors our 

comments from last year. As usual, we will preface our comments with our comprehensive fourpart approach, which will provide context for our comments. 

• A Value Added Tax (1/ AT) to fund domestic military spending and domestic 

discretionary spending with a rate between I 0% and 13%, which makes sure very 

American pays something. 

• Personal income surtaxes on joint and widowed filers with net annual incomes of 

$100,000 and single filers earning $50,000 per year to fund net interest payments, debt 

retirement and overseas and strategic military spending and other international spending, 

with graduated rates between 5% and 25%. 

• Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income 

cap, which allows for lower payment levels to wealthier retirees without making bend 

points more progressive. 

• A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT 

with additional tax expenditures for family support, health care and the private delivery 

of governmental services, to fund entitlement spending and replace income tax tiling for 

most people (including people who file without paying), the corporate income tax, 

business tax ftling tluough individual income taxes and the employer contribution to 

OASI, all payroll taxes for hospital insurance, disability insurance, unemployment 

insurance and survivors under age 60. 

Far be it from the Center to interfere with a dispute between the Conunittee and the White House 

over Steel Tariffs and NAFT A. Such arguments are like those over immigration, where some 

business owners want employees to stay in the shadows and be abused, others want legal 

employees (though non-union - repealing right to work laws would end illegal immigration 

because no one would hire an undocumented worker with union representation) and still others 

in the conservative camp simply hate the illegality or the elhnicity of the immigrants (speaking 

of the White House). 

The real similarity in the short term is that attacking unions for the past 30 years has taken its toll 

on the American worker in both immigration and trade. That has been facilitated by decreasing 

the top marginal income tax rates so that when savings are made to labor costs, the CEOs and 

stockholders actually benefit. When tax rates are high, the goverrm1ent gets the cash so wages 
153 


33807A.085

are not kept low nor unions busted. It is a bit late in the day for the Majority to show rea l 

concern for the American worker rather than the American capitalist or conswner. 

Reversing the plight of the American worker will involve more than trade, but I doubt that the 

Majority has the will to break from the last 30 years of tax policy to make worker wages safe 

again from their bosses. Sorry for being such a scold, but the times require it. 

Some of our prior comments to the Trade Subcommittee from June of2016 on our standard tax 

plan still apply, even though that bearing was on agricultural exports. Allow us to repeat them 

now: 

The main trade impact in our plan is the first point, the value added tax (VAT). This is because 

(exported) products would shed the tax, i.e. the tax would be zero rated, at export. Whatever 

VAT congress sets is an export subsidy. Seen another way, to not put as much taxation into 

VAT as possible is to enact an unconstitutional export tax. 

The second point, the income and inheritance surtax, bas no impact on exports. It is what people 

pay when they have successfully exported goods and their costs have been otherwise covered by 

the VAT and the Net Business Receipts Tax/Subtraction VAT. This VAT will fund U.S. 

military deployments abroad, so it helps make expo11s safe but is not involved in trade policy 

other than in protecting the seas. 

The third point is about individual retirement savi11gs. As long as such savings are funded 

through a payroll tax and linked to income, rather than funded by a consumption tax and paid as 

an average, they will add a small amount to the export cost of products. 

The fourth bullet point is tricky. The NBRT /Subtraction VAT could be made either border 

adjustable, like the VAT, or be included in the price. This tax is designed to benefit the families 

of workers, either through government services or services provided by employers in lieu of tax. 

As such, it is really part of compensation. While we could run all compensation through the 

public sector and make it all border adjustable, that would be a mockery of the concept. The tax 

is designed to pay for needed services. Not including the tax at the border means that services 

provided to employees, such as a much-needed expanded child tax credit - would be forgone. 

To this we respond, absolutely not - Heaven forbid - over our dead bodies. Just no. 

The NBRT will have a huge impact on trade policy, probably much more than trade treaties, if 

one of the deductions from the tax is purchase of employer voting stock (in equal dollar amounts 

for each worker). Over a fairly short period of time, much of American industry, if not 

employee-owned outright (and there are other policies to accelerate this, like ESOP conversion) 

will give workers enough of a share to greatly impact wages, management hiring and 

compensation and dealing with overseas subsidiaries and the supply chain - as well as impacting 

certain legal provisions that limit the fiduciary impact of management decision to improving 

short-tem1 profitabiljty (at least that is the excuse managers give for not privileging j ob 

retention). 

2 
154 


33807A.086

Employee-owners will fmd it in their own interest to give their overseas subsidiaries and their 

supply chain's employees the same dea l that they get as far as employee-ownership plus an 

equivalent standard of living. The same pay is not necessary, currency markets will adjust once 

worker standards of living rise. 

Over time, this will change the economies of the nations we trade with, as working in employeeowned companies will become the market preference and force other firms to adopt similar 

policies (in much the same way that, even without a tax benefit for purchasing stock, employeeowned companies that become more democratic or even more socialistic, will force all other 

employers to adopt sin1ilar measures to compete for the best workers and professionals). 

In the long run, trade will no longer be an issue. Interna l company dynamics will replace the 

need for trade agreements as capitalists lose the ability to pit tbe interest of one nation's workers 

against the other's. This approach is also tbe most ef!ective way to deal with the advance of 

robotics. If the workers own the robots, wages are swapped for profits with the profits going 

where they will enhance consumption without such devices as a guaranteed income. 

If Senator Sanders had been nominated and elected, this is the type of trade policy you might be 

talking about today. Although the statT at the Center supported the Senator, you can inlagine 

some of us thought him too conservative in his approach to these issues, although we did agree 

with him on the SIS minimum wage. Economically, this would have had little impact on trade, 

as workers at this price point often generate much more in productivity than their wage retums to 

them. This is why the economy is slow, even with low wage foreign imports. Such labor 

markets are what Welfare Economics call monopsonistic (either full monopsony, oligopsony or 

monopsonistic competition - which high wage workers mostly face). Foreign wages are often 

less than the current minimum wage, however many jobs cannot be moved overseas. 

As we stated at the outset, the best protection for American workers and American consumer are 

higher marginal tax rates for the wealthy. This will also end the possibility of a fu111re crisis 

where the U.S. Treasury cannot continue to roll over its debt into new borrowing. Japan sells its 

debt to its rich and under-taxes them. They have a huge Debt to GOP ratio, however they are a 

small nation. We ca1mot expect the same treatment from our world-wide network of creditors, 

an issue which is also very important for trade. Ctmently, we trade the security of our debt for 

consumer products. Theoretically, some ofihese funds should make workers who lose their jobs 

whole - so far it bas not. This is another way that higher tax rates and collection (and we are 

nowhere near the top of the semi-fictitious Laffer Curve) hurt the American workforce. Raising 

taxes solves both problems, even though it is the last thing I would expect of the Majority. 

We make these comments because majorities change - either by deciding to do the right thing or 

losing to those who will, so we will keep providing comments, at least until invited to testify. 

Thank you for the opportw1ity to address the conm1ittee. We are, of course, available for direct 

testimony or to answer questions by members and staff. 

3 
155 

f 


33807A.087

Contact Sheet 

Michael Bindner 

Center for Fiscal Equity 

14448 Parkvale Road, Suite 6 

Rockville, MD 20853 

240-81 0-9268 

fiscalequitycenter@yahoo.com 

Committee on Ways and Means 

Hearing on U.S. Trade Policy Agenda 

Wednesday, March 21, 2017, 10:00 A.M. 

I 100 Longworth House Office Building 

All submissions must include a list of all clients, persons and/or organizations on whose behalf 

the witness appears: 

This testimony is not submitted on behalf of any client, person or organization other than the 

Center itself, which is so far unfunded by any donations. 

4 
156 


33807A.088

Consumer 

Technology 

Association 

March 19, 2018 

The Honorable Orrin G. Hatch 

Chairman 

Committee on Finance 

United States Senate 

219 Dirksen Senate Office Building 

Washington, D.C. 20510 

The Honorable Kevin Brady 

Chairman 

House Committee on Ways and Means 

1102 Longworth House Office Building 

Washington, DC 20515 

The Honorable Ron Wyden 

Ranking Member 

Committee on Finance 

United States Senate 

219 Dirksen Senate Office Bui lding 

Washington, D.C. 20510 

The Honorable Richard Neal 

Ranking Member 

1919 S. Eack St 

Artlngton. VA 22202 

701·907-7600 

CTA.ttch 

House Committee on Ways and Means 

1106 Longworth House Office Building 

Washington, DC 20515 

Dear Chairman Hatch, Ranking Member Wyden, Chairman Brady and Ranking Member Neal, 

In advance of upcoming hearings on the president's 2018 Trade Agenda with United States Trade 

Representative Robert Ughthizer, the Consumer Technology Association (CTA) urges you to consider how 

President Trump's possible imposition of Section 301 tariffs on Chinese imports might affect the consumer 

technology industry. 

CTA is the trade association representing the $351 billion U.S. consumer technology industry, including 

manufacturers, retailers, component suppl iers and service providers. Every day, our more than 2,200 

member companies-80 percent of whom are small businesses and startups- are innovating, introducing 

extraordinary products and supporting 15 million American jobs. 

At a t ime when the economy is growing and tax reform is taking hold- more companies are hiring and 

paying higher wages - the U.S. risks reversing its recent successes with high tariffs. According to CTA's latest 

economic study on the consumer technology sector, our industry makes up 10.3 percent of U.S. GOP and 17 

percent of total U.S. exports in 2015. Imposing broad tariffs against China would be highly detrimental to 

the tech sector, U.S. jobs and the economy. Tariffs, no matter how well-intended, function as taxes on U.S. 

consumers and businesses. 
157 

f 


33807A.089

Additionally, according to CTA's semi-annual U.S. Consumer Technology Sales and Forecasts report, our 

industry's 2018 domestic revenue will reach a record-breaking $351 billion- 3.9 percent higher than 2017. 

The top five revenue categories - smartphones, laptops, t elevisions, tablets and automotive electronicsalone contribute more than half of that revenue. If the U.S. targets these popular products, consumers 

would be forced to pay more and companies could not hire as many American workers. 

Importantly, broad reaching tariffs on China would undoubtedly bring retaliation against other sectors, 

creating a dangerous race to the bottom in the global trading system and wreaking havoc on global supply 

chains. And these retaliatory measures would almost certainly include tariffs on products made by 

American companies. 

Rather than imposing tariffs against China, the United States should work with China to achieve a more 

balanced bilateral relationship. As you prepare to question Ambassador Lighthizer, we encourage your 

committees to explore the negative impacts tariffs would have on the consumer technology sector and 

consumers, and what other remedies the administration has studied to protect our national security 

without harming the U.S. economy. 

Thank you for helping to promote free trade principles that will spur economic growth, deliver more 

American jobs and create a brighter future for our children. 

Sincerely, 

Gary Shapiro 

President and CEO 

Consumer Technology Association 

cc: Senate Finance Committee Members 

House Ways and Means Committee Members 
158 


33807A.090

t 85 Admiral Cochrane Drive 0. Suite 105 

rnA Flexible Packaging r r~. Association 

CoMecting. Advancing. Leading. 

Annapolis, M021401 

Tel (410) 694-0800 

Fax (410) 694-0900 

www.llexpack.org 

Flexible Packaging Association (FPA) 

Statement for the Record 

House Ways and Means 

Hearing o n U.S. Trade Policy Agenda 

Wednesday, March 21, 2018 

and 

Hearing with Commerce Secretary Ross 

Thursday, March 22, 2018 

My name is Alison Keane, and I am President and CEO of the Flexible Packaging 

Association (FPA). FPA is the voice of U.S. manufacturers of fl exible packaging and their 

supplie rs. The association's mission is connecting, adva ncing. and leading the flexible 

packaging industry. Flexible packaging represents over $30 billion in annual sales in the 

U.S. and is the second largest and o ne of the fastest growing segments of the packaging 

industry. The industry employs over 80,000 workers in the United States. Flexible 

packaging is produced from paper, plastic, film, aluminum foil, or any combination of these 

materials, and includes bags, pouches, labels, liners, wraps, rollstock, and other flexible 

products. With respect to a luminum foil, th is packaging includes everyday food and 

beverage produ(.ts such as candy, salty snacks, yogurt, and beverages; as we ll as healt h and 

beauty items and pharmaceuticals, such as aspirin, shampoo and shaving cream. Alumi num 

foil provides the ba rrier protection from oxygen, light and bacteria that these products 

need to ensure stable shelf-life and freshness. Aluminum foil is a lso used by the flexible 

packaging industry for medical device packaging to ensure that the products packaged, 
159 


33807A.091

such as absorbable sutures, human tissue, and artificial joints, maintain their efficacy at the 

time of use. 

This Section 232 investigation, that was initiated under the Trade Expansion Act of 

1962, was to determine what, If any, effects Imports of aluminum have on national security. 

FPA is not aware of any impacts aluminum foil imports for use in the packaging industry 

has on U.S. national security and the Department of Commerce Report entitled "Effects of 

Aluminum Imports on the National Security," (Report) did not specify any. FPA supports 

efforts to protect domestic manufacturing and ensure national security, however, these 

efforts must consider the Impact and consequences on all U.S. manufacturing industries, 

and the recently imposed 10% tariff on aluminum imports does not. Aluminum foil imports 

necessary for the packaging industry, and without application for national defense, should 

have been excluded from the tariffs. In its investigation, the Administration was to 

consider a range of factors related to national security, including the economy and the 

effects of foreign competition on the economic welfare of domestic industries, including 

Impacts on employment. However, this docs not appear to have been the case. These 

import restrictions on aluminum will have a significant negative Impact on the Oexible 

packaging industry and its employment in the U.S with regard to aluminum foil converting. 

FPA was pleased to see that one aspect of the Report was adopted in the 

Administration's proclamation instituting the aluminum tariffs - the process for exclusions 

from the tariffs "upon request of affected parties if the steel or aluminum articles are 

determined not to be produced in the U.S. in a sufficient and reasonably available amount 

or of a satisfactory quality or based upon specific national security considerations." 

However, according to the direct-final regulations implementing the exclusionary process 

(83 FR 12106, March 19, 2018), trade organizations, such as FPA .• can not petition on behalf 
160 


33807A.092

of their respective members, even though our members would all be making the same 

request - that aluminum foil is exempted as it is not make domestically in the quantities 

and quality needed for the packaging industry. Many manufacturers, particularly small 

businesses, rely on their trade associations to assist them in responding and negotiating 

solutions to government regulations. By not allowing trade associations to file on behalf of 

their industries, this rule is encouraging excessive and duplicative filings and will 

disproportionately impact small businesses. And, the tariffs went into effect on March 23, 

2018, when the earliest possible date Commerce could grant an exclusion would be May 18, 

2018, when the exclusions will "generally" be approved. So, there is no guaranteed 

timeframe in which petitioners will know whether or not their petition has been approved 

and they will have already been paying the tarifffor at least 90 days. The damage to U.S. 

Hexible packaging jobs may very well already be done after 90 days of this tariff, and once 

again, this process will certainly disproportionately disadvantage small converting 

businesses that cannot afford to front these costs. 

Further, there is little to no clarity on the petition process from the rule. Commerce 

must supply FAQ's answering such questions as how confidential business information 

(CBJ) can be submitted. Right now, there is simply a check box on the form where 

businesses can state that they have CBI information and there is no indication of the 

process for submitting such; whether or not the petition is incomplete without the 

information and if so, what the timeline for completion would be; nor if the arbitrary 25· 

page limit of the petition includes or does not include this CBI. Similarly, the rule states 

that Commerce may approve a broader exclusion request to apply to multiple similarly 

situated importers but gives absolutely no information on how groups of companies can 

apply for this broader exclusion. Again, as trade associations such as FPA, do not "use 
161 


33807A.093

aluminum in business," we can not file on behalf of multiple companies. If a product 

exclusion is granted because it is not manufactured domestically in quantities and quality 

necessary for the industry- why wouldn't that exclusion be granted to all users of the 

product? Lastly, the exclusio n process, if granted, would only be applicable for one-year. 

Will companies have to petition for the exclusion every year? If the product is not available 

domestically now, why does Commerce believe it will be available next year, or the year 

after, or ever? It should not be up to individual companies to prove to the Administration 

that these products do not exist domestically, this should have been part of Commerce's 

analysis before instituting the overly broad tariff in the first place. Even if the domestic 

aluminum foil suppliers gua ranteed to start making the aluminum foil gauges flexible 

packaging manufacturers need tomorrow - it would take several years for the mills to 

produce the quantity and quality of the foil our companies need. Further, under Federal 

Food and Drug Administration regulations, substitution of the foil substrate could take two 

to ten years for approval, depending on use in packaging for food or medical devices. 

FPA is also concerned about the lack of transparency with regard to the Section 

232 remedy and the process Commerce will use to monitor and report o n its effects. As 

stated above, while the investigation was supposed to take into consideration the effects of 

foreign competition on the economic welfare of domestic industries, incl uding impacts on 

employment; the Report failed to address downstream industries dependent on aluminum 

or steel. How will Commerce monitor and report on the effect of this tariff on the primary 

manufactu rers of aJuminum in the U.S.; let alone downstream industries, which were 

ignored in the Report? Commerce must be accountable to show the impacts to all affect ed 

industries and ultimately work towards alleviating the devastating impacts of these tariffs 

on downstream users of aluminum products and mitigating the burdensome and 
162 


33807A.094

unnecessary paperwork this exclusionary process would apparently mandate on an annual 

basis. 

The Section 232 investigation and proposed remedy is paralleling an International 

Trade Commission (lTC) investigation and remedies for Chinese aluminum foil imports. 

Thus. FPA members a re being penalized twice - first with the lTC anti-dumping and 

countervailing duties that in some cases exceed 140%, and then with the new 10% tariffs 

on other imports of aluminum foil, which are applied on top of the duties already in place. 

The consequences of the tariff under this investigation, combined with the duties from the 

lTC probe., is the loss of flexible packaging jobs in the U.S. The negative impact on 

American jobs by cutting off the supply of a luminum foil for flexible packaging 

manufacn1ring will far outweigh any job benefits that are envisioned by the lTC and Section 

232 taxes. These duties and tariffs are leading to U.S. companies sourcing aluminum foil 

from other non-U.S. manufacturers at a much higher cost; Chinese suppliers of printed or 

otherwise converted aluminum foil products entering the U.S. market, since this bypasses 

the duties; and/or U.S. companies moving flexible foil packaging production outside the 

U.S .• thereby reducing the amount of U.S. foil converting jobs. There is simply no scenario 

where the benefits to the U.S. aluminum manufacturers out\veighs the detriment to the U.S. 

flexible packaging industry. 

Aluminum foil used by the flexible packaging industry is not manufactured in the 

U.S. in the quantities and qualities needed. Failure to invest, and quality lapses, including 

gauge. width, and lack of appropriate alloys all contribute to the fact that the U.S. producers 

of aluminum foil are not able to serve the U.S. flexible packaging industry. In fact, the lTC, at 

its preliminary hearing on March 30, 2017, found that domestic ultra-thin foil production 

"may be limited or nonexistent." Thus, the packaging industry in the U.S. should be granted 
163 

f 


33807A.095

an exclusion for aluminum foil imports from the Section 232 tariff. Since FPA is not eligible 

to petition on their behalf, Commerce should recognize the broad·based exclusion the rule 

mentions to reduce the repetitive and burdensome petitions it will received with regard to 

this foil for flexible packaging manufacturers. 

FPA shares the same goal as the domestic aluminum foil producers who want more 

American jobs and understands the importance of protecting national security. This tariff is 

not the answer. The Administration should find ways to work together to improve our 

country's competitiveness. Everybody loses in unfair trade cases, especially the American 

consumer. 

Thank you. 
164 


33807A.096

Statement of Richard Woldenberg on Possible Chinese Toy Tariffs 

Submitted to the 

House Committee on Ways and Means 

The United States House of Representatives 

March 20, 2018 

My name is Richard Woldenberg, and I am CEO of Learning Resources, Inc. located in Vernon Hills, 

Illinois. I am submitting this testimony on behalf of our company. Our company is a family business 

which develops and markets educational products and educational toys in the United States and dozens 

of other countries. We outsource the manufacturing of our products overseas, and as a result, we are a 

significant importer (of our own products) into the United States. Many of our products are made in 

China under our control. 

We have grave concerns about reports that the President intends to impose high tariffs on toys made in 

China by the end of March. The imposition of tariffs on toy imports is completely unrelated to 

allegations of Chinese theft of intellectual property and forced technology transfers in other industries, 

and is rife with risk and unintended consequences. Our industry is highly dependent on China as a 

manufacturing hub, and thus an easy target in trade disputes with China. I fear that the future of our 

company, and the many jobs we provide, are at stake here. We are a small business under the Federal 

government definition and believe that the problems we will face under a harsh import tariff regime will 

be experienced by many other small business importers in the United States. 

Our Company: 

Learning Resources, Inc. (LR) was founded in 1984 and is located in Vernon Hills, Illinois and has about 

1SO employees in the U.S. and U.K. The company is part of our family business group which turned 100 

years old in 2016; I am the third generation of my family to run this business, and we were proud to 

welcome the first member of the fourth generation into our business last year. LR develops and markets 

proprietary educational toys and materials in Vernon Hills but has manufactured most of its 1,200 

products overseas since the late 1980's. Jobs at our company pay well, turnover is low and we are an 

important member of our community, injecting many millions of salary and benefit dollars into the local 

economy annually. In 2013 and again in 2016, LR tried and failed to find factories located in the United 

States interested in making our products. In other words, we know from recent experience that we have 

no realistic option to make our products in the United States, with or without the coercive pressure of 

tariffs. High tariffs will just shrink our business and impoverish our consumers. 

Toy Tariffs Will Hit the Wrong Target: 

Our China factories are not State-owned: 

Our business largely depends on factory relationships in China. To my knowledge, we do not do 

business with any Chinese government-owned or controlled entities. The factories that we use are 
165 


33807A.097

private businesses, typically family businesses like ours. These businesses are subject to law, and pay 

fair wages to make our products in a responsible manner. The factories are subject to Code of Conduct 

audits and certifications, and must also pass compliance audits by local authorities. The high quality 

products we make in our Chinese factories satisfy U.S. safety standards and other international safety 

standards. We do good business in China with good people. 

Losses by our partner factories will hurt us. Our partners are hard working and honest people who do a 

great job making consumer goods for Americans to buy and enjoy. They do not have deep capital 

reserves, however. Their economic suffering at the hands of U.S. tariffs will come out of our pockets, in 

the form of higher costs, lost production capacity, ruined teams or forgotten know-how, weakened 

balance sheets and broken trust. When the President pushes Humpty Dumpty off the wall, we know he 

cannot be put back together again. 

Chinese enforcement of our property rights has been reliable: 

We have ~ experienced intellectual property theft by our factories. We register our intellect ual 

property in China, as elsewhere, and rely on Chinese lawyers and Chinese courts to enforce our rights in 

our innovations. We have been successful in enforcing our rights in China, in part because of our legal 

ability to close the U.S. market to infringers. We are not confident we will have the same leverage when 

the President closes U.S. markets to all Chinese toy companies preemptively. 

In fact, a greater issue in our business is the economic health of our factories, which can be shaky at 

times. We have seen fact ories go out of business, leaving our U.S. business endangered. In one 

notorious case, a big factory closed overnight, leaving our business exposed with many important 

proprietary molds in legal limbo. However, within a short period of time, a Chinese judge ruled in our 

favor in the local insolvency proceeding and allowed us to recover our molds in time for Christmas toy 

production. The Chinese judge's decision to uphold our property rights in the molds saved our holiday 

selling season. In our experience, Chinese courts and Chinese judges have been respectful of our 

property rights even though we come from another country. 

Our company has no realistic ability to move its supply chain ta another country: 

We have business reasons for t he assignment of products to specific factories, whether in the U.S. or in 

other countries. There are many considerations for these decisions. Based on our market knowledge, 

we locate our manufacturing in the most efficient way possible. We know of no other markets where 

we can get the range of services and skills necessary to make our products at the best possible cost. We 

have also made repeated attempts to develop a U.S.-based supply chain but cannot do so on any basis, 

even inefficiently. We have no known realistic alternative to our current supply chain. 

Our products are used in American Schools: 

Toy tariffs will harm American schools because many toy companies cross over into school supply. 

Notably, our company was formed to supply schools with hands-on learning tools in 1984. U.S. Customs 

regulations treat our educational products as "toys", which means that the cost of tariffs will force us to 
166 


33807A.098

raise the cost of school products. The big losers will be poorly-equipped American schools, and the 

American fami lies depending on them. This is yet another example of the self-destructive nature of 

import tariffs aimed at the wrong target. 

Our industry is greatly weakened right now: 

The demise of Toys R Us is a material event in the American toy industry. Not only did TRU have U.S. 

market share of 20-2S%, leaving a huge hole for many companies in the wake of its liquidation, but it 

also played a special role in the market for the introduction of hot new toys. The absence of TRU from 

the marketplace removes a critical industry marketing vehicle, not to mention a brand ambassador and 

a critically important source of revenue. Notably, TRU inflicted massive losses on many toy companies in 

September 2017 when it sought Chapter 11 bankruptcy protection, and again in March 2018 when it 

announced plans to fully liquidate. This was a kind of a "Double Indemnity" event for the toy industry. 

Adding tariffs at this time will devastate the health of an already weakened American toy industry 

employing hundreds of thousands of Americans. 

The vast majority of imports are made by Small Businesses: 

It is well-known that 97% of U.S. importers are Small Businesses (U.S. Census data, 2014). The average 

import value per annum per congressional district is about $1.S billion from Small Business alone. The 

annual import value (201S) for the U.S. Small Business community was a very healthy $631 billion 

(https:Uwww.census.gov/foreign-trade/Press-Release/edb/201S/exh1d.pdf). Toy tariffs will certainly be 

a Small Business tax. According to the U.S. Census Bureau, there were more than 191,000 small 

business importers in 201S in the United States. Toy tariffs will put many small business jobs at risk and 

there should be no presumption that those jobs will come back if Mr. Trump later reverses course. 

Just Because We Start a Fight Doesn't Mean We Will Have the Power to End it: 

The effect of toy tariffs is unknown and may be irreversible: 

Our industry has never experienced high tariffs. The burden of toy tariffs was last felt in the early 1990's 

and the removal of those small tariffs led to dramatic industry growth. In that same time period, retail 

prices have fallen on an adjusted basis while innovation has skyrocketed. It is reasonable to assume that 

high tariffs will sharply reverse that progression. The cost of tariffs will have to be passed on to American 

consumers, and the financial burden of the tariffs will drain cash availability at victimized toy companies. 

The outcome of this grand trade experiment cannot be foretold but it is certainly not going to be 

pleasant. Jobs lost because of this ill-considered policy may never return. The historic lessons of SmootHawley need to be taken seriously. 
167 


33807A.099

Retaliation may leave a permanent mark on certain industries owing to lack of trust: 

The imposition of t ariffs on our industry has no precedent. No one has a plan to deal with it, and our 

factories will immediately become financially sick. Under these circumstances, when the U.S. 

government demonstrates a willingness to act capriciously and unpredictably, trust can be forever 

damaged. Who will be willing to invest in reliance on prevailing trade practices after that? We will have 

to deal with this externality for years to come. That's a cost we will never get back. 

Retaliation will be followed by reinvigorated foreign competition: 

The likelihood of retaliation for high tariffs is great. Market access removed because of aggressive trade 

actions may cede market control to foreign competition. As everyone knows, it's easier to retain a 

customer than to win one back. The government is playing with our life's work with these tariffs, and 

the future is murky. We will have no control over the removal of measures taken in response to the 

President's provocative tariff plan. 

Conclusion: 

Regardless of the justifications supporting toy tariffs, no one is going to miss the point that costs are 

going to skyrocket. In the wake of tax reform designed to improve corporate competitiveness, the high 

toy tariffs will come as a shock to an unsuspecting corporate community preparing for expansion. The 

voters' anger will only mount as job losses pile up and prices rise. 

There must be another, better way to fix trade imbalances with China, and it is Congress' responsibility 

to find it. Thank you for considering my views. 

33807A.100

Po•-ABW Prlc. incn•• 34. 

Vol ..... 

A8W Pl•n T• x Rllte 2$. 

MoM/ Com,.ny, 38% GPM 

I Po«-ABW BhHtpr1nt, CUran t Tax a..w (AJ "'A S.tttr W•y"" Bfuepr'lnt AdjuSie d for Price Inc;,..•• I Ec:onomla' 

8 • ncl Volume Reduction i_C) Soen•rl

Rewnue 

Cun'Of'll Rownut $26.000.000 $2'6,000.000 $28,000,000 I m.ooo.ooo 

Post..ABW PIM Pf!¢0 lnetetlSO $8,840,000 Post..ABW Plan Vobne Reduc-tiOn (Prof.) ($13,936,000) 

Netltewnue $28,000,000 $2$.000.000 $20.904.000 

coos 

eu .... coos $16.120.000 $16,120.000 $ 16, 120,000 $16.120.000 

POSt-ABW Pion Votvtr'rt Roduetaon (Pf(li,) ($6.448.000) ($3.878,520) ·24% 

Net(A)tltofGoods 

liw!..fl:2lll so,aeo,ooo $11,232,000 

Selling Expenses $2.000,000 $2,000.000 $2,000,000 $2,000,000 

P06t-A8W Cost Reduction (112 \01 redUction ($400,000) 

FuH)'oloac:ted Payrol (1nCiuding temps) $4,500,000 $<4.500,000 $4,500,000 $4,500,000 

PO&t-ABW Cost RecluetiOtl (112 \01 reductiOn ($900,000) 

O&A eJc:pGnSOS (butlnoss $300.000 $300.000 $300.000 $300,000 Othor Ga.A Exponses $1,500.000 $1,500.000 $1,500.000 $1,500.000 

Poet-ABW Cost Recluetlon (112 \01 reduction ($300,000) 

Tobll SG&A Ex pen•• $8,300,000 $8,300,000 $6,700.000 

Op!r•Unq Income ,. 

nterest Expense $200,000 $200,000 $200,000 

Ntt Tuab lt lncom• $ 1,380,000 

Ackl b•ck to T•x•bl• lnc;ome 

COGS $16,120.000 $9,672.000 $12.241.480 

lnltrOSt Exponso $200,000 $200.000 $200,000 

Toll I Tau.b le Adjuttment. $16,320,000 $9,812.000 

Adju .. d T8.XIble lnc:ome ' 

Statll TU (IL $51,750 $51,750 $51,750 ' 

Federal Income T8 x (39.6"1.pre-ABW) $548,430 $&,..$25,000 $3,551,000 

Net tncome after Taxes STa1.no ($3,045,000) $111.000 
169 

f 


33807A.101
170 


33807A.102

Statement for the Record 

National Association of Home Builders 

United States House of Representatives 

Committee on Ways and Means 

Hearing on 

U.S. Trade Policy Agenda 

March 21, 2018 
171 


33807A.103

The National Association of Home Builders (NAHB) represents more t han 140,000 members 

involved in the home building, remodeling, multifamily construction, property management, 

subcontracting and light commercial construction industries. NAHB is also affiliated with more 

t han 700 state and local home builder associations throughout the United States. Since its 

inception in 1942, NAHB's primary goal has been to ensure that housing is a national priority 

and that all people in the U.S. have access to safe, decent and affordable housing, whether they 

choose to buy or rent a home. 

NAHB recognizes that with a global economy, many products and materials used in the 

residential construction industry may frequently be sourced from outside the United States. 

Therefore, NAHB supports a robust trade policy agenda that ensures products and materials are 

readily available. Additionally, NAHB supports government policies that encourage the removal 

of barriers to free trade in lumber and other building materials. 

Building safe, decent and affordable housing depends in large part upon a stable and affordable 

supply of quality softwood lumber, steel, and aluminum. Unfortunately, even modest price 

increases in the cost of these materials can deny many American families an opportunity to 

achieve homeownership. There are currently several building materials that are of concern to 

NAHB and its members as the spring building season ramps up. 

Lumber accounts for a larger share of the cost of a home than any other building material. It is 

used for wood-frame residential construction and is common for interior and finishing 

purposes, such as windows and doors. NAHB research shows that, at current prices, lumber 

accounts for approximately $18,000 of the cost of constructing a typical single-family home. As 

such, lumber price increases have severe effects on our nation's housing market. 

The price of lumber has soared as the housing recovery has gained momentum. For example, 

softwood lumber pri ces are up over 43%1 since January of 2017 and reached an all-time high of 

$512 per thousand board feet the last week of February 2018; most of this increase is directly 

attributable to the ongoing trade dispute between t he U.S. and Canada over softwood lumber. 

In another move that will have far ranging consequences in the housing sector, particularly for 

multifamily building, t he administration announced this month tariffs on steel and aluminum 

imports. These materials are used extensively in building for everything from roofing and 

flooring to structural framing. The artificially higher prices paid for these materials will 

necessarily drive up the cost of construction further. 

1 Random lengths, NAHB calculations 
172 


33807A.104

The rising cost of t hese critical inputs drives up the cost of construction, which in turn, drives up 

t he price of a new home. The impact is of particular concern in the affordable housing sector 

where relatively small price increases can have an immediate impact on low- to moderateincome home buyers who are more susceptible to being priced out of the market. Even a small 

change in home prices or interest rates can determine whether they can buy a home. 

A 2016 analysis by NAHB illustrates the number of households priced out of t he market for a 

median priced new home due to a $1,000 price increase. Nationally, a $1,000 increase in the 

median new home price will leave 152,903 households priced out of the market .

2 

Resolving t he long-running dispute with Canada over the trade in softwood lumber and 

addressing t he newly announced steel and aluminum tariffs must be a top priority of Congress 

and the Administration. 

Making homes more affordable, however, is not a purely charitable endeavor. Reducing the 

cost of lumber and, by extension, the price of the average single-family home adds fuel to t he 

economy. 

In 2017, reducing the price of the average new single-family home by $1,000 would have 

generated $719.9 million in additional single-family construction, $363.4 million in wages and 

salaries, 6,313 full-time-equivalent (FTE) jobs, 3 and an additional $243.9 million in taxes and 

fees for federal, state and local government. If the $1,000 reduction (indexed to inflation) 

remained in place for five years, the effect would have been even more pronounced: $4.457 

billion in single-family construction, $2.250 billion in wages and salaries, 39,082 FTE jobs, and 

$1.510 billion in taxes and fees for various levels of government.• 

Conclusion 

There is mounting evidence that we are entering a housing affordability crisis in this country. 

Protectionist trade policies that artificially increase t he cost of key building materials 

exacerbate the problem while doing little to expand economic opportunity. Congress must 

' Natalia Siniavskaia, Metro Area Median New Home Prices and Households Priced out of the Market (NAH8 

Housing Economics 2016) (available at www.nahb.org). 

3 Full-time equivalents represent enough work to keep one worker employed for a full year based on average 

hours worked per week in the relevant industry 

• Measured in 2017 dollars 
173 

f 


33807A.105

work to ensure our trade policy agenda is both fair to domestic industry and considers the 

potential impacts on American consumers. 

Thank you for allowing the National Association of Home Builders this opportunity to share our 

views on America's Trade Policy Agenda. We look forward to working with the committee to 

ensure U.S. trade policies are beneficial to consumers and businesses alike. 
174 


33807A.106

March 20, 2018 

Senator Orrin Hatch 

Chairman 

Committee on Finance 

United States Senate 

219 Dirksen Senate Office Building 

Washington, DC 20510 

Senator Ron Wyden 

Ranking Member 

Committee on Finance 

United States Senate 

221 Dirksen Senate Office Building 

Washington, DC 20510 

Dear Chairmen and Ranking Members: 

The Honorable Kevin Brady 

Chairman 

Committee on Ways of Means 

United States House of Representatives 

1102 Longworth House Office Building 

Washington, DC 20515 

The Honorable Richard Neal 

Ranking Member 

Committee on Ways of Means 

United States House of Representatives 

341 Cannon House Office Building 

Washington, DC 20515 

As your committees prepare to conduct hearings this week on the trade policy agenda, we would 

like to share with you our organization's views about the Administration's Section 301 

investigation into China's acts, policies and practices related to technology transfer, intellectual 

property and innovation. 

The National Foreign Trade Council (NFTC) member companies have significant concerns about 

China's growing use of trade and investment policies, including those designed to promote 

"indigenous technologies.· These practices deny national treatment ar.d create discriminatory 

burdens that are unreasonable for American companies, innovators and workers. 

While NFTC supports efforts to investigate and address these discriminatory practices, the NFTC 

and its member companies are interested in a strong, multi-pronged effort aimed at improving the 

ability of U.S. companies to compete in China rather than making things worse. Our observations 

are directed at this fundamental goal. 

The overall focus of the Section 301 investigation should be to bring China to the negotiating 

table for a meaningful resolution of specific, sector-by-sector issues with the ultimate goal of 

removing the offending practices and policies. Premature, unilateral sanctions alone are unlikely 

to achieve this objective. It is critical that the United States work with our allies and major trading 

partners to identify and outline the specific actions we seek from China, and to devise a strategy 

to increase pressure in order to guarantee all of our exporters and investors fair treatment in 

these areas. Multilateral pressure and a consensus with our allies will be key to maximizing 

leverage over China's practices. 

The NFTC is particularly concerned with reports that the Administration is considering immediate 

imposition of tariffs on up to 100 categories of products including consumer electronics, toys, IT 

products, furniture and sporting goods, as a potential remedy prior to any 
175 

f 


33807A.107

coordinated negotiating effort. This runs contrary to the long history of successful use of Section 

301 as a carefully managed device to obtain foreign compliance rather than a pretext for import 

protection. 

Unilateral imposition of tariffs prior to any meaningful negotiations with China will raise charges 

that the U.S. has ignored its WTO commitments and will turn the focus from China's unjust 

behavior to the legitimacy of our own action. This will, in tum, alienate many of the trading 

partners we are relying upon to support our cause and may embolden China to resist our efforts. 

It will provoke retaliation by China against major U.S. exports, causing significant harm to key 

U.S. industries and agricultural interests and increasing the likelihood that competitors from 

Europe, Japan and elsewhere supplant American businesses, innovators and farmers as 

suppliers in China's market. 

Higher tariffs on a broad range of consumer goods will increase the shopping bill for all 

Americans, while tariffs on components will harm U.S. productivity in all sectors and U.S. 

manufacturing exports by making it more expensive and challenging to procure key inputs. At a 

time when the U.S. economy is enjoying a resurgence thanks to tax and regulatory reform, these 

tariffs run the risk of stifling our own growth while making our exporters less competitive in the 

global economy. In combination with the tariff increases already announced on steel and 

aluminum, these additional taxes will be even more harmful to domestic manufacturers. 

Finally, it is reported that the Administration is also considering measures to impose "reciprocal 

investment restrictions" on Chinese investors in the United States as part of its response under 

Section 301 . Efforts to develop new investment restrictions on China should be the subject of 

extensive consultations with U.S. companies. as it is vital to consider existing U.S. investment 

interests that could be adversely affected if the matter is not handled appropriately. Furthermore, 

as with other possible Section 301 remedies, proposed investment restrictions should not be 

imposed immediately, but should be used as leverage to obtain the far more desirable goal of 

fundamental changes in China's investment and IP regimes. 

We urge your committees to impress upon USTR the importance of a strategy to address 

Chinese policies and practices in a manner that will achieve maximum benefits for U.S. trade and 

investment interests and avoid unintended effects that may cause greater harm than good to U.S. 

economic interests. 

Sincerely, 

1flff 

Rufus Yerxa 

President 
176 


33807A.108

Statement of the 

National lumber and Building Material Dealers Association 

on 

U.S. Trade Policy Agenda 

April 4, 2018 

2025 M Street, NW, Suite 800 • Washington, D.C. 20036 • 202-367-1169 • www.dealer.org 
177 


33807A.109

Statement of U.S. Trade Policy Agenda 

The National lumber and Building Material Dealers Association (NLBMDA) represents over 

6,000 building material retail locations nationwide operating lumberyards and component 

plants serving homebuilders, subcontractors, general contractors, and consumers in the new 

construction, repair, and remodeling of residential and light commercial structures. 

NLBMDA remains concerned about the softwood lumber dispute between the U.S. and Canada 

and its effects on residential construction. Failing to resolve the dispute has increased the price 

of softwood lumber and consequently the cost of new home construction. In addition, NLBMDA 

is concerned about the new tariffs on imported steel as it increases construction costs, 

decreases housing affordability, and can cause an unnecessary trade war that harms 

consumers. 

U.S.- Canada Softwood lumber Dispute 

American consumers and homebuilders rely on a stable, predictable supply of softwood lumber 

for residential remodeling and construction. In the U.S., softwood lumber is essential for many 

products and accounts for 10.3 percent of the overall cost of housing. 

Both countries have benefited from previous Softwood Lumber Agreements (SLA). The U.S. 

relies on Canada for a stable supply of softwood lumber, with roughly one-third of the lumber 

used in the U.S. in 2017 being imported, and more than 95 percent of those imports coming 

from Canada. Additionally, there are numerous parts of the U.S. that require softwood lumber 

known as Spruce, Pine, Fir (SPF). of which there is a limited supply produced in the U.S. Even if 

domestic producers were to increase their production beyond capacity, there is not enough 

forest of SPF lumber t o meet this need; therefore, the U.S. still needs imports from Canada. 

Under the last SLA (Lumber IV), which 

lasted from 2006 to 2015, the Canadian 

share of the U.S. softwood lumber market 

averaged 28 percent annually. U.S. market 

share during that period averaged 71 

percent annually. There is relatively little 

softwood lumber imported into the U.S. 

from countries other than Canada. 

Included is a graph from the Congressional 

Research Service visually illustrating 

domestic lumber consumption by source. 

.-onbo¥CIIH1 

!0 

,. 

60 

50 

.. 

30 

lO 

10 
178 


33807A.110

According to the Western Wood Products Association, in 2017, U.S. softwood lumber 

production increased by 4.2 percent, to 33.8 billion board feet (BBF} compared t o 32.5 BBF in 

2016. Softwood lumber production in Canada remained flat in 2017 at 28.3 BBF. Forisk 

Consulting estimates that U.S. softwood lumber consumption was 48.1 BBR in 2017. There is 

simply not enough softwood lumber produced annually in the U.S. to meet demand in the 

domestic market, and imports- primarily from Canada- are needed. 

North American Lumber Production 

3,400 

3,200 

3,000 

g- 2,800 

2,800 

~ 2,400 

= 2,200 

c 2,000 0 1,800 

~ 1,600 

;l! 1,400 

1.200 

1,000 

+ ~ - -

-t" 

~ ..... 

·-- -

..,.;;;:. 

-

.:::!--....... 

[-u.s. -Conad-:-j 

Source: Souttutm Forest Products Association, U.S. Census Sureeu. Cooncil of Focest Industries-cAN, WWPA 

Moreover, despite the duties places on Canadian softwood lumber, sawmill utilization has 

increased only marginally. For 2017, U.S. sawmill capacity utilization rates improved by 1 

percent to 87 percent. 

On November 25, 2016, the Committee Overseeing Action for Lumber International Trade 

Investigations or Negotiations (COALITON}, an ad hoc association of American softwood lumber 

producers, petitioned the U.S. Department of Commerce and the U.S. International Trade 

Commission {lTC} to restore what it considers to be the conditions of fair trade in softwood 

lumber between the U.S. and Canada. Overall, the COALITION represents nearly 70 percent of 

softwood lumber produced in the U.S. In its petition, the COALITION requested the imposition 

of duties to offset the harm caused by Canadian softwood lumber production subsidies. 

On November 2, 2017, the Department of Commerce finalized AD and CVD on Canadian 

softwood lumber. The lTC on December 7, 2017, upheld the Commerce Department's decision 

concerning duties. 

Most Canadian firms are paying a combined AD/CVD rate of 20.83 percent. For the five 

companies (Canfor, J.D. Irving, Resolute, Tolko, and West Fraser} directly involved in the 

investigation, the rates vary between 9 percent and 23 percent. Duties do not apply to 

softwood lumber harvested in the Atlantic Provinces of Newfoundland and labrador, Nova 

Scotia, and Prince Edwards Island. 

2 
179 


33807A.111

Below is a table detailing the current tariffs on Canadian softwood lumber producers. 

~ Counterv8111!11 AntldumDirur Overall Dulles 

Dudas ICVDl Dutles(Y) 

Can for 13.24% 8.89% 22.13% 

J.D. Irving 3.34% 6.58% 9.92% 

Resolute 14.70% 3.20% 17.90% 

Tolko 14.85% 7.22% 22.07% 

West Fraser 18.19% 5.57% 23.76% 

All Others 14.25% 6.58% 20.83% 

The Canadian government has responded on several fronts in the ongoing dispute. On 

November 14, 2017, it requested the establishment of a NAFTA dispute resolution panel to 

review the final CVD rates. Subsequently, on December 5, Canada also requested the 

establishment of a NAFTA dispute resolution panel to review to final AD rates. Finally, on 

November 28, 2017, Canada took the first step toward bringing a WTO case by requesting 

consultations with the U.S. 

A North American Free Trade Agreement (NAFTA) dispute resolution panel-allowed under 

NAFTA Chapter 19- is brought to assess whether a country's investigating authorities are 

following its own laws. Under NAFTA Chapter 19, a party can seek a binational review panel to 

assess whether a party's investigating authority's decision is consistent with its trade remedy 

laws. The U.S. has proposed eliminating Chapter 19 as part of NAFTA renegotiations, a position 

Canada opposes. 

A challenge at the WTO is brought to determine whether a trade action is compatible with the 

country's agreements, in this case the Antidumping Agreement and the Agreement on 

Subsidies and Countervailing measures. Canada maintains that the Commerce Department 

impermissibly used certain methodologies in calculating the dumping duties, and also used the 

practice of zeroing, which the WTO has ruled impermissible. It also requested consultation on 

CVD duties, which it claims the U.S. improperly described its timber programs as subsidies. 

3 
180 


33807A.112

Domestic softwood lumber prices have increased 23.9 percent since the investigation started in 

November 2017 according to the Producer Price Index published by the Bureau of Labor 

Statistics. 

FRED.,p-,.._,,.~ .... .,~ ... , ....... .,...ftt.u ... ~t.w~ ... 

"' 

"' 

210 

.. 

'" 

The Random lengths Framing Lumber Composite price has increased 21.6 percent in the past 

year, and the Random Lengths Structural Panel composite price has increased 33.5 percent in 

the past year. These price increases are ultimately passed on to consumers. 

Random lengths Framing 

l umber Composite Price 

$550 

$SZS 

$500 

$075 

$050 

Random lengths Structural 

Panel Composite Price 

StrU<'tural P~MI 

ComposUt Price '-.,.. 

~ 

2011 3011 4017 1018 

Officials from the U.S. and Canada continue to publicly express support for a new SLA. 

However, Canada has transitioned to a path of litigation. Experts believe a protracted legal 

battle is likely and will ultimately be resolved utilizing third-party arbitration. The last time a 

trade case was brought by the U.S. lumber industry in the dispute, it took several years to 

resolve and $5 billion in duties were placed on Canadian imports until a new agreement was 

reached. 

4 
181 

f 


33807A.113

The ongoing to dispute is harming residential construction and ultimately consumers. The 

Department of Commerce and Office of the United States Trade Representative should renew 

their efforts in reaching a new agreement that helps meet domestic demand for softwood 

lumber, does not put U.S. lumber producers at a competitive disadvantage, unnecessarily 

restrict the availability of products, or increase the cost of housing to the detriment of 

prospective home buyers and U.S. consumers. 

U.S. Steel Tariffs 

The U.S. Department of Commerce has imposed a 25 percent tariff on steel imported to the 

United States effective March 23. Steel imports from Argentina, Australia, Brazil, Canada, the 

European Union, Mexico, and South Korea are exempt from the tariffs. Approximately one-third 

of steel imports are still subject to the tariffs. 

NLBMDA opposes the tariffs recently enacted by the Trump Administration. The construction 

industry is already besieged with high costs from land, labor, and increased prices for building 

materials, and the steel tariffs are the latest headwind. Residential construction is a driving 

force for economic growth. Moreover, the tariffs could lead to a broader trade war that would 

dampen economic growth and increase prices for American consumers. 

Conclusion 

The Trump Administration and Congress have improved the tax code and streamlined 

regulations to make American businesses more competitive. However, duties on softwood 

lumber imported from Canada and tariffs on imported steel are undermining some of that great 

work. 

NLBMDA supports reaching a new agreement in the longstanding U.S.-Canadian softwood 

lumber dispute that brings stability and predictability to pricing and availability without the 

imposition of duties. Additionally, the association strongly urges Commerce Secretary Wi lbur 

Ross and Ambassador Robert Lighthizer to consult with all st akeholders, including retailers and 

consumers of lumber products, in future discussions regarding any terms of trade in softwood 

lumber between the U.S. and Canada. 

In addition, the Trump Administration should remove tariffs on imported steel. The action hurts 

U.S. consumers and could spark a broader trade war with far-reaching negative effects for the 

nation's economy. 

Submitted by: 

Ben Gann 

NLBMDA 

Vice President of legislative and Political Affairs 

5 
182 


33807A.114

W.-itten Testimony of 

Scott Smith 

President 

Pt·ecious Metals Association of North America 

Before the 

House Committee on Ways & Means 

Heuing on "U.S. Trade Policy Agenda" 

Wednesday, March 21, 2018 

Chairman Brady and Members of the Committee, 

My name is Scott Smith and lam the CEO of Pyromet, which is a privately owned precious 

metals manufacturer and refiner of silver, gold, and platinum group metals. Since 1969, Pyromet 

bas been a reputable name in precious metals and precious metals management. I a lso serve as 

President of the Precious Metals Association of North America (PMANA) and am submitting 

this written testimony on behalf of our members. It is our traders, distributors, and authorized 

purchasers of the United States Mint that are particularly concerned with counterfeit bullion 

produced in the People's Republic of China, and subsequently sold one-commerce platforms. 

Background 

According to the Organization for Economic Cooperation and Development (OECD), the trade 

of fake goods represents 2.5 percent of global trade, or $46 1 billion every year. Among the many 

counterfeits traded globally each year are fake precious metals bullion coins and bars- most of 

which are produced in China and easily distributed through e-commerce platforms. Additionally, 

estin1ates show over 85 percent of U.S. counterfeit goods originate in China. 

Precious metals bullion has been introduced by numerous national govcrlllllents and private 

mints around the world for nearly fifty years. The U.S. began production of its own bullion in 

1986 with the introduction of the American Eagle Gold coin. Since then, the American Eagle 

family has since expanded to include silver, platinum, and palladium bullion coins. 

U.S. Mint bullion coins are not sold directly to the public. Instead, authorized purchasers that 

satisfy stringent financial and professional criteria buy bullion coins and sell them at a premium 

to investors. Precious metals bullion can also take the form of bars - or ingots- and are usually 

produced by private mints from around the world and are sold by domestic traders and 

distributors. This network of bullion distributors, many of whom are members of the PMANA, 
183 


33807A.115

includes some of the most trusted names in the precious metals industry. When investors are 

deceived by counterfeit bullion, distributors' brands, and jobs all along the precious metals 

supply chain, are significantly affected. 

The problem has grown in recent years with the explosion of e-commerce trading and its ability 

to connect conswners to the worldwide market. At the same time, e-commerce has also given 

Chinese manufacturers, with the backing of their government, greater access for selling fake 

goods. 

Chinese law requires truth in advertising, which also means that counterfeit bullion products be 

sold as such. However, the law does not require that counterfeits be physically marked 

accordingly. With this legal shortcoming, e-commerce sites such as Alibaba are flooded with 

posts that advertise counterfeit bullion as " replica", "copy", and "fake." While this is completely 

legal in the People's Republic of China, it gives government-sanctioned manufacturers the 

ability to manipulate vulnerable American consumers and those looking to defraud consumers in 

the future. In other words, if they are not deceiving American consumers directly, they are 

providing domestic criminals with the necessmy tools to do so in tbe future. On their web 

profiles, Chinese manufacturers often tout the ability of their counterfeit bullion to pass as the 

real thing. Answers to "frequently asked questions" make potential buyers aware that counterfeit 

coins are non-magnetic, weigh almost identical to authentic coins, and pass most authentication 

tests. Clearly, their intent is to deceive consumers in one way or another. 

Whether in coin or bar form, it is relatively easy to pass off counterfeit bullion as authentic. 

Manufacturers will often coat, or "plate", tungsten in a thin layer of gold. Since tungsten and 

gold have nearly the same weight and density, plated coins can pass a novice investor's basic 

tests. Even the most experienced precious metals traders require spending as much as $ 100,000 

on itmovative teclmology to detect fake bullion. Unsuspecting c.onsumers do not have access to 

such technology which make them easy targets for criminals who can easily leverage a 400% 

return on their investment. Recently, the PMANA met with several offices on the Ways & 

Means committee, and we showed staff two bullion coins - one fake, one genuine. Out of all the 

staff we met with, no one was able to identify the genuine coin. Our point is that these fakes are 

exceptional, and we need to do more to protect consumers and jobs all along the precious metals 

supply chain. While c1iminals profit, our traders and distributors arc affected with damaged 

brands, falling revenues, and less capital to purchase additional bullion for investors. 

Furthermore, the decrease in demand for bullion causes refiners and manufacturers along the 

supply chain to suffer. 

The PMANA has been working with the United States Trade Representative to address concerns 

with Chinese-produced counterfeit bullion coins. In Febmary of this year, the PMANA 

submitted public comments for the United States Trade Representative's (USTR) Special 

Review in which we recommended that the USTR continue to include the People's Republic of 

China on its Pri01ity Watch List for 2018. The rationale for our recommendation is the lack of 

physical marking requirements for fake bullion, whether it be coins or bars, produced in China. 

TI1e implementation and enforcement of such requirements would go a long way in preventing 

further consumer deception for items imported into the United States. 
184 

f 


33807A.116

Policv Proposal 

To address the issue of counterfeit bullion, the PMANA strongly suggests a two-pronged 

approach with Congress and the USTR. First, to lessen the already significant burden placed on 

law enforcement, the PMANA urges Congress to amend 15 U.S. Code§ 2 101 to expand marking 

requirements to include bullion investment coins and bars. Doing so would require any imitation 

or replica item manufactured or imported into the United States to be plainly and permanently 

marked "Copy" or "Replica". This would provide transparency for consumers and weaken tbe 

ability for domestic and international criminals to take advantage of them. 

Second, the PMANA urges the USTR to include language in future trade agreements that holds 

all parties to the same marking requirements as U.S. citizens under 15 U.S. Code§ 2101, as 

amended with language relating to investment bullion. This trade provision would protect jobs 

along the precious metals supply chain, provide transparency for investors, and generate tax 

revenue for both the U.S. and our trading partners. 

Thank you for giving the PMANA the opportunity to submit these comments to the Committee. 

If you or your staff have any questions, please do not hesitate to reach out to us. We are more 

than happy to discuss our concerns with you or your stat! and look forward to working together 

to protect consumers and businesses from counterfeit products. 

tltltl 
185 


33807A.117

Small Business & 

~~Entrepreneu~hip Council ~ March 21,2018 

The Honorable Kevin Brady 

Chairman 

Conunittee on Ways and Means 

U.S. House of Representatives 

Washington, D.C. 20515 

The Honorable Richard Neal 

Ranking Member 

Committee on Ways and Means 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Chainnan Brady and Ranking Member Neal, 

On behalf of our nationwide membership of entrepreneurs and small businesses, the Small 

Business & Entrepreneurship Council (SBE Council) is submitting this letter for the record on 

the Hearing on U.S. Trade Policy Agenda, hosted by the Ways and Means Committee on March 

21, 2018. Thank you for hosting this important hearing as certainty and U.S. leadership on trade 

is vital to ensuring strong U.S. economic growth, small business growth, quality j ob growth and 

the hea lth ofU.S. entrepreneurship. 

Since U.S. small businesses are very involved in global trade and integrated into the global 

marketplace, our entrepreneurial sector has a strong stake in trade policy - namely, opening 

markets that allow our small businesses to grow and expand. Small businesses and their 

employees are deeply involved in foreign trade in tenns of both exports and imports. Looking at 

employer ftm1s directly involved in trade, according to the U.S. Census Bureau, 76.2 percent of 

U.S. expo•·ters have fewer than 20 employees, a nd 86.7 percent fewer than SO workers; 

while 75.2 percent of importe1·s have fewe1· than 20 wo•·ke•·s, and 8S.S percent fewe1· than 

SO workei'S. 

Unfortunately, trade has been stuck in a no-growth gear for too long. According to the latest 

tJ·ade data from the Bureau of Economic Analysis, January 2018's numbers on both imports and 

exports were poor. On a seasonally-adjusted basis, exports in January actually declined by 1.3 

percent versus December. In effect, from November to January, exports were flat. Meanwhile, 

imports experienced a slight decline in January, and that was after four months of growth. But to 

put this in perspective, the January 2018level of$200.9 billion in U.S. exports was, in effect, the 

same level registered in October 2014 (S200.1 billion). That's no effective gro\\1h for over three 
186 


33807A.118

years. As a side note, these numbers do not factor in inflation, so in real tenns, there has been a 

decline. 

Weak growth, or no growth, on exports means U.S. businesses are losing ground overseas. Tlus 

hurts the economy and small business growth, as 95 percent of the world's consumers are outside 

U.S. borders. Our small businesses desperately want to tap into the explosive growth of wealth 

and middle-class disposable income overseas. These global consumers want U.S. products and 

services, and our small businesses want to compete for their business. Given innovative 

technologies and the growth and convenience of the platform-based economy, tapping into these 

markets should be easy. However, rugh tariffs and other barriers often make the pursuit of doing 

business overseas complex and not cost-effective. 

That is why SBE Council would like to see the U.S. return to its global leadership role on trade 

and aggressively pursue new agreements. 

In tem1s of going global, entrepreneurs are also concerned about the potential theft of their 

intellectual property (IP). SBE Council was pleased that the Trans Pacific Partnership (TPP) 

zeroed in on the issue of protecting IP along with its other chapters to ease small business access 

into every market involved in the agreement. Unfommately, the U.S. pulled out ofTPP, wruch 

we believe is a setback for the U.S. and our small businesses. 

On NAFTA re-negotiations, we are also pleased to see a focus on streugthening IP. SBE 

Council feels strongly that NAFTA modernization should be about expanding trading 

opportunities, strengthening ll' and addressing other issues that make the agreement work better 

for all parties when it comes to increasing cross-border commerce. It would be a very bad move 

for the U.S. to pull out ofNAFTA. 

As the negotiations proceed to modernize NAFTA, it is critical to keep in mind that since the 

agreement went into effect in 1994, it bas been very positive for the U.S., Canada and Mexico. 

NAFTA has also been positive for U.S. small businesses. 

In a t·ecent analysis on NAFTA, SBE Council chief economist Raymond Keating crunched the 

numbers, using U.S. Census Bureau data, on its beneficial impact for the U.S. economy and our 

small businesses. He noted: 

"Since free trade accords went into effect with Can{J(Ia, Mexico and the U.S., export growth 

from the U.S. to both nations has been strong. The U.S. entered in a free trade ogreement with 

Canada first, taking effect in 1989. From 1988 to 2017, U.S. goods e.xportsto our neighbor to 

the north increased by 294.3 percent. (Over the same period, inflation- as measured by the 

GDP price index- increased by 82.8 percent.) 

But export growth has been particularly strong with Mexico since NAF'IA took effect in 1994. 

U.S. goods exports to Mexico grew by 484.4 percent from 1993 to 2017. That wos more thon 

double the growth in U.S. exports to the world, which registered a 239.5 percent increase over 

the some period. (Inflation increosed by on(v 56.9 percent over this period.) 

2 
187 


33807A.119

Import growth was even more robust. Goods imports from Canada grew by 268.6 percent from 

1988to 2017, am! goods imports from Mexico expanded by686. 7 percentfroml993 to 2017." 

As noted time and again by Keating, imports are not economic negatives: 

"To the contrary, growing imports reflect an expanding domestic economy, with imports 

inclutling consumption protlucts as well tts capital goods usetl by U.S. businesses. For good 

measure, many U.S. firms are involved in the importation of goods from other nations. In the 

end, U.S. consumers and small businesses benefit from the expanded choices and lower costs 

that come with lower barriers to imports. " 

In 20 15, there were 89, I 06 firms that were exporters to Canada, as well as 59,428 firms 

exporting to Mexico. These firms, according to the U.S. Census Bureau, are overwhelmingly 

small and mid-sized businesses. For example, 75.4 pe•·cent of firms expo•·ting to Canada and 

72.7 percent offi1·ms exporting to Mexico have fewe1· than SO employees. 

The growth in the number of U.S. firms exporting to both Canada and Mexico has been 

dramatic. From 1992 to 2015, there was an81.4 percent increase in the number of U.S. exporters 

to Canada and a dramatic 365.5 percent increase in those exporting to Mexico. NAFTA has been 

a growth engine for small business. 

As tor imports, in 2015, there were 16,799 U.S. firms that were importers related to Canada, ru1d 

15,290 U.S. firms were importers related to Mexico. Again, the vast majority were small and 

mid-sized businesses. For example, 54.8 percent of Canada importers and 67.5 percent of 

Mexico importers have fewer than 50 employees. 

The bottom line is that small businesses are winning with NAFT A and in the global marketplace. 

With expanded opportunities made possible through more trade agreements, U.S. entrepreneurs 

will continue to excel and dominate, which means they will contribute even more to America's 

innovative and competitive capacity. 

That is why SBE Council is urging the Administration to positively engage with a ll our trading 

partners. Fixing outdated agreements or flawed trading practices can be achieved through 

strategies that do not hurt the U.S. economy or our small businesses and their employees (by 

inlposing tariffs, for example.) 

An agenda that takes the U.S. down a protectionist path on trade is not a productive one or a 

strategy for economic growth. Reclaiming the mantle of leadership on free trade will expand 

opportunity for U.S. entrepreneurs, businesses, workers and consumers, as well as for those in 

nations with which we have ti·ee trade agreements. 

Thank you for your leadership and for hosting this hearing to explore the direction of U.S. trade 

policy. Please let SBE Council know how we can help the Committee better understand the 

sma ll business stake in this important issue. 

3 
188 

f 


33807A.120

Karen Kerrigan 

President & CEO 

301 Maple Avenue West- Suite 100- Vienna, VA 22180 

www.sbecouncil.org 

Protecting Small Business, Promoting Entrepreneu1·ship 

4 
189 


33807A.121

STATEMENT FOR THE RECORD 

March 19, 2018 

U.S. House Committee on Ways and Means 

Hearing on U.S. Trade Policy Agenda 

On behalf the Association for Accessible Medicines (AAM), the leading trade association for 

manufacturers and distributors of generic prescription drugs and biosimilar therapies, 

manufacturers of bulk active pharmaceutical chemicals, and suppliers of other goods and 

services to the generic drug and biosimilar industry, thank you for the opportunity to submit this 

statement for the record on the U.S. trade policy agenda. 

As the NAFTA negotiations continue, AAM and its Biosimilars Council urge Congress and the 

Administration to keep in mind the carefully balanced intellectual property rights objectives set 

out in previously enacted legislation providing for Trade Promotion Authority (TPA), which call 

for the U.S. Trade Representative (USTR) to (1) ensure implementation of the Trade-Related 

Aspects of Intellectual Property Rights (TRIPS) Agreement, including the 2001 World Trade 

Organization (WTO) Doha Declaration on TRIPS and Public Health; (2) secure market access 

opportunities for exporters of all pharmaceuticals, including biosimilars; and (3) promote both 

innovation and patient access to medicines via competition. 

AAM's core mission is to improve the lives of patients by advancing timely access to affordable 

FDA-approved generic and biosimilar medications. The story of the U.S. generic industry is 

one of success for American patients based on a healthy domestic market characterized by 

strong competitive bidding. Since 1984, when the Drug Price Competition and Patent Term 

Restoration Act (Hatch-Waxman) was adopted, generic pharmaceuticals have grown from just 

under 20 percent of prescriptions filled to 89 percent of the prescriptions dispensed in the 

United States today. At the same time, generics represent just 26% of total drug expenditure 

and saved the U.S. health system $253 billion in 2016. For the past 30 years, the generic 

industry has played a vital role in ensuring patients' access to more affordable drugs and 

lowering health care costs. 

Generic drug companies have also been a steady source of new manufacturing jobs in the 

U.S. In 2016, the generic drug industry manufactured over 61 billion doses of medicines in the 

U.S. and employed over 36,000 U.S. workers and contract manufacturers. However, the 

generic and biosimilar industry now faces several, severe headwinds that jeopardize the 

savings and uninterrupted access historically provided to patients. 

Access to new markets is critical to the development of biosimilars and policies that delay their 

introduction in a market will impact consumers both abroad and in the United States. Increased 

patient access to biosimilars means manufacturers are incentivized to develop these costeffective medicines and provide competition in the market. Should the USTR negotiate a 

mandatory years-long period of exclusivity for biologics within NAFT A - an internationally 

binding treaty that will be incredibly difficult to change- patient access to more affordable, 

601 H£VI JERSEY J.Y(UW ·SlifE 8!il WASHINGTON DC •20001 • PHON£ ~-2t9-1100 · FAX 20'H49-7105 
190 

Æ 


33807A.122

FDA-approved biosimilars will be curtailed. NAFTA should be an opportunity to increase 

competition and should not be used to extend government-provided monopolies for 

blockbuster brand drugs. Rather than extend exclusivity periods for brand biologics, the U.S. 

government should advance policies that promote patient access to generic and biosimilar 

medicines in Canada and Mexico. 

Moreover, a NAFT A outcome that increases protection for high-cost brand drugs does not 

increase access to affordable medicines is inconsistent with the TPA mandate. Additional 

brand name pharmaceutical exclusivity is unnecessary in NAFTA and will hurt patients in the 

United States. 

Further, Inter Partes Review (IPR) frameworks must address and equally support public health 

needs and industry interests in fostering innovation, while ensuring patients' access to more 

affordable drugs. AAM believes that the standard of balancing innovation and access to 

medicines set forth in the TRIPS Agreement, the bipartisan May 10th Agreement of 2007, and 

the 'Bipartisan Congressional Trade Priorities and Accountability Act of 2015' reflect the 

appropriate balance. 

USTR should pursue an intellectual property framework that provides governments with the 

flexibility to adapt national policies that maintain the balance between fostering innovation and 

generating robust biosimilars competition both in the U.S. and with its trading partners. 

Allowing each NAFT A partner to adopt its own policies on exclusivity for biologics - and to 

change them as patient needs arise - will best achieve this balance in a sector that is still 

young and evolving. 

Access to safe, effective and affordable generic and biosimilar medicines improves people's 

lives and provides significant savings. The biosimilars industry in the U.S has been projected 

to create as much as $250 billion in additional savings in the U.S. over the next decade.

1 

However, these savings are only possible if a robust biosimilars market exists globally. 

Contact: Kristin Murphy- 202.249.7102 

' The $250 Billion Potential of Biosimilars. Express Scripts. April 2013. http:Jnab.expressscripts.com/lablinsightslindustry·updates/the-S250·billion·potential-<>f·biosimilars 

l.OllfEW JERSEY ,\\'(NW • SI..ITE 850 W4SH!NOTON, DC • ?0001 • PhONE 20l·2:4~71M FAX201·2<~~110S