U.S. GOVERNMENT PUBLISHING OFFICE

36–528—PDF WASHINGTON : 2019

S. HRG. 115–618 

PRESIDENT’S 2018 TRADE POLICY AGENDA 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

MARCH 22, 2018 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

ORRIN G. HATCH, Utah, Chairman 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BILL CASSIDY, Louisiana 

RON WYDEN, Oregon 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, JR., Pennsylvania 

MARK R. WARNER, Virginia 

CLAIRE MCCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

A. JAY KHOSLA, Staff Director 

JOSHUA SHEINKMAN, Democratic Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, Committee on 

Finance ................................................................................................................. 1 

Wyden, Hon. Ron, a U.S. Senator from Oregon .................................................... 3 

ADMINISTRATION WITNESS 

Lighthizer, Hon. Robert E., United States Trade Representative, Executive 

Office of the President, Washington, DC ........................................................... 4 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 47 

Lighthizer, Hon. Robert E.: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 48 

Responses to questions from committee members ......................................... 49 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 84 

COMMUNICATIONS

American Farm Bureau Federation ....................................................................... 85 

Center for Fiscal Equity .......................................................................................... 86 

Learning Resources, Inc. ......................................................................................... 88 

(III) 

(1) 

PRESIDENT’S 2018 TRADE POLICY AGENDA 

THURSDAY, MARCH 22, 2018 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Orrin G. 

Hatch (chairman of the committee) presiding. 

Present: Senators Grassley, Crapo, Roberts, Cornyn, Thune, 

Isakson, Portman, Toomey, Heller, Scott, Cassidy, Wyden, Stabenow, Cantwell, Nelson, Menendez, Carper, Cardin, Brown, Bennet, 

Casey, Warner, McCaskill, and Whitehouse. 

Also present: Republican staff: Jay Khosla, Staff Director; Brian 

Bombassaro, International Trade Counsel; Rory Heslington, Professional Staff Member; Douglas Peterson, International Trade Counsel; and Shane Warren, Chief International Trade Counsel. Democratic staff: Elissa Alben, Senior Trade and Competitiveness Counsel; and Greta Peisch, International Trade Counsel. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM UTAH, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Good morning and welcome to today’s hearing, during which we 

will discuss our Nation’s trade policy agenda. I want to thank Ambassador Lighthizer for being here today and taking his very important time to be with us. He was last before this committee in 

June of last year, and the trade agenda looks quite different now 

than it did then. 

Let us start with the North American Free Trade Agreement. 

Negotiations with Canada and Mexico began on August 16, 2017. 

Since then, we have seen good progress toward modernizing the 

agreement. In particular, I want to congratulate you on closing a 

strong chapter on SPS measures that would benefit American 

farmers and ranchers. But many crucial issues must be addressed 

before the negotiations can be brought to a successful conclusion. 

Your first priority, in my opinion, should be strengthening protections for America’s creators and innovators and, in particular, 

strengthening copyright protection and enforcement provisions and 

creating disciplines to ensure that regulation does not undermine 

the market value of patented products. It is essential that any 

agreement reached be fully enforceable through state-to-state and 

investor-state dispute settlement, and that market access gains, including in government procurement, are not weakened. 

2 

It is also important that you keep in mind that an updated 

NAFTA must be passed by Congress. That means that you must 

adhere to the negotiating objectives set out in the Trade Promotion 

Authority law passed in 2015 and that you deliver an agreement 

that will be supported by members who favor expanding trade with 

Canada and Mexico. There is no other viable path to enact a modernized NAFTA. 

Now, I want to change the subject a bit. And next up, I have to 

discuss what I consider to be a significant step in the wrong direction: the administration’s imposition of steel and aluminum tariffs. 

I am deeply disappointed in the decision to impose global tariffs 

to address a problem caused by China. Tariffs are taxes, and so I 

am concerned about the harm that this action will impose on 

American manufacturers and families. And I am astonished at the 

process—or in reality, the lack thereof—for implementing the tariffs so far. 

Ambassador Lighthizer, you have been tasked with working with 

our trading partners on exemptions from the new tariffs. These tariffs are slated to take effect about 14 hours from now. There is no 

clarity on country exemptions. And the recently announced process 

for product exclusions is prolonged and unnecessarily cumbersome. 

As such, I am hoping that you can make clear what is happening 

on this front today. 

Let me turn now to an issue that is squarely within your responsibility. I am deeply concerned about Chinese mercantilist policies 

that disadvantage U.S. companies, restrict U.S. exports and investment, and harm American workers. From the beginning of your 

tenure, you have identified Chinese theft of trade secrets and the 

forced transfer of American technology as significant problems that 

must be addressed. That is why I supported and continue to support USTR’s section 301 investigation. 

But as you know, my continued support is contingent on the 

President choosing an appropriate remedy. That remedy should be 

targeted specifically at the perpetrators and beneficiaries of China’s actions, and it must be part of the strategy to correct China’s 

technology policies. Now, I really look forward to your comments on 

this. 

Finally, I welcome the administration’s decision to seek a renewal of Trade Promotion Authority. I particularly welcome the 

President’s announcement that he would use an extension of TPA 

to aggressively negotiate new trade agreements. 

I intend to use the extension process to get further details on 

your plan of expanding opportunities for American businesses overseas through new and ongoing negotiations and to emphasize that 

these negotiations must be conducted consistent with the objectives 

set out in TPA. 

And I welcome any comments you have to offer on that today. 

[The prepared statement of Chairman Hatch appears in the appendix.] 

The CHAIRMAN. So with that, Senator Wyden, please go ahead 

with your statement. 

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OPENING STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you very much, Mr. Chairman. I also 

want to welcome Ambassador Lighthizer and look forward to hearing from him. 

Colleagues, anybody reading the trade policy news on the business pages now probably suffers from a nasty case of whiplash trying to decipher all that news. It is hard to identify a coherent strategy that will help American workers, businesses, and farmers when 

the dust settles. 

Since the summer, the administration has been engaged in negotiations with Canada and Mexico to update NAFTA, a project that 

is exceptionally important to our workers and the American economy. However, these talks are routinely broadsided by tweets from 

the President on subjects like the fantasy of Mexico paying for a 

border wall. It creates chaos, threatens to derail the discussions, 

and, at the very least, distracts from the important issues. 

A decision with respect to steel and aluminum action was delayed for months as a result of political maneuvering. But then, in 

a meeting that was billed as a listening session, the President 

blurted out his plans to impose a 25-percent tariff on steel imports 

and a 10-percent tariff on aluminum. 

What followed was more of the same: chaos. Lobbyists descended 

on Washington to get special carve-outs. Other countries, especially 

our longstanding allies, threatened retaliation. It was unclear who 

in the administration was responsible for making key decisions 

about tariffs that would take effect in very short order. 

It is still an open question as to which countries will be excluded 

and which will be included in the tariffs. You would hope and expect that more information will be released. The tariffs are scheduled to go into effect tomorrow. 

Now, with respect to the overnight news about China, I am 

pleased the administration appears to be taking a more deliberative approach. The fact is, China has stolen our intellectual property, held American companies hostage until they disclosed their 

trade secrets, and manipulated their markets in a strategic manner 

to rip off American jobs and industries. 

I want to hear more this morning about how the administration 

will manage the 301 process going forward to get trade done right. 

The bottom line is, the Trump administration stormed into office 

promising better deals, more certainty for businesses to create 

good-paying jobs in our country, and a stronger position in the 

world economy. But after 14 months, what has basically been delivered is mostly a whole lot of chaos. Total chaos on trade is not 

going to create a single red, white, and blue job in America. 

So we are looking forward to hearing Ambassador Lighthizer discuss the Trump administration’s agenda. 

And we, very frankly, Ambassador, are counting on you to be a 

cool head in the middle of a very overheated atmosphere. 

I look forward to questions and hearing from the ambassador. 

The CHAIRMAN. Well, thank you, Senator. 

[The prepared statement of Senator Wyden appears in the appendix.] 

4 

The CHAIRMAN. Today I have the pleasure of introducing Ambassador Robert E. Lighthizer. Ambassador Lighthizer was sworn in 

as the 18th United States Trade Representative on May 15th of 

last year. Since members of this committee have gotten to know 

Bob well over the past several months, and because we have a lot 

to talk about, I will dispense with further introductions. 

It is a pleasure to have you here with us today. I think very 

highly of you, Mr. Ambassador. So please continue with your opening statement, and we will go from there. 

STATEMENT OF HON. ROBERT E. LIGHTHIZER, UNITED 

STATES TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF 

THE PRESIDENT, WASHINGTON, DC 

Ambassador LIGHTHIZER. Thank you very much, Mr. Chairman, 

Ranking Member Wyden, and members of the committee. I begin 

by saying being referred to as a ‘‘cool head’’ is an unusual experience for me. But I hope that, over a period of time, I earn that. 

I want to say also, although you have had hearings, I brought 

my two newly minted Deputies with me so that the committee can 

see them again: Jeff Gerrish, who is the Deputy for Europe, Middle 

East, and Asia; and C.J. Mahoney, who is the Deputy for Africa, 

China, and the Western Hemisphere; and then they each have 

some additional responsibilities. 

But I think it is important—I will not do this again—but I think 

it is important to remind you that we have people there. We are 

grateful for the fact that the committee has confirmed them. 

And I know that you, and probably mostly your staff, will rely 

on them and use them. And they are available and very eager to 

serve the United States Senate Committee on Finance. 

It is a great opportunity for me to testify here. Before I take 

questions, I would like to very briefly make three points. 

First, I would like to thank you, as I said, for giving me my Deputies and, in addition to the two here, another Deputy, Dennis 

Shea, who is going to be the Deputy in Geneva, whom you also 

confirmed; and Gregg Doud, who is the Chief Agricultural Negotiator. 

Second, I would like to draw the committee’s attention to the fact 

that in the last year, the trade deficit in goods and services rose 

to $556 billion, and the trade deficit in goods alone rose to $811 

billion. 

There are, of course, many reasons for trade deficits, but the 

President believes, and I agree, that persistent, enormous deficits, 

to some extent, reflect market distortions around the world that 

treat U.S. workers and businesses unfairly. 

We also have a massive trade deficit, as everyone here knows, 

with China—$375 billion last year—and large deficits with the EU, 

Japan, and a few other countries. 

I note that members here have a variety of views on these 

figures, but we believe they raise significant concerns. They indicate that global rules of trade sometimes make it hard for U.S. 

companies to export. They can discourage U.S. investors and businesses from entering into certain sectors of the global economy. 

Further, they indicate that, in the United States, the cost of globalization is falling more heavily on workers in some parts of the 

5 

economy that are exposed to trade. And this is troubling. Finally, 

they undermine the political support for the global trading system 

in the United States, and that is bad. 

Third, I would like to very briefly summarize the President’s 

trade agenda that we just put out, as the committee knows, pursuant to statute. 

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, will preserve our national sovereignty, will respond to hostile economic competitors, will recognize the importance of technology, and will seek opportunities to work with other 

countries that share our goals. 

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

overseas market, we need a strong economy here at home. 

Third, we are negotiating trade deals that will work for all Americans. As the members know well, the President has asked us to 

seek significant changes in NAFTA. We have already had seven 

rounds of talks with our partners in Canada and Mexico, and I believe that substantial progress is being made, but we are quickly 

running out of time if we are going to have this Congress vote on 

a final passage. 

We have also reached out to and begun discussions with Korea 

on the KORUS agreement. I am happy to talk about all this. 

Now that we have a full team of Deputies in place, we intend to 

pursue vigorously free trade agreements in other parts of the 

world. We have a working group with the United Kingdom, which 

you are aware of, and expect to begin the process of entering into 

an FTA with them at the appropriate time. 

We have told Japan that we are interested in having an FTA 

with them when it makes sense for them. And in addition, we hope 

to, working with this committee and others in the administration, 

pick out countries in Africa and Southeast Asia for which it would 

make the most sense to have an FTA, and begin that process. So 

that will begin very quickly: the consultations with this committee, 

as well as with other people in the administration. 

As the chairman noted, we have asked for an extension of Trade 

Promotion Authority until 2020. 

Fourth, we are enforcing and defending U.S. trade laws. The 

President said he would use all trade laws available to defend U.S. 

workers, and he is keeping that promise. 

We are, in addition, vigorously defending our laws at the WTO. 

And we are prepared to talk about these things to you. 

Finally, we seek to reform the multilateral trading system, which 

for too long has failed to promote liberalization. For too many 

members, it has become a litigation forum and not a negotiation 

forum, and we think that is unhelpful. 

In short, the USTR, under the direction of President Trump, is 

seeking to build a better, fairer system for global markets that will 

lead to a higher standard of living for all Americans. I am excited 

to have the opportunity to work in this area. And mostly, I am excited to have the opportunity to work with the Senate Finance 

Committee. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Well, thank you, Mr. Ambassador. 

6 

[The prepared statement of Ambassador Lighthizer appears in 

the appendix.] 

The CHAIRMAN. The administration is set to announce soon the 

results of USTR’s section 301 investigation into Chinese theft of 

trade secrets and forced transfer of American technology. 

The remedies under consideration reportedly include tariffs on 

Chinese products, an action I have some qualms about. What in 

your mind are the appropriate criteria for determining if higher 

tariffs are justified, the appropriate level of any tariff increases, 

and the products to be covered? 

Ambassador LIGHTHIZER. So that is an excellent question, and an 

important question. And I suspect that very soon the President will 

make his decision on this 301 on IP, and I hope as well that it will 

be supported by members of the committee. And I suspect it will 

be, if it is done properly. And no decisions are made until the President makes them, but I expect him to make them very quickly. 

So the first question that we ask is, do we have a problem with 

IP theft? And of course we do. If you look at the record, going back 

to 1991, George Herbert Walker Bush brought a 301 against China 

for failure to protect IP. And it has continued. We had one from 

Clinton, neither of which really amounted to much. 

And then we had a system of dialogues over a period of time in 

the WTO. During that time, on at least 10 different occasions, 

China made specific commitments not to do certain things in this 

space. It has not kept any of them. 

So we start with the proposition that one of the most important 

parts of our economy is the IP protection. It is an extreme competitive advantage for the United States, and it is the core of an enormous number of sectors that you do not think of quite as high-tech. 

We have done a study. We will put that study out very quickly. 

The members, of course, will have it as soon as we possibly can 

give it to you. It is an extensive study of about 200 pages. And it 

documents this very, very serious problem. 

We see four parts to it. One part is, as you suggest, Mr. Chairman, China forces technology transfer if you want to do business 

in China. It is a huge area, and it affects almost every technology 

company that goes there. 

The second part that we analyzed is, they force technology licensing at less than economic value. 

The third one is, they have a program that is really hundreds of 

billions of dollars, the state-owned buying of technology in the 

United States. And it is very complicated and difficult, and it is not 

market-driven either. But it is very effective and something that 

we have to worry about. 

And then the fourth leg of this, the way we see it, is the issue 

of just plain old ordinary cyber-theft. 

Now, you asked about remedies. So technically, to me, among the 

things one would consider would be tariffs—and I will address that 

right now, because that is your specific question and I know concern, Mr. Chairman—but also restrictions on investment. 

We have Senator Cornyn, who is one of the leaders in expanding 

the CFIUS program, something that we feel very strongly about 

and want to encourage. The idea, if the President decides to take 

this action, would be to do a lot of the kinds of things that you 

7 

want to do, but do them right now. We cannot be in a position, we 

believe, where China can go out and buy U.S. technology in a variety of ways that are troubling to us. 

So the remedies that you would consider would be tariffs, and 

you would consider restrictions on investment. 

Now, you asked specifically about tariffs. So how would you decide on the amount of tariffs that you would put in place? We have 

given this an enormous amount of thought. I want everyone, 

whether you agree with it or not, to know that this has been really 

studied. There are a variety of things in this plate of problems, in 

these four prongs, that are probably extremely costly to the United 

States economy, but difficult to quantify. 

Let me give you a good example: cyber-theft. There are studies 

that have cyber-theft at $400 billion or $500 billion a year, theft 

of technology through cyber, but that is a hard thing to quantify. 

So you look at the things that you can quantify. One of them is 

the effect on technology, forced technology transfer. And then the 

economists create an algorithm to decide what the cost, what the 

value of that should be. They begin using the system that USTR 

has used for years and years and years. None of these is foolproof, 

but they are designed to be fair. 

Then if you decide that you are going to put tariffs on, the question then becomes, what products do you put the tariffs on? The rational approach, I would suggest, is that, number one, you would 

take products that are in the China 2025 category, which are 

things that they clearly are designing this program around, to get 

our technology, to get to where they are ahead of the China 2025. 

I know you know those things, but they are things like advanced 

robotics and new-energy vehicles and high-speed transportation, all 

the really high-tech things that China came out a few years ago 

and said, we are going to put hundreds of billions of dollars of our 

resources into a program of obtaining technology and use those 

things, not in an economic way, to become dominant in these 

spheres. And I have a list, and I will go through all of those if you 

like. 

So those are the kinds of products a rational person would put 

on this list, I would suggest. Then with respect to the rest of them, 

what do you do? 

What we did is, we created an algorithm, and it was basically 

based on past practice. And we did it in a way that I suspect every 

member would do it. And that is, you line up everything that you 

import from China and you have an axis, and the things that have 

the most effect on China and the least effect on the U.S., you have 

moving towards the left. And the purpose of your algorithm is to 

pick out things, to the extent you can, that are in that category, 

things that are in the category that have the maximum effect on 

China and the minimum effect on U.S. consumers. 

So if we do this, and if we have tariffs—and the President has 

not made that decision, but I think he will make it quickly—you 

have a serious economic study of what the quantifiable cost is. And 

it is much smaller than the real cost, I would suggest. And then 

you use an algorithm basically to create a list of items that you 

would put tariffs on. 

8 

So for example, something that you get from China and a lot of 

other people, if you put a tariff on that, the effect on U.S. consumers would be minimized. That is kind of the idea of this. 

So it is a sensible, moderate, appropriate amount if the President 

decides to do this. And it is calculated and created in a very businesslike, sensible way. 

Now, the final thing I would say is that, with respect to at least 

one of these provisions of these four prongs, we believe there is a 

violation of our WTO rights. And in that case, we would bring a 

WTO case. With respect to things that are not covered by the WTO, 

we would then have other options pursuant to section 301. 

I apologize for the fact that I have run over my time. That was 

a very lengthy answer. I will try not to do that again, but I wanted 

to kind of lay it out, because I know it is on your mind, Mr. Chairman, and the mind of other members. 

The CHAIRMAN. Well, I thought it was good. 

Senator Wyden? 

Senator WYDEN. Thank you very much, Mr. Chairman. 

So, Mr. Ambassador, the President makes the final decision. You 

make recommendations. And of course, we need information about 

what is ahead. That is what consultation is all about. So I want 

to get into a couple of issues on China, a couple of issues on steel 

and aluminum. 

The first on China: on which products are you recommending 

that the President impose tariffs? This is your recommendation. 

Ambassador LIGHTHIZER. Well, in the first place, I want to make 

it clear that I am part of the process. And it is not something that 

the USTR is doing. 

Senator WYDEN. Right. But your recommendation. 

Ambassador LIGHTHIZER. Yes, sir. We have the Council of Economic Advisers as well as our internal professional economic people 

who have put together this algorithm. 

So the way I start with this is—and I think this is how it was 

done, Senator—the algorithm kicks out the entire amount. And 

then you say, what things are not on the algorithm that any sensible person would put on? And that would be a list of things, to 

me at least, that are on the China 2025 list. 

So what is on the China 2025 list? And I will just go through this 

very quickly, but I will not if I am just taking your time. 

Senator WYDEN. No, I am sure—I want to know which products 

you are recommending. 

Ambassador LIGHTHIZER. Well, these are the ones, the ones that 

I care about. 

Senator WYDEN. Good. 

Ambassador LIGHTHIZER. Number one, I think the algorithm 

makes sense because it has maximum effect on them and minimum 

effect on our consumers, which is what we want. And there are a 

few consumer items which, in my judgment, should not be on there 

and they are not on there, but there are some items that I would 

put on that clearly would not be in the algorithm. 

And those are things related to—and these are the things that 

China listed and said, we are going to take technology, spend several hundred billion dollars, and dominate the world. And these are 

things that if China dominates the world in, it is bad for America. 

9 

So here is their list: new, advanced information technology; automated machine tools and robotics—— 

Senator WYDEN. These are products that you are recommending 

should have tariffs? 

Ambassador LIGHTHIZER. I believe these items should be—that is 

correct. 

Senator WYDEN. Thank you. Anything else? 

Ambassador LIGHTHIZER. Well, I mean, there are 10 of them 

here. 

Senator WYDEN. Okay. Yes, that would be good. Let us hear all 

10. 

Ambassador LIGHTHIZER. All right. So, I mean, if you sit here, 

you are going to think this is basically America in 10 years, right? 

Aerospace and aeronautics equipment. Maritime equipment and 

high-tech shipping. Modern rail transport equipment. New-energy 

vehicles and equipment. Power equipment. Agriculture equipment. 

New materials in biopharma and advanced medical products. Now, 

every one of these they say they want to be mostly self-sufficient 

in within 2 or 3 years and basically world-dominant by China 2025. 

That is the sense of China 2025; that is what it is. And this is not 

like our spies figuring this out. They put this out and said this. 

Now you see, the last time, in 2006—Senator Portman knows 

this—they put out a provision that said, we want to be dominant 

in solar panels and solar modules. And they followed that plan and 

basically put the United States and most of the world out of business. 

So there is a lot of reason for concern. They did the same sorts 

of things in steel. They did the same sorts of things in aluminum. 

You can go down the list. But in this case, they specifically said, 

these are 10 that are in this category. 

Senator WYDEN. Okay. What outcome are you seeking in your 

strategy with China? 

Ambassador LIGHTHIZER. Well, that is a very good question. I 

would say two things. Number one, you would like change in the 

way they are approaching this thing, changed behavior. That would 

be what they do, ideally. And in some areas, I think there is potential for that; in other areas, there is not. 

When I sit around with my colleagues in the administration and 

when I talk privately with Senators, I tell them—which I think is 

the truth—I think, at the end of the day, no matter what I do and 

what you do during your career—and hopefully you are going to 

focus more and more on this issue—China is still going to be a 

market-driven communist country. It is never going to be like we 

are. 

It is always going to have a different system that challenges our 

system and wants to take over the world. That is my view. But 

there are a lot of areas where you can make a difference, and we 

should in those areas. 

The second part of my answer is, there are some areas where you 

just have to protect yourself from them. So they are not going to 

change their attitude on these things, but we can at least be in a 

position where U.S. industry is not wiped out because of it. And if 

we do not do that, then shame on us. 

Senator WYDEN. Okay. 

10 

Ambassador LIGHTHIZER. Particularly in a case—let me give you 

the list. 

Senator WYDEN. I want to get one other question in with respect 

to steel and aluminum. 

These tariffs go into effect tomorrow. Yesterday, you listed some 

countries that you are negotiating with and said that the tariffs 

might not apply to them during the negotiations. Which countries 

will not have tariffs applied to them as of tomorrow? 

Ambassador LIGHTHIZER. So the idea that the President has is 

that, based on a certain set of criteria, that some countries should 

get out. There are countries with whom we are negotiating. And 

the question then becomes the obvious one, where you think, well, 

okay, as a matter of business, how does this work? So what he has 

decided to do is to pause the imposition of the tariffs with respect 

to those countries. 

Senator WYDEN. Which ones are they? 

Ambassador LIGHTHIZER. Well, all right. So we have the two 

NAFTA countries, and we know where they are. We have Europe. 

We have Australia. We have Argentina. We have Brazil. Who am 

I forgetting? Oh, and obviously Korea, where we are renegotiating 

the KORUS. 

Senator WYDEN. But are the tariffs going to be paused for them? 

I mean, I am asking you specifically. We are the committee of jurisdiction here. Everybody here wants to be part of the consultation 

process. We have not had much recently. 

Which countries—because this is going to happen tomorrow—will 

not have these steel and aluminum tariffs applied to them? 

Ambassador LIGHTHIZER. It is the list that I just gave, Senator. 

Senator WYDEN. Okay. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Stabenow? 

Senator STABENOW. Thank you very much, Mr. Chairman. 

And Ambassador Lighthizer, welcome again. 

Ambassador LIGHTHIZER. Thank you. 

Senator STABENOW. Let me just start off by saying that I think 

a goal for all of us ought to be exporting our products, not our jobs. 

And it gets complicated beyond that, certainly. 

And I look at my colleague and friend, the chairman of the Ag 

Committee, and I am sure he will say the same thing on agriculture that I will, that we need markets; we need markets for our 

products, but we also need a level playing field to make sure that 

we are not exporting our jobs as we go. 

I want to specifically ask you about currency manipulation. The 

President said day one of his administration he would label China 

a currency manipulator. It is well past day one, and that has not 

happened. We have also, in NAFTA, had seven NAFTA negotiating 

rounds, and USTR has not specified its objectives with regard to 

currency manipulation, which was included in the administration’s 

NAFTA negotiating strategy. 

So you indicated to me last year that you were, quote, ‘‘committed to developing effective approaches to address the problem of 

currency manipulation’’ and that you would work to get the best 

possible enforcement tools. We have lost, in manufacturing alone, 

11 

over 5 million jobs in our country related to currency manipulation. 

So what is the status of including strong and enforceable language 

on currency manipulation in the NAFTA negotiations? 

Ambassador LIGHTHIZER. So as you know, because we have spoken a lot, I agree completely with your proposition. Currency manipulation is something that goes right across the line. It affects all 

the industries where we export and an awful lot of them where we 

do not, that we sell in our own market. It is a complicated and 

difficult issue. 

It is something where the notion was, we would cover it in 

NAFTA, not because we believed the Canadians or Mexicans are 

currency manipulators, because we, at least right now, do not, but 

that it would become the kind of thing that you would put in other 

agreements and it would become sort of a model. 

Senator STABENOW. That is right. So the question is, will there 

be or will there not be currency manipulation language, enforcement language, in NAFTA? 

Ambassador LIGHTHIZER. Let me say, first of all, there are a 

number of things on which I do not know what will finally be in, 

because I am in the process, as you know, of negotiations. But I 

can tell you what my position is and what is going on. 

So what is going on is, you are having the Treasury Department 

engaged in negotiations with their counterparts on this issue, not 

only with respect to NAFTA issues, but also with respect to 

KORUS. And I think it is important to know this. I asked my career people, ‘‘What happened the last time you had this level of discussion about currency, where we were talking about specific 

things in a hard way?’’ And they came back to me and they said, 

‘‘We have never had discussions like this.’’ We have never had 

Treasury ever be willing to—and this is not partisan—in any of 

these administrations—these are career people—ever get involved 

in this kind of discussion like we are doing now. 

So it is an enormously important thing that we have happening. 

And a lot of it is because of push by you and a handful of other 

Senators who have just sort of said, ‘‘This is such an important 

issue.’’ But it is transformative in terms of the way the Treasury 

Department is dealing with this. 

Senator STABENOW. So what does that mean, though? 

Ambassador LIGHTHIZER. Well, my hope is that we end up with 

language that deals with transparency and deals with competitive 

devaluations. And the other thing—just notionally, you have to 

think of it—you also want to be in a position where it does not affect, where we are not guilty of the provision ourselves, in a circumstance where we do some kind of quantitative easing. 

Now, we clearly do not do it for competitive advantages. But it 

has to be woven in in a way that somebody cannot say, ‘‘Oh, now 

the United States has violated the agreement.’’ 

Senator STABENOW. Right. No, and I understand that. They say 

that about the Fed all the time, but it is not the same. 

Ambassador LIGHTHIZER. But the notion of transparency and no 

competitive devaluations is very much at the heart of what we are 

doing, whether it is in this agreement or not. It is my view that 

it at least has to be enforceable here. That is my view. 

But there are a lot of talks going on. They are very intense. 

12 

Senator STABENOW. Well, I hope that they produce results. 

Excuse me, my time is about up. 

We need results on this. There has been talk for years and years, 

as long as I have been here. And so I appreciate what you are saying. We need results. 

And just finally, what about the U.S.–Korea Free Trade Agreement negotiations? Are we doing the same thing there? Because 

the regimen on enforcing against currency manipulation needs to 

be in every agreement. 

Ambassador LIGHTHIZER. And if you said, where does it belong, 

more than anywhere else you would say China, Japan, and Korea. 

So listen, you and I are in complete agreement on both the pernicious effects of this and on where we ought to go. My hope is that 

I will prevail. That is more or less the status quo. 

Senator STABENOW. Thank you, Mr. Chairman. 

The CHAIRMAN. Your time is up. 

We will now turn to—let us see who I have here. 

Senator Roberts? 

Senator ROBERTS. Thank you, Mr. Chairman. And thank you for 

making a very excellent statement at the opening of this hearing. 

I would like to be associated with your remarks. 

Ambassador Lighthizer, Bob, welcome back to the committee. 

Last year at this committee’s trade agenda hearing, and in many 

conversations we have had since, we discussed concerns. I continue 

to hear in farm country the dire need to expand and explore new 

markets. Unfortunately, the ag economy has not seen improvements; it has become more concerning. 

In the last year, the United States, I believe, has lost its title as 

a reliable supplier. That is certainly not a good thing. We have 

seen Mexico turn to Argentina to purchase wheat and Brazil for 

corn. These should be sales with the U.S., not the other countries. 

The Kansas wheat crop is still on the ground. We have another 

crop coming on, I hope. But that crop should be on the Kansas City 

Southern railway headed for Mexico. And I think probably, at this 

juncture, I would like to give you a little farm report. 

Wichita, KS—the latest crop report estimates that about 1 percent of the wheat in Kansas is in excellent condition—1 percent. 

Ten percent is good; all the rest is poor or very poor. That assessment comes at the same time that topsoil moisture supplies were 

rated as short or very short across 81 percent of our State. 

I do not know what we did to mother nature, but she sure is not 

being very helpful. We are dry. We are having a drought. We have 

wheat at the Dodge City elevator hovering around $4; it was $7 

about 3 years ago. We even have in eastern Colorado and western 

Kansas a hotline for people who are considering suicide. Now, that 

is pretty bad. I mean, that is a very dire situation. 

We have a situation, however, that is being recognized by the 

White House and yourself. We just had a good visit about that. 

Thank you for being very candid. 

Ray Starling, Special Assistant to the President for Agriculture, 

Trade, and Food Assistance, said the other day that insistence on 

free and reciprocal trade—and then obviously we plan to examine 

that on a case-by-case basis as those threats materialize. ‘‘We will 

do everything within our power to protect our farmers from that 

13 

sort of egregious behavior,’’ he said. He then said, ‘‘If that results 

in retaliation against us, then that tells you something about the 

state of free and fair trade.’’ My message back to Ray is that, if the 

shoe fits, he ought to wear it. 

You said yesterday before Ways and Means in a 4-hour marathon, ‘‘You have to think about counter-retaliation, you have to 

think about programs for farmers who are in this situation. I 

mean, there are a lot of things outside my realm that have to be 

considered.’’ 

I would suggest probably talking with Sonny Perdue—I know 

you have done that—our Secretary of Agriculture. 

And then you said that you have tasked one of your Deputies, 

Deputy USTR Jeffrey Gerrish—with a portfolio covering Asia—on 

the possibility of deals with the Philippines, Vietnam, and Japan. 

Would you put Taiwan in there, because they have visited with me, 

along with a lot of other people? 

Senator Stabenow—who has left the committee right now—and 

I have talked at great length about some kind of relief for farmers 

on a case-by-case basis. I think somebody said on the staff that 

maybe we could have a Trump tariff payment, a TTP instead of 

TPP. I would much prefer we do something else. We need to sell 

our product, and we need to sell it to about everybody we can think 

of. So I encourage you to really think about this. 

If we continue down this road, we may have to consider some 

kind of a payment on a case-by-case basis to farmers. 

So my message to you is this: it is simple. In 2018, the USTR’s 

trade agenda must include a focus on returning the United States 

to being a reliable supplier, and the USTR must actively pursue 

markets to sell our products—any place that you can sell grain, 

anything that you can give as hope to a very bad situation, not only 

in Kansas, but all over the country. 

On the very day that this committee was talking to the President, sorghum producers were in my office. By the way, it is sorghum, not ‘‘sour gum’’ as some have said in the administration. 

And I do not understand how the basis points went off 80 points 

while we were talking with the President. Senator Toomey was 

flying at 30,000 feet talking about trade policy. Senator Portman, 

of course, used to be the trade rep, and he added his advice. Senator Thune, who is not here right now, and myself tried to protect 

agriculture, and we went all around the room. 

I have had over a hundred people, Kansas farmers, in our Ag 

hearing room with kids, and they were wondering if they could 

farm the next year, this next crop year. I do not know what kind 

of a crop we are going to have, but it is bad unless the weather 

changes. 

And we still have our past crop on the ground, and we are not 

moving it. So we are in a dire fix. We are trying to write a farm 

bill here, and it is with a backdrop of severe budget limitations. 

And we know that we have to do that, but if we have to go down 

the road with a special payment with regards to retaliation, that 

just adds another dustup right before the farm bill. 

This is not a good situation. Now, I have gone over 30 seconds, 

but I just feel a lot better, because I woke up pretty cranky. 

14 

If you would like to respond, sir—I think we have had a private 

talk—I would be delighted to hear anything you might want to say. 

Ambassador LIGHTHIZER. I would just say, since you are over 

your time, but I am not sure whether you are over my time—all 

I get is part of your time, so I will just say we are both over time. 

I agree completely with your point. 

Senator ROBERTS. Your time is my time; my time is your time. 

Ambassador LIGHTHIZER. I agree completely with your position. 

I think that too often we think of agriculture on the defense. The 

fact is that every place where we have a market, and we have a 

lot of them, the market could be much bigger. And in most cases, 

it is protectionism, where we are going, that is holding us back, 

even the places like Mexico, as you say, where we sell $18 billion, 

China for sure—every one of these markets. 

And then there are additional opportunities, and they are in East 

Asia and in other places. And we are in a position where we are 

going to very soon, as I say—I mean, like, next week—start the 

process of consulting, with a Deputy each doing one—consulting 

with the administration, consulting with the House, consulting 

with the Senate Finance Committee—and picking this out, deciding 

what our objectives are, and then going forward and deciding what 

the best way to get the FTA is. 

And it is not, if I have my way, going to be a 5-year negotiation 

to do all this stuff. It is going to be a focused negotiation where 

we get something very quickly for agriculture, but also other parts 

of the U.S. economy, and increase exports. 

The CHAIRMAN. Okay. 

Senator Portman? 

Senator PORTMAN. Thank you, Mr. Chairman. 

And to my successor in this job at USTR, I feel your pain. I 

heard you say earlier you were trying to figure out how to do your 

job in 23 hours rather than 24 hours a day so you can get some 

sleep. There is a lot going on right now; you are busy. 

I want to focus, if I could, on exports, because I think in your 

answer to Pat Roberts you are correct: we export way below our 

weight and we can do much, much better in terms of opening markets for our products, including our ag products. 

We are concerned right now with the combination of the potential retaliation from the steel tariffs and potential retaliation from 

China on a 301 that is not yet fully formulated. And so the concern 

is, we could actually be seeing a reduction of exports rather than 

an increase of exports, which is what we need and should have. 

You know, in the context of other countries, the United States is 

a relatively small exporter per capita. I think we are somewhere 

between Tonga and Ethiopia on the list. 

So you talked earlier about the potential of extending the Trade 

Promotion Authority. I hope that this committee and this body will 

strongly support that. The TPA extension that you are seeking, it 

is my understanding, will be automatic unless there is a resolution 

of disapproval, which I hope there will not be, and that will take 

you until July 30, 2021. Actually, you need that. 

And second, we have to start developing some of these markets. 

So you mentioned earlier the United Kingdom. There was, I think, 

15 

a good decision by the EU this week saying, during their transition 

period, they are allowed to negotiate trade agreements. 

You said there is a working group that has been formed there. 

If you could tell us in a moment a little bit about that, I think that 

is an extremely important opportunity for us with Brexit. 

You talked about Japan. You talked about Southeast Asia. You 

talked about Africa. Putting Africa in context here, back in, let us 

say 2000, I think China had about a billion dollars’ worth of trade 

with Africa, and we had about, more or less, $50 billion, I think. 

In inflation-adjusted terms, we are about where we were; China is 

now at $150 billion with Africa. So what a great opportunity for us 

in terms of those countries of Africa, the AGOA countries, and others. But also, what an important strategic opportunity for us. So 

I would like to hear what you have to say about Africa. 

And then just in general, how can we increase the exports, not 

just of agriculture products, which are important to Ohio, but with 

regard to manufactured products and services? 

I think trade agreements work. I know that you are in the middle of now renegotiating and modernizing NAFTA, the North 

American Free Trade Agreement, and I support that modernization. But I am sometimes concerned about the administration’s position on trade agreements. We have them with only about 10 percent of the world. We send 47 percent of our exports to that 10 percent of the world. 

In the aggregate, we actually have a trade surplus with our trading partners in FTAs, and yet they always seem to come up as a 

negative. I think they are a positive. Yes, they can be improved and 

modernized. 

So a lot of questions there. I appreciate your responses. And 

again, I appreciate the job you are doing at USTR, which is a tough 

job right now. 

Ambassador LIGHTHIZER. Thank you very much. And I am honored to be one of your successors. Well I, unlike you, expect to die 

after it. I am going to be more like Christian Herter. He basically 

was USTR and then just died. 

So, as you say, there are a lot of things there. One of the—— 

Senator Portman. Some would say, that is what happens when 

coming to the Senate. [Laughter.] 

Ambassador LIGHTHIZER. No, that would not be a staffer’s view. 

So, you know, there is an overriding problem in why we have not 

liberalized trade, and that is that the United States has low tariffs. 

Everybody can get through—they think they can get through litigation at the WTO what they will trade for, and so we have had no 

real trade agreements on a multilateral basis forever and ever and 

ever. Clearly, we agree completely that increasing exports is what 

we should do. 

I am just sort of taking these in no particular order. 

The African issue, I completely agree with. I am not only informed by you, but Senator Isakson. The first time I talked to Senator Isakson, he was, like, ‘‘Lighthizer, you had better focus on 

this,’’ and Lighthizer focused on it. And not only the AGOA, where 

we are in a position to really insist in a new way that the people 

who have benefits from AGOA open up their market and reform in 

16 

the ways that people want them to, but also this idea of having an 

FTA with the appropriate African country. 

We ought to pick out the right country, and we ought to have an 

FTA. It would be very good for them and potentially very good for 

us. So that is something that we are very serious about. 

And I am informed on that. As I say, it is not a part of the world 

that I have enormous amount of expertise in, but I was informed 

by the members of this committee and others. So that is something 

that—I was literally just waiting to have these Deputies, because 

I just cannot do that and these other things. 

The first thing I probably should have said in all of this is, we 

want to be more competitive, we want more exports. There is not 

universal agreement here, but the tax bill was an enormous step 

in that direction. Getting rid of regulations is an enormous step in 

that direction. These are all things that are at least as important 

as everything I am doing, right? I mean, these are things that 

make the whole economy more efficient and more effective, and 

that helps us export and helps us make money generally. 

So I guess the last one, I would say, with respect to the UK, we 

have a working group. There are things that we can do because 

they are not really competencies that were ceded to the EU; there 

are certifications of lawyers and accountants. There are a lot of 

things like that, and we are making headway on those. 

We are also making headway on the kinds of things you would 

expect to have to talk through, some of which are contentious, like 

the TRQ. We have a relationship with the EU; now what is our relationship with the EU and the UK after they break up? You know, 

there is a possibility of loss there if you do not do it right. And so 

that is a big issue, but we are making real headway. 

Our sense is that, with the exception of that—and I met as recently as last week with my counterpart. I have talked to him 

often; he is an excellent guy, a smart guy. And my guess is that 

we are still a year away from being able to start real negotiations. 

And to some extent, that time will be dictated by a variety of 

things, none related to me. But it is something we want to be prepared to do the day that it is available. 

So getting some new FTAs, we think, is really important. The 

kinds of things you have done to make us competitive are important. 

And we also think we are going to get new exports out of the revision of NAFTA and KORUS and these other things. And if you 

believe in the basic ideas that we all have, which is that you have 

to improve services, you have to improve digital trade, you have to 

improve IP—if you believe all those things, which we believe, those 

should lead to new exports and make the United States—— 

Senator PORTMAN. Thank you. My time is up. 

The Brexit negotiations can begin in earnest a year from now, so, 

you know, on March 30, 2019. So I think this committee would be 

strongly in support of that. 

Thank you, Mr. Chairman. 

Senator WYDEN. Mr. Chairman? Mr. Chairman? Without taking 

any time from Senator Bennet, who is next, if I could just be recognized for a minute—— 

The CHAIRMAN. Next will be Senator Grassley. 

17 

Senator WYDEN. Oh, it is Grassley and then Bennet. Okay. Could 

I just be recognized for a minute? 

The CHAIRMAN. Sure. 

Senator WYDEN. Thank you, Mr. Chairman. 

Colleagues, Senator Cornyn and I both serve on the Intelligence 

Committee. And we there have the responsibility to protect some 

of America’s most important secrets. And we have just learned, because of our committee assignment, that the chairman is having a 

birthday today. [Laughter.] 

We have been able to excavate this fact. And I just wanted to 

mention this because I know Senators would like to wish the chairman well over the course of the day. And he is still punching away 

in the ring, and we hope that before the end of the year when he 

and Elaine go back to Utah, we can deliver some more bipartisan 

hits by working together. 

So, Mr. Chairman, happy birthday. 

The CHAIRMAN. Well, thank you so much. [Applause.] 

I am not much for birthdays. When I was a kid, I was the only 

kid in the neighborhood who never had a birthday party, so I just 

never—and it even extends to today. It is a crazy psychological 

thing. [Laughter.] 

Some people think that is my normalcy: a psychological thing. 

[Attendees sing ‘‘Happy Birthday.’’] 

[Applause.] 

The CHAIRMAN. For a musician who writes music, that was the 

most discordant ‘‘Happy Birthday’’ I ever heard. [Laughter.] 

Okay. Senator Grassley? 

Senator GRASSLEY. Since I was down the hallway at the Judiciary Committee, maybe my staff or my colleagues have already 

talked to you about the administration considering a $60-billion 

tariff package against China related to section 301. 

I understand 301 concerns with China related to intellectual 

property, but I must also remind you, Mr. Lighthizer, a State like 

Iowa stands to lose a great deal from retaliation. 

China buys over one-third of America’s annual soybean production, which equates to roughly $14 billion each year. As an example 

of how sensitive agriculture markets are, Iowa farmers still remember President Carter’s grain embargo. An immediate 10-percent reduction in grain exports occurred when the embargo suddenly halted grain shipment. So, you know, that is 38 years ago, but that is 

still in the memory of farmers. 

So, Mr. Ambassador, has your office by itself or in consultation 

with the USDA done any analysis of what potential retaliation 

means for farmers in the Midwest, whom China has already singled out for retaliation? 

Ambassador LIGHTHIZER. We certainly, Mr. Chairman, have done 

a lot of analysis of that in the context of 301, but also in the context of other things. And the analysis is way beyond just USDA 

and us; it is also NSC and a whole variety of things. 

And at some level, whatever you decide, it is really just speculation. But there has been a lot of effort, a lot of work done on it. 

And when you come down to it, in almost every case, the most 

vulnerable sectors of the economy are the ones that export. And 

farmers are a very susceptible group, not only with respect to 301, 

18 

but every time we take a trade action, agriculture is in the crosshairs. And it is something that we are very sympathetic to and we 

have to be very careful about. And we have to decide—and we will 

work with you to decide—if that happens, how we react. 

Senator Roberts, whom I know very well, remembers the Carter 

grain embargo, because it was an important part of his own political career, or reacting to it was an important part of his own political career. I know he is very concerned about it, that he has talked 

about it. 

I do not get out of my own lane in terms of what programs we 

have, but I would note that it is unfair in this circumstance to 

farmers, particularly in this case soybean farmers who, number 

one, sell an enormous amount—as you say, $14 billion—to China. 

And if you look at the ag sales to China, we sell a lot of things. 

I mean, if you think of it, we sell $130 billion worth of stuff to 

China altogether, and $18 billion is soybeans. That is a pretty big 

number. And if you look at it, you drop down to whatever the second crop is—Senator Roberts probably knows—but you get down to 

about a billion and a half is the second crop. Now, that might be 

big for them, whatever that crop is, but it is a huge drop-off. So 

any person who would look at this, would look and say, yes, soybeans are a real problem. 

And soybeans, also from the point of view of retaliation, have the 

advantage of being grown all over the place. As near as I can tell, 

most everybody has some soybeans. So it is something we are worried about. 

It is unfair, in my judgment, that farmers, particularly soybean 

farmers, would be singled out to have to take this hit. 

Having said that, it is not possible to take the position that, because of soybean farmers, we are not going to stick up for our 

rights in a whole variety of ways and have hundreds of billions of 

dollars’ worth of other exporters and domestic producers be punished because of unfair trade. It creates a conundrum. 

And I guess my sense is that, working with this committee, we 

have to decide the extent to which we retaliate and the extent to 

which the Congress in its wisdom decides that there should be programs that deal with this situation, where people are unfairly targeted in a case where we are doing something really for the national good. 

But the bottom line is, it is very serious. It is something we have 

worked on. We have spent a lot of time on it, USDA and Secretary 

Perdue and USTR, but also Commerce and Defense and NSC and 

NEC. It is something we spend a lot of time thinking about. 

Senator GRASSLEY. I have 30 seconds to ask a question you can 

say ‘‘yes’’ or ‘‘no’’ to. Can I tell my constituents we are past the 

point of worrying about withdrawal from NAFTA? 

Ambassador LIGHTHIZER. No. 

Senator GRASSLEY. I still have 15 seconds left. [Laughter.] 

I do want to tell you about a tool—and Senator Brown will probably bring this up as well—the Foreign Investment Review Act, 

which would give the administration new powers to prevent investment in the U.S. that originates from countries that do not believe 

in reciprocal trade benefits. 

19 

Our legislation represents a targeted approach for causing behavioral changes while not jeopardizing existing trade flows. And so 

this is a request that you would work with Senator Brown and us 

to give you and Commerce Secretary Ross new tools to prevent bad 

behavior by some of our trading partners. Thank you. 

Ambassador LIGHTHIZER. Yes; the answer is ‘‘yes’’ to that. 

The CHAIRMAN. Okay. 

Senator Cardin? 

Senator CARDIN. Thank you, Mr. Chairman. 

Mr. Ambassador, it is always good to see you. 

I want to follow up on what your response is going to be, with 

Commerce and other agencies, on retaliatory actions that are likely 

to be taken by other countries in regards to the steel and aluminum tariff. I say that because we expect there will be some reactions. And as I understand it, Commerce is working out a way for 

exceptions. You are involved in those conversations. 

But I am concerned that, whereas a large company or industry 

may be able to have their voices heard, how do you deal with small 

companies that have critical supply chains that could be impacted 

by retaliatory action by another country where they do not have 

the resources to be able to get their message across to the administration? 

How are you going to protect smaller companies, as we are going 

to certainly see a lot more activity, not just here but around the 

world, in regards to trade? 

Ambassador LIGHTHIZER. Well, Senator, I would say, first of all, 

with respect to the 232, there are going to be two things going on. 

One is going to be the country exclusion process, which we are in 

the process of—and I am looking at it, and we have talked about 

that. And some countries are under consideration, and it is a decision that is ultimately going to be made by the President. It is not 

going to be made by me in any case. 

Senator CARDIN. But on the company-specific—— 

Ambassador LIGHTHIZER. There will not be company-specific exclusions, but there will be product exclusions, which I think is 

probably what you are referring to, and they will be done at the 

Department of Commerce and, to the extent it is appropriate, on 

anything that any member here cares about. 

Senator CARDIN. But how are you going to protect smaller companies? They are not going to have the same voice that large companies will have in regards to industry-specific issues. 

Ambassador LIGHTHIZER. Yes, I mean, this is a far broader problem obviously than 232. It is a problem that deals with using the 

trade laws and dumping and countervailing, the whole disequilibrium between people who spend millions of dollars lobbying in 

Washington and people who do not have fancy lawyers who do 

that. So it is a far bigger problem then in this case. 

The product exclusion process at the Department of Commerce 

will be one where, if somebody files an exclusion, it will be looked 

at by professional people, and they will make a decision. Hopefully 

it will not—— 

Senator CARDIN. Well, by what method will small companies be 

able to get into that process? That is my concern. Industries have 

the resources to do it; big companies have the resources. But I repVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 R:\DOCS\36528.000 TIM
20 

resent a lot of small companies that do not have that type of resource on their own. They can work through their trade groups if 

their trade group is interested in it, but if they are not, how do 

they protect themselves? 

Ambassador LIGHTHIZER. Well, I mean, I am sympathetic to your 

position. I think the system is set up at the Department of Commerce so as to make it very easy to apply. That is not to say you 

get the same results, and that is a different question, but it is supposed to be easy to apply. 

And to the extent you come to me and say, I have this or that 

constituent who has this problem and it is not being reflected, I 

will certainly go to the Department of Commerce, or my people 

will, and we will sit down with them, because it is supposed to be 

designed so as not to discriminate in that way. I hope it is. I am 

not that close to it, to be honest, to know about how it is set up. 

Senator CARDIN. So I have another set of problems in regards to 

potential retaliatory actions. And I will use McCormick Spice as an 

example. It is a good American company. They source as much as 

they possibly can in our country. But you cannot move the equator, 

and they need products from other countries in order to have their 

spices. And that is exactly the type of concern we have: that they 

could be targeted for retaliatory actions when they have no choice. 

What do I tell McCormick? 

Ambassador LIGHTHIZER. Well, I do not know enough about 

where they buy spices. A lot of places, presumably, where they buy 

spices are not going to be on the list where they are going to be 

significantly affected by 232 on aluminum or steel. 

One that probably does come to mind where they probably do is 

India. I would presume India, I do not know—I mean, once again, 

I am just not an expert in the spice industry. But the Middle East 

I remember from the old days, the whole spice trade, the whole 

opium trade, was basically started with Europeans getting spices 

out of India and selling them in China. So that is kind of my frame 

of reference. 

To the extent they see specific retaliation, they ought to bring it 

to our attention. We focus, as we have said before, on soybeans and 

some of the very big issues, but it is conceivable you would have 

an issue with that. Also with India, my guess is that India may be 

in a position where they want to retaliate. I think there is some 

vulnerability there. India has a substantial trade surplus with the 

United States, and they have a system which is not particularly 

open. They have a system which has a number of vulnerabilities. 

So to the extent there are individuals who have this problem, all 

I can say is, we will try to work with them. It is a serious problem 

and one that we have considered. 

Senator CARDIN. I thank you for your willingness to work with 

our office. I can assure you that you will be getting some calls. 

Ambassador LIGHTHIZER. I would be pleased to spend time with 

your people, many of whom are friends. 

Senator CARDIN. Thank you. 

The CHAIRMAN. Senator Bennet? 

Senator BENNET. Thank you, Mr. Chairman. Thank you for holding this hearing. 

21 

Mr. Lighthizer, I want to tell you how much I appreciate your 

candor and your willingness not to speak from a script in these 

hearings. So often that is what we hear. I do not necessarily agree 

with much of what you say, but I do believe you are giving us your 

candid view. 

You mentioned in your written testimony and then again in your 

oral testimony the need to deal with hostile economic competitors. 

And I can never figure out who that is from the point of view of 

the United States at this point. But would you call Canada a hostile economic competitor to the United States? 

Ambassador LIGHTHIZER. I would call them an economic competitor. 

Senator BENNET. Okay; that is different from a hostile economic 

competitor. 

Ambassador LIGHTHIZER. I agree with that. 

Senator BENNET. What about Mexico? Are they a hostile economic competitor? 

Ambassador LIGHTHIZER. Of course not; no. 

Senator BENNET. What about the members of the EU? Are any 

members of the EU hostile economic competitors? 

Ambassador LIGHTHIZER. In my view, they are not. 

Senator BENNET. Okay. I think it is very important to make 

these distinctions, because our allies are hearing the administration describe them as hostile, when I do not think you mean to describe them as hostile. The President may have a different view, 

but they are hearing that. And I want you to know that, because 

we are hearing it as well. 

I wanted also to go back to the discussion about agriculture. You 

pointed out that agriculture as a sector is the most vulnerable to 

retaliation of any sector that we have. Is that right? 

Ambassador LIGHTHIZER. I mean, it is certainly in everybody’s 

crosshairs—— 

Senator BENNET. And we have already seen—— 

Ambassador LIGHTHIZER. And it is vulnerable. 

Senator BENNET. We have already seen it with sorghum. 

Ambassador LIGHTHIZER. And it is even more vulnerable under 

the current economic environment. 

Senator BENNET. Exactly, exactly. And you said you were sympathetic to that, that was the word you used, but that we could not 

give up our right to defend our action and that maybe the Congress 

could pass something up here that could mitigate the damage that 

is being done. 

That is not what our farmers and ranchers want. Our farmers 

and ranchers want to be able to export the goods that they are producing here in the United States. They do not need sympathy; they 

need the administration to act responsibly. 

And along the lines of what I was asking earlier about—our describing other countries as hostile—do you think the President has 

any awareness, Mr. Lighthizer, about the effect he has on the domestic politics of our allies when he makes these tweets or decides 

one day that we ought to increase tariffs by 25 percent on steel and 

aluminum? 

22 

I think he thinks he is scaring other people, but he is not really 

having that effect. I wonder whether you have a sense of the domestic politics in these other places. 

Ambassador LIGHTHIZER. Listen, I am a Trump supporter. I love 

the President. I am a trade expert. I am not going to get engaged 

with you in a political thing. That is not what I came here to do. 

Senator BENNET. Well, it is not a political thing. Would you 

agree that what he says can have an effect on agricultural commodity prices in the United States, if people believe that other 

countries are going to retaliate against the proposed trade policies 

of the United States, that our farmers and ranchers are already 

being affected in the commodity prices that they are seeing as a result of this rhetoric? Would you agree that there is a danger to 

that? 

Ambassador LIGHTHIZER. What I would agree with is that we 

have trade rights that we have to defend and that too often farmers get the short end of the stick. 

Senator BENNET. Well, that is right; they do. 

Ambassador LIGHTHIZER. And we have to deal with—we cannot 

give up. The fact that we have an $800-billion deficit—— 

Senator BENNET. Nobody is asking you—I am not asking you to 

do that. 

Ambassador LIGHTHIZER. So we have to balance this. 

Senator BENNET. I am asking you to understand that everybody 

is listening and that our farmers and ranchers are bearing the 

brunt of it. And what I am not asking you to do is not fight for 

our fair rights to trade. That is not what I am asking for. 

What I am asking for is for us to do it in a way that does not 

inadvertently—I hope it is inadvertent; I am sure it is not advertent—drive commodity prices down at a moment when our farmers 

and ranchers can least withstand that. 

Ambassador LIGHTHIZER. I am sorry, what was the question? 

Senator BENNET. I will just finish by saying I do not think it 

helps when the President—now, I am sure he did not consult with 

anybody here before he announced his tariffs—when he said, I am 

going to raise tariffs by 25 percent, and then 3 weeks later you 

come with a list of Australia, Korea, Canada, Mexico, the European 

Union, and some others and say, sorry, we did not really mean it. 

This is not a business transaction, you know, for real estate in 

New York City. This is the trade policy of the United States of 

America. And I wish you guys would consult with us, or just the 

Republicans even, so that you can understand the effect that you 

are having in places like Weld County, CO, where we need to have 

strong commodity prices and where 80 percent of our wheat is exported overseas. 

My time is up. I apologize, Mr. Chairman. 

I will just acknowledge that my farmers and ranchers know very 

well that the day that the President announced these tariff increases, TPP was being signed in Chile by the enumerated countries there, and they are still waiting for this administration to 

have what it suggested would be its unilateral trade negotiations 

with every member of TPP to see that their equities are being 

thought of by this administration. 

The CHAIRMAN. Senator, your time is up. 

23 

Senator BENNET. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Cantwell? 

Senator CANTWELL. Mr. Chairman, I understand I missed the 

feting of your birthday, but I guarantee you, my voice was not 

needed. I am not a very good singer. 

Senator BENNET. It could not have gotten worse. [Laughter.] 

Senator CANTWELL. But happy birthday. Happy birthday to you. 

The CHAIRMAN. It was plenty welcomed, though. I did not expect 

it. 

Senator CANTWELL. Okay. Well, happy birthday. 

The CHAIRMAN. Thank you, dear. 

Senator CANTWELL. Ambassador Lighthizer, the Export-Import 

Bank does not have a functioning quorum. There are $35 billion in 

pending transactions stuck in that pipeline. Do you agree that the 

Export-Import Bank needs a functioning quorum? 

Ambassador LIGHTHIZER. Yes. 

Senator CANTWELL. What are the actions the administration is 

going to take to get us a new nominee? 

Ambassador LIGHTHIZER. Well, first of all, Senator, as you know, 

that is not exactly the middle of my lane. But because it affects 

trade, it is something that I do care a great deal about. 

When I was here originally, you asked me a question and you did 

not discern the subtlety of my support. But since I am here and 

confirmed, I can be more straightforward. The answer is, I clearly 

support it. I am working with White House personnel. I am happy 

to talk to you about it. 

I think that Jeff Goettman, the COO, you ought to have in your 

office, unless you have met him. He is a very strong guy. My recommendation is that you sit down and talk to him. He is a guy who 

is somebody whom I have known for a long, long time. 

And I am working with White House personnel. I realize it is a 

tricky issue, but I want to work with you on it to the extent I can, 

because I think it is important. And I think you could probably 

snap your fingers and get $20 billion worth of U.S. sales. 

Senator CANTWELL. I am sorry, Mr. Ambassador; who are you 

talking about? 

Ambassador LIGHTHIZER. The COO of the Ex-Im Bank is a guy 

named Jeff Goettman. He is a person whom I know well. He was 

put there, and he is the Chief Operating Officer. He is very worried 

about everything that you are worried about. 

Senator CANTWELL. Okay. How are you suggesting we free up 

this—was that a snap of the fingers? Because believe me, today I 

would—— 

Ambassador LIGHTHIZER. No, no, no. No, I was saying if you can 

get the Ex-Im Bank operating again, you will find exports very 

quickly, a bunch of pent-up demand. 

Senator CANTWELL. Trust me, I get that. So I am asking you, as 

part of the administration whose job it is to worry about trade, how 

are we going to get this nominee up from the White House—and 

somebody who actually supports the bank, not supports dismantling the bank? 

Ambassador LIGHTHIZER. Well, I am working with—I am happy 

to work with you—I am working with White House personnel. It 

24 

is not exactly what is in my level of responsibility, although I am 

an ex-officio on the bank. 

I agree with you completely in terms of outcome. And I am happy 

to talk to you offline and try to figure out some solution. You know 

the problem better than I do for sure, because the problem is not 

in the administration. 

Senator CANTWELL. The problem is not the—don’t you think that 

the White House needs to send us a name of somebody who supports the bank? 

Ambassador LIGHTHIZER. All I want is to have a quorum on the 

bank and have it start working. That is as far as my interest goes. 

I want it to become functional. I think that is what you want too. 

Senator CANTWELL. We will take you up on the offer—— 

Ambassador LIGHTHIZER. Okay. 

Senator CANTWELL [continuing]. So we work every day to make 

sure that great U.S. products can reach the customers in international markets. 

So speaking of that, one of my predecessors—I am kind of 

amazed that he said this—Warren Magnuson, said, ‘‘We cannot afford to ignore or misunderstand China.’’ So I am pretty sure he 

probably said that in the 1970s or 1980s. Why? Because he realized 

that China was not only a market, but a competitor. 

So I am somebody who believes in competition. There are days 

when we are going to compete with them, and there are days when 

we are going to cooperate, depending on what the agenda is. 

So what avenues are we going to take to protect the $7-billion 

export agricultural market from my State from being retaliated 

against in this trade war that the President is basically embracing? 

Ambassador LIGHTHIZER. Well, I would say there are a variety 

of things that I guess I would comment on. Number one, I do not 

think the President is embracing a trade war. I think that is not 

an accurate statement. 

Senator CANTWELL. I am just talking about his tweets. If he has 

backed off on that—I believe anybody can learn, and if he has 

backed off on that, that is great. 

Ambassador LIGHTHIZER. I do not believe the President intends 

to start a trade war, so I fundamentally disagree with the first part 

of what you said. 

Senator CANTWELL. So this tariff, increasing the cost of products 

imported from China, you do not think is going to add to this? 

Ambassador LIGHTHIZER. Well, let me ask you this, because I 

know you care about things beyond just the items that would be 

retaliated against. We have a $375-billion trade deficit in goods 

with China, the biggest in the history of the world between two 

countries, probably times five. All right? 

We have them engaging in unfair activity and stealing technology. And by the way, when they get down the road and develop 

aerospace and take over that industry—— 

Senator CANTWELL. They are not going to take over aerospace, 

trust me. 

Ambassador LIGHTHIZER. Well, they seem to have it on their list 

of China 2025. I know you are familiar with that. Aerospace and 

aeronautic equipment is one of the areas where they are taking 

25 

technology and expecting to become the dominant player. So I 

know you are concerned about these other issues too. 

We had an enormous amount of discussion about retaliation. I 

am happy to reiterate it right now if you—well, perhaps not. 

Senator CANTWELL. No. I guess here is where I am. I want a 

more sophisticated approach. I get that a kind of stomp-your-feet 

approach makes some people feel good. But in the integrated economy that we already have, it is more complex. 

I think the S&ED—whether you are talking about Hank Paulson 

getting them to readjust on monetary policy or what we were able 

to do in getting a clean-energy strategy or the agreement we got 

on cybersecurity, which needs to be updated—it takes constant dialogue. It is not that there is not a WTO structure and complaints 

to be filed. But the notion that the President thinks and has said 

with his Commerce Secretary many times that there will be collateral damage, that there will be a retaliation and that is just part 

of what is going to happen, is just not something I think that an 

economy like the State of Washington, which is so trade-dependent, 

is ready to embrace. 

They look at this very retro 1980s view of policy: let us start a 

trade war. We would like something more sophisticated. 

Thank you, Mr. Chairman. My time is expired. 

The CHAIRMAN. Thank you, Senator. 

Senator Casey? 

Senator CASEY. Thank you, Mr. Chairman. 

Ambassador LIGHTHIZER. Mr. Chairman, at some point if I could 

have a minute, I would like to respond to that—— 

The CHAIRMAN. Sure. 

Ambassador LIGHTHIZER [continuing]. Because I think it is just 

fundamentally wrong. If this is the right time, I will do it. Or I will 

do it at another time perhaps. 

The CHAIRMAN. No, this would be fine. Go ahead and respond. 

Ambassador LIGHTHIZER. Yes. I would say this. To suggest that 

what we are doing is not sophisticated or nuanced is nonsense. 

I would also suggest to you that if you look at these dialogues 

that we have had—and we have had a bunch of them, all right— 

China joined the WTO in 2002. Before that, we had a George Herbert Walker Bush action against China for IP—no result. We had 

a Clinton 301 action against China for IP—no result. All right? 

Now we start the JCCT, we start the Strategic Economic Dialogue. The deficit goes from about 100 to about 200 to about 250 

billion. Then they decide while we are talking and getting essentially nothing done through these years of discussions, they say, 

well, here is the problem: the Strategic Economic Dialogue is not 

working; let us have a Strategic and Economic Dialogue. So they 

put that on the table. 

They do that for a couple of years—the trade deficit continues to 

go up with every one of these. I have a chart that illustrates this, 

Mr. Chairman. 

We have had every one of these so-called dialogues and have accomplished almost nothing. The trade deficit has gotten worse with 

respect to every single one of them. 

And then this President came in and said, we are going to do exactly what you said. We are going to start a comprehensive ecoVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 R:\DOCS\36528.000 TIM
26 

nomic dialogue. And we are going to do it differently. We are going 

to have short-term goals. We are going to say, here are the specific 

things. And we had a 100-day plan. 

At the end of the 100 days, we essentially got nothing. And the 

trade deficit last year shockingly went up again. So the idea that 

there is not a plan, that we are not exploring all of this, is just 

wrong. 

So what we decided to do was focus the 301 on one of the things 

that has specifically been a problem and affects almost every single 

part of our economy, even agriculture. 

And during the course of all these dialogues—you mentioned one 

of the early ones, Senator—during the course of all that, on 10 different occasions China made specific commitments to do things in 

the IP area and did none of them. 

Senator CANTWELL. Ten seconds, Mr. Chairman. 

The lunacy of an administration that cannot make a layup on the 

Export-Import Bank and increase exports and yet wants to shoot 

consumers in the foot with a tariff costing us something as the next 

step is something I disagree with. 

Thank you. 

The CHAIRMAN. Senator Casey? 

Senator CASEY. Mr. Chairman, thank you very much, and happy 

birthday. 

The CHAIRMAN. Well, thank you. 

Senator CASEY. Pretty bad singers, but we tried. [Laughter.] 

Mr. Lighthizer, thank you for being here and for your work, for 

your willingness to come back into public service at a difficult time. 

I was struck by a lot of your opening statement, but one sentence 

that kind of jumped off the page, at the top of page 2 is, quote, 

‘‘The costs of globalization are falling most heavily on workers.’’ 

And I think it is those last five words that are maybe the most important thing you said: ‘‘falling most heavily on workers.’’ 

That has been the experience of Pennsylvania. We have had a 

record manufacturing job loss in the last generation. You know a 

lot of the numbers, but the numbers do not tell the story—just economic devastation that I cannot even imagine, lives completely destroyed, the trauma and suffering that flow from the job loss: suicides and family breakups and all kinds of trauma is probably the 

best way to describe it. 

And it started to present itself in the 1980s. There was a 4- or 

5-year period in the early 1980s when about half of the steelworker 

jobs in southwestern Pennsylvania were lost. It went from close to 

90,000 to 45,000 in a couple of years, and it just continued from 

there. And I have to say that I do not think in the last generation 

either party has done nearly enough. Neither party has had, in my 

judgment—and this applies to multiple administrations, multiple 

Congresses—an answer for those workers. A lot of talk, a lot of 

studies, a lot of theorizing, but no answers, or at least no answers 

that delivered results. 

And if you do not have a strategy that undergirds the development of an answer, I would say I do not think you can get there. 

So I am asking you about strategy today. 

27 

Obviously, to address some of the root causes of this problem, 

you have to have a strategy that addresses global steel overcapacity, which is the most current discussion topic. 

Preventing China from stealing our future—there are so many 

instances where China has cheated over and over and over again 

on currency and intellectual property, trade deals. And when they 

cheat, we lose jobs in Pennsylvania and just get hammered over 

and over again, and there is almost no reaction to that, no response. 

And then thirdly, we should be working with allies to address 

systemic trade cheaters generally, not just China. 

So if you could—and I know this is a lot, and you can amplify 

it in writing if you want—but if you could address your strategy 

or the administration’s strategy on global steel overcapacity, addressing that, pushing back on China, and then, thirdly, beyond 

the cheating that China does, working with allies to address those 

systemic trade cheaters. 

Ambassador LIGHTHIZER. First of all, we do not have an enormous amount of time, but I would shorten my response by saying 

I agree with almost every single thing you said. And I only add the 

‘‘almost’’ because I would have to dice it to make sure there was 

not something notionally. 

I agree with all of it. I think you are exactly right as a matter 

of fact, and I think you are exactly right as a matter of tone. 

And I think that administrations for years have not dealt with 

the problem. And it is not one of those problems that is going to 

go away with the invisible hand, because there is no invisible hand. 

Everybody else is acting. 

I would also note that in the 1980s it was, at that point, a serious problem. Also at that point, the Reagan administration—and I 

had the honor to do this—negotiated voluntary restraint agreements with most of the people in the world, and it had a huge impact and saved that industry for that time, but not fundamentally. 

So I start off by saying I completely agree with you. 

Now, in terms of global steel capacity, you know the issues as 

well as I do. I mean, I have been dealing with it and litigating it 

and representing steel companies and representing workers. I 

agree with you that it is far more devastating than anyone who 

does not see it realizes. It is just absolutely devastating. 

And it is way beyond some guy not having a job. It is families 

breaking up and opioid addiction and a breakdown of society. I 

mean, it is just so fundamental. 

And the President is very—I know you have talked to him—the 

President is very moved by this. He is very empathetic on these 

kinds of things and very, very sympathetic to the people who are 

suffering. 

So steel—what do you do on steel? You bring cases against unfair 

trade, and I think the industry has done that, the unions have 

done that, and this administration has been very good at prosecuting these and getting them to conclusion. But that only solves 

the problem with steel coming in here; it does not solve the problem with China doing it everywhere else. 

So the President’s view is that you try to do this with 232. That, 

I might say, is after years of basic discussion. And we can talk 

28 

about this Global Forum on Steel, because it is a classic example 

of the kind of thing that I was trying to discuss with Senator Cantwell. And that is, there are so many opportunities for these kinds 

of discussions, but people understand more and more that they do 

not go anywhere, these discussions, and almost nothing has been 

accomplished in that forum. 

So you try to make it expensive for China to have excess capacity, and that is what we are trying to do in the 232—that is what 

you are trying to do with trade cases. 

And then you work closely with our allies. And we have a trilateral group between the United States, Europe in the form of the 

EU, and USTR and this administration. We have already had two 

meetings. We had one right after the 232. And even with the disruption of that, the three of us put out a statement saying exactly 

what we were doing. 

We have to deal with this problem of non-economic capacity creation and its negative effects on us. And I would love it if it was 

just steel, but it is not just steel; it is not just steel and aluminum. 

It is semiconductors; it is going to be all these things on this list. 

We are literally going to be the reciprocal of what other people do 

not want if we do not start standing up. 

I mean, we have a plan: we are trying to make it more expensive 

for them to do these noneconomic things. Unfortunately, the WTO 

is not designed to deal with this kind of a problem. 

So I should probably stop talking. 

So we decided an additional action would be the 301 on IP. We 

expect to bring additional ones afterwards in areas where we do 

not have reciprocal response and where we are competing against 

states or against people who operate in a noneconomic way. 

We are very comfortable when we are competing in a reciprocal 

way on the basis of economics. And win or lose, it is fine, but we 

cannot be in a position where our people cannot compete because 

they are competing with governments or competing with rules that 

discriminate against them. 

Senator CASEY. Thanks. And I will have some questions for the 

record that deal with the NAFTA renegotiation on labor issues. 

But, Mr. Chairman, thank you for the extra time. 

The CHAIRMAN. Thanks, Senator. 

Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. And by the way, 

happy birthday, Mr. Chairman. 

The CHAIRMAN. Well, thank you very much. 

Senator THUNE. I heard I missed the opportunity to sing to you, 

but I am sure that was, with all the beautiful voices on this committee, quite a thing. 

Senator WYDEN. Senator Bennet said you did not miss anything. 

[Laughter.] 

Senator THUNE. Okay. 

Ambassador, as I have conveyed to you before, while I support 

the administration’s overall goal of free, fair, and reciprocal trade, 

I am very concerned about the fact that too little attention is being 

given to the collateral effect that many of these actions could have 

on other sectors of the economy, particularly the agricultural sector, which is critically important in my State of South Dakota. And 

29 

I look forward to hearing about the administration’s plans to address some of those effects. 

But I wanted to take up an issue that is in this year’s trade 

agenda. You note that President Trump gave as a reason for withdrawing from the negotiations of the TPP that there is ‘‘no way to 

fix the TPP and that we do not need to enter into another massive 

international agreement that ties us up and binds us down.’’ That 

is a direct quote. 

So the question is, given the President’s recent remarks at the 

Davos World Economic Forum in January that he would be open 

to rejoining the agreement, what is the administration’s current approach to the Trans-Pacific Partnership? 

Ambassador LIGHTHIZER. Thank you, Senator. So as you say, the 

President is not in favor of TPP. He said he went after it in the 

campaign. He was elected, and he did get out. He then indicated 

that he would, and I think his exact words were, he would be willing to discuss an improved TPP either with the 11 or individually 

with countries. 

So the way I dice it is as follows. There are 11 countries in the 

TPP. The United States has an FTA with six of those, including all 

of the big economies with the exception of Japan. So of the five 

with which we do not have an agreement right now, you have $5 

trillion in the case of Japan, where we have asked for and hopefully at the appropriate time will begin a process of negotiating an 

FTA. The next two of consequence are Malaysia, where the number 

is probably $300 trillion and change—this is their entire GDP—and 

then Vietnam, where it is about $295 trillion. And then after that, 

they get smaller fairly quickly. 

So I guess what I am saying is, you could have a couple of FTA 

agreements that would essentially bring in a vast majority, 95 percent, of the growth potential that you could get out of a TPP. And 

that might be a more effective way to do it. 

And then your response might be, well, you also want to upgrade 

these other six. And that is probably something that ought to be 

done too. So there are more ways to accomplish this. And it is one 

of these things on which there is no right answer. 

Is that easier than sitting down and getting 11 people who have 

just come to agreement to change that agreement? I mean, that is 

something. You do more negotiating than I do, because you have 

to do that every day with your colleagues to make that judgment. 

In my opinion, I am better off going to these other countries, and 

it is easier than trying to get 11 people to change something that 

they just agreed to. 

Senator THUNE. Let me shift to another issue. There is a significant amount of grain that is exported from my State of South Dakota. It goes through ports in the Pacific Northwest to Asian buyers. So it is countries like Japan, South Korea, and they are among 

our most active and loyal customers when it comes to corn and 

other grains. 

And there are countries in Southeast Asia, as you mentioned, 

that are among the fastest-growing feed grain markets in the 

world. So my question is, what is the administration currently 

doing to maintain and build on the relationships that we have with 

these key Asian countries absent a TPP approach? 

30 

Ambassador LIGHTHIZER. Well, I would say there is an enormous 

amount of stuff that is being done at USDA, of which you, I am 

sure, know more about than I do. 

I would also point out, as I just mentioned, that Japan is a 

country with which it is reasonable to suggest the United States 

have an FTA. And we have asked, and they are in their own position and their own political thing. But I suspect at some point that 

will be something to move forward with. 

With respect to Korea, they are in a different category, right? 

Korea is not in the TPP. 

Senator THUNE. Right. 

Ambassador LIGHTHIZER. They are an independent country. And 

in the case of Korea, we are renegotiating KORUS. And I think 

that even the course of that renegotiation has been good for your 

agriculture sales. And I would note that Korea has bought a billion 

dollars more agriculture in the last year than they did before, and 

I suspect it is not unrelated to the fact that they want to get the 

deficit down and they want to show that this is an important 

agreement for the United States. I think it is an example of ways 

that pressure does have a positive effect on agriculture sales, and 

we ought to be using that pressure when we can. 

So my hope is that we end up with a successful negotiation with 

Korea. If we do, I expect it to lead to additional sales. 

With respect to Japan, the other one you just mentioned, that is, 

you know, more or less the position that I have. I think that we 

have asked; it is reasonable to expect at the appropriate time. This 

is probably not the appropriate time right now because they just 

started the TPP, but that is something that is coming very quickly. 

The CHAIRMAN. Senator Warner? 

Senator WARNER. Thank you, Mr. Chairman. 

Ambassador Lighthizer, good to see you again. 

Let me first of all add my voice to two of my colleagues’. One, 

I completely agree with Senator Bennet that the President’s language about our allies, Mexico, Canada, EU—there are serious repercussions here. And I know you do not probably have access to 

his tweetage, but some restraint would be terribly appropriate. 

And I also agree with Senator Cantwell, and you said you support the Export-Import Bank. Let us get it functioning, the sooner 

the better. 

What I am going to talk about is something that falls in your 

lane, but not entirely in your lane, and that is, I think, the incredible growing threat of China. 

You outlined some aspects of the China 2025 plan. What I did 

not hear you outline were areas—and the ranking member and I 

serve on the Intelligence Committee—that China has an extraordinarily organized plan of investment in: artificial intelligence, machine learning, quantum computing, where their goal is to leapfrog 

ahead of today’s technologies and not be our equal, but bypass us. 

We have talked a lot, and I think, again, for many administrations, we have allowed China to steal our intellectual property with 

virtually no pushback. 

We now have an unprecedented organized effort by Chinese investors to invest actually in early-stage companies that we have 

31 

never seen before. And it is organized in a way that companies are 

not aware of the concerns I believe they should have. 

I think we see in an unprecedented way the Chinese use their 

students who come over to this country and then, again, go back, 

oftentimes with intellectual property—and again, in an organized 

way that did not exist 2 or 3 years ago. 

I have huge concerns about the number of American companies, 

frankly, that have been so anxious to access the Chinese market 

that they give up their intellectual property, they give up their 

source codes, in ways they would never do for entering into any 

other nation. 

And you made an announcement yesterday, the administration 

did, about some areas they were going to try to concentrate on in 

trying to take on IP. I would like you to spell that out a little bit 

more. 

But what I am concerned about is, quietly in some of the companies, like Huawei and Alibaba that people may be aware of—but 

there are 20-plus Chinese tech companies all with valuations north 

of $20 billion. 

Senator Cornyn—I am trying to work with him as well. We are 

trying to reform some of the CFIUS process. But the CFIUS process alone will not get us there when some of these companies have 

such breadth and scope they can enter into our American market 

directly. 

Now again, this is a little bit outside of your lane, but I would 

hope, rather than simply focusing on aluminum and steel, that you 

would look in a much more organized way at the national security 

concerns, the protection of our intellectual property vis-a`-vis China 

and how we can have a, not just trade policy, but a whole-ofgovernment policy to frankly warn American companies before they 

allow, I believe, some of these Chinese tech companies to take over 

our markets. They operate on totally different principles than any 

true market-based economy. 

They have a market plan, they have industrial planning in ways 

that are exponentially greater—not something we should repeat. 

But how is the administration and how is USTR going to help take 

on this issue? 

Ambassador LIGHTHIZER. Well, I would say, first of all, it is very 

encouraging to hear your description of the problem. I totally agree 

with it. I think in the final analysis, if you say what keeps me 

awake at night, that is what keeps me awake at night. 

If you ask what is going to define whether or not I have done 

my job or you have done yours, it is going to be how we deal with 

this issue. So it is very encouraging. 

Whenever I hear it, I always think, why doesn’t the Intelligence 

Committee take so many of these other Senators who are not on 

it and make them sit in the SCIF and say, here, look at this stuff? 

And I think if you did, we would have a lot more people who are 

interested and sympathetic to your view. 

It strikes me as almost impossible for a smart person to be exposed to what you are exposed to in that other committee and not 

conclude the way you conclude. So I completely agree with it. 

I would say it is because of that that we have focused as our first 

major thing—we have NAFTA, we have KORUS, the steel thing is 

32 

what it is, we have cases that were brought. But from my point of 

view, the most important single thing was this 301 on IP. And it 

was because I start precisely where you are. 

And I agree with you on this issue. I hope that Senators spend 

time on it, this issue of putting a million dollars into 10 little 

things and have one of them pop up and now you are in a position 

where it is likely a joint-use technology. It is going to have whatever the military effects are, but it is going to have all these effects 

in terms of our economy going forward—developed in the United 

States and gone from the United States. 

So our remedy, in the 301, will deal with that, I believe, in ways 

that you will find helpful. And as we announce it and move forward, I hope that you will engage with the Secretary of Treasury 

specifically, just person-to-person on this issue, this issue of investment that you just mentioned. 

Senator WARNER. Mr. Chairman, let me just add one quick comment. 

Some of the low-hanging fruit—and this is outside of your lane— 

we have a 700,000-person backlog on security clearances, yet what 

ought to be one of our top priorities is making sure the chief security officer of every Fortune 1000 company has a security clearance 

so we can share the vulnerabilities that are out there and some of 

the nefarious means that some of these Chinese tech companies are 

going to use. 

The CHAIRMAN. Thank you, Senator. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Ambassador, thank you for your testimony. 

In almost all past trade negotiations, intellectual property proved 

to be a sticking point that required high-level political decisions 

from us and our trading partners at the final stages of negotiations. 

Given the IP concerns we have in NAFTA, especially those involving Canada’s treatment of innovative, lifesaving U.S. medicines, what is your strategy for closing out the toughest chapters 

and delivering a strong IP chapter for U.S. innovators? 

And what are you doing to make sure that intellectual property 

is a top priority in these negotiations so that innovators in my 

State of New Jersey and others around the country will feel protected? 

Ambassador LIGHTHIZER. Well, of course, I am sure by that you 

are not suggesting that I give out my strategy. But I will say this. 

I am in complete agreement. 

I think, as you say, in almost every single negotiation, IP is always the last thing to go. And the principal reason is that we are 

basically creators and the people we are negotiating with are basically takers. And so they have every instinct and incentive to want 

to have weak laws so they can get our IP. And we have the ones 

to do the opposite. 

And ironically—and it is always a surprise to people, but it will 

not be to you, of course—Canada is very much in the group of countries that are the takers and not the protectors. 

We think of Canada as having a similar view on most things that 

we do, and we think they would have that view on IP. I know you 

33 

know, and Senator Hatch for sure knows, that that is not the case; 

they have very weak laws. 

So it is a high priority. It is something that will go down to the 

end and that I expect to—I view myself as being mandated by the 

committee to make substantial improvements. 

Senator MENENDEZ. So the bottom line is, I get concerned, since 

this is virtually always the last thing. After everything else is 

agreed to, then why have a sticking point on IP? 

But I will take from your comment—and correct me if I am 

wrong—that you intend to push for strong IP standards in the 

NAFTA agreement. 

Ambassador LIGHTHIZER. That is absolutely true. 

Senator MENENDEZ. Now, would you agree that having credibility 

when negotiating is essential to developing trust and getting a good 

deal for the United States in these negotiations? 

Ambassador LIGHTHIZER. Yes, I would. 

Senator MENENDEZ. Did I hear you say you would? I’m sorry. 

Ambassador LIGHTHIZER. Yes. It struck me as an easy question 

to answer. 

Senator MENENDEZ. Okay. Well, it would seem so. But have you 

ever briefed the President on the status of our trade relationship 

with Canada? 

Ambassador LIGHTHIZER. Are you going to ask me to go through 

the numbers? I am happy to do it. 

Senator MENENDEZ. No, I know the numbers. I am asking you, 

have you briefed the President? 

Ambassador LIGHTHIZER. I have talked to him a lot, yes, and he 

was completely right that the numbers are all screwy. And I am 

happy to spend time—I do not—— 

Senator MENENDEZ. So let me read to you what your website 

says. USTR’s website says that the U.S. goods and services trade 

surplus with Canada was $12.5 billion in 2016. Is that false? Is 

that false, ‘‘yes’’ or ‘‘no’’? 

Ambassador LIGHTHIZER. I am sorry; would you repeat the question? 

Senator MENENDEZ. Sure. According to USTR’s website, the U.S. 

goods and services trade surplus with Canada was $12.5 billion in 

2016. Is that true or false, what is on your website? 

Ambassador LIGHTHIZER. If it is on there, it could be. Yes, I will 

concede that it is. I am sure you would not give me misinformation, 

but I do not remember that number. 

Senator MENENDEZ. So if it is on your website, I would assume 

that you maintain that it is a truism, right? 

Ambassador LIGHTHIZER. Well, I would assume it is a version of 

the numbers. I am happy to go through these numbers with you, 

if you like. I can spend some time on it, if you like. 

Senator MENENDEZ. Well, the point is that, as I think about, 

whether it is NAFTA or any other place in the world, that credibility is important to any negotiation. So when the President has 

a blatant disregard for the truth when discussing our trade surplus 

with Canada’s prime minister, I cannot understand how that helps 

you in your negotiations. 

Ambassador LIGHTHIZER. That is just completely wrong. That is 

just completely wrong. So here are the numbers. In 2017, the—— 

34 

Senator MENENDEZ. Well, what numbers are you going to give 

me that are different than what is on your website? 

Ambassador LIGHTHIZER. Can I—— 

Senator MENENDEZ. Are you going to give me—no, here is the 

point. I have limited time. 

Ambassador LIGHTHIZER. I am happy to go through this. 

Senator MENENDEZ. Are you going to give me different numbers 

than what is on your website? 

Ambassador LIGHTHIZER. Look, I am happy to go through this. 

If you raise the issue, I am happy to go through it. Do you want 

me to go through it? 

Senator MENENDEZ. Are you going to give me different numbers 

than what is on your website? 

Ambassador LIGHTHIZER. I am going to give you the numbers. I 

am happy to do it and explain the issue. I know what you really 

want to do is get an explanation of these numbers rather than 

make a political point, so I—— 

Senator MENENDEZ. What I really want to do is reconcile—if you 

are going to tell me something different than what is on your 

website, then I am happy to listen to it. 

Ambassador LIGHTHIZER. I am going to tell you—— 

Senator MENENDEZ. If it is the same thing as your website, I am 

not quite sure. 

Ambassador LIGHTHIZER. I am going to give you the numbers. 

Can I do that or not? 

Senator MENENDEZ. Well, let me go to a last question, because 

I take your website to have the right numbers. You told me that 

if it is on your website, it is true. So I take your website to be true. 

Ambassador LIGHTHIZER. Unfortunately, like most things in 

trade, it is very complicated, and there are other numbers that 

show a massive trade deficit with Canada. And I am happy to take 

you through it. 

Senator MENENDEZ. Then you should change your website, because the average American, including a member of the Senate, 

would look at your website and it says that the, according to your 

website, U.S. goods and services trade surplus—goods and services—with Canada was $12.5 billion. 

So let me ask you this. Do you believe that an optional dispute 

mechanism is an effective way to make labor standards enforceable 

in NAFTA? 

Ambassador LIGHTHIZER. An optional—I am sorry, an optional—— 

Senator MENENDEZ. An optional dispute mechanism. 

Ambassador LIGHTHIZER. I have to run, as the chairman knows, 

so I cannot very well stand here and have you make this statement 

which I do not agree with at all on the issue of these trade numbers. So if you will not get—when people—— 

Senator MENENDEZ. Look, Ambassador, I am asking you a different question. 

Ambassador LIGHTHIZER. I will submit, Mr. Chairman—can I 

submit in writing a response to the Senator on the trade numbers? 

The CHAIRMAN. We would be happy to have that. 

Ambassador LIGHTHIZER. Thank you. 

The CHAIRMAN. We would be happy to have that. 

35 

Senator MENENDEZ. Can you answer me on the optional dispute 

trade mechanism? 

Ambassador LIGHTHIZER. Perhaps Senator McCaskill will hear 

my point. 

Senator MENENDEZ. Ambassador? 

Ambassador LIGHTHIZER. Pardon me? 

Senator MENENDEZ. Can you answer me on the optional dispute 

mechanism? Do you think that is an effective way to make labor 

standards enforceable under NAFTA? 

Ambassador LIGHTHIZER. An optional dispute—oh, so you are 

saying—I think we ought to have labor standards enforced to the 

same extent other things are enforced, yes. 

Senator MENENDEZ. Yes, so an optional dispute mechanism is an 

appropriate way to go ahead? 

The CHAIRMAN. Senator, your time is up. 

Senator McCaskill? 

Senator MENENDEZ. Mr. Chairman, I hope that witnesses in the 

future can be responsive to questions, because anyone can eat up 

my time. I have been around here long enough—26 years between 

the House and the Senate—to know when there is a filibuster 

going on. 

So at the end of the day, if you ask a question and you cannot 

get an answer, and the chairman is going to say your time is up— 

I would like to get an answer. 

Senator WYDEN. Mr. Chairman, if Senator Menendez—— 

The CHAIRMAN. I am not against getting an answer, but—— 

Senator WYDEN. Senator Menendez, would you like to make sure 

you get an answer before you walk out of the room? 

Senator MENENDEZ. I would like to. 

Senator WYDEN. Go ahead. 

The CHAIRMAN. Let us give him an answer—whatever. 

Ambassador LIGHTHIZER. I think we ought to have enforceable 

labor standards, enforced the same way everything—I guess I am 

not quite getting the point of what you are saying. I think labor 

standards—I have been on record, I have said it many times— 

ought to be in the agreement in NAFTA and enforced in the same 

way everything else in the agreement is enforced. That has been 

my position from the beginning. 

The CHAIRMAN. Okay. 

Senator McCaskill? 

Senator MCCASKILL. Thank you, Mr. Chairman. 

I remember talking to you in my office before your confirmation, 

Mr. Lighthizer, and I remember telling you how worried I was 

about ag. And you said, well, you should be. And you know, it was 

startling to me. First of all, I appreciated your candor; that is unusual in this town to have somebody be that honest about it. 

And I know you said to one of the other Senators earlier that, 

you know, it is going to be unfair what happens to Missouri soybeans, but it is for the national good. Well, it does not feel like it 

is for the national good to the soybean farmers. 

You know, this is the thing about trade: in efforts to make trade 

more fair, there are always winners and losers in the countries 

that are trying to push the envelope in terms of trade. And ag is 

going to be a big loser here if this goes down the path that we are 

36 

going down, especially if you look at where our ag products go in 

Missouri, which is Canada, number one; Mexico, number two; and 

for soybeans China, number three. 

So it is really worrisome to an economy that is dependent on agriculture that we are going to say, well, it is for the national good 

and you guys are just going to have to power through it. 

I wanted to specifically—and also, of course, the other one I am 

worried about is Boeing. Do you anticipate that the airplane sales 

that President Trump, many of which had been in the works for 

years before he became President, do you anticipate all of those 

will go through with what you all are doing? Do you game this out 

with your algorithms that Boeing is going to continue to be able to 

compete in an evenhanded way with Airbus or, more importantly, 

with the Chinese companies that are developing competitors to the 

Boeing aircraft? 

Ambassador LIGHTHIZER. What I said, and what I do say, is really that I share your concern. It was not meant—— 

Senator MCCASKILL. No. I know you were not being—you were 

not saying, ‘‘Too bad for them.’’ I was not trying to make you Simon 

Legree here. You just acknowledged that ag is going to be the easiest target for retaliation. 

Ambassador LIGHTHIZER. Yes. And it is something that I worry 

about a lot. 

Senator MCCASKILL. Yes. 

Ambassador LIGHTHIZER. And so does Secretary Perdue and so 

does the President. So with respect to NAFTA and your sales in 

NAFTA, it is my hope that we have a successful agreement and 

those sales are not threatened. So I want to kind of bake that in. 

It is also my hope that we enter into FTAs that increase sales. 

And I have tried to make that point here today too. 

Now, if we bring in intellectual property, I mean, if the President 

decides to do something on the 301, will China retaliate? That is 

something that is a real risk that we have talked about, we have 

gamed out; we have to decide what we want to do when it happens. 

And obviously, it is not something I want to talk to you about in 

this forum, but I want to sit down and get your counsel on what 

you think we ought to do. 

Senator MCCASKILL. Yes, I would love to, because you did name 

aerospace on the list. 

Ambassador LIGHTHIZER. And aerospace is something that 

specifically the Chinese have decided to be part of their China 

2025, and they expect to dominate in that area. And they are 

spending over $300 billion to do that. 

And they are going to—and Boeing for sure knows. I mean, they 

are very focused on this threat. They are focused on the retaliation 

threat of sales now, and they are focused on the noneconomic competition they are going to have to face from China down the road. 

So Boeing is in this very peculiar position where they see longterm—— 

Senator MCCASKILL. I would call it ‘‘precarious’’ rather than ‘‘peculiar.’’ 

Ambassador LIGHTHIZER. Yes, precarious. Long-term, they have 

a real risk from China in terms of what China is trying to do, and 

they have a short-term problem. So we are sympathetic to that. 

37 

And to the extent it comes to real actions afterwards, I want to 

work with you on that so that you are satisfied and—— 

Senator MCCASKILL. Okay. I am going to try to get to one more 

area before I get cut off. Japan was not on the list that you gave 

of the countries that have been exempted. Correct? 

Ambassador LIGHTHIZER. No. 

Senator MCCASKILL. Okay. And so some of this issue is about 

businesses that are relying on specialized steel imports. It is not 

a matter of price; it is a matter of availability. I mean, I have a 

small company in Joplin that relies on Japanese specialized steel 

to make the bearings, and it is not available in the United States. 

So it is not one of these things where they can actually turn to 

a more expensive—they are not bringing this in because they are 

getting it cheaper than they can get it in the United States. They 

are bringing it in because they cannot get it. 

Do you have some kind of mechanism in place to rocket those 

kinds of manufacturing facilities to the top of your exemption list? 

Is there some way they can navigate this? Because they have no 

choice, if they want to stay in business, than to use this Japanese 

specialized steel they are using. 

Ambassador LIGHTHIZER. I agree with you. I am sympathetic. 

There is a process at the Department of Commerce to do that. I do 

not really have the people they do. 

But if you have a specific constituent that you say is somehow 

lost in this process, if you bring it to me, I will—— 

Senator MCCASKILL. I think all the small manufacturers are 

going to be lost in this process. It is 90 days, it is complicated, the 

tariff starts tomorrow. There has been nobody reaching out to these 

businesses that are going to be dramatically harmed by this to say, 

what can we do to facilitate you continuing to even get the product 

you must have? Nobody is doing that, Mr. Ambassador. 

The CHAIRMAN. Senator, your time is up. 

Senator Carper? 

Senator MCCASKILL. Okay. I just want to note for the record, Mr. 

Chairman, that earlier in the questioning everybody was going over 

2 and 3 minutes. When you get to the end of the table, man, it gets 

tough. 

Senator WYDEN. Mr. Chairman, the Senator has a valid point. 

Is there a response that the Senator wants from the Ambassador 

now before we wrap up? 

Senator MCCASKILL. I was just—— 

The CHAIRMAN. I do not have any problem with that, but it is 

just—— 

Ambassador LIGHTHIZER. No, I want to work with you. 

Senator MCCASKILL. It is just low-hanging fruit on trade. And 

the notion that you and Secretaries Ross and Mnuchin cannot get 

in the room and get Export-Import done is weird. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Well, thank you. 

Senator Carper? 

Senator CARPER. Ambassador, nice to see you. 

A number of my colleagues have raised agricultural concerns 

with respect to the renegotiation of NAFTA and the loss of TPP: 

tariffs, the imposition of tariffs, and what the trickle-down effect 

38 

might be on them and their livelihood. I just want to echo those 

sentiments. 

We only have three counties in Delaware. One of them, the 

southern-most county, is Sussex County, the third-largest county in 

America. Last time I checked, I think they were maybe the 

number-one soybean county east of the Appalachian Mountains. So 

soybeans have been mentioned here already; I want to just reiterate that. 

I have a question on services. I think between 2006 and 2016, 

service exports from my State more than doubled, I think from 

about $1.5 billion to $3 billion. And those exports, I am told, support close to 20,000 jobs, which is a lot of jobs for Delaware. 

This year’s annual Economic Report of the President reiterates 

the fact that the U.S. has a trading deficit in goods but, as you 

know, a surplus in services. The report goes on to say that focusing, this is a quote from the annual Economic Report of the President, ‘‘Focusing only on the trade in goods alone ignores the U.S. 

comparative advantage in services.’’ That is lifted right out of the 

report. And most of the administration’s focus today seems to be 

on goods. We hear very little about expanding trade opportunities 

for services. 

So I would just ask you two related questions. One, what is the 

administration doing to take advantage of our comparative advantage in exporting services? Two, what is the administration’s position on restarting talks on the Trade in Services Agreement? Those 

two questions, please. 

Ambassador LIGHTHIZER. Well, I would say, first of all, we acknowledge we have about, I think the number is about $750 billion 

worth of exports in services, and we have about $250 billion—I 

think these are approximately right—— 

Senator CARPER. And I would just ask, what is the administration doing to take advantage of our comparative advantage in exporting services? And what is the position on restarting talks on 

the Trade in Services Agreement? 

Ambassador LIGHTHIZER. Well, on the NAFTA issue, we have a 

very, very aggressive pro-services agenda involving market access 

in a whole variety of areas, including delivery of services, all of 

which are included in that area. On financial services, we have a 

very aggressive plan. On telecommunications, we are trying to lock 

in the kinds of improvements that the Mexicans have made in their 

own law in the digital trade area, which is, of course, part of services. We have a very aggressive agenda there. 

We have also started a negotiation, sort of under the auspices of 

the WTO. I say ‘‘sort of’’ because it is a group of countries that 

agree with us. Right now everything is stopped because you have 

one or two countries that do not want to do anything, so we have 

gotten a group of about 70 countries that want to negotiate on digital trade and get their own rules. And we are moving ahead on 

that as a way to get around this sort of hostage-taking and the, you 

know, the logjam that we have had. 

The area of trade in services is something that has been dormant 

for some time. We are looking at it; we see areas of improvement. 

And the question is whether you start that negotiation up and 

whether or not that negotiation is the quickest way to actually 

39 

make improvement, or if you pick out some of the areas that are 

specifically under it and try to work with them among a plurilateral group of people who actually are trying to make progress. 

So we are trying to sort our way through that right now. 

Senator CARPER. Now, my second question was, what is the administration’s position on restarting talks on the Trade in Services 

Agreement? 

Ambassador LIGHTHIZER. Well, that is what I said. So the TiSA 

agreement is something that we are studying. And the issue is, 

right now for us—and I would be happy to talk to you, you know, 

offline and get your thoughts on it—the issue is whether or not you 

take all those items. 

And you are more likely to make progress in a shorter period of 

time in TiSA, or you are more likely to make progress if you deal 

with them in specific groups of like-minded people who actually 

have the desire to move forward in that area and not take hostages 

involving agriculture and all kinds of other stuff. 

So it is something that we are still looking at. We now have our 

Deputies onboard as of this week. So we are at kind of a crucial 

time, and it probably makes sense for us to sit down and talk about 

it. 

Senator CARPER. All right, fair enough. Thanks very much. 

The CHAIRMAN. Thank you, Senator. 

Senator Whitehouse? 

Senator WHITEHOUSE. Thank you, Mr. Chairman. 

How are you, Ambassador? 

First of all, I am and have been for many years very, very concerned about what I view as an officially sanctioned and supported 

campaign by the Chinese government to, through cyber-attack, engage in industrial espionage and theft of American intellectual 

property in order to provide mercantilist advantage to their companies against ours. And I appreciate your focus on that. 

I recall that there has actually been an indictment of Chinese 

military officials for that activity, and I hope that the administration continues to look at not only the trade aspects of this, but 

what law enforcement aspects might also be appropriate. 

Industrial espionage and theft are industrial espionage and theft, 

even when the criminal perpetrators are from a foreign country. 

The second thing I wanted to raise with you is an issue that is 

very peripheral to the main thrust of what this hearing has been 

about, but I think is an important one for our country. 

I do not know; where do you come from? 

Ambassador LIGHTHIZER. I am from Ohio. 

Senator WHITEHOUSE. You are from Ohio. Okay. So you are not 

going to be much help in the sense of having a big coastal sensibility. But a lot of us in coastal States are seeing very significant 

harm to our ocean environments. And as a result, Senator Sullivan 

of Alaska, who gets it even worse than we do in Rhode Island, and 

I got together and cleared a bill through the Senate unanimously 

to try to address the problem of marine plastic debris, of ocean 

plastic junk. 

Now, ocean plastic junk has been traced back, the bulk of it, to 

five Asian countries. And the reason that they are putting all this 

plastic junk into the oceans that then washes up on our shores is 

40 

because they have lousy upland waste-management infrastructure. 

So everything ends up washing down the creeks and rivers and 

into the oceans. This has, I think, been pretty clearly identified. 

So my pitch to you is that, as you are considering our trade relationship with those countries, that you consider the advantage they 

are securing for themselves by failing to invest in adequate upland 

waste-management infrastructure and that we then face the consequences of all the plastic junk that piles up in our oceans and 

along our shores. 

In Alaska, the testimony from Dan Sullivan’s witnesses was 

that—you know, we pick up our plastic junk in, like, trash bags on 

beach cleanup days. In Alaska, they have to do it with dumpsters 

and front-end loaders and barges, they get so much, because the 

Pacific is the worst, because those five countries are the worst. 

So if we could simply get them to take their upland wastemanagement disposal responsibilities seriously, that would do two 

things. One, it would eliminate an unfair competitive advantage 

that they have by not paying attention to that. And two, it would 

provide a business opportunity for American companies that are 

expert in, guess what, waste management. 

So I hope that this is an issue that will pop up on your radar 

screen. I do not expect it to be your first issue, but I hope it is not 

completely ignored, because it is a global problem. 

The U.N. is beginning to address it. There has been a U.N. resolution about it. They have developed a whole Clean Seas initiative. 

NOAA has supported the International Marine Debris Conference 

just now in San Diego. The G7, Canada have announced they are 

going to try to make this a priority. The G20 has already released 

an action plan on this. So there is global progress moving forward 

that you should, I think, be consistent with. 

And even the industry is supporting it. The European plastic 

trade association has made a new marine plastic pledge in January. And 74 plastics associations from 40 countries gathered together under the Global Plastics Association, including the American Chemistry Council, have made a declaration for solutions on 

marine litter. 

So you would not be going against the stream; you would be 

going with the stream of both our international partners and our 

industry. And I take this time with you to urge that you put this 

on your list of issues, not necessarily at the top, but where we can 

be helpful, let us push in on these five countries and make sure 

they clean up their act. 

Ambassador LIGHTHIZER. Thank you, Senator. I am generally 

aware of the problem, but more specifically aware of it now, and 

we will look at it. 

Senator WHITEHOUSE. Great. Thank you. I will follow up. 

Ambassador LIGHTHIZER. Thank you. 

The CHAIRMAN. Thank you. 

Senator Cassidy? 

Senator CASSIDY. Hey, Ambassador, thank you for hanging in 

there, man. 

Listen, if tariffs are on steel, but not on the finished products, 

it greatly disadvantages our fabricators. There are folks in Korea 

who are doing finished product and taking it across the ocean and 

41 

installing it in a major petrochemical plant in southwest Louisiana, 

depriving our fabricators of the business. 

My concern is, if you do tariffs on the raw steel—and that has 

increased the price of inputs for our domestic fabricators—you further tilt it because now you have incentivized folks to build their 

finished product overseas, and you have increased the cost differential. 

Any thoughts on that? 

Ambassador LIGHTHIZER. We are, of course, aware of the problem 

of downstream effects. And that is always something that you have 

to consider when you take any trade action. 

And your fundamental point is that you are generally better off 

putting tariffs and taking actions on finished products. 

Senator CASSIDY. Correct. 

Ambassador LIGHTHIZER. That is for sure true, in my judgment. 

Having said that, you are in a position here where you have a 

specific problem and you have to figure out how you are going to 

deal with it. 

So I think what we have to do—the President has decided to take 

this action—I think we have to monitor what you are saying very 

closely and see if there is something that we should be doing in the 

meantime somehow to mitigate the problem with respect to specific 

circumstances. 

But your fundamental point is—and the President, by the way, 

completely agrees—your fundamental point is, you are far better 

off taking action on finished products than you are on input products. 

Senator CASSIDY. Now, that seemed to be a little bit of a disconnect there. You fundamentally agree, the President fundamentally agrees, but you are only monitoring as opposed to implementing. We can predict—we are already losing projects to overseas fabricators because their cost of steel is significantly lower 

than ours, labor is lower, et cetera. 

So let me just ask, if you fundamentally agree, why is there a 

hesitation in doing something about the finished product? 

Ambassador LIGHTHIZER. Well, I am not—I guess what I am saying is, when you have a circumstance that you consider to be a national security issue on the 232, you cannot not take that action for 

that reason. 

But to the extent there are specific cases we ought to be looking 

at, I guess what I am saying is, I am sympathetic, and I think we 

ought to be looking at them. 

Senator CASSIDY. Now, secondly—and I do not know this; I am 

asking—there is a fabricator in, I think, Montana, Wyoming, one 

of those States, who tells me that he bid on a project and lost to 

a South Korean company. The South Korean company bid $900,000 

for this steel project for a replacement part for a refinery up there. 

But the transportation costs, according to a logistics company, 

would be at least $600,000. So the Korean company bid $900,000, 

won the bid, and you can look at that and imagine there is a subsidy of some sort, because they would have to have taken all their 

inputs and install it for $300,000 after you factor in the logistics. 

42 

Are we doing anything about the subsidies that are accruing to 

folks perhaps in terms of transportation of these major pieces of a 

complex—— 

Ambassador LIGHTHIZER. Well, I mean, I do not know about, of 

course, that specific case. 

Senator CASSIDY. I understand. 

Ambassador LIGHTHIZER. But as a general matter, yes, this administration has been very aggressive on going after subsidies. 

Even, I think, people who view themselves as fundamentally free 

traders have to acknowledge that there is nothing fair about government subsidies. That just throws the whole thing askew. It is 

more of a Department of Commerce issue, but we are happy to take 

the facts of a specific circumstance and go to the Department and 

have them look at it. 

You know, it is complicated. Will you bring your case? Then you 

bring the case, and can you prove injury and the like? But directionally, you are completely right: it is a huge problem. 

And I have heard stories like this over the years from time to 

time, and they have always been bothersome. So to the extent you 

have a specific one, we would like to look at it. 

Senator CASSIDY. I heard earlier that it is actually Commerce 

who is responsible for giving the exemptions. But I will say, just 

so you can pass this along, that we are requiring small fabricators 

who make custom pieces to give a specification as to the thickness 

of the steel, the diameter of the pipe, et cetera, when this is a oneoff. 

It is not something being stamped for a car door, of which you 

will do a million; it is something you are doing 50 of. And the 

means by which you obtain an exemption is somewhat onerous. 

Is it at all possible that we could allow the exemption to go to 

the vendor to sell their steel as opposed to the purchaser who then 

has to justify their purchase by giving specs which, again, are a 

one-off? 

Ambassador LIGHTHIZER. Yes, I guess I just do not know the detail enough on that. I mean, what you are saying strikes me as reasonable, but I do not know exactly how it is set up. I am happy 

to look into it if you like. 

Senator CASSIDY. Please. Okay, thank you. 

I yield back. 

The CHAIRMAN. Thank you, Senator. 

We will turn to Senator Brown, who is next. 

Senator BROWN. Thank you, Mr. Chairman. And happy birthday, 

Mr. Chairman. 

The CHAIRMAN. Well, thank you so much. 

Senator BROWN. It is good to be with you on your birthday. 

I have a couple of comments. 

And, Ambassador, welcome again, and nice to see you. And 

thank you for your responsiveness pretty much all the time. I appreciate that. 

I want to make a few comments before I get to just really one 

question. First, thanks for what you are doing on NAFTA negotiations. I appreciate the new approach. You know I place a lot of importance on the labor chapter and investor-state and strong and 

43 

enforceable currency provisions. I appreciate the cooperation with 

your whole staff and my staff, and with you and me personally. 

I have tried many times—I want to make it clear today—I have 

said it at the White House, I have said it to you in meetings with 

staff, one-on-one, that I will strongly support a NAFTA agreement 

if it is good for workers. I have confidence that you will achieve 

that goal. And if you do, I think you will see, for sure, a lot of 

Democratic support for a renegotiated NAFTA. 

There is one thing I want to express concern about, an article on 

the front page of, I believe, yesterday’s New York Times. It indicates provisions are being discussed in the NAFTA talks that 

would make it harder for countries to maintain food labeling standards. 

I do not want to take time to ask you to confirm if the reporting 

is accurate, I just want to urge you to make sure that a renegotiated NAFTA does not undermine, does not make it easier to block 

public health measures on food labeling. 

That kind of special interest, multinational, corporate agenda is 

what made our trade agreements so backward and so, so reviled by 

so many in the American public. 

The second statement I want to make briefly is, I know you told 

the committee that Korea would be excluded from the 232 tariffs. 

That is troubling, given their history of unfair trade practices. 

There are a lot of laid-off workers in Ashtabula and Mansfield and 

places in between in Ohio because of their subsidized imports. 

I urge you to reconsider the exclusion. And, I would appreciate 

if your staff would follow up with Nora and me directly on your 

strategy to exclude South Korea. 

And lastly, I want to talk briefly about China. I applaud your decision to launch a 301 into China’s theft of U.S. intellectual property. We have to reset our trade relationship with China; I think 

it does that. 

I know you have said tariffs may be part of the remedy if the 

President chooses to make that decision. As you know, tariffs are 

one tool in your toolkit and also temporary, so they can help buy 

time. But the Chinese, as you know, have a long, long history, and 

they may look at time a little differently from how we do. 

I know you are considering proposals to address Chinese investment in the U.S., which tripled between 2015 and 2016. It has gone 

up tenfold in the last 5 years, so we should be concerned. 

I mean, I welcome Chinese investment in my State, but I have 

concerns sometimes about their strategies and their subsidies of 

land and water and energy and capital and all they do. 

Senator Grassley earlier mentioned, but it is worth mentioning 

again, that he and I have introduced a bill that would require a 

review of certain foreign investments made in the U.S., particularly 

those made by state-owned companies. The point of our bill is to 

ensure that, as we do with CFIUS in national security, that foreign 

investments made here are in our national economic interest. Currently, there is no legal mechanism to do that. 

We want to get this bill signed into law. My question is pretty 

simple, Ambassador. Will you commit to working with Senator 

Grassley and me on our legislation as part of the section 301 remVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 R:\DOCS\36528.000 TIM
44 

edy package and as part of the administration’s overall trade agenda? 

Ambassador LIGHTHIZER. Yes. Yes, absolutely I will. And I think 

the Korea thing will not be a problem. I am happy to work with 

you on that also. 

Senator BROWN. Okay. Thank you so much. 

The CHAIRMAN. Senator Scott? 

Senator SCOTT. Thank you, Mr. Chairman. And happy birthday 

as well. Good to be with you and Senator Brown on your birthday, 

which I thought was nice of him. 

Ambassador Lighthizer, thank you for your responsiveness. You 

and I have had many conversations, and the lines of communication have been open. And I appreciate your responsiveness. 

One of the reasons why having open lines of communication with 

you is quite important to me as a South Carolina Senator is, South 

Carolina has really come back to life because of our trade. We have 

6,000 companies employing more than 500,000 people, exporting 

over $2 trillion of goods around the world. 

It is critically important for our major brands, from the Boeings, 

the Volvos, the Mercedes, the BMWs of the world, and our farmers 

to connect with about 96 percent of the consumers who live outside 

of the country. So it is critically important for us to have open lines 

of communication, and you have been very responsive, and I appreciate that. 

We believe that good trade policy unlocks opportunity for American families and gives us the tools necessary to make sure our 

trade partners play by the same rules we do. 

With those thoughts in mind, I think it is important for us to understand your approach to China. Much has been said, correctly, 

about China’s lack of commitment to world economic policies championed by the WTO. And many have been accurately critical of the 

U.S.–China trade relations when it comes to manufacturing, IP, 

and technology. 

Here are my questions for you, sir. How does the administration 

view China’s efforts to open market access to U.S. companies in 

other sectors, such as financial services? And how do we balance, 

or is it possible to increase investment flows between the two countries in those sectors while continuing to challenge negative practices in other sectors? 

Ambassador LIGHTHIZER. So, first I would say it has been a 

pleasure working with you. And I find our close working relationship to be important in terms of us getting it right. So I am grateful. And South Carolina has to benefit from this whole process. 

Senator SCOTT. Yes, sir. 

Ambassador LIGHTHIZER. If you do not, then we are doing something very wrong. 

In terms of this question of financial services, what the administration has to demand is reciprocity. The administration has to demand and I think will take steps to—and I will deal with you 

offline on this, because it is a next, very important phase of this, 

so it is extremely timely. 

But the essence, in my opinion, of financial services, of our policy, has to be that China cannot operate in the United States on 

rules that are more favorable than we can operate on in China. 

45 

And financial services are important for the reasons that you say. 

It is jobs, and it is this, and it is that. 

But far more important than that is, it is, in many cases, the vehicle by which capital is allocated. And if capital is allocated in the 

state-capitalist way that China would do it as opposed to the 

market-driven way that we would do it, we are going to have different results in terms of how the economies work out and how our 

resources are allocated. So financial services are extremely important. 

I have dealt with people in the industry. I want to deal personally with you now that I know this is another issue that you are 

interested in. 

And it is a whole variety of things that are related but different, 

as you know. But to me, the fundamental rule has to be, they get 

the same rules that we get, and we have to be extremely careful 

about how those mechanisms are used to allocate resources for the 

next 100 years or 50 years. 

Senator SCOTT. Yes. Good. Thank you. 

As you know, South Carolina has a significant trade surplus 

with South Korea. And I understand that you guys are on track to 

continue the discussions on KORUS. When do you anticipate releasing objectives for the negotiations? And do you have a time 

frame when you think it will be finished? And how does USTR differentiate between renegotiation and amending the agreement 

when seeking new asks? 

Ambassador LIGHTHIZER. So this is really important. So NAFTA 

we are renegotiating, and we are using TPA. On KORUS, of course, 

we are not. The objective from the beginning was to make this an 

easier, simpler thing to do. There is a mechanism under that agreement that we can use and that we are using. 

In terms of where the lines are drawn, if it requires changing 

law, we cannot do it in this agreement. So it has to be things that 

we can do by the terms of the agreement or things they can do 

themselves that do not require changes in law. 

But if it requires a change in law, then you have to do TPA. Our 

initial objective was not to do that, because we thought it would 

lead to this level of uncertainty, that we would go on and on and 

on, because TPA, as you know, is a process that requires literally 

years. 

So our hope is that we will make—the final part of your question—our hope is that we are making progress. I met with my 

counterpart, Minister Kim, yesterday, I met with him the day before; I met with him last week. So it is impossible to predict when 

you will end the negotiation. But it certainly is my hope that we 

will do it sooner. I know it is important to you. 

Senator SCOTT. Okay. I look forward to continuing the conversation offline on this subject as well. 

Ambassador LIGHTHIZER. Good. 

Senator SCOTT. Thank you. 

Ambassador LIGHTHIZER. Thank you. 

Senator SCOTT. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

My partner, Senator Wyden, has a question. 

46 

Senator WYDEN. Thank you very much, Mr. Chairman. It is really a statement, and I will be just about a minute or so. 

Mr. Chairman, steel and aluminum tariffs go into effect in 12 

hours. Before this hearing, we knew that Canada and Mexico 

would be exempt from the tariffs. And the Ambassador, when I 

asked him about it, gave us new information that Europe, Australia, Brazil, Argentina, and South Korea would also be exempt. 

I bring this up only, Mr. Chairman, to note that you and I have 

felt so strongly, and our colleagues on a bipartisan basis have, that 

real consultation means that we have to get information so as to 

be able to do vigorous oversight, and that means getting it certainly well in advance of this morning and 12 hours before the tariffs go into effect. 

So I only make that point because I want to work with you on 

improving consultation. 

The second point, Mr. Chairman, I want to direct to the ambassador. 

Ambassador, you are a veteran of the Finance Committee, and 

you know that folks here have real differences of opinion. We have 

pretty spirited debates. 

I do want to tell you, to describe a member of the committee’s 

position, as was the case with Senator Cantwell, as nonsense is unacceptable to me, and I just believe beneath you. So I hope you will 

keep that in mind when you next appear before the committee. 

Ambassador LIGHTHIZER. Well, I will. And I certainly did not 

mean that as a—I guess what I was saying is that I disagree with 

that problem. And ‘‘nonsense’’ was an inappropriate term. 

Senator WYDEN. Well, I appreciate your saying that, Ambassador, because, you know, you are an alum of the committee. We 

have pretty vigorous debates around here, and people differ constantly. But I appreciate your saying that that was not what you 

wanted to say. 

Ambassador LIGHTHIZER. No. I disagreed, but you are completely 

right. 

Senator WYDEN. I appreciate your clarifying. 

Mr. Chairman, I am done. Thank you. 

The CHAIRMAN. Well, thank you. 

Ambassador, I have to say that I have always enjoyed working 

with you. You are a straight-up, straight-shooting guy. You are 

very competent. You have a world of experience behind you. I think 

we are lucky to have you. I think today’s hearing proves that to a 

degree—not as much as I know you can show. 

But I think very highly of you, and we just wish you the best in 

working for our country. And I have no doubt that you are going 

to continue to do a terrific job. 

So we appreciate you taking time to be with us. And I hope this 

has not been too painful for you. 

So with that, we will recess until further notice. 

[Whereupon, at 12:24 p.m., the hearing was concluded.] 

(47) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH

WASHINGTON—Senate Finance Committee Chairman Orrin Hatch (R–Utah) today 

delivered the following opening statement at a Finance Committee hearing on the 

administration’s trade agenda. 

Good morning and welcome to today’s hearing, during which we will discuss our 

Nation’s trade policy agenda. 

Thank you, Ambassador Lighthizer, for being here today. You were last before 

this committee in June of last year, and the trade agenda looks quite different now 

than it did then. 

Let’s start with the North American Free Trade Agreement. 

Negotiations with Canada and Mexico began on August 16, 2017. Since then, 

we’ve seen good progress toward modernizing the agreement. In particular, I want 

to congratulate you on closing a strong chapter on SPS measures that would benefit 

American farmers and ranchers. 

But many crucial issues must be addressed before the negotiations can be brought 

to a successful conclusion. 

Your first priority should be strengthening protections for America’s creators and 

innovators, in particular: strengthening copyright protection and enforcement provisions and creating disciplines to ensure that regulation does not undermine the 

market value of patented products. 

It is essential that any agreement reached be fully enforceable through state-tostate and investor-state dispute settlement, and that market access gains, including 

in government procurement, are not weakened. 

It is also important that you keep in mind that an updated NAFTA must be 

passed by Congress. That means that you must adhere to the negotiating objectives 

set out in the Trade Promotion Authority law passed in 2015, and that you deliver 

an agreement that will be supported by members who favor expanding trade with 

Canada and Mexico. 

There is no other viable path to enact a modernized NAFTA. 

Now, I want to change the subject a bit. Next up, I have to discuss what I consider to be a significant step in the wrong direction: the administration’s imposition 

of steel and aluminum tariffs. 

I am deeply disappointed in the decision to impose global tariffs to address a problem caused by China. Tariffs are taxes, and so I am concerned about the harm that 

this action will impose on American manufacturers and families. And I am astonished at the process—or in reality, the lack thereof—for implementing the tariffs so 

far. 

Ambassador Lighthizer, you have been tasked with working with our trading 

partners on exemptions from the new tariffs. These tariffs are slated to take effect 

about 14 hours from now. There is no clarity on country exemptions, and the recently announced process for product exclusions is prolonged and unnecessarily 

cumbersome. 

48 

As such, I am hoping that you can make clear what is happening on this front 

today. 

Let me turn now to an issue that is squarely within your responsibility. I am 

deeply concerned about Chinese mercantilist policies that disadvantage U.S. companies, restrict U.S. exports and investment, and harm American workers. From the 

beginning of your tenure, you have identified Chinese theft of trade secrets and the 

forced transfer of American technology as significant problems that must be addressed. 

That is why I supported and continue to support USTR’s section 301 investigation. 

But, as you know, my continued support is contingent on the President choosing 

an appropriate remedy. That remedy should be targeted specifically at the perpetrators and beneficiaries of China’s actions, and it must be part of a strategy to correct 

China’s technology policies. I look forward to your comments on this. 

Finally, I welcome the administration’s decision to seek a renewal of Trade Promotion Authority. I particularly welcome the President’s announcement that he 

would use an extension of TPA to aggressively negotiate new trade agreements. 

I intend to use the extension process to get further details on your plan for expanding opportunities for American businesses overseas through new and ongoing 

negotiations, and to emphasize that these negotiations must be conducted consistent 

with the objectives set out in TPA. And I welcome any comments you have to offer 

on that today. 

PREPARED STATEMENT OF HON. ROBERT E. LIGHTHIZER, UNITED STATES

TRADE REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT

Mr. Chairman, Ranking Member Wyden, and members of this committee, thank 

you very much for the opportunity to testify this morning. During my time at USTR, 

I have benefited from many helpful and productive conversations with the members 

of this committee. I am grateful for your counsel and look forward to our continued 

engagement. 

My remarks will be brief—I want to cover three major points. 

First, I would like to thank the members of this committee—and the rest of the 

Senate—for approving three Deputies for my office and my Chief Agriculture Negotiator. This has been a long process and I am glad we are now in a position to better 

support your priorities and those of the President. 

Second, 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 billion, and that the trade deficit 

in goods alone rose to $811 billion. There are, of course, many causes for the trade 

deficits but the President believes—and I agree—that persistent, enormous deficits 

to some extent reflect market distortions around the world that treat U.S. workers 

and businesses unfairly. We also have a massive trade deficit in goods with China— 

$375.2 billion last year—and large deficits with the European Union, Japan, and 

others. 

I know that the members here have a variety of views on these figures. But we 

believe that they raise significant concerns. They indicate that the global rules of 

trade sometimes make it harder for U.S. companies to export. They can discourage 

U.S. investors and businesses from entering certain sectors of the global economy. 

Further, they indicate that in the United States, the costs of globalization are falling most heavily on workers in those parts of the economy exposed to trade. And 

they undermine U.S. political support for the global trading system. 

Third, I would like to summarize the President’s Trade Agenda, which we released recently. 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, will preserve our 

national sovereignty, will respond to hostile economic competitors, will recognize the 

importance of technology, and will 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. The Congress has passed and PresiVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00052 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
49 

dent Trump has signed a major tax reform 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 know well, 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. 

I have urged our trading partners to recognize that time is short if we are to complete a deal in time for consideration by this Congress. We have also reached out 

to South Korea to discuss potential improvements in our free trade agreement with 

that country. 

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 formal exit from the European Union. We have 

told Japan of our desire to negotiate a free trade agreement with them. We will 

work closely with the committee to decide upon opportunities for potential FTAs 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 of 2016, President Trump said that he would use all available tools to defend our national interest and our national security—including sections 201 and 301 

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 the President will act when necessary to defend our national security or to address unfair 

trading practices that threaten U.S. jobs. We are also aggressively defending the 

trade laws created by Congress—including our important antidumping and countervailing duty 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 modern issues like 

digital trade. Too many WTO members think that they can get their way through 

litigation, rather than negotiation. Perhaps most worryingly of all, the WTO has 

proven to be wholly inadequate to deal with China’s version of a state-dominated 

economy that rejects market principles. 

In short, USTR—under the direction of President Trump—is seeking to build a 

better, fairer system of global markets that will lead to higher living standards for 

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

QUESTIONS SUBMITTED FOR THE RECORD TO HON. ROBERT E. LIGHTHIZER

QUESTIONS SUBMITTED BY HON. ORRIN G. HATCH

Question. I welcome the President’s request for an extension of Trade Promotion 

Authority. I am seeking your assurances that, if extended, the administration will 

use this authority effectively. That means negotiating new trade agreements that 

comply with the negotiating objectives and procedures of TPA. 

What new agreements is USTR considering? And do you commit that both in negotiating these new agreements, as well as in the ongoing negotiations regarding 

NAFTA and KORUS, USTR will comply with the objectives set out in TPA? 

Answer. USTR is currently exploring potential bilateral deals with several countries, including the UK and countries in Africa and the Indo-Pacific, in order to secure greater market access for American farmers, workers, ranchers, and businesses. As you know, USTR frequently explores these options through our Trade 

and Investment Framework Agreements as well as through discussions that are 

more informal. Before USTR begins any bilateral negotiations, we will ensure to 

consult closely with you and your staff and to follow the requirements outlined in 

TPA throughout the process. 

Question. As you know, U.S. law provides for a 12-year term of regulatory data 

protection for biologics. Securing a result consistent with U.S. law is an important 

outcome for the NAFTA negotiations. 

50 

What is USTR doing to secure strong provisions on regulatory data protection for 

biologics? 

Answer. USTR understands the critical role that intellectual property plays in 

incentivizing the investment in research and development necessary to bring new 

pharmaceutical products to patients. Through the NAFTA renegotiations, USTR is 

pressing for high standards on intellectual property protections for pharmaceuticals, 

including biologics data protection, that appropriately recognize the value of innovative medicines so that these trading partners contribute their fair share to research 

and development of new treatments and cures. Specifically, USTR has been pressing 

for a robust data protection term for biologics in the NAFTA renegotiation. 

Question. As Senator Nelson and I noted in our letter to you dated April 13, 2018, 

the United States has the world’s strongest creative industries. America’s creative 

industries were responsible for $177 billion in U.S. exports in 2015, and provide 

more than 4.5 percent of all private sector jobs in the United States. Unfortunately, 

Canada and Mexico do not place the same value on strong intellectual property protections as the United States. It was recently said that Canada maintains thirdworld IP standards, which indicates there is certainly room for improvement. 

Will you please share with us how you will use the NAFTA talks to strengthen, 

rather than create exceptions to, current copyright standards, and how you will ensure the agreement protects the value of U.S. innovation? 

Answer. We are using the NAFTA talks to ensure that U.S. creators have a full 

and fair opportunity to use and profit from their copyrights and related rights. Ensuring strong intellectual property protection and enforcement by our trading partners is a top trade priority, including in trade negotiations. As reflected in USTR’s 

NAFTA renegotiation objectives and our proposed text, USTR continues to ‘‘[s]eek 

provisions governing intellectual property rights that reflect a standard of protection similar to that found in U.S. law, including, but not limited to protections related to trademarks, patents, copyright, and related rights, undisclosed test or other 

data, and trade secrets.’’ 

Question. TPA requires that U.S. trade agreements include robust and enforceable 

dispute settlement procedures. Such procedures ensure that our trading partners 

comply with their commitments, including those concerning the protection of intellectual property. As you know, many WTO Members frequently violate their IP obligations. And yet, until the recent dispute against China brought under the TRIPS 

Agreement, the United States had not initiated an IP dispute at the WTO in over 

a decade. 

How do you intend to use the WTO dispute settlement system to ensure that 

countries comply with their IP and other WTO obligations? 

Answer. Consistent with the President’s trade policy agenda, USTR will use all 

available tools, including the WTO where appropriate, to ensure that American intellectual property holders receive fair treatment in trade and win the full benefit 

of the economic opportunities the United States has negotiated. 

Question. Services constitute the largest sector of the U.S. economy, and enhancing trade in services is vital for American economic growth. And yet, services often 

seem to be under-appreciated during U.S. trade policy discussions. 

In the context of ongoing and future trade negotiations, how do you intend to facilitate increased trade for America’s world-leading services industry? 

Answer. The U.S. service sector is highly innovative and a key driver of the U.S. 

economy. Maintaining a vibrant U.S. services sector and expanding U.S. services exports is vital to a healthy economy and a core objective of U.S. trade policy. USTR 

is pursuing robust services outcomes in the ongoing NAFTA negotiations and other 

ongoing bilateral efforts. We are also pursuing talks on digital trade with a group 

of like-minded countries at the WTO, which of course has a strong services component. USTR is also evaluating the various options available to pursue these objectives in other forums and will continue to consult with you as we chart the best 

course forward. 

Question. In recent years, India has maintained or instituted a host of concerning 

trade policies, including inadequate protection of intellectual property rights, draconian price controls on medical devices, and tariff increases on technology products. 

Despite these policies, India continues to benefit from the United States’ GSP program. 

51 

To this end, I welcomed the WTO case that USTR recently filed against India’s 

export subsidy programs. I also was pleased that USTR initiated a review of India’s 

GSP eligibility and accepted two GSP petitions filed by the U.S. dairy and medical 

device industries concerning India’s market access barriers. 

However, I would like to know how these actions fit into the administration’s 

broader strategy concerning India’s trade policies. Can we expect to see other actions to oppose India’s unfair trade practices, either at the WTO or through other 

means? 

Answer. USTR is focused on improving the terms of our trade relationship with 

India, through both enforcement and negotiation efforts. The administration’s filing 

of a request for consultations in the WTO on export subsidies and the initiation of 

a review of India’s GSP eligibility followed efforts over some years to engage with 

India both multilaterally in the WTO and bilaterally in the Trade Policy Forum 

(TPF). We intend to continue to address our concerns with India on a range of trade 

restrictive measures through the TPF and the WTO. We will also consider additional tools and points of leverage, as appropriate, to push India to make the 

changes needed to rebalance the bilateral trade relationship. For example, USTR 

just submitted the first ‘‘counter-notification’’ at the WTO highlighting subsidy programs that India failed to notify despite its obligation to do so. 

Question. In the Trade Facilitation and Trade Enforcement Act of 2015, Congress 

raised the de minimis threshold to $800, in order to reduce the burden on U.S. businesses. USTR also established in its NAFTA specific objectives of November 7, 2017, 

the goal of ‘‘provid[ing] for a de minimis shipment value that is comparable to the 

U.S. de minimis shipment value of $800.’’ 

How does USTR intend to meet the negotiating objective of increasing the de 

minimis shipment values of Canada and Mexico? 

Answer. The United States put forth very ambitious negotiating objectives for the 

NAFTA Customs Administration and Trade Facilitation Chapter and is seeking 

commitments that meet this level of ambition. Included among the objectives is a 

de minimis value comparable to what the United States offers importers, so that 

U.S. exporters and companies can see new job growth and increased opportunities. 

The United States has been a vocal proponent of Canada and Mexico raising their 

respective de minimis shipment values during the NAFTA negotiations. Unfortunately, both of our NAFTA trading partners have been unwilling to move their very 

low de minimis levels to match the United States’ level. 

Question. Multiple foreign governments have subjected U.S. companies to competition investigations that lack adequate due process protections. I am also concerned 

about the imposition by some governments of overly broad remedies. The NAFTA 

specific objectives of November 7, 2017, recognize the importance of establishing 

rules to promote due process and responsible remedies in competition policy. 

What steps have been taken in the KORUS and NAFTA negotiations, and what 

steps have been taken in bilateral discussions with other trading partners, to pursue fair treatment of U.S. companies in competition proceedings? 

Answer. The United States has long been following the developments in foreign 

competition authority regimes and shares the concern expressed in the question. 

The United States is taking several, varying steps to address the concerns that are 

being raised by U.S. stakeholders, as well as concerns of our own. 

For example, as indicated in the November 2017 NAFTA negotiating objectives, 

the United States identified two key objectives related to the question above: 

• Establish or affirm basic rules for procedural fairness on competition law enforcement, including by: allowing representation by counsel; recognizing privileged communications; providing for the protection of confidential and privileged information and communications; ensuring access to information necessary to prepare an adequate defense, providing an opportunity to present 

rebuttal evidence and cross-examine witnesses; and ensuring the resolution of 

competition law cases before an impartial administrative or judicial authority. 

• Ensure that, in calculating a fine for a violation of a national competition law, 

the party considers revenue or profit relating to the party’s territory or commerce. Limit remedies relating to conduct outside the party’s territory to situations where there is an appropriate nexus to the party’s territory. 

As you know, the competition chapter in the NAFTA negotiations was closed right 

before the commencement of the 4th negotiating round (i.e., prior to the release of 

52 

the November negotiating objectives). We cannot discuss any specifics of the text 

due to the confidential nature of the negotiations, but can assure you that Canada 

and Mexico share our commitment to these objectives, and we worked very closely 

with both NAFTA parties on the obligations in the text. 

With Korea and other trading partners where such concerns continue to exist, we 

have actively and consistently engaged with the competition authorities to raise our 

concerns. 

With Korea, we have made competition issues a priority and are continuing to engage to resolve concerns with respect to the KFTC’s implementation of procedural 

fairness rights provided under KORUS. 

QUESTIONS SUBMITTED BY HON. PAT ROBERTS

Question. Over a year ago, the administration withdrew from the Trans-Pacific 

Partnership (TPP) negotiations. Recently, the remaining 11 countries moved forward and signed an agreement. In the absence of a free trade agreement in the 

same region, the United States will miss opportunities to expand and explore trade 

with Pacific Rim countries. Last year, during the USTR trade agenda hearing, you 

expressed interest in working with Asia-Pacific countries on a bilateral basis to export U.S. agriculture products. However, over the last year, we have not seen much 

progress on this front. 

During the House Ways and Means Trade Agenda hearing, you stated you 

planned to task Deputy USTR Gerrish with ‘‘thoroughly studying’’ countries that 

would be good candidates for trade negotiations. What criteria do you plan to use 

to make these determinations and what is your timeline for concluding this study? 

Answer. The President understands that strong relationships with the countries 

in the Indo-Pacific region are economically and strategically important to the United 

States. With regard to possible FTAs in the region, we are engaging with countries 

who are interested in concluding agreements on terms that will lead to free, fair, 

and reciprocal trade and significantly improved market outcomes for U.S. companies, workers, farmers, and ranchers. My Deputy USTR, Jeff Gerrish, is traveling 

to the region next week to meet with trade officials in Vietnam and the Philippines, 

and he will also be working with trade officials from several countries in the region 

at the APEC ministerial meetings. I have another team that just returned from 

Japan, where they pressed the need to engage in FTA discussions. USTR will continue to consult with Congress and stakeholders as we contemplate next steps. 

Question. In March, President Trump announced global tariffs on imports of steel 

and aluminum based on national security concerns. The President’s proclamation 

provided an opportunity for our national security allies to work with the United 

States to address oversupply and potentially remove or modify tariffs if an agreement is reached. 

What details can you share about the process and procedure USTR uses to determine country specific national security exclusions? Also, does USTR plan to consult 

with our national security agencies to identify the United States’ ongoing security 

relationships? 

Answer. The President’s proclamations note that he may remove or modify the 

tariffs he has imposed pursuant to section 232 of the Trade Expansion Act of 1962, 

as amended, where he determines that the United States and a country with which 

we have a security relationship have arrived at satisfactory alternative means to address the threat to the national security caused by imports from that country, such 

that the President determines that imports from that country no longer threaten to 

impair the national security. There has also been an interagency process regarding 

security relationships in the section 232 context, which has included our national 

security agencies. USTR is advising the President with respect to matters within 

our expertise, but the President will make any determination about whether to remove or modify the tariffs for individual countries. 

Question. President Trump, along with USTR and others in the administration, 

took steps early on towards increasing exports to China including historic beef and 

rice access, agreements on biotechnology, and continued enforcement action on Chinese subsidies and tariff rate quotas (TRQs) on certain agricultural products. Much 

of this activity stemmed from the U.S. China Comprehensive Economic Dialogue. 

53 

Since this dialogue, what has been the universe of bilateral engagement with 

China? Moving forward, what opportunities will the United States have to build on 

the early progress and engage with China to eliminate barriers to trade, particularly 

for the agriculture sector? 

Answer. As explained more fully in USTR’s 2017 Report to Congress on China’s 

WTO compliance, the administration carefully reviewed the past 15 years of the 

United States’ formal high-level trade dialogues with China, including the U.S.- 

China Comprehensive Economic Dialogue. The administration found that these dialogues did not lead to fundamental changes in China’s trade, investment, and intellectual property rights regimes, but rather incremental and incomplete changes to 

Chinese policies and practices that it repeatedly failed to fulfill. Currently, despite 

the absence of a formal high-level dialogue, the administration 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, including on a wide range of agricultural matters, to make the U.S.-China 

trade relationship fair, balanced, and reciprocal. 

Question. I have been pleased to hear that progress has been made in moving towards a modernized and strengthened NAFTA agreement. Now that seven rounds 

of negotiations have been completed, I hope that we continue to build momentum 

and work quickly to finalize a new agreement. Continued progress on issues like 

Canada dairy access could go a long way in helping our producers who have recently 

been in a rough patch. 

What is your assessment of the NAFTA negotiations, and how can we continue 

to move full speed ahead towards finalizing a strong agreement so that the United 

States can continue to aggressively pursue new market opportunities around the 

world? 

Answer. Renegotiating NAFTA remains a top priority of the Trump administration. Since early March, we have been negotiating on a more or less continuous 

basis. Technical experts have been holding discussions in all remaining area, and 

I have been in regular communication with my Canadian and Mexican counterparts 

on key U.S. priorities. We are making good progress, but as always, as you approach 

the end the most difficult issues must be addressed. Dairy in particular has been 

a difficult issue, but USTR has set out ambitious negotiating objectives in that regard. 

QUESTIONS SUBMITTED BY HON. JOHN CORNYN

Question. For decades, U.S. trade and investment agreements have provided for 

neutral arbitration to resolve investment disputes. Yet despite this precedent, and 

also despite the fact that Trade Promotion Authority requires the administration to 

pursue FTA’s with ISDS like protections, the U.S. negotiators have advocated to 

eliminate ISDS completely. ISDS is an essential enforcement mechanism for investor protections and must be maintained rather than weakened or abandoned. Robust ISDS protections are absolutely critical to the energy sector in my State. 

Why is USTR insistent on eliminating ISDS from an updated agreement when 

TPA clearly shows Congress’s support for it? 

Answer. The administration is committed to pursuing an outcome in the NAFTA 

negotiations that puts the interests of American farmers, ranchers, businesses, and 

workers first. The administration is advocating for a flexible, opt-in approach to 

ISDS in the NAFTA that safeguards U.S. sovereignty and avoids incentivizing the 

off-shoring of U.S. jobs and manufacturing. Robust and modern investment protections will continue to be available for U.S. investors in Mexico and Canada through 

state-to-state dispute settlement mechanisms, just like it is for all other enforceable 

obligations in NAFTA. I look forward to continuing to work with the Congress on 

this issue, consistent with the broad negotiating objectives on investment protections set forth in the 2015 Trade Promotion Authority legislation. 

Question. The President has made it clear that addressing our trade deficits with 

certain countries are the top priority, particularly with regard to NAFTA. There is 

a clear dispute about whether trade deficits are the right way to measure productive 

economic activity and jobs growth. Regardless of which side you land on that debate, 

it is a fact that the United States has a services surplus with both Mexico and Canada. 

54 

What aspects of the NAFTA negotiations do you think will best preserve and grow 

the United States services success story? 

Answer. The U.S. service sector is highly innovative and a key driver of the U.S. 

economy. Maintaining a vibrant U.S. services sector and expanding U.S. services exports is vital to a healthy economy and a core objective of U.S. trade policy. USTR 

is pursuing robust services outcomes in the ongoing NAFTA negotiations and other 

ongoing bilateral efforts. These include the highest possible standards for market 

access and non-discriminatory treatment; targeted commitments in important sectors like telecommunications, financial services, and delivery services; and robust 

digital trade obligations that will support the growth and prosperity of the U.S. 

service sector. 

Question. One of the most important issues for Texas’s agriculture sector is market access. I hear on a regular basis from Texas farmers of their desire to see the 

U.S. actively pursue new trade agreements with key trading partners in Asia. Our 

dairy, beef, and cotton growers need this in order to stay competitive in those priority markets as their competitors from the EU, Oceania, and elsewhere negotiate 

new deals. At the top of that list is Japan and Vietnam, but others in Asia such 

as allies in Southeast Asia would make good partners as well. 

Will the administration move forward with the bilateral trade deals in Asia that 

it has promised to pursue? 

Answer. Yes. The United States will continue to lead in the Indo-Pacific region 

by building our trade relationships with countries bilaterally and through our engagements with APEC and ASEAN. Concerning FTAs with nations in Southeast 

Asia, the President has expressed the willingness of the United States to engage 

with interested countries on terms that will lead to free, fair, and reciprocal trade 

and significantly improved market outcomes for U.S. companies, workers, farmers, 

and ranchers. My Deputy is visiting the region next week to speak with trade 

officials to explore the possibility of beginning talks for such deals. 

Regarding Japan specifically, President Trump recently confirmed his interest in 

negotiating a bilateral trade deal in his meeting with Prime Minister Abe. Both 

leaders agreed to intensify U.S.–Japan trade and investment consultations, which 

USTR is leading. In fact, a USTR team just returned from Japan last week, where 

they discussed the scope of discussions with Japan and pressed them on the need 

to begin work on a bilateral FTA. 

Question. I am highly concerned at China’s concerted effort to vacuum up dualuse technologies, many of which have direct military applications. In some ways, 

China has weaponized investment to evade the current CFIUS process, circumventing review and gaining access to sensitive technologies. I have been working on 

legislation to modernize CFIUS so that it can review certain types of transactions 

it currently cannot. 

Do you agree that we should take a look at the current CFIUS statute and make 

sure that CFIUS can handle these additional types of transactions that may have 

national security impacts? 

Are you concerned that China has weaponized investment to evade national security review? 

Answer. I agree on both counts. CFIUS only reviews a fraction of proposed foreign 

investment in the United States, and some transactions that are outside the current 

scope of CFIUS authorities do raise national security concerns. Further, certain 

transactions—including transactions involving China-based acquirers—may be deliberately structured to evade CFIUS jurisdiction. Through the Department of 

Treasury, as Chair of CFIUS, USTR has been actively engaged with your staff and 

others in Congress to modernize CFIUS so that it can review certain types of transactions that are currently outside its jurisdiction. In January, the administration 

voiced support for the Foreign Investment Risk Review Modernization Act 

(FIRRMA), which you sponsored, noting that the bill would protect national security 

and preserve the longstanding U.S. open investment policy. 

QUESTIONS SUBMITTED BY HON. JOHN THUNE

Question. A significant amount of the grain exported from my State of South Dakota goes through ports in the Pacific Northwest to Asian buyers. Countries like 

Japan and South Korea are among our most active and loyal customers of U.S. corn 

55 

and other grains, and countries in Southeast Asia are among the fastest-growing 

feed-grain markets in the world. 

How is the administration working to maintain and build on the relationships we 

have with key Asian countries? 

Answer. As the President stated at the APEC summit in Vietnam last November, 

the United States is working to establish a new and stronger partnership with the 

Indo-Pacific region. We see tremendous opportunities in the region to deepen our 

trade ties, enhance economic and job growth, remove barriers to goods and services, 

and expand U.S. exports. The United States will continue to lead in this important 

region by working to combat unfair trade practices and by building our trade relationships with countries bilaterally and through our engagements with APEC and 

ASEAN, including through free, fair, and reciprocal bilateral trade deals. We just 

completed an agreement in principle with Korea to update KORUS which preserved 

agricultural market access for U.S. farmers. Regarding Japan, President Trump recently confirmed his interest in negotiating a bilateral trade deal in his meeting 

with Prime Minister Abe. Both leaders agreed to intensify U.S.–Japan trade and investment consultations, which USTR is leading. USTR had a team in Japan just 

last week to move talks forward and encourage the negotiation of a bilateral FTA. 

Question. The farm economy has been struggling with low commodity prices— 

farm income is down 50 percent compared to 2013 and crop prices are down 40 percent in just the last 5 years. Farmers are very concerned that the administration’s 

current trade policies could cause retaliation by the United States’ largest trading 

partners, kneecapping prices received by our producers and further hurting the already depressed farm economy. We should be seeking additional trade opportunities 

to support rural America and the rural economy, not jeopardizing agriculture’s export markets. 

What is the administration doing to increase agricultural exports? 

Answer. USTR is working closely with USDA to address a number of bilateral 

issues that block or impede exports of U.S. agricultural products. With regard to 

possible new trade agreements, we are open to engaging with countries who are 

ready to conclude agreements on terms that will lead to free, fair, and reciprocal 

trade and significantly improved market outcomes for U.S. companies, workers, 

farmers and ranchers. USTR will continue to consult with Congress and stakeholders as we contemplate next steps. At the same time, USTR will support the 

President’s agenda by using strong enforcement tools to eliminate unfair trade practices that affected U.S. exporters, including our farmers. 

Question. I appreciate the administration’s focus on the negative economic impact 

of China’s industrial policies, forced technology transfer, intellectual property theft, 

and unfair trade practices. However, the administration’s proposed tariffs in response to these practices raise significant concerns. By some estimates, tariffs the 

range proposes by the administration would wipe out over a third of the benefit that 

American families are now seeing from the tax-reform legislation that took effect 

at the start of this year. We cannot afford to jeopardize that positive economic result 

with a destructive trade war that would create serious consequences for U.S. economic growth and job creation. 

Has the administration taken into account the negative, offsetting effects this action would have with respect to tax reform and other options exist for dealing with 

China that do not endanger the livelihood of America’s consumers, businesses, and 

farmers? 

Answer. On a long-term basis, the United States simply cannot afford to let China 

illicitly obtain the crown jewels of our economy, our intellectual property. The proposed list of products that may be subject to tariffs was based on an extensive interagency economic analysis that targeted products that benefit from China’s industrial plans while minimizing the impact on the U.S. economy and consumers, taking 

into account alternative country sources for each product. The list is not final, and 

interested parties, including businesses, have an opportunity to provide public comment on the proposed list and appear at a public hearing. 

Question. As I know you are aware, there is strong support among the members 

of this committee for retention of an investor-state dispute settlement (ISDS) mechanism in the updated NAFTA agreement. I’ve been concerned by reports that USTR 

continues to advocate for weakening the ISDS option in chapter 11 of NAFTA by 

making it optional for any of the three countries to join it. The history of this provision demonstrates that ISDS is important to U.S. companies, and that it is not a 

56 

threat to U.S. sovereignty since its panels cannot alter U.S. law or regulations. U.S. 

companies have used ISDS 40 times under NAFTA, and have prevailed in 11 cases 

and settled the others on favorable terms. Moreover, the United States has won all 

of the NAFTA ISDS cases brought against it—20 in all. 

Why is USTR continuing to target ISDS when weakening or eliminating it will 

cost significant support from the business groups, like the U.S. Chamber of Commerce, the National Association of Manufacturers, the Business Roundtable, and 

their member companies, which it is intended to benefit, as well as so many members of Congress who have clearly expressed our support for this provision in the 

updated NAFTA agreement? 

Answer. The administration is committed to pursuing an outcome in the NAFTA 

negotiations that puts the interests of American farmers, ranchers, businesses, and 

workers first. The administration is advocating for a flexible, opt-in approach to 

ISDS in the NAFTA that safeguards U.S. sovereignty and avoids incentivizing the 

off-shoring of U.S. jobs and manufacturing. NAFTA will of course cover a broad 

range of strong, modern investment protections which can be enforced through 

state-to-state dispute settlement just like other obligations in the agreement. 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. 

Question. De minimis thresholds are increasingly important to small e-commerce 

businesses that leverage the Internet to sell low-value items to customers across the 

globe, but do not have the resources to manage complex customs regimes. Unfortunately, both Canada and Mexico continue to erect customs and trade facilitation 

barriers that limit the success of Internet-enabled goods exporters, many that ship 

small, low-value packages. Canada has a $20 CAD customs de minimis threshold 

and Mexico has a $50 threshold—both of which stand in stark contrast to the 

United States’ $800 threshold, which I worked to increase in the Trade Facilitation 

and Trade Enforcement Act. Mexico also has proposed changes to eliminate streamlined customs procedures to disadvantage U.S. e-commerce companies exporting to 

Mexico. USTR has committed to seeking parity with Mexico and Canada on de minimis in the renegotiations of NAFTA. 

What progress has been made on de minimis thresholds in the negotiations? 

Answer. The United States has been a vocal proponent of Canada and Mexico 

raising their respective de minimis shipment values during the NAFTA negotiations, and has worked closely with U.S. stakeholders on this matter. We are aware 

this is a highly sensitive issue in both Canada and Mexico, but it is a very important issue to the United States. I have personally pushed this issue with my counterparts, but we have seen no appetite in either Mexico or Canada to adjust their 

levels upward. 

Question. How is USTR engaging with other countries in raising their de minimis 

levels so that U.S. goods shipped abroad can receive parity? 

Answer. The United States engages in all forums to advocate for countries to raise 

their de minimis levels. This advocacy includes work in APEC, the World Customs 

Organization, the World Trade Organization, and raising de minimis levels to help 

American competitiveness is an objective in bilateral initiatives, including trade and 

investment frameworks. 

Question. American innovation and intellectual property support more than 45 

million U.S. jobs in manufacturing, agriculture, entertainment, high tech, and beyond. America’s ability to support and grow those jobs depends on our ability to protect intellectual property in the United States and abroad. 

Answer. What approach is USTR taking in the NAFTA negotiations to ensure 

that intellectual property protections are strengthened? 

Answer. We are using the NAFTA talks to ensure that U.S. right holders have 

a full and fair opportunity to use and profit from their intellectual property rights 

in Canada and Mexico. As reflected in USTR’s NAFTA renegotiation objectives, 

USTR continues to ‘‘[s]eek provisions governing intellectual property rights that 

reflect a standard of protection similar to that found in U.S. law, including, but not 

limited to protections related to trademarks, patents, copyright, and related rights 

(including, as appropriate, exceptions and limitations), undisclosed test or other 

data, and trade secrets.’’ Unfortunately, our trading partners have been unwilling 

to fully commit to improving their intellectual property regimes. 

57 

Question. What steps are you taking to see that the IP chapter is given the top 

priority it deserves? 

Answer. We tabled an ambitious text and we have pushed strong intellectual 

property protections in the IP chapter at all levels—from USTR professional staff 

right up to my personal interventions with my counterparts in Mexico and Canada. 

USTR is seeking robust commitments for IP protection and enforcement that update 

and modernize the IP Chapter of NAFTA consistent with the Trump administration’s commitment to ensuring strong intellectual property protection and enforcement. 

QUESTIONS SUBMITTED BY HON. RICHARD BURR

Question. I appreciate USTR’s work on the section 301 investigation of China’s 

Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, 

and Innovation. China’s violations of trade laws have disadvantaged many U.S. 

businesses and workers, and I share the desire to see actions taken to ensure that 

U.S. companies are able to compete freely and fairly in China. 

Going forward, it is my hope that as negotiations occur with China to address the 

issues identified, USTR will make every effort to ensure that there are not unintended consequences, such as the retaliation of North Carolina’s agriculture exports. 

Can you assure me this will be the case? 

Answer. Our goal is to maximize pressure on China to change its behavior while 

minimizing any negative effects on American businesses, including those in agriculture. Economies around the world—including China’s domestic economy—will 

benefit if China responds by making needed reforms to its trade distortive policies, 

instead of adopting new and harmful policies to block trade and distort world markets. 

We note that China has historically put unfair limits on U.S. exports of competitive, high-quality agricultural products through a variety of policies. The Trump administration is committed to vigorous enforcement to defend the interests of America’s farmers and ranchers. As we take a stronger approach to the way we handle 

trade, we will use all of our authorities to ensure that we protect and expand our 

agricultural interests. 

Question. In December 2017, Senator Tillis and I wrote to you regarding Colombia’s reference price system that poses a significant barrier to the entry of valueadded textile products made from U.S.-grown cotton and U.S.-spun yard. The system, in place since 2013, results in the application of a value added tax that is higher than the actual value of the merchandise, and additional decrees since then have 

made the prospect of importing goods with U.S. content into Colombia even more 

onerous. 

Will you commit to working to resolve this issue and raising it in the appropriate 

venues for discussion with the Colombians? 

Answer. The Office of the U.S. Trade Representative has been closely following 

the Colombian Government’s developments on this issue since it was first brought 

to our attention a few years ago. Since Colombia introduced its new measure on reference pricing earlier this year, USTR has been working with colleagues at the Departments of Commerce and State to collect additional information on the directive 

and its application. We have been regularly raising the issue with Colombian authorities and will continue to do so. 

QUESTIONS SUBMITTED BY HON. JOHNNY ISAKSON

Question. Your testimony mentions the groundwork being laid to enter into bilateral agreements with the UK, Japan, and countries in Africa and Southeast Asia. 

Now that you have your Deputies, what is the timeline for following through on 

these intentions, especially with Japan? 

Answer. With respect to the UK, the UK cannot formally negotiate and sign trade 

agreements with non-EU countries until it has exited the EU (commonly known as 

Brexit), which is scheduled to take place on March 29, 2019. In July 2017, UK Secretary of State for International Trade Dr. Liam Fox and I established a U.S.–UK 

Trade and Investment Working Group in order to deepen our current trade relationVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00061 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
58 

ship and to lay the groundwork for a potential future free trade agreement once the 

UK has left the EU. That working group is continuing to meet regularly with the 

last meetings held in March 2018 in Washington and the next meetings to be held 

this summer in London. 

With respect to Japan, President Trump recently confirmed his interest in negotiating a bilateral trade deal in his meeting with Prime Minister Abe. Both leaders 

agreed to intensify U.S.–Japan trade and investment consultations, which USTR is 

leading. A USTR team just returned from Japan, where we discussed the scope of 

talks and pressed them on negotiating a bilateral trade agreement. 

With respect to bilateral deals with Africa and Southeast Asia, we are in the process of identifying potential partners who are ready to enter into exploratory talks 

regarding free, fair, and reciprocal arrangements, so it would be premature to signal 

a timeline. 

Question. How does Japan’s participation in the Comprehensive Trans-Pacific 

Partnership affect our ability to negotiate a bilateral agreement with a key Pacific 

ally? 

Answer. Both Japan and the United States have many existing trade agreements 

with other countries. A U.S.–Japan bilateral trade deal is the preferred approach 

and views such a deal as an opportunity to improve upon some of the major concerns with, and shortcomings of, the CPTPP agreement. The United States was by 

far the largest economy—and Japan was the second largest economy—among the 

TPP countries, and it makes sense for the United States and Japan to have a bilateral trade agreement. 

Question. I appreciate your announcement about finding an African country to 

enter into a bilateral trade agreement. While I am excited about this opportunity, 

I am concerned that we could be missing opportunities to expand markets for not 

only American goods, but also our services, if we only pursue bilateral agreements. 

Given regional economic integration, such as ECOWAS, the South African Customs Union and the East African Community, how do these efforts throughout subSaharan Africa affect our ability to negotiate bilateral agreements in a region where 

I fear we may be behind other competitors, such as China and the EU? 

Answer. The United States has expressed an interest in pursuing deeper trade 

ties on the continent that go beyond the unilateral preferences offered by AGOA. 

Our vision is to begin by establishing a model with an African partner on a bilateral 

basis that we can then expand to other partners in the region. We have the opportunity to explore such a model agreement and ways it can help strengthen African 

regional integration and expand our two-way trade relationship in both goods and 

services. 

Question. Just like the President and our allies, I share your concerns about China’s unfair trade practices. I believe that coordinated and concerted action against 

China is the only way to get them to change their behavior. Unilateral action from 

the United States will just lead to China redirecting its trade to other countries— 

on top of what they are already doing. 

What discussions have you had with our allies and partners? 

Do they agree with our assessment? And are they willing to take simultaneous, 

coordinated action? 

Answer. Most of our allies and trade partners share the same concerns about China’s state-driven, mercantilist policies on trade and technology transfer. 

Many countries also agree that China continues to game the WTO’s international 

rules-based trading system and the openness of our economies in ways that threaten 

all of our economies and our long-term competitiveness. 

In addition, we have maintained a sustained engagement effort with our allies 

and other like-minded countries in confronting China. 

• Through a series of high-level meetings, we continue to work closely with 

Japan and the European Union to ensure that WTO members maintain their 

rights to use non-market economy methodologies in antidumping proceedings 

in order to curb China’s distortive economic behavior. 

• During the WTO Ministerial Meeting in Argentina last December, the EU 

Trade Commissioner, the Japanese Trade Minister and the U.S. Trade Representative issued a joint statement recognizing that ‘‘forced technology transVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00062 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
59 

fer’’ threatens the proper functioning of international trade, the creation of innovative technologies, and sustainable growth of the global economy. Together, we agreed to enhance trilateral cooperation in the WTO and in other 

fora to address this and other critical trade concerns. 

Earlier this year, the EU Trade Commissioner, the Japanese Trade Minister and 

the U.S. Trade Representative underscored ‘‘their shared objective to address non 

market-oriented policies and practices.’’ 

QUESTIONS SUBMITTED BY HON. ROB PORTMAN

Question. As part of our World Trade Organization (WTO) commitments, the 

United States bound its tariff rates. Because of this, I am concerned that the proposed tariffs on Chinese goods violates WTO rules. 

Do you believe that these tariffs violate WTO commitments, and if not, why? 

Answer. China’s behavior has been undermining the global trading system and 

the WTO for years, using its protected market to force technology transfers and by 

acquiring leading technology companies overseas. Mercantilist trade policies, like 

China’s Made in China 2025 initiative, clearly state that China seeks to take away 

domestic and international market share from foreigners, in defiance of global 

norms. The world’s second-largest economy should not continue to ignore fundamental precepts of the global trading system. 

The administration has been clear from the outset that most of China’s policies 

covered by the investigation cannot be addressed under WTO rules. Further, we 

have made clear that if and when we determined that a particular aspect of China’s 

trade distorting technology transfer policies could be addressed through WTO dispute settlement, we would pursue that option. 

Indeed, one of the matters covered in the investigation—technology licensing requirements—does appear to be inconsistent with China’s WTO obligations. Accordingly, USTR has initiated formal dispute settlement on this issue. 

Question. China’s behavior is a threat to the multilateral trading system. However, since the WTO is a consensus body it will be difficult to change rules, make 

reforms, and update agreements to correct China’s behavior. 

What is your strategy for WTO reform both broadly for the world, and specifically 

in regards to China? 

Answer. The United States is focusing on three areas of reform: dispute settlement, monitoring and implementation, and development. 

On dispute settlement, we are seizing on the opportunity to have a serious discussion about the failure of the WTO Appellate Body to follow and apply WTO rules, 

which undermines the functioning of the rules-based trading system, and about the 

need for members of the WTO to exercise their authority appropriately to manage 

the WTO’s dispute settlement system. These discussions are critical if WTO dispute 

settlement is to assist in addressing the systemic distortions caused by China’s nonmarket economy. 

On monitoring and implementation, the United States has been providing leadership on the issue of notifications and transparency in order to correct a substantial 

shortcoming in the functioning of the WTO. In contrast, China’s economic and trading system continues to be opaque and its record on transparency in the WTO continues to be a concern for many WTO members. 

Finally, we see scope for a serious look at how we incorporate development issues 

into WTO work. These issues touch on core questions of how WTO members evaluate the relationships between trade rules, market opening, and prospects for economic expansion and development. China is at the heart of this paradigm and, in 

our view, should be treated as the global trader and producer that it is—and not 

like developing countries who do not compete on the same level. 

Question. What steps have been taken pursuant to this strategy? 

Answer. I have personally engaged with my counterparts from dozens of countries 

on these issues. At the December 2011 WTO Ministerial Conference, we received 

quite a bit of support and agreement from other countries. Discussions on each of 

these areas of reform are ongoing in Geneva, with the understanding that consensus 

60 

views take considerable time and considerable effort to establish. However, the 

United States views this hard work as necessary to keep the WTO relevant. 

Question. During the time that you have to receive feedback and finalize the tariff 

list, do you—and others in the administration—plan to begin negotiating with China 

during that time? 

Will those negotiations focus on addressing specific practices by China? 

If so, what will those specific practices be? The end of joint venture requirements? 

The cessation of all distortive practices for certain priority sectors or the end to a 

handful of distortive practices across all sectors? 

Answer. The administration has been clear about its concerns with China’s unfair 

trade practices. There is a wide range of such practices, including those applicable 

to U.S. farmers, manufacturers, and service providers, and many have been problematic for years despite prior promises. For the 301 investigation, USTR looked 

into China’s market-distorting forced technology transfers, theft of intellectual property, cyber-intrusions of U.S. commercial networks, and China’s failure to abide by 

its WTO obligations. We are looking for fundamental change from China, including—but not limited to—the possible solutions you have highlighted. 

Under section 301 of the Trade Act of 1974, USTR conducted an open and exhaustive investigation and determined that China’s unfair trade practices harm America’s economy. The administration has also identified specific programs that China 

needs to address. These are identified in numerous reports, including USTR’s report 

on China’s compliance at the World Trade Organization, USTR’s Special 301 Report, 

and the Department of Commerce’s determination that China remains a non-market 

economy. 

The administration has been and continues to be open to hear what steps China 

will take to address these critical concerns. As you may know, a delegation comprised of Ambassador Lighthizer, Secretary Mnuchin, Secretary Ross, and other senior administration officials traveled to China on May 2nd to meet with Chinese 

counterparts to discuss these issues. We are meeting again this week in Washington. 

Question. Data from the Department of Commerce, shows that in 2016 foreign students attending U.S. institutions of higher education spent $39.4 billion in foreign funds on U.S. services. In other words, a $39.4 billion export that reduces the 

trade deficit. Do you support restrictions on student visas for Chinese students 

studying in the United States as part of the section 301 remedy? 

Answer. USTR is not managing any section 301 responsive actions involving 

visas. We would refer you to the Department of State for general questions about 

U.S. visa policy. 

Question. I know that there is still interest in beginning to negotiate a Free Trade 

Agreement (FTA) with an African country. I think this would be a helpful bulwark 

against China. What are you doing to identify such a country and what qualities, 

features, and conditions are you looking for when it comes to identifying ideal future 

trading partners both in Africa and other parts of the world? 

Answer. The administration is still at an early stage of identifying a potential African partner with which to negotiate a free trade agreement. We would first engage 

in exploratory talks to clarify mutual expectations as well as consultations with 

Congress. We are in the process of defining the range of criteria for selecting an 

African negotiating counterpart, and we welcome your views. The advantage of such 

an FTA to the United States would be to ensure free, fair, and reciprocal access to 

a growing African market, and for the African partner it would represent an important opportunity to build on the successes of the African Growth and Opportunity 

Act. 

QUESTIONS SUBMITTED BY HON. PATRICK J. TOOMEY

Question. I remain concerned that the administration’s trade agenda is centered 

on reducing the U.S. trade deficit, which fails to provide an accurate measure of a 

country’s economic health. The United States has experienced its largest trade 

deficits when manufacturing output was highest and unemployment low. When the 

economy is growing and Americans have more disposable income, consumers can 

purchase more goods and services from both domestic and foreign sources, which 

will inevitably increase the trade deficit. Last year, the U.S. trade deficit increased 

61 

12 percent compared to 2016, yet our economy experienced tremendous growth and 

saw the unemployment rate drop to 4.4 percent, the lowest level since 2000. It 

would be unwise for USTR to jeopardize these economic gains by implementing policies that restrict imports and increase prices for American consumers and businesses. 

How do you rationalize strong growth in the U.S. economy last year, despite the 

United States incurring a higher trade deficit with its trading partners? 

Answer. The President is concerned about trade deficits, especially since some of 

our trading partners have enormous surpluses and have simultaneously sustained 

high growth rates. The administration has made reducing trade deficits a priority 

given that they are evidence, among other things, of unfair trade practices by our 

trading partners. Reducing trade barriers and increasing our exports is a major priority. Insomuch as barriers are reduced and U.S. exports increase, it will further 

benefit our economy. 

Question. As you and your team strive to complete the NAFTA renegotiations, I 

urge you to continue advocating for stronger intellectual property protections and 

greater access to Canada’s dairy market. I also have concerns about including a sunset provision in the revised agreement. To my understanding, under your proposal, 

NAFTA would automatically terminate after 5 years unless the member nations 

agree to continue the agreement for another 5 year term. This framework would reduce investment in the United States, both domestically and from abroad, and 

would immediately curtail U.S. exports. Businesses need to plain their supply 

chains well beyond a 5 year time horizon and would move production and sourcing 

locations outside of North America if such a sunset provision were included in the 

finalized agreement. 

If the administration believes that it has the unilateral authority to withdraw 

from NAFTA, why is USTR also advocating for a sunset provision, which will risk 

investment in and exports from the United States? 

Answer. All of our trading relationships should be frequently reviewed to ensure 

that they continue to serve the interest of the American people. The proposed performance review mechanism will achieve this goal. Constant scrutiny of these agreements is necessary to ensure that they serve our interests, and the traditional withdrawal mechanism has not provided an incentive for parties to keep the agreement 

beneficial to Americans. This is why, in the NAFTA, the administration is seeking 

to provide a mechanism to ensure that the parties assess the benefits of the agreement on a periodic basis. There is no evidence that the performance review provision would have an adverse impact on the United States. Indeed, the U.S. economy, 

which is the largest in the world and dwarfs those of Canada and Mexico, has 

boomed during the renegotiation of NAFTA and will continue to be the destination 

of choice for investors. 

QUESTIONS SUBMITTED BY HON. DEAN HELLER

Question. As a strong proponent of an all-of-the-above energy policy, I have long 

championed using the best in conventional and alternative energy technologies to 

deliver the greatest possible savings to Nevada’s consumers. In a place like Nevada, 

where we’re blessed with an abundance of sunshine, alternative energy necessarily 

includes solar, and that means thousands of solar jobs. In fact, more than 6,500 Nevadans work for the over 120 solar companies, including 15 manufacturers, that operate in our State. 

While I commend the President on his efforts to strengthen the economy and protect American jobs, I believe we must always closely examine our trade policies, including the recent solar tariffs, to ensure they are having the intended effect. 

Based on your preliminary analysis, what has the net impact of these tariffs been 

on solar jobs in this country? 

Answer. Under section 201 of the Trade Act of 1974, when the U.S. International 

Trade Commission (ITC) reaches an affirmative determination of serious injury, the 

Trade Policy Committee (TPC), chaired by the USTR, reviews any recommendations 

made by the ITC, public comments, and testimony delivered in relation to the public 

hearing to develop a recommendation for the President. The TPC’s recommendation 

considers all relevant facts related to the case, including the impact a given action 

may have on solar jobs, and develops an appropriate and feasible recommendation 

for action within the President’s authority. This process also includes the considerVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00065 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
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ation of the extent to which the adjustment of such workers may be facilitated by 

existing programs. Accordingly, the statute requires the President to take into account a cost-benefit analysis that any action will have greater economic and social 

benefit than harm. 

Section 204(a) of the Trade Act of 1974 requires the ITC to ‘‘monitor developments 

with respect to the domestic industry, including the progress and specific efforts 

made by workers and firms in the domestic industry to make a positive adjustment 

to import competition.’’ The statute then requires the ITC to report the results of 

its monitoring to the President no later than halfway through the initial period the 

safeguard measure is scheduled to be in place. The administration will carefully review that report when it arrives. 

Although the administration is not monitoring developments, we note that a number of foreign and domestic companies have announced or continued with plans to 

open manufacturing facilities in the United States for the production of solar cells 

or modules. The planned facilities would increase the number of U.S. manufacturing 

jobs in the solar industry and help maintain levels of employment elsewhere within 

the industry. 

Question. Tariffs can be a blunt instrument and oftentimes must be tailored to 

maximize their benefit. In the case of solar, the President thoughtfully included an 

exclusion process for products that are not made in the United States. 

Will you commit to meeting with a group of stakeholders whose companies have 

significant investment planned in my home State of Nevada to ensure these solar 

tariffs capture all relevant nuances? 

Answer. Following the President’s decision on solar products, USTR announced an 

opportunity for companies to request product exclusions from the safeguard. On 

February 14, 2018, USTR issued a Federal Register notice providing for a public 

comment period that concluded on April 16th. USTR is currently in the process of 

reviewing the requests that we have received, and will meet with stakeholders as 

appropriate to implement the President’s proclamation. 

QUESTIONS SUBMITTED BY HON. RON WYDEN

CHINA IP/TECH TRANSFER (SECTION 301 INVESTIGATION)

Question. Some administration officials have stated that the United States is currently negotiating or that it intends to enter into negotiations with China to address 

the concerns identified in USTR’s section 301 determination. 

Is the administration currently discussing with China the issues identified in the 

section 301 determination, and if so, which U.S. agency or agencies are leading 

those discussions? 

Has the administration requested that China modify laws, regulations, or other 

measures relating to the section 301 determination since that determination was 

issued and if so, which measures? 

Answer. The administration has been clear about its concerns with China’s unfair 

trade practices. These practices include China’s market-distorting forced technology 

transfers, theft of intellectual property, cyber intrusions of U.S. commercial networks, and China’s failure to abide by its WTO obligations.. 

Under section 301 of the Trade Act of 1974, USTR conducted an exhaustive investigation and determined that China’s unfair trade practices harm America’s economy and published a detailed report on related policies. In addition, the administration has identified very specific programs that China needs to address. These are 

identified in numerous reports, including USTR’s report on China’s compliance at 

the World Trade Organization and the Department of Commerce’s determination 

that China remains a non-market economy. 

The President hopes that China will take concrete action to address its unfair 

policies and practices such as distorting markets, forcing technology transfer, and 

stealing technology. China must also finally follow through on commitments to 

lower its barriers to U.S. exports and cease its WTO-inconsistent behavior. 

If China takes these actions, trade between the United States and China will be 

more free, fair, and reciprocal. The United States will finally be able to export more 

products to China and the trade deficit will narrow. 

63 

The administration has been and continues to be open to hear what steps China 

will take to address these critical concerns. As you may know, a delegation comprised of Ambassador Lighthizer, Secretary Mnuchin, Secretary Ross and other senior administration officials traveled to China on May 2nd to meet with Chinese 

counterparts to discuss these issues. The administration will continue to be open to 

China’s views on how to change its unfair trade practices. 

STEEL AND ALUMINUM (SECTION 232 INVESTIGATIONS)

Question. Which countries have requested exemptions from the steel and aluminum tariffs imposed under section 232? 

Of the countries listed, with which ones is the administration currently negotiating a possible exemption? For each, please identify the lead administration official 

responsible for the negotiation. 

Please list the criteria the administration is using in the negotiations to determine whether to exempt countries from the steel and aluminum tariffs 

Beyond the section 232 proceedings, what is the administration’s strategy for addressing global overcapacity in steel and aluminum? 

With respect to the quota agreement recently announced with Korea, what product categories will be used to set product specific quotas? How will the agreement 

be enforced, and what steps is the administration taking to ensure that the agreement does not incentivize increased imports of specialty or high value products? 

Answer. The President’s proclamations identify countries with which the United 

States is engaged in discussions on satisfactory alternative means to address the 

threatened impairment to the national security caused by imports of steel and aluminum. The Department of Commerce is leading discussions with the European 

Union, on behalf of its member countries; USTR is leading discussions with the 

other identified countries. 

The President’s proclamations identify the criteria for determining whether to exempt a country from the tariffs the President proclaimed pursuant to section 232 

of the Trade Expansion Act of 1962, as amended. These criteria are whether the 

United States has a security relationship with a country, and whether the United 

States and that country can arrive at satisfactory alternative means for addressing 

the threatened impairment to the national security caused by imports from that 

country. 

In proclaiming the tariffs, the President recognized that certain countries share 

our concern about global excess capacity in the steel and aluminum sectors, a situation that is contributing to the threatened impairment of U.S. national security. We 

continue to work with willing partners to address the root causes of this excess capacity, including through cooperation in relevant international fora. 

An annex to the President’s April 30, 2018 steel proclamation identifies the product categories to which the quota on steel articles from the Republic of Korea will 

apply. Further information on the quota, including as regards enforcement, is available at the website of U.S. Customs and Border Protection (https://www.cbp.gov/ 

trade/quota/bulletins/qb-18-118-steel-mill-articles). 

NAFTA

Question. Shortcomings in Mexico’s implementation of labor reforms have created 

serious concern that it will be unable to live up to its commitments in NAFTA. 

Please describe your plan to ensure that the NAFTA parties, and particularly Mexico, implement the labor commitments that they ultimately agree to in the current 

negotiation. 

Do you agree that the labor legislation currently pending in Mexico’s Senate, if 

adopted in its current form, would not be consistent with labor commitments the 

United States is seeking in NAFTA? If so, what steps is the administration taking 

to ensure that there are effective mechanisms available to the United States—other 

than dispute settlement—to ensure that Mexico expeditiously implements NAFTA 

labor commitments, including commitments with respect to freedom of association 

and collective bargaining? 

Answer. Among our top priorities for the NAFTA are improvements that create 

incentives to increase manufacturing in the United States, lower the U.S. trade 

deficit with the NAFTA countries, and improve export opportunities for U.S. proVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00067 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
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ducers and workers. To support these priorities, we are working to ensure that the 

renegotiated agreement provides strong labor standards. In accordance with the objectives Congress set out in TPA, we are prioritizing the inclusion of high-standard 

labor provisions directly in the core of the agreement rather than in a side agreement as is currently the case with the NAFTA. We are also working to ensure that 

the labor obligations are subject to the same dispute settlement mechanisms and 

trade sanctions as the rest of the agreement. 

Regarding labor standards in Mexico, we are closely monitoring the implementation of Mexico’s landmark constitutional reforms that will overhaul its system of 

labor justice. NAFTA provides an opportunity to lock in this progress. We understand the concerns that have been raised regarding some elements of the proposed 

labor legislation in Mexico, particularly on collective bargaining and protection contracts. We are consulting with Mexico on these issues and on ways to address these 

concerns. 

Question. It is also the case that very few of our trading partners have implemented obligations to provide a conditional safe harbor to online service providers 

with respect to liability for copyright infringement. Please describe what you plan 

to do to get our trading partners to implement those existing obligations. 

Answer. USTR takes the proper and complete implementation of all FTA commitments seriously and engages with trading partners on a regular and sustained basis 

to advance implementation of all of FTA commitments. 

Question. This administration has made steady progress on its effort to renegotiate NAFTA. I am encouraged by the fact that you have closed six chapters and 

seemed to be getting close on others as well. Of course, negotiations often get harder 

as time goes on and more difficult issues need to be resolved. And, the environment 

won’t get any easier with elections occurring in all three countries this year. That 

said, I would like to reiterate a point that I have made to you before—the substance 

should drive the timing in this negotiation. It is too important to our workers that 

we get enforceable labor and environmental standards and upgraded obligations 

across the board—we can’t just throw up our hands and walk away or hastily accept 

unambitious outcomes because we have failed to meet some artificial deadline. Have 

you set a deadline for concluding negotiations? 

Answer. I completely agree. We are seeking to conclude a modernized and rebalanced NAFTA as soon as possible. However, the substance will determine the pace 

of this negotiation and we will not limit the United States to an artificial deadline. 

We will not conclude a bad deal for the sake of expediency. 

Question. At the 2017 trade agenda hearing, you stated that you were prepared 

to negotiate until we get a high-standard agreement unless there is a total stalemate, in which case, you said, you would be back in front of this committee to consult with us. Is that still your commitment? 

Answer. As the United States Trade Representative, I place great importance on 

the both the history of the agency’s relationship with Congress and its requirements 

under statute. This administration is committed to following the guidelines for consultations with Congress for trade agreement negotiations that were developed in 

2015. 

Question. Chapter 19 of the NAFTA has been used successfully by Canada to roll 

back U.S. protections against unfair trade, particularly for softwood lumber producers in Oregon and across the country. Frankly, it is a relic that does not belong 

in any trade agreement and I urge you to get rid of it. You have spoken at some 

length about concerns you see regarding the impact of a different mechanism— 

ISDS—on U.S. sovereignty. While as you acknowledge the United States has never 

lost a case under ISDS, it has lost dozens of cases under NAFTA chapter 19. Furthermore, while ISDS remedies are limited to penalties, chapter 19 allows these tribunals to function as U.S. courts and compel U.S. agencies to reverse protections 

for American manufacturers. 

Does chapter 19 in your view create concerns regarding U.S. sovereignty? 

Will you be satisfied with a renegotiated NAFTA agreement that includes chapter 

19? 

Answer. This administration agrees with you that chapter 19 disputes brought by 

Canada and Mexico have been detrimental to our robust trade remedy regime. As 

indicated in our negotiating objectives for NAFTA, our objective in a renegotiated 

NAFTA is to preserve the ability of the United States to enforce rigorously its trade 

65 

laws, including antidumping, countervailing duty, and safeguards laws, as well as 

eliminate the chapter 19 dispute settlement mechanism. We have not deviated from 

this objective in our discussions with Canada and Mexico and are working with both 

countries to strengthen our respective trade remedy regimes so that they can more 

adequately and vigorously address dumped or subsidized injurious trade. 

Question. On April 11th, Secretary Perdue told the Senate Agriculture Appropriations Subcommittee that he was not optimistic that our challenges with Canada in 

the dairy sector would be resolved. He indicated that it is not one of your top priorities—that you have larger issues. It is one of my top priorities. As I laid out at 

last year’s trade agenda hearing—before USTR launched negotiations—addressing 

challenges to our dairy industry is a key issue in a renegotiated NAFTA. That 

means, at a minimum, eliminating the Class 7 pricing program and obtaining gains 

in market access. In your view, is a NAFTA renegotiation a success if it fails to 

eliminate Class 7 and improve access to Canada’s market for our dairy producers? 

Answer. I have personally been engaging with my Canadian counterpart on the 

dairy issue and it is at the forefront of our negotiations. 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 NAFTA renegotiation. 

The administration is also seeking to open up Canada’s market to the full range of 

U.S. dairy, poultry and egg products through NAFTA renegotiation. These are both 

high priorities for the United States. 

Question. It is my firm belief that our trade agreements must protect the free exchange of ideas and information, and the access of American-made digital products 

and services around the world. Other countries are increasingly erecting barriers, 

threatening to erode U.S. leadership in digital trade. That is why it is so important 

that a renegotiated NAFTA set a new high-water mark on obligations that protect 

the Internet as an open platform for commerce as well as the free exchange of ideas 

of all kind. This means it must have robust commitments on data flows and localization, clear commitments on intermediary liability, as well as copyright commitments that reflect U.S. law and its support of creation and innovation. Do you agree 

with me that NAFTA is a critical opportunity to set a new standard on the frontier 

of digital trade and are you seeking to address each aspect of a digital trade agenda? 

Answer. I agree that a renegotiated NAFTA provides the opportunity to pursue 

the highest possible standards for ensuring key U.S. objectives in with respect to 

digital trade, helping to safeguard U.S. leadership in this critical area. We have tabled an ambitious set of proposals, in consultation with you and others in the Congress. I am confident that the United States is currently on a path to achieving the 

strongest outcome on digital trade issues ever negotiated in a U.S. trade agreement. 

Question. As NAFTA discussions progress, it becomes even more important for the 

administration to consult with Congress. We are partners in this effort and share 

the administration’s goals. I’d argue there isn’t a member of Congress who doesn’t 

think NAFTA can be improved to the benefit of U.S. workers, businesses and farmers. And, Congress is the body who will be asked to pass the legislation that gives 

effect to the deal you negotiate. For these reasons, as decisions get harder and 

trade-offs are made to strike a deal, it is critical that the administration follows the 

letter and spirit of the consultations requirement in TPA, including the Guideline 

for Transparency Engagement promulgated by USTR. To that end: 

Will you recommit to make yourself available in a timely manner—i.e., before key 

decisions are made and communicated to trading partners—to the committee when 

it requests your presence for consultations? 

Answer. As I said during that hearing, it is my intention to fulfill the consultation 

requirements as outlined by TPA. I, along with the USTR senior and professional 

staff, have dedicated over 2,600 employee hours to consultations with members of 

Congress and their staff. 

Question. The TPA guidelines state that: ‘‘In formulating and adjusting U.S. negotiating positions with respect to the negotiating objectives found in the Trade Priorities Act, USTR will consult with relevant congressional committees.’’ Will you commit to ensure that any adjustments to U.S. negotiating positions discussed by negotiators with our trading partners are first the subject of consultations with the committee, even if such adjustments are not proposed in writing? 

66 

Answer. The TPA requirements and guidelines require USTR to engage in detailed information exchange throughout the negotiations. It is my intention to continue to fulfill these requirements. 

Question. The TPA guidelines state: ‘‘During key negotiating meetings, USTR will 

consult intensively with the Committees on Finance and Ways and Means.’’ Will you 

commit to ensure that committee staff is updated on the negotiations on a regular 

and timely basis, including during key meetings, such as ministerial discussions? 

Will you commit to make senior policy staff on your political team available for intensive consultations during key negotiating meetings? 

Answer. As the USTR, I have made it a habit of personally calling the chairman 

and ranking member, or in some circumstances their senior staff, to deliver news 

on upcoming actions, and it is my intent to continue personally relaying important 

messages in this way. Furthermore, by my own approximation I have personally 

conducted over 85 meetings and calls with congressional members, while my staff 

has conducted over 649 such meetings and calls. In total, we estimate that USTR 

has spent over 2,600 man-hours in consultations with congressional staff and members. Moving forward, I can assure you that USTR will continue to consult with congressional members and staff in a timely fashion. 

Question. In written questions for both your confirmation hearing and the 2017 

Trade Agenda hearing, I asked you about the trade-distorting measures undertaken 

by British Columbia and other provinces that have a severe impact on wine exported from the United States, including Oregon wine. The United States originally 

requested consultations with Canada on January 18, 2017 through the World Trade 

Organization’s dispute settlement mechanism. Your administration updated the request in October, but didn’t expand it to the full range of Canadian federal and provincial laws and regulations that disadvantage U.S. exports. And, that dispute has 

not proceeded. 

Are you committed to addressing these barriers in the renegotiated NAFTA? 

What is the status of the dispute at the WTO? 

Answer. Policies restricting sales of U.S. wine in Canada are a major problem. We 

are considering the most effective steps to address those British Columbia measures 

governing the sale of wine in grocery stores, as well as other measures in Canada 

that may be harming our wine exports. Whether we go to a dispute settlement panel 

or address these measures in the NAFTA negotiations, we are working to get this 

problem resolved for U.S. wine makers. 

With regard to the status of dispute settlement proceedings at the WTO, the 

United States and Canada held consultations in October 2017 concerning British 

Columbia measures governing the sale of wine in grocery stores. In March 2018, the 

United States joined consultations between Australia and Canada concerning the 

same British Columbia measures, as well as other provincial and federal measures 

identified by Australia in its request for consultations. 

ASIA-PACIFIC TRADE AGENDA

Question. The remaining participants in the Trans-Pacific Partnership (TPP) last 

month signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Press reports indicate that the President on April 12th directed 

you and other senior economic advisors to initiate discussions with TPP countries 

on U.S. reentry into the TPP. The President then tweeted that the United States 

‘‘would only join TPP if the deal were substantially better’’ and that the United 

States is ‘‘working to make a deal with’’ Japan. 

Have you been directed to initiate discussions with TPP countries on U.S. reentry 

into the TPP? 

Answer. As the President has stated, we believe that multilateral and multicountry agreements like TPP limit the depth of commitments participating countries 

make. We have offered to move forward with countries in the region on a bilateral 

basis, and we look forward to negotiating and concluding free, fair, and reciprocal 

trade agreements. 

Question. Has Japan expressed interest in a bilateral free trade agreement with 

the United States? If not, what ‘‘deal’’ is the administration working on with Japan? 

What are the U.S. priorities for this deal and what specific issues would the administration like the deal to address? 

67 

Answer. President Trump and Prime Minister Abe recently met, and President 

Trump made clear his preference for negotiating a bilateral trade deal with Japan. 

Among other objectives, the administration would aim to maximize export opportunities to Japan through removal of a broad range of tariff and non-tariff barriers 

to U.S. exports. 

Question. Has USTR identified improvements that, if achieved, would constitute 

a ‘‘substantially better’’ TPP deal? If so, in what areas would it be seeking improvements to the TPP? If not, when will USTR identify its priorities for improving the 

TPP? 

Answer. As noted previously, the United States is focused on the negotiation and 

conclusion of bilateral trade deals to address the numerous barriers to trade and 

investment throughout the Indo-Pacific region. Such negotiations will offer the 

United States the opportunity to improve upon some of the concerns and shortcomings of the TPP. 

Question. As the CPTPP moves forward, what is the administration’s strategy to 

ensure that U.S. farmers and manufacturers are not disadvantaged as compared to 

their competitors in Canada and Mexico when exporting to Japan, Vietnam, and 

other CPTPP countries? 

Answer. The administration aims to negotiate and conclude free, fair, and reciprocal trade deals across the Indo-Pacific region. For example, the President already 

has made clear his desire to negotiate a bilateral deal with Japan, and USTR is currently leading talks to advance this objective. 

GEOGRAPHICAL INDICATIONS

Question. In order for our companies to stay competitive globally, we need strong 

enforcement when countries ignore their trade commitments to us and a comprehensive strategy to counter the intentional use of trade policies to create artificial barriers to our products. Last year, Chairman Hatch and I together sent a letter to the 

Acting USTR on the misuse of geographical indications (GIs) that puts at risk U.S. 

market access opportunities. The EU has a track record of using trade deals to 

throw up new barriers that make it harder for the United States to sell various 

foods and wines in the EU and other key markets by misusing GIs. In questions 

for the record for last year’s trade agenda hearing, I asked you how you were going 

to use the NAFTA discussions to continue to engage with Mexico in particular to 

prevent that result. 

Can you provide an update on that effort to engage with Mexico on GIs and their 

negotiations with the European Union? 

Answer. We have consistently raised our strong objection to the practice of protecting GIs through international agreements without adequate fairness, transparency, or due process, including through the Mexico-EU trade agreement. We are 

discussing the outcomes of this negotiation in detail with Mexico. USTR will use all 

appropriate trade tools to combat unfair GI practices, in Mexico and elsewhere. 

Question. Is there anything we can do to address GIs in Canada in NAFTA? 

Answer. The United States seeks fairness in the GI systems in all trading partners, including Canada. We seek robust IP commitments in the NAFTA, including 

with respect to geographical indications. 

Question. How you plan to confront this problem more generally? 

Answer. We are working intensively in many forums to ensure that GI-related 

trade initiatives of the EU, its member states, like-minded countries, and international organizations, do not undercut our market access. USTR, with the Department of Agriculture, Department of Commerce and many other U.S. agencies is promoting and protecting access to foreign markets for U.S. exporters of products that 

are trademark protected or are identified by common names. We are using every 

available opportunity to advance these objectives including free trade agreement negotiations, Asia-Pacific Economic Cooperation (APEC), WIPO, and the WTO. USTR 

is also continually engaging bilaterally to address concerns resulting from the GI 

provisions in existing EU trade agreements, agreements under negotiation, and 

other initiatives. 

WTO AND OTHER PLURILATERAL INITIATIVES

Question. As we have discussed in the past, the United States is the world’s leader in the services sector, which accounts for 30 percent of U.S. exports and supports 

68 

millions of jobs. But, we can’t take that competitive advantage for granted. We must 

continue to address barriers to U.S. service exports so that we can continue to be 

a worldwide leader in the sector. In the past, you have said that the administration 

was evaluating whether to pursue the multilateral Trade in Services Agreement 

(TiSA) and developing a strategy to eliminate service barriers worldwide, including 

on new digital services. 

What is the outcome of that evaluation of TiSA and what strategy has been developed? 

Answer. The U.S. service sector is highly innovative and a key driver of the U.S. 

economy. Maintaining a vibrant U.S. services sector and expanding U.S. services exports is vital to a healthy economy and a core objective of U.S. trade policy. USTR 

is currently pursuing robust services outcomes in the ongoing NAFTA negotiations 

and other ongoing bilateral efforts. USTR is also pursuing an aggressive agenda on 

digital trade, including through participation in plurilateral discussions at the WTO 

involving e-commerce. USTR is still evaluating additional options for pursuing our 

services trade objectives, including TiSA, and will continue to consult with you as 

we chart the best course forward. 

Question. Ongoing negotiations for an agreement to eliminate tariffs on environmental goods have been on hold for more than a year. Trade in environmental goods 

presents major opportunities for American businesses and workers given that over 

80 percent of clean energy investments will take place outside of the United States 

and the United States is a leading producer of a number of environmental technologies, ranging from water filtration equipment to turbines to air quality monitoring equipment. Last June, you indicated that the administration was in the process of reviewing the Environmental Goods Agreement (EGA). 

What is the status of the administration’s review? If it is still pending, when will 

it be complete? If it is complete, what is the administration’s assessment? 

Answer. The administration continues to review the EGA, among other initiatives, 

and I look forward to working with you and other members of Congress and stakeholders as we consider how best to move forward in order to advance U.S. manufacturing interests in this sector. 

Question. Fishing and fisheries are important to Oregon’s coastal economy, and 

ensuring that other countries play by the rules is vital to ensuring fairness for Oregon’s fishers. In the President’s Trade Policy Agenda, the administration detailed 

its support for ‘‘strong prohibitions on subsidies that contribute to overfishing and 

overcapacity and those that support illegal fishing activities.’’ The administration 

also advised that it will ‘‘continue to press for an ambitious agreement on fisheries 

subsidies that includes enhanced transparency and notifications of fisheries subsidies programs.’’ 

Please provide an update on your efforts to pursue these goals, as well as the status of ongoing negotiations at the WTO regarding these issues. 

Answer. At the WTO’s Ministerial Conference in December 2017, members agreed 

to continue negotiations to prohibit harmful fisheries subsidies with the goal of concluding an agreement by the next WTO Ministerial in December 2019. WTO Members have since agreed to a robust work program to advance the fisheries subsidies 

negotiations. The administration will continue to actively participate in these negotiations and advocate for prohibitions that apply to all members, including the largest subsidizers, which will help level the playing field for the U.S. fishing industry. 

I look forward to working you and other members and stakeholders as we further 

advance these negotiations. 

E-COMMERCE

Question. In recent years, we have seen a true transformation in trade, where 

even a very small business in Oregon can reach customers globally due to the Internet. This disaggregation of trade means that we are seeing more and more shipments come in through small packages, rather than shipping containers. That is 

why Congress raised the de minimis threshold for small shipments entering the 

United States in the Trade Facilitation and Trade Enforcement Act of 2015. I was 

pleased that USTR’s summary of negotiating objectives indicates that you are asking Canada and Mexico to raise their thresholds to the level of the United States. 

But, we need to look beyond Canada and Mexico at what discussions are going on 

around the world regarding how to capitalize on the opportunities and address chalVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00072 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
69 

lenges posed by the new reality we are living in. To me, it is critical the United 

States be a leader in those discussions, with USTR play a prominent role. 

Will you commit to me that will be the case not only at the World Trade Organization, but also at the World Customs Organization, and any other relevant international bodies? 

Answer. The United States put forth very ambitious negotiating objectives for the 

NAFTA Customs Administration and Trade Facilitation Chapter and is seeking 

commitments that meet this level of ambition. We have been seeking new commitments on faster and less burdensome release of goods, transparency and automation 

in customs procedures, and in how the government works with and interacts with 

traders. Included among the objectives is a higher de minimis value, so that U.S. 

exporters and companies will also enjoy including new job growth and increased opportunities. Based on input and feedback we have received from U.S. stakeholders 

and Congress, we know that faster, more transparent, and less burdensome formalities make trade easier and more profitable for U.S. traders. USTR is committed to 

seeking reciprocal reforms and modernized borders from our trading partners as the 

United States offers at its borders, and will seek such commitments in all international fora. 

ETHICS COMPLIANCE

Question. Given the wide range of bilateral trade negotiations recently launched 

by the administration, it is more critical than ever that both the President and top 

administration officials are in full compliance with ethics laws as they negotiate on 

behalf of the United States. The American people must have full confidence that the 

results of such negotiations are in the interest of the United States as a whole and 

not designed to benefit particular companies or sectors to which administration 

officials have financial or other ties. 

With respect to the recently announced steel and aluminum tariffs, for example, 

the President has stated that the United States Trade Representative has chief responsibility for negotiating country exemptions. In his ethics agreement, Ambassador Jeffrey Gerrish, who was recently confirmed as Deputy United States Trade 

Representative, committed not to participate for one year after his withdrawal from 

Skadden (his previous law firm) in any particular matter involving specific parties 

which were former clients, unless first authorized to participate. Ambassador 

Gerrish recently served as counsel to U.S. Steel Corporation, a major U.S. steel company affected by these negotiations, and was a registered lobbyist for the company 

from Q4 2007–Q1 2009 and from Q4 2014–Q2 2016. 

Furthermore, in his ethics agreement, Ambassador Gerrish committed to divest 

certain assets, including holdings in a major energy company, within 90 days of 

confirmation and committed not to participate in any particular matter that to his 

knowledge has a direct and predictable effect on the financial interests of such entities until divestment was complete. 

Has Ambassador Gerrish participated in negotiations with foreign governments 

related to steel and aluminum tariff exemptions and if so, when did he first do so? 

Answer. Yes, but he did not participate in any particular matters involving 

specific parties which were former clients. He first participated on March 16, 2018. 

Question. If Ambassador Gerrish did participate in such negotiations, did he receive authorization from the USTR Designated Agency Ethics Official (DAEO) before doing so? If so, please describe the basis for that authorization and provide a 

copy to the committee. 

Answer. Ambassador Gerrish has had and continues to have discussions about 

ethics issues with appropriate USTR officials, and he is in full compliance with applicable ethics requirements. 

Question. Ambassador Gerrish’s ethics agreement states that within 90 days of 

confirmation (which took place March 5, 2018) he will divest his interests in the entities listed in Attachment A of his ethics agreement. Has he divested his interests 

in these entities? On what date was divestiture completed? 

Answer. Ambassador Gerrish has fully complied with all requirements of his ethics agreement. He filed a 278–T periodic transaction report and filed his Certification of Ethics Agreement Compliance with the Office of Government Ethics on 

May 1, 2018. 

70 

QUESTIONS SUBMITTED BY HON. DEBBIE STABENOW

Question. Last year, Chairman Roberts and I sent you and Secretary Perdue a letter asking you to address the impact of Canada’s new dairy pricing (‘‘Class 7’’) 

scheme on the U.S. dairy industry. In 2017, this new policy cost Michigan dairy 

farmers an estimated $40 million in lost income. At a time when our dairy farmers 

are already facing significant financial hardship, this unfair practice cannot continue. 

I appreciate your engagement on this issue, but will you continue to prioritize 

finding a solution for U.S. dairy farmers in the NAFTA renegotiation? 

Answer. 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 NAFTA renegotiation. 

Question. Michigan cherry growers are continuing to struggle with a flood of 

cheap imports of tart cherry juice concentrate, primarily from Turkey. During your 

confirmation, you committed to work with me and Michigan’s cherry industry to address this, and I appreciate your attention to this issue. 

The U.S. cherry industry has submitted a petition to have Turkey’s duty-free access for tart cherry juice concentrate revoked under the Generalized System of Preferences (GSP) program. The petition also noted that Turkey has exceeded the GSP 

program’s competitive need limit (CNL) by supplying more than 50 percent of all 

U.S. imports of tart cherry juice concentrate every year since 2013. How long will 

it take to make a determination on this petition? If Turkey is exceeding the CNL 

threshold for tart cherry juice concentrate, will you move to terminate their dutyfree treatment for this product? 

Answer. USTR will be making a decision on which GSP product petitions to accept for review in the coming weeks. In the most recent GSP renewal, Congress established a new deadline of November 1st for GSP CNL decisions. The President 

makes the final decision on all GSP product removals. USTR will continue to work 

with you and the U.S. cherry industry to address its concerns. 

Question. One of the challenges in addressing this issue is the lack of information 

about production and processing capacity, market conditions, and potential countervailable subsidies in Turkey. Will you consider requesting that the U.S. International Trade Commission undertake a section 332 investigation into these factors 

and their impact on the U.S. cherry industry? 

Answer. We are always willing to discuss any appropriate measures to collect any 

necessary additional information. 

Question. As we have discussed, including strong and enforceable language on 

currency manipulation in NAFTA, and other trade agreements we are negotiating, 

is critical. Given what seems to be an acceleration of discussions between the 

NAFTA parties recently, what is the status of including language on currency manipulation in the NAFTA negotiations? 

Answer. As I have said before, this administration believes it is critical to ensure 

that trading partners do not manipulate exchange rates in order to prevent effective 

balance of payments adjustment or to gain an unfair competitive advantage. Secretary Mnuchin and I are working closely with our Canadian and Mexican counterparts on how best to achieve this in the NAFTA. 

Question. As you are aware, the long-standing dispute with China on solar products has also ravaged the U.S. polysilicon industry, which is a critical component 

for semiconductors. Hemlock Semiconductor, located in Michigan, is one of the largest polysilicon producers in the world. This dispute has blocked market access for 

U.S. polysilicon in China and threatens a critical manufacturing industry in the 

United States. In January USTR announced, it would be engaging in discussions 

about how U.S. polysilicon can gain market access in China. Thank you for your 

commitment on this issue. 

Have you engaged in the discussions on this issue? How? 

What actions have you taken to stop China’s retaliation on the U.S. polysilicon 

industry? 

What steps do you plan to take to help the U.S. polysilicon industry? 

When do you plan to take these steps? 

71 

Answer. When President Trump announced safeguard relief for U.S. manufacturers of solar cells and modules, he committed that ‘‘[t]he U.S. Trade Representative 

will engage in discussions among interested parties that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon. The goal of those discussions 

must be fair and sustainable trade throughout the whole solar energy value chain, 

which would benefit U.S. producers, workers, and consumers.’’ The Office of the 

U.S. Trade Representative has been engaged in such discussions with U.S. stakeholders in an effort to find a solution that is beneficial to both the U.S. solar industry and the U.S. polysilicon industry, and which would be acceptable to China. 

Those discussions are ongoing. 

Question. USTR is engaged in negotiations with several countries in light of the 

President’s announcement and implementation of tariffs on certain steel and aluminum imports to the United States. 

What are your criteria for country exemptions and negotiations as they relate to 

the steel and aluminum tariffs? 

Are your criteria consistent for each country? 

Answer. The President’s proclamations identify the criteria for determining 

whether to exempt a country from the tariffs he proclaimed pursuant to section 232 

of the Trade Expansion Act of 1962, as amended. These criteria are whether the 

United States has a security relationship with a country, and whether the United 

States and that country can arrive at satisfactory alternative means for addressing 

the threatened impairment to the national security caused by imports from that 

country. The President’s proclamations relating to section 232 also describe the 

issues the United States is discussing with partner countries relating to satisfactory 

alternative means. These include measures to reduce global excess capacity by addressing its root causes and measures to increase domestic capacity utilization. 

QUESTIONS SUBMITTED BY HON. MARIA CANTWELL

BILATERAL TRADE AGREEMENTS

Question. Please identify the countries that the President is in bilateral negotiations with at this time. Which countries is he targeting for bilateral trade agreements and what is the timeline for beginning these negotiations? 

Answer. USTR is currently exploring potential bilateral deals with several countries in order to secure greater market access for American farmers, workers, ranchers, and businesses. These include the UK, Japan, and countries in Africa and the 

Indo-Pacific. As you know, USTR frequently explores these options through our 

Trade and Investment Framework Agreements as well as through discussions that 

are more informal. Before USTR begins any bilateral negotiations, we will ensure 

to consult closely with you and your staff. 

Question. Who will be the lead negotiator of bilateral agreements—or any agreements for that matter: USTR or the Department of Commerce? 

Answer. As USTR, my statutorily mandated responsibility is to be the President’s 

principal trade advisor and lead trade negotiator for the United States. I intend to 

continue fulfilling that role. As USTR has always done, and where required by statute, I will continue to work closely with all members of the President’s cabinet, Congress, and the Trade Advisory Committees in order to develop a balanced trade policy that furthers the priorities of the President and the American people. 

Question. In your view, does USTR have the personnel/expertise on board to be 

able to negotiate more than one bilateral agreement at a time? 

Answer. As you know, in March, the Senate confirmed three of my deputies, C.J. 

Mahoney, Dennis Shea, and Jeffrey Gerrish, as well as my Chief Agriculture Negotiator, Gregg Doud. Our new senior leadership team joins more than 200 highly 

qualified civil service staff already at the agency who bring decades of negotiating 

experience to the table. Rebalancing America’s trading relationships to better serve 

our workers, farmers, ranchers, and businesses is a principal objective of this President. I am fully confident that USTR will be able to accomplish this mission. 

72 

SECTION 301 ACTION

Question. The recent 301 case investigated two important issues that companies 

want to see addressed: IPR protection and forced technology transfer. Despite the 

recent announcement of WTO, tariff and investment restriction action, it remains 

unclear what the administration’s strategy is in this case and more broadly for U.S.- 

China relations, and what you would consider to be successful resolution of these 

issues. I would like some clarity on these issues: 

How will the proposed tariffs address the problems of IP protection and forced 

technology transfer in China, and bring it to a successful resolution? 

Answer. By targeting products that benefit from Chinese industrial policies, including Made in China 2025, the proposed tariff list aims to apply pressure on 

China in sectors that China deems important. 

Question. What actions would China need to take to improve IP protection and 

end forced technology transfer to end the tariffs you plan to implement? Specifically, 

how will issues around cloud computing be addressed? 

Answer. The administration has been clear about its concerns with China’s unfair 

trade practices. These practices include China’s market-distorting forced technology 

transfers (including in the cloud computing sector), theft of intellectual property, 

cyber intrusions of U.S. commercial networks, and China’s failure to abide by its 

WTO obligations. 

The administration has also identified very specific programs that China needs 

to address. These are identified in numerous reports, including USTR’s report on 

China’s compliance at the World Trade Organization, USTR’s Special 301 Report, 

and the Department of Commerce’s determination that China remains a non-market 

economy. 

The appropriate response from China should be to change its behavior, which China’s government has pledged to do many times in the past but has not. Economies 

around the world—including China’s domestic economy—will benefit if China responds by making needed reforms to its trade distortive policies, instead of adopting 

new and harmful policies to block trade and distort world markets. 

Question. How long will the administration keep tariffs and investment restrictions in place before it decides this course of action is or isn’t working? What metrics 

will be part of that evaluation? 

Answer. The administration has made no final determination with respect to the 

length of time the proposed tariff action or any investment restrictions would be imposed. 

Question. Given that the Comprehensive Economic Dialogue is stalled, what active steps is the administration taking to get China to the table to negotiate a resolution to these issues and other economic and trade issues? 

Answer. As you may know, a delegation comprised of Ambassador Lighthizer, Secretary Mnuchin, Secretary Ross, and other senior administration officials traveled 

to China on May 2nd to meet with Chinese counterparts to discuss these issues. The 

same delegation met this week to further discuss ways to resolve challenges in the 

U.S.-China trade relationship. 

The President calls on China to take concrete action to stop distorting markets, 

forcing technology transfer, and stealing technology. China must also finally follow 

through on commitments to lower its barriers to U.S. exports and cease its WTOinconsistent behavior. 

If China takes these actions, trade between the United States and China will be 

more free, fair, and reciprocal. 

DAIRY TRADE

Question. Does the United States remain committed to addressing concerns about 

Class 7 policies as part of NAFTA talks? 

What progress is being made to address the Class 7 pricing program in the 

NAFTA renegotiation context? 

Answer. 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 NAFTA renegotiation. 

73 

TRADE ENFORCEMENT

Question. I appreciate USTR’s effort to remove Indonesia’s import restrictions on 

horticultural imports. These restrictions cost growers in Washington State tens of 

millions of dollars in lost sales and added costs each year. As a result of USTR’s 

work, Indonesia lost its appeal at the World Trade Organization last year. However, 

Indonesia has decided to close its market to apples during August, September, and 

October of this year, when 30 percent of the fruit is shipped to Indonesia. 

What is USTR’s plan to address Indonesia’s decision to close its market to apples 

during certain months of the year? 

Answer. We continue to attach a high importance to resolving Indonesia market 

access concerns, including the import restrictions on apples. Indonesia’s seasonal restrictions on horticultural products—including apples—were found by the WTO Dispute Settlement Body to be inconsistent with Indonesia’s WTO obligations. USTR 

will continue to pursue the WTO dispute as quickly and vigorously as possible in 

order to obtain effective market access for U.S. producers. 

USTR will also continue to press for removal of the planned seasonal restrictions 

on apple imports in other forums. In particular, USTR made this issue a priority 

at the Trade and Investment Framework Agreement (TIFA) meeting with Indonesia 

held on May 14th. 

POLYSILICON

Question. As you know, the United States has been engaged in a longstanding dispute with China over solar products, which has crippled the U.S. polysilicon industry. The domestic polysilicon industry is a high tech manufacturing industry, and 

is critical for U.S. semi-conductor independence. The industry has the potential to 

be a large net exporter to China. 

In his announcement of the section 201 action, the President said that USTR 

would be working to resolve the persistent issues plaguing the domestic polysilicon 

industry. Please explain what concrete steps you plan to take to achieve a resolution 

for the U.S. polysilicon industry. 

Answer. When President Trump announced safeguard relief for U.S. manufacturers of solar cells and modules, he committed that ‘‘[t]he U.S. Trade Representative 

will engage in discussions among interested parties that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon. The goal of those discussions 

must be fair and sustainable trade throughout the whole solar energy value chain, 

which would benefit U.S. producers, workers, and consumers.’’ The Office of the 

U.S. Trade Representative has been engaged in such discussions with U.S. stakeholders in an effort to find a solution that is beneficial to both the U.S. solar industry and the U.S. polysilicon industry, and which would be acceptable to China. 

Those discussions are ongoing. 

Question. Is polysilicon currently part of an ongoing USTR effort? If not, what is 

USTR’s timetable to address the challenging issues facing the domestic polysilicon 

industry? 

Answer. As noted above, USTR has been engaged in discussions with U.S. stakeholders in an effort to find a solution that is beneficial to both the U.S. solar industry and the U.S. polysilicon industry, and which would be acceptable to China. 

Question. How have Chinese tariffs on U.S. solar products, such as polysilicon, impacted the U.S. polysilicon industry? 

Answer. The Office of the U.S. Trade Representative has been informed by U.S. 

polysilicon producers that Chinese tariffs have effectively blocked U.S. polysilicon 

from entering the Chinese market. 

Question. I understand that there is currently a fund held at the Treasury Department of roughly $1.4 billion in duties collected from solar imports from China 

into the United States. Is that accurate? 

Answer. The ‘‘fund’’ mentioned in this question appears to be a reference to the 

antidumping and countervailing duty cash deposits collected by U.S. Customs and 

Border Protection on entries of solar cells and modules from China that are subject 

to U.S. antidumping and countervailing duty measures. Such cash deposits are held 

by U.S. Customs and Border Protection until the final antidumping and countervailing duties are determined by the U.S. Department of Commerce (‘‘Commerce’’) 

74 

and the entries on which the cash deposits were paid are ‘‘liquidated.’’ At that point, 

the actual duties owed are assessed against the cash deposits, and any additional 

duty owed beyond the cash deposits is collected, or any excess portions of the cash 

deposits are refunded; the duties collected are transferred to the General Fund of 

the United States. The Commerce determination of the final duties is subject to appeal to the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, and possibly even the U.S. Supreme Court. Liquidation of these cash 

deposits occurs only after all judicial review of the Commerce determination has 

been completed. 

Question. How has this effective tax on solar investments in the United States 

helped or hurt the U.S. solar industry? Is there any evidence that the 2012 tariffs 

on certain Chinese manufactured solar panels helped U.S. solar manufacturers, particularly the petitioner SolarWorld, which subsequently still declared bankruptcy? 

Answer. The Office of the U.S. Trade Representative does not track the effect of 

U.S. antidumping and countervailing duty measures. Such measures are imposed by 

Commerce following investigations conducted by Commerce and the U.S. International Trade Commission that result in affirmative determinations that dumping/ 

subsidization exists and that such dumping/subsidization has caused material injury 

or threatened to cause material injury to the U.S. industry producing the like domestic product. 

Question. How does USTR and/or the Treasury Department plan to use those 

funds to support the U.S. solar manufacturing industry? 

Answer. Neither the Office of the U.S. Trade Representative nor the Department 

of the Treasury has legal authority to use collected cash deposits to support the U.S. 

solar manufacturing industry. However, as noted above, President Trump committed earlier this year that ‘‘[t]he U.S. Trade Representative will engage in discussions among interested parties that could lead to positive resolution of the separate 

antidumping and countervailing duty measures currently imposed on Chinese solar 

products and U.S. polysilicon. The goal of those discussions must be fair and sustainable trade throughout the whole solar energy value chain, which would benefit 

U.S. producers, workers, and consumers.’’ The Office of the U.S. Trade Representative has been engaged in such discussions with U.S. stakeholders in an effort to find 

a solution that is beneficial to both the U.S. solar industry and the U.S. polysilicon 

industry, and which would be acceptable to China. Those discussions are ongoing. 

ALUMINUM TARIFFS

Question. I understand the Department has self-initiated an antidumping investigation regarding Chinese aluminum sheet. 

Other than the aluminum industry, have you consulted with other downstream 

users of aluminum sheet products? 

It is my understanding beverage cans are outside the scope of the antidumping 

investigation. Will other aluminum products be considered outside the scope as 

well? 

What process did the administration take to determine what items are out of the 

scope of the ongoing antidumping investigation? 

What impact do actions in the 232 investigation have on this investigation? 

Answer. I would refer you to the U.S. Department of Commerce for questions relating to this antidumping investigation. 

DIGITAL TRADE

Question. What steps are you taking to bridge the remaining gaps between the 

U.S., Mexico, and China on digital trade in the NAFTA renegotiation? Where do the 

negotiations on digital issues stand in the talks? 

Answer. The United States has tabled an ambitious set of proposals on digital 

trade in the NAFTA renegotiations, and we have made substantial progress in our 

negotiations to date. While we are continuing to work with Mexico and Canada to 

resolve some outstanding issues, I am confident that the United States is currently 

on a path to achieving the strongest outcome on digital trade issues to date in a 

U.S. trade agreement. 

75 

E-COMMERCE

Question. I was encouraged by your reiteration of commitment to work on e-commerce issues at the conclusion of the meetings in Brussels with Japan and the EU 

earlier this month. An e-commerce work program at the WTO is a step in the right 

direction toward addressing trade issues affecting a number of technology companies 

in Washington State. 

What are USTR’s goals for a successful outcome of these talks? 

Is the United States committed to achieving agreement on high-standard objectives on digital trade similar to those under discussion in the NAFTA renegotiation 

talks? 

Answer. Digital trade is essential to the U.S. economy, and USTR is pursuing an 

aggressive agenda on digital trade in a range of forums, including at the WTO. At 

the WTO Ministerial in Buenos Aires in December, I joined 70 other trade ministers 

in initiating exploratory work on negotiations on digital trade issues at the WTO. 

That work is now underway, and the United States was among the first members 

to submit a paper outlining potential priorities for the initiative as part of the ongoing exploratory discussions. This paper, which is publicly available, outlines the 

highest-standard provisions for safeguarding and promoting digital trade, including 

provisions that guarantee cross-border data flows and ensure fair treatment of digital products and services. As this initiative moves forward, USTR will continue to 

push for an outcome that delivers commercially meaningful results for U.S. companies and consumers. 

QUESTIONS SUBMITTED BY HON. BILL NELSON

Question. I want to commend you for your leadership on providing an equitable 

way for regional fruit and vegetable growers to combat unfair trade practices. You 

deserve a lot of credit for having the courage to stick firm on the issue. However, 

there’s been rumors that you may be willing to give up on the current U.S. proposal 

for letting regional growers use seasonal data in anti-dumping and countervailing 

duty cases, in order to win other concessions in NAFTA renegotiations. I want to 

give you the opportunity to put those rumors to rest. Please answer each of the following questions. 

Do you plan to withdraw the current U.S. proposal for dealing with the problem 

of Mexican agricultural goods being unfairly subsidized and dumped into the U.S. 

during the winter months? 

Do you foresee any possibility of giving in on that proposal? 

Should Florida growers have anything to fear about your resoluteness on this 

issue? 

Answer. It would be inappropriate to comment on any rumors regarding the negotiations due to the confidential nature of the discussions. That being said, as we 

have maintained throughout the negotiations, we want to help ensure that our agricultural products are treated fairly. 

QUESTIONS SUBMITTED BY HON. BENJAMIN L. CARDIN

Question. As you know, the NAFTA rules of origin for heavy-duty trucks and 

buses are different than those for light duty passenger cars and trucks. In particular, to qualify for preferential treatment, the largest commercial vehicles are required to contain North American content equal to at least 60 percent of their value. 

Light duty vehicles must meet a 62.5 percent benchmark. Heavy-duty and lightduty vehicles also have different tracing requirements. 

The 2.5-percent variance in the above content levels reflects the significant differences between the two industries. For example, in 2017, passenger cars and lightduty trucks sold a combined 17 million new units, while the market for new heavy 

trucks was 300,000 vehicles. The average sale price of heavy trucks is approximately three times that of passenger vehicles. And, due to their robust manufacture 

and challenging service lives, heavy trucks and buses include significantly more 

steel than their smaller counterparts. 

76 

Would you please assure this committee that, when you have concluded renegotiating the rules of origin provisions with our North American partners, the new rules 

will continue to reflect the differences between the heavy commercial vehicle and 

passenger car industries, including a lower regional value number for trucks and 

buses and different tracing requirements? 

Answer. USTR understands that there are differences between the heavy truck 

and passenger car industries. We are working with our heavy truck industries to 

understand how to reflect these differences in the rules of origin provisions of the 

renegotiated NAFTA. 

Question. During the March 22nd hearing, I raised a few concerns with you regarding the process by which companies may apply for exclusions from the section 

232 steel and aluminum tariffs. In particular, I am concerned that the exclusion 

process may be very difficult for small businesses. For instance, based on the guidance issued by the Commerce Department, it appears that exclusion may only be 

requested on a company-by-company basis, rather than allowing smaller companies 

to seek exclusions—a resource-intensive process that requires extremely detailed 

specifications—jointly or via trade associations. In addition, if granted, I understand 

that an exclusion, in most cases, is only available to the company that petitioned, 

as opposed to extending to the product. The fact that the exclusions will be provided 

to individual companies could further tip the balance against smaller players; 

whereas larger companies can afford legal counsel with respect to exclusion requests, smaller companies will have to spread that cost over fewer sales. 

Do you agree that the Commerce Department’s exclusion process should take into 

account the challenges and resource constraints faced by smaller businesses? 

Answer. I would refer you to the U.S. Department of Commerce for questions relating to the procedures for seeking product exclusions from the section 232 tariffs. 

Question. Newspapers are a vital civic resource that helps keep citizens connected 

to their schools, local businesses, and with one another. Over the last 10 years, local 

newspapers, like The Baltimore Sun and community newspapers throughout my 

State, have faced strong headwinds. Historically, advertising provided the lion’s 

share of revenue, but this advertising revenue has been cut in half, as a result of 

the Great Recession and market forces. 

Recent countervailing and antidumping duties on Canadian imports of newsprint 

imposed by the Department of Commerce have exacerbated the challenges that community newspapers face. As a result of these duties, newspapers have seen the price 

of newsprint go from $600 to a $800 ton—a more than 30 percent increase. 

I understand that this trade dispute stems from a single actor that operates one 

mill and was recently acquired by a hedge fund. I also understand that other U.S. 

paper producers universally oppose this action, including the American Forest and 

Paper Association. 

Newspapers have publicly stated that they cannot absorb these tariffs, and will 

need to implement expense and revenue measures, such as cutting jobs in their operations, reducing news coverage in communities, cutting back on days of print distribution, and raising subscription prices on the printed newspaper which hurts citizens—particularly the elderly in rural communities that are reliant on print. Overall, the tariffs will likely have the effect of convincing customers to reduce demand 

for a product from U.S. producers that the tariffs are intended to help. 

Are changes in our trade laws needed that would allow decisionmakers at the 

Commerce Department and the International Trade Commission to acknowledge the 

economic damage to U.S. businesses and their customers that can occur when trade 

remedies are imposed? 

Is there sufficient discretionary authority for mitigating such unintended effects? 

Answer. Under U.S. law, the domestic industry for a particular product can submit a petition to the U.S. Department of Commerce and U.S. International Trade 

Commission (ITC) alleging that it is being injured or threatened with injury by 

dumped or subsidized imports. Throughout the investigation, particularly during the 

injury phase conducted by the ITC, parties have the opportunity to submit information on the administrative record in the form of questionnaire responses and 

through hearing testimony for the Commission to consider when making its final 

determination regarding injury or threat thereof. 

Question. Since the March 22nd hearing, there have been several major developments related to the China section 301 investigation. The tariff list resulting from 

77 

that investigation on the U.S. side was released on April 3rd; China responded with 

its own list on April 4th; and President Trump asked USTR to consider proposing 

$100 billion in additional tariffs on April 5th. 

I strongly agree with USTR’s assessment that we have significant problems related to intellectual property and other market access-related issues with China. We 

should protect U.S. workers, businesses, and innovation. 

That being said, I would like to know more about USTR’s long-term plans to address these issues, beyond tariff escalation. As you may know, the Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness 

recently held a hearing on market access challenges in China since the country’s 

accession to the WTO. When asked, the panel of witnesses for that hearing seemed 

to agree that more certainty was needed with respect to the administration’s strategy to hold China to its commitments in order to protect American industry and 

level the playing field for our workers. 

Could you elaborate on what you see as a productive path forward with China? 

What steps need to be taken to ensure that the Chinese government will follow 

through on market access and IP-related commitments in a timely way? 

Answer. China’s behavior has been undermining the global trading system and 

the WTO for years, using its protected market to force technology transfers and by 

acquiring leading technology companies overseas. Mercantilist trade policies, like 

China’s Made in China 2025 initiative, clearly state that China seeks to take away 

domestic and international market share from foreigners, in defiance of global 

norms. The world’s second-largest economy should not continue to ignore fundamental precepts of the global trading system. 

China should respond to the findings and the action of the section 301 investigation by undertaking the necessary economic and policy reforms and market liberalization needed to end its trade-distortive practices. In contrast, counter-reactions— 

either unilaterally or through attempted recourse to WTO dispute settlement— 

would do nothing to address the harmful impacts of China’s policies. 

The President hopes that China will take concrete actions to address its unfair 

trade practices and policies soon. China must also finally follow through on commitments to lower its barriers to U.S. exports and cease its WTO-inconsistent behavior. 

If China takes these actions, trade between the United States and China will be 

more free, fair, and reciprocal. 

Question. How can we best engage our allies who share our position? 

Answer. Most of our allies and trade partners share the same concerns about China’s state-driven, mercantilist policies on trade and technology transfer. 

Many countries also agree that China continues to game the WTO’s international 

rules-based trading system and the openness of our economies in ways that threaten 

all of our economies and our long-term competitiveness. 

We have maintained a sustained engagement effort with our allies and other likeminded countries in confronting China. 

We continue to work closely with Japan and the European Union to ensure that 

WTO members maintain their rights to use non-market economy methodologies in 

antidumping proceedings in order to curb China’s distortive economic behavior. 

During the WTO Ministerial Meeting in Argentina last December, the EU Trade 

Commissioner, the Japanese Trade Minister, and the U.S. Trade Representative 

issued a joint statement recognizing that ‘‘forced technology transfer’’ threatens the 

proper functioning of international trade, the creation of innovative technologies, 

and sustainable growth of the global economy. Together, we agreed to enhance trilateral cooperation in the WTO and in other fora to address this and other critical 

trade concerns. 

Earlier this year, the EU Trade Commissioner, the Japanese Trade Minister, and 

the U.S. Trade Representative underscored ‘‘their shared objective to address nonmarket-oriented policies and practices.’’ 

78 

QUESTIONS SUBMITTED BY HON. ROBERT MENENDEZ

Question. Ambassador Lighthizer, during your confirmation hearing, I asked you 

about a matter in Australia that my constituents had brought to my attention. I 

am told that the Government of New South Wales (NSW) expropriated a company’s 

mining license and left investors, including those from the United States, with no 

recourse to challenge the action or ability to seek compensation. These were rights 

the investors had when they made the investments, but were later nullified by an 

act of the NSW Parliament. 

Thank you for your previous response and for agreeing to look into the matter. 

I understand that USTR has since formally requested consultations with Australia 

under the Australia–U.S. Free Trade Agreement (AUSFTA). However, I understand 

the federal and NSW governments have shown little interest in finding a resolution. 

What is the status of the consultations USTR previously requested under 

AUSFTA? 

Has USTR linked this issue to discussions on a permanent exclusion from the section 232 tariffs? 

What other means or mechanisms are you exploring to resolve this dispute? 

Answer. The administration places a high priority on ensuring full compliance 

with the obligations in our trade and investment agreements, including the Australia–United States Free Trade Agreement. Accordingly, we initiated consultations 

under the Investment Chapter of that Agreement to address a discrete investment 

dispute in the energy sector involving U.S. investors. We are continuing to engage 

with Australia regarding this ongoing matter. 

Question. Ambassador Lighthizer, you’ve stated several times that you believe 

labor obligations in NAFTA should be subject to the same enforcement mechanisms 

as other aspects of the agreement. However, it is my understanding that USTR is 

advocating for a non-binding dispute settlement mechanism that could allow parties 

to disregard penalties imposed for a failure to comply with labor or other provisions. 

In other words, it appears that while you support having an enforcement mechanism that applies equally to all parts of the agreement, that mechanism may be useless in compelling parties to adhere to the deal. 

Under the non-binding system you have proposed, what incentive will our trading 

partners have to live up to their labor and other obligations if they can simply disregard penalties for noncompliance? 

How is such a system an improvement on what was negotiated in TPP, which at 

least provided for binding penalties for violations of labor obligations? 

Answer. I am committed to vigorously enforcing our trade agreements, including 

by incorporating enforceable, high-standard labor provisions into the core of the 

agreement rather than in a side agreement as is currently the case with the existing 

NAFTA. As you may know, current NAFTA dispute settlement procedures do not 

work, and NAFTA violations eventually are litigated at the WTO instead of through 

NAFTA panels. In consultation with Congress, we are considering a number of options in the renegotiation that will allow us to enforce vigorously the new labor obligations, as well as ensuring that the obligations are subject to the same dispute settlement mechanisms and trade sanctions as the rest of the agreement. We also seek 

to make sure that any improved dispute settlement system permits the United 

States to retain its sovereign ability to enact laws and regulations. 

QUESTIONS SUBMITTED BY HON. ROBERT P. CASEY, JR. 

Question. During the tax debate, I wrote a letter to the President, which you were 

copied on, asking for details on how the administration is acting in a coordinated 

fashion to curb outsourcing. To your knowledge, is there an interagency policy to 

coordinate strategy on curbing outsourcing? 

Answer. Ensuring that American firms, especially those located here, have the 

tools to remain competitive in the global marketplace is a principal objective of this 

administration. As the President’s Trade Agenda outlined in five major pillars, the 

administration is aiming to decrease offshoring incentives by supporting our national security, strengthening the U.S. economy, negotiating better trade deals, aggressively enforcing U.S. trade laws, and reforming the multilateral trading system. 

President Trump believes that each of these pillars is necessary to increase the 

79 

competiveness of U.S. firms and to obtain more efficient global markets and fairer 

treatment for U.S. workers. We work on these objectives together with other appropriate agencies to ensure that we are moving toward this goal. 

Question. To your knowledge, does interagency guidance exist requiring the assessment of outsourcing impact prior to the administration’s advancement or endorsement of policy? 

Answer. There are several interagency processes for assessing the trade impacts 

of administration decisions. Specifically, USTR oversees the Trade Policy Committee 

(TPC) and the Trade Policy Staff Committee (TPSC). The TPSC is the first line operating group, with representation at the senior civil servant level. Supporting the 

TPSC are more than 100 subcommittees responsible for specialized issues. The 

TPSC regularly seeks advice from the public on its policy decisions and negotiations 

through Federal Register Notices and public hearings. USTR also oversees the trade 

advisory committee system, established by Congress in 1974. There are 28 of these 

committees, with a total membership of up to 700 advisors. USTR regularly consults 

with the TPC, the TPSC, and the trade advisory committees when developing the 

administration’s trade policy. This includes evaluating the potential effects of offshoring. 

Question. We now know that the 2017 tax bill creates incentives for corporations 

to move tangible assets overseas; that is, the bill creates incentives for companies 

to locate manufacturing abroad (pp. 109–110 of CBO’s ‘‘The Budget and Economic 

Outlook: 2018 to 2028’’). How does this policy align with the President’s goal to curb 

outsourcing? Did Treasury consult with USTR on the impact on outsourcing from 

the international tax provisions they negotiated in the tax bill? 

Answer. The President’s economic advisors, including USTR and the Department 

of the Treasury, coordinate closely on all matters affecting the U.S. economy. The 

tax bill has proven a huge boon to U.S. businesses and workers. 

Question. NAFTA didn’t simply have a direct impact on jobs in the years following 

its passage, but has had lasting impacts on workers ever since. Including the looming threat of a company moving to Mexico absent wage or workplace concessions. 

In many ways it put companies ahead of workers. U.S. workers can outcompete anyone in the world if the playing field is level. Can you discuss how exempting profits 

from a new overseas factory from U.S. tax helps level the playing field for workers 

in the United States? 

Answer. Among our top priorities for NAFTA are improvements that create incentives to increase manufacturing in the United States, lower the U.S. trade deficit 

with the NAFTA countries, and improve export opportunities for U.S. producers and 

workers. We are vigorously pursuing these goals throughout the renegotiations, including by strengthening rules of origin and bringing strong labor and environment 

provisions into the core of the Agreement, and subjecting them to the same dispute 

settlement mechanisms as other provisions in the Agreement. U.S. trade agreements, including NAFTA, do not deal with domestic tax policy. 

QUESTIONS SUBMITTED BY HON. CLAIRE MCCASKILL

Question. The President announced on April 5th that he would consider adding 

another $100 billion in tariffs against China as part of a section 301 remedy. Can 

you discuss the process by which USTR and other administration officials will develop the list of products that will be covered by the tariff? 

Answer. Trade analysts from various U.S. Government agencies continue to implement the President’s instruction announced on April 5th. Any list that comes out 

of that process will be subject to public comment as was the original list. 

Question. USTR has highlighted our interest in finding remedies that inflict maximum pain against China and minimum pain on the United States. What kind of 

analysis have you done to ensure that is the case? Can you explain exactly how the 

algorithm works? 

Answer. Trade analysts from several U.S. Government agencies identified products that benefit from Chinese industrial policies, including Made in China 2025. 

The list was refined 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 constraints. The remaining products were ranked according to the 

likely impact on U.S. consumers, based on available trade data involving alternative 

80 

country sources for each product. The proposed list was then compiled by selecting 

products from the ranked list with lowest consumer impact. 

Question. Can you explain how tariffs on apparel and footwear would address the 

IPR and forced technology transfer issues underlying the section 301 case? 

Answer. Neither apparel nor footwear were on the proposed list of products set 

forth in USTR’s Federal Register notice published on April 6, 2018. As we review 

products for a potential second list, an interagency team of career staff international 

trade experts and economists will base any proposal on extensive economic analysis, 

using widely accepted sources of trade and other economic data. 

Question. Has USTR studied the economic impact for the proposed section 301 

tariffs? Have you looked at the downstream impact the proposed tariffs will have 

on businesses, both large and small? What about the impact on consumers? 

Answer. Yes. The interagency team of trade analysts and economists accounted 

for various economic factors in its analysis. The analysis identified products that 

benefit from Chinese industrial policies, including Made in China 2025. The list was 

refined 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 constraints. The remaining products were ranked according to the likely impact 

on U.S. consumers, based on available trade data involving alternative country 

sources for each product. The proposed list was then compiled by selecting products 

from the ranked list with lowest consumer impact. This list is not final, and businesses, both large and small, have an opportunity to provide public comment on it, 

and many participated in a hearing this week on this topic. 

Question. What kind of consultations have you done with U.S. companies who rely 

on imports from China to talk about the potential impact this will have on their 

businesses? 

Answer. After the launch of the 301 investigation in August 2017, USTR held extensive stakeholder outreach including soliciting input for the advisory committee 

system, a Federal Register Notice with public comment period, and a public hearing. 

We received over 70 written submissions during the public comment period and 

heard from witnesses with varied interests and perspectives on China’s technology 

transfer acts, practices, and policies. The majority of the submissions and witnesses 

support USTR’s determination that China engages in unreasonable and discriminatory technology transfer acts, policies, and practices that burden or restrict U.S. 

commerce. 

Furthermore, the April 6th Federal Register Notice announcing the proposed list 

of products invited comments from all interested parties. The interagency section 

301 committee, chaired by USTR, conducted 3 days of public hearings beginning on 

May 15th. We have briefed Congress throughout the process. We have also consulted with the advisory committees before initiating the investigation, and provided 

further opportunities for input during the investigation. 

Question. Has USTR conducted any kind of analysis of the supply chains that will 

be affected by the 301 tariffs? Did this analysis include an evaluation of available 

capacity in other markets to produce covered goods? How quickly does USTR believe 

companies can shift sourcing away from China? 

Answer. Yes. In compiling the proposed list of products for the $50-billion list, the 

interagency team of trade analysts and economists had considered and accounted 

for alternative country sources for each product, thereby minimizing the effects on 

supply chains. In addition, interested parties also have the opportunity to provide 

additional information regarding supply chain issues for each product during the notice and comment period. 

Question. Have you done any kind of analysis on the potential for retaliation from 

China against U.S. industries, specifically agriculture? 

Answer. We have considered that China may retaliate, but how China ultimately 

responds is, of course, China’s decision. The appropriate and constructive response 

from China to our action should be for China to change its behavior, which China’s 

government has pledged to do many times in the past but has failed to carry out. 

The administration stands ready to defend our producers that may be harmed by 

foreign country retaliation, in particular farmers and ranchers who are often the 

first to be targeted by trade actions. As we take a stronger approach to the way 

we handle trade, we will use all appropriate authorities to ensure that we protect 

and preserve our agricultural interests. 

81 

Question. Please describe the goal of our negotiations with China. Are there 

specific actions expected from China in order to remove tariffs? Will you use specific 

benchmarks to measure success? 

Answer. The administration has been clear about its concerns with China’s unfair 

trade practices. These practices include China’s market-distorting forced technology 

transfers, theft of intellectual property, cyber-intrusions of U.S. commercial networks, and China’s failure to abide by its WTO obligations. 

Under section 301 of the Trade Act of 1974, USTR conducted an exhaustive investigation and determined that China’s unfair trade practices harm America’s economy. The administration has also identified very specific programs that China needs 

to address. These are identified in numerous reports, including USTR’s report on 

China’s compliance at the World Trade Organization, USTR’s Special 301 Report, 

and the Department of Commerce’s report on China’s non-market economy. 

The President calls on China to take concrete action to address its unfair policies 

and practices such as distorting markets, forcing technology transfer, and stealing 

technology. China must also finally follow through on commitments to lower its barriers to U.S. exports and cease its WTO-inconsistent behavior. 

If China takes these actions, trade between the United States and China will be 

more free, fair, and reciprocal. 

Question. How does the administration consider the supply chain of the U.S. economy when setting tariffs? Did USTR staff speak with companies who are sourcing 

from China to discuss their supply chains? Did the USTR analyze other potential 

sources for products that are currently made in China? 

Answer. As discussed in the response above, the interagency team of trade analysts and economists had considered and accounted for alternative country sources 

for each product in compiling the proposed list of products, thereby minimizing the 

effects on supply chains. In addition, interested parties also have the opportunity 

to provide additional information regarding supply chain issues for each product 

during the notice and comment period. 

Question. Why do you believe the proposed tariffs will have the effect of pressuring China to change its policies? 

Answer. By targeting products that benefit from Chinese industrial policies, including Made in China 2025, the proposed tariff list aims to apply pressure on 

China in sectors that China deems important. 

Question. When the administration discusses the trade deficit, does this only address trade in goods or does this include trade in services as well? 

Answer. The administration looks at all trade balances when assessing trade 

flows—goods and services, goods alone, services, agriculture, manufacturing, and resources. 

Question. Under the proposed tariffs, stakeholders can petition to not have their 

products subject to the tariff. Can you describe that process? If a company is in the 

petition process when the tariffs take effect, will they be subject to the tariff? Will 

they be able to get a refund on the tariff if their product is exempt after the tariff 

takes effect? 

Answer. Sections E, F, and G of the April 6th Federal Register notice set forth 

the process to comment and testify about specific products subject to the proposed 

tariff. USTR has not made any final determination with respect to the proposed tariff action, including any effective date. 

Question. The aluminum sector is facing tariffs set under the 232 action, as well 

as an ongoing Department of Commerce antidumping investigation regarding aluminum sheet from China. Does the administration consider the impact of both tariffs on manufacturing that uses aluminum? 

Answer. I would refer you to the U.S. Department of Commerce for questions relating to the antidumping investigation of imports of aluminum sheet and its relationship to the President’s section 232 action. 

QUESTIONS SUBMITTED BY HON. SHELDON WHITEHOUSE

Question. The Senate report accompanying the 2018 National Defense Authorization Act asked the U.S. Trade to consider marine debris in future trade agreements. 

82 

Yet, disappointingly, the President’s 2018 policy agenda does not mention ‘‘plastic’’ 

or ‘‘marine debris.’’ 

How will you consider the direction given in the NDAA and incorporate it into 

your office’s work on future trade agreements? 

Answer. The Office of the U.S. Trade Representative (USTR) has taken into consideration both the Marine Debris Act and the NDAA, and we are actively working 

to incorporate this guidance into our bilateral and regional trade policy initiatives, 

including through the environment cooperation work programs with our trading 

partners. 

Question. Around 80 percent of the plastic in the oceans comes from land. Of that 

plastic, more than half comes from just five countries: China, Indonesia, the Philippines, Thailand, and Vietnam. 

Are there opportunities with these countries to push waste management improvements and other efforts to mitigate their contributions to the global marine plastic 

debris problem? 

Answer. Yes, USTR is actively exploring opportunities with these countries to discuss and encourage waste management improvements and other efforts to mitigate 

their contributions to the global marine plastic debris problem, including under existing Trade and Investment Framework Agreements (TIFAs). 

Question. How will you include marine debris in future multilateral or bilateral 

negotiations with these and other priority countries? 

Answer. Environmental protections are important negotiating objectives that Congress has set out in TPA for future U.S. trade agreements, including obligations for 

the parties to effectively enforce their environmental laws, such as laws that would 

address land and sea pollution. Additionally, USTR was directed under the Marine 

Debris Act and the NDAA to consider including marine debris in future multilateral 

or bilateral negotiations with these and other priority countries. I look forward to 

working closely with you and other members as we consider possible future FTAs 

with additional trade partners. 

Question. What role will the U.S. Trade Representative’s office play in helping 

rapidly developing economies in Africa avoid the same waste management issues 

we’ve seen in rapidly developing economies in Asia? 

Answer. USTR supports developing countries following sound development strategies, as reflected in the statutory eligibility criteria of the African Growth and Opportunity Act as well as Trade Promotion Authority. USTR’s efforts are complemented by those of other U.S. Government agencies operating in Africa, including 

the U.S. Agency for International Development. As USTR considers possible African 

partners for exploratory FTA talks, we will make efforts to incorporate environmental obligations, consistent with guidance outlined in TPA. 

Question. Where does marine debris rank among the United States’ many trade 

priorities with China, the greatest contributor of plastic from land into the ocean? 

Answer. Marine debris is among the many trade and environment policy priorities 

we have with China, and we are working to address marine debris in multilateral 

fora to which we both belong, such as APEC and G20. 

Question. How can the U.S. Trade Representative coordinate with NOAA, the 

State Department, and EPA to provide technical assistance and research support for 

countries needing to improve their waste management regimes and reduce plastic 

waste entering the ocean? 

Answer. USTR is already coordinating closely with NOAA, the State Department, 

and EPA to include marine debris as a priority in existing environmental cooperation work programs that support implementation of our FTAs to improve waste 

management regimes and reduce plastic waste entering the ocean. USTR, NOAA, 

the State Department, and EPA are currently considering technical assistance and 

research to address marine debris and waste management under the Environment 

Plans of Action with Singapore, Jordan, and Oman, as well as an ongoing program 

in Panama to prevent land-based trash from flowing into the Caribbean Sea. 

Question. What role will the U.S. Trade Representative’s office play if a new international treaty on land-based sources of marine debris were developed? How quickly 

could the USTR incorporate a new treaty into future trade agreements? 

83 

Answer. The 2015 Bipartisan Trade Priorities and Accountability Act (2015 TPA) 

provides that USTR ensure that our trading partners comply with their obligations 

under certain common multilateral environmental agreements (MEAs) through 

trade agreement negotiations. I look forward to consulting with you and other members of Congress closely on any proposed future additions related to marine debris. 

Question. You opposed the Paris Agreement, characterizing it as ‘‘another unfair 

trade barrier that America cannot afford.’’ In reality, the Paris Agreement would not 

have penalized American exports nor favored imports from overseas. In fact, the 

trade risk comes from withdrawing from the Paris Agreement, as every other country in the world begins implementing it. Canada is in the process of implementing 

an economy-wide carbon price. Several European countries are discussing implementing a carbon tax, and Mexico, Columbia, and Chile have also indicated that 

they will begin pricing carbon. And China has begun implementing a cap and trade 

system to limit carbon emissions. 

As the rest of the world charges ahead with pricing carbon in order to meet national emissions reductions goals under the Paris Agreement, what is the risk that 

these countries will impose tariffs on U.S. goods to compensate for the fact that we 

are not pricing carbon? 

Answer. The President has clearly articulated his views regarding the Paris Climate Agreement, while at the same time expressing his support for a balanced approach to climate policy that lowers emissions while promoting economic growth and 

ensuring energy security. 

Question. Extreme weather events and global sea level rise borne of climate 

change threaten manufacturing and transportation infrastructures around the 

world. 

Do you believe that climate change poses a threat to the global supply chains 

upon which world trade depends? 

How do you propose the United States address the threats that climate change 

poses to global supply chains and the economy? 

Answer. I defer to other relevant Cabinet officials regarding U.S. and global climate change policy matters. 

Question. The U.S. helped negotiate the Kigali Amendment to the Montreal Protocol. The Kigali Amendment would phase down emissions of hydrofluorocarbons 

(HFCs), a powerful greenhouse gas used as a refrigerant. It is supported by American manufacturers, which have developed alternative molecules to replace HFCs 

and would see increased sales were it to be implemented. However, the Trump administration has yet to indicate whether it will send the Kigali Amendment to the 

Senate for ratification. The Kigali Amendment is good for American business, American workers, our international leadership, and the planet. 

Do you support the Kigali Amendment? If not, why not? 

Answer. The administration continues to review the Kigali Amendment to the 

Montreal Protocol, and USTR and other relevant agencies are participating in the 

interagency review process led by the National Security Council (NSC). 

Question. As you know, President Trump recently announced his intention to impose tariffs on $60 billion of imported goods from China. While China’s troubling 

record of intellectual property theft warrants U.S. action, I’m concerned that American families may end up paying for these tariffs in the form of higher prices for 

clothing, toys, electronics, and household goods. 

Are you working to ensure that tariffs on Chinese goods are tailored to ensure 

minimal price affects for middle-class families? Do you anticipate these tariffs will 

lead to higher prices for clothing, toys, electronics, and household goods? Why or 

why not? 

Answer. The proposed tariff list was selected based on a methodology that balances the application of maximum pressure on China’s unfair industrial policy, and 

minimizing any impact on the U.S. economy. The interagency team of trade analysts 

and economists had accounted for various economic factors in its analysis. The proposed tariff list identified products that benefit from Chinese industrial policies, including Made in China 2025. The list was refined 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 constraints. The remaining products 

were ranked according to the likely impact on U.S. consumers, based on available 

84 

trade data involving alternative country sources for each product. The proposed list 

was then compiled by selecting products from the ranked list with lowest consumer 

impact. 

PREPARED STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON

Anybody reading the trade policy news on the business pages is probably suffering 

from a nasty case of whiplash. Trying to decipher all that news, it is hard to identify 

a coherent strategy that will help American workers, businesses, and farmers when 

the dust settles. 

Since the summer, the administration has been engaged in negotiations with Canada and Mexico to update NAFTA—a project that is incredibly important to U.S. 

workers and the American economy. However, those talks are routinely broadsided 

by tweets from the President on subjects like the fantasy of Mexico paying for a border wall. It creates chaos, threatening to derail the discussions, or at least distract 

from the important issues. 

A decision with respect to steel and aluminum action was delayed for months as 

a result of political maneuvering. But then, in a meeting that was billed as a ‘‘listening session,’’ the President blurted out his plans to impose a 25 percent tariff on 

steel imports and a 10 percent tariff on aluminum. 

What followed was more of the same: it was chaos. Lobbyists descended on Washington to get special carve-outs. Other countries—including longstanding allies— 

threatened retaliation. It was unclear who in the administration was responsible for 

making key decisions about tariffs that would take effect in very short order. 

It’s still an open question as to which countries will be excluded and which will 

be included in the tariffs. You’d hope and expect that more information will be released over the coming weeks. But the tariffs are scheduled to go into effect tomorrow. 

With respect to the overnight news about China, I’m pleased the administration 

appears to be taking a more deliberative approach. The fact is, China has stolen our 

intellectual property, held American companies hostage until they disclose their 

trade secrets, and manipulated their markets in a strategic manner to rip off American jobs and industries. I want to hear more this morning about how the administration will manage the 301 process going forward in order to get trade done right. 

Bottom line, the Trump administration stormed into office promising better deals, 

more certainty for businesses to create jobs in America, and a stronger position in 

the world economy. But after 14 months, it’s mostly delivered a whole lot of chaos. 

Total chaos on trade isn’t going to create a single red, white, and blue job. 

So I’m glad Ambassador Lighthizer is here with the committee today to discuss 

the administration’s trade agenda, because I am counting on him to bring a cool 

head to this heated situation. And I look forward to questions. 

(85) 

COMMUNICATIONS

AMERICAN FARM BUREAU FEDERATION

600 Maryland Avenue, SW, Suite 1000W 

Washington, DC 20024 

p 202–406–3600 

f 202–406–3606 

www.fb.org 

The American Farm Bureau Federation (Farm Bureau) offers the following statement for the record on the hearing: ‘‘President’s 2018 Trade Policy Agenda.’’ 

Trade is critical to the livelihood of the U.S. agricultural sector because it spurs economic growth for our farmers, ranchers, and their rural communities. Agriculture 

supports jobs in the food and agricultural industries and beyond. The fact is that 

95 percent of the world’s consumers live outside of the United States and over 20 

percent of U.S. farm income is based on exports. Expanding opportunities for U.S. 

crop and livestock producers to access international markets will boost farm income 

in the United States, while preserving existing access is critical to maintaining farm 

income at current levels. U.S. agricultural exports 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, 45 percent of all agricultural exports. Existing trade agreements have 

proved successful in tearing down tariff and non-tariff trade barriers that hinder 

U.S. farmers’ 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 off-season supplies of fresh produce. 

NAFTA

One of the most talked about trade agreements, the North America Free Trade 

Agreement (NAFTA), has been overwhelmingly beneficial for farmers, ranchers, and 

associated businesses all across the United States, Canada, and Mexico for decades. 

With NAFTA, U.S. farmers 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 United States, Canada, and Mexico seek to 

modernize the agreement and provide greater benefits to the economics of North 

America. Despite these numerous benefits, there are reasons to update and reform 

NAFTA from agriculture’s perspective. Improvements that eliminate and reduce tariff barriers, 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 if tariff 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. dairy producers of 

ultra 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 

86 

effort 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. 

Trade in goods consists of not only final consumer products but also intermediate 

inputs and raw materials, as firms reorganize their activities around regional markets for both inputs and outputs, spurred 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 of NAFTA 

will expand market opportunities for U.S. agriculture. 

TRANS-PACIFIC PARTNERSHIP

The 11 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. 

The Farm Bureau was a strong supporter 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. agricultural trade would increase by over $5.5 billion annually due to the removal of tariff and non-tariff barriers in the TPP region. 

JAPAN

The Farm Bureau supported 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 United States to rejoin the 

TPP, now called the CPTPP (Comprehensive and Progressive Trans Pacific Partnership. 

CHINA

The U.S. exported over $22 billion in agricultural products to China in 2017, ranking as the #2 export market for U.S. farmers 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. runs 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 exports. 

The impact on American farmers 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. 

CENTER FOR FISCAL EQUITY

14448 Parkvale Road, Suite 6 

Rockville, MD 20853 

fiscalequitycenter@yahoo.com 

Chairman Hatch and Ranking Member Wyden, thank you for the opportunity to 

submit these comments for the record to the Committee on Finance. This largely 

mirrors our comments from last year. As usual, we will preface our comments with 

our comprehensive four-part approach, which will provide context for our comments. 

• A Value-Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% 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 payVerDate Sep 11 2014 19:56 Jun 03, 2019 Jkt 000000 PO 00000 Frm 00090 Fmt 6601 Sfmt 6621 R:\DOCS\36528.000 TIM
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ments, 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 filing for most people (including people who file without paying), the corporate income tax, business tax filing through 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 Committee and 

the White House over steel tariffs and NAFTA. 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 ethnicity 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 government gets the cash so wages are not kept low nor unions 

busted. It is a bit late in the day for the Majority to show real concern for the American worker rather than the American capitalist or consumer. 

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 of 2016 on our 

standard tax plan still apply, even though that hearing 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, has 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 exports safe but is not involved in trade policy other than in protecting the seas. 

The third point is about individual retirement savings. 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 

88 

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 shortterm profitability (at least that is the excuse managers give for not privileging job 

retention). 

Employee-owners will find it in their own interest to give their overseas subsidiaries 

and their supply chain’s employees the same deal that they get as far as employeeownership 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 employee owned 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, employee-owned companies that become more democratic 

or even more socialistic, will force all other employers to adopt similar measures to 

compete for the best workers and professionals). 

In the long run, trade will no longer be an issue. Internal company dynamics will 

replace the need for trade agreements as capitalists lose the ability to pit the interest of one nation’s workers against the others. This approach is also the most effective 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 staff at the Center supported the 

Senator, you can imagine some of us thought him too conservative in his approach 

to these issues, although we did agree with him on the $15 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 returns 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 future 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 GDP ratio; however, they are a small nation. We cannot expect 

the same treatment from our world-wide network of creditors, an issue which is also 

very important for trade. Currently, we trade the security of our debt for consumer 

products. Theoretically, some of these funds should make workers who lose their 

jobs whole—so far it has 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 opportunity to address the committee. We are, of course, available for direct testimony or to answer questions by members and staff. 

LEARNING RESOURCES, INC. 380 North Fairway Drive 

Vernon Hills, IL 60061 

Statement on Possible Chinese Toy Tariffs 

My name is Richard Woldenberg, and I am CEO of Learning Resources, Inc. located 

in Vernon Hills, IL. 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 

89 

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, 

IL and has about 150 employees in the United States and the 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 1980s. 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 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 never experienced intellectual property theft by our factories. We register 

our intellectual 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 factories 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. 

90 

Our company has no realistic ability to move its supply chain to another country 

We have business reasons for the assignment of products to specific factories, 

whether in the United States 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 raise the cost of school 

products. The big losers will be poorly-equipped American schools, and the American 

families 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 20–25 percent, 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 percent of U.S. importers are Small Businesses (U.S. Census data, 2014). The average import value per annum per congressional district is 

about $1.5 billion from Small Business alone. The annual import value (2015) for 

the U.S. Small Business community was a very healthy $631 billion (https:// 

www.census.gov/foreign-trade/Press-Release/edb/2015/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 2015 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 1990s 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 Smoot-Hawley 

need to be taken seriously. 

Retaliation may leave a permanent mark on certain industries owing to lack of trust 

The imposition of tariffs 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 

91 

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’s responsibility to find it. Thank you for considering my views. 

Æ