    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                            U.S. TRADE POLICY AGENDA

    =======================================================================

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 21, 2018

                                   __________

                              Serial No. 115-FC08

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
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                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    DEVIN NUNES, California              SANDER M. LEVIN, Michigan
    DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
    PETER J. ROSKAM, Illinois            LLOYD DOGGETT, Texas
    VERN BUCHANAN, Florida               MIKE THOMPSON, California
    ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
    LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
    ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
    KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
    DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
    JIM RENACCI, Ohio                    BRIAN HIGGINS, New York
    PAT MEEHAN, Pennsylvania             TERRI SEWELL, Alabama
    KRISTI NOEM, South Dakota            SUZAN DELBENE, Washington
    GEORGE HOLDING, North Carolina       JUDY CHU, California
    JASON SMITH, Missouri
    TOM RICE, South Carolina
    DAVID SCHWEIKERT, Arizona
    JACKIE WALORSKI, Indiana
    CARLOS CURBELO, Florida
    MIKE BISHOP, Michigan
    DARIN LAHOOD, Illinois

                         David Stewart, Staff Director

                     Brandon Casey, Minority Chief Counsel

                                C O N T E N T S

                                   __________

                                                                       Page

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

                                    WITNESS

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

                            QUESTIONS FOR THE RECORD

    Question from Ways and Means Committee Chairman Brady to
      Ambassador Lighthizer..........................................    92
    Questions from Ways and Means Committee Ranking Member Neal to
      Ambassador Lighthizer..........................................    93
    Questions from Trade Subcommittee Chairman Reichert to Ambassador
      Lighthizer.....................................................    98
    Questions from Trade Subcommittee Ranking Member Pascrell to
      Ambassador Lighthizer..........................................    99
    Questions from Representative Nunes to Ambassador Lighthizer.....   109
    Questions from Representative Lewis to Ambassador Lighthizer.....   110
    Question from Representative Roskam to Ambassador Lighthizer.....   114
    Question from Representative Larson to Ambassador Lighthizer.....   114
    Questions from Representative Paulsen to Ambassador Lighthizer...   115
    Questions from Representative Black to Ambassador Lighthizer.....   120
    Questions from Representative Sanchez to Ambassador Lighthizer...   123
    Questions from Representative Sewell to Ambassador Lighthizer....   124
    Questions from Representative Meehan to Ambassador Lighthizer....   125
    Questions from Representative DelBene to Ambassador Lighthizer...   126
    Question from Representative Chu to Ambassador Lighthizer........   127
    Questions from Representative Jason Smith to Ambassador
      Lighthizer.....................................................   128
    Questions from Representative Walorski to Ambassador Lighthizer..   129
    Questions from Representative LaHood to Ambassador Lighthizer....   131

                           SUBMISSIONS FOR THE RECORD

    American Farm Bureau Federation..................................   133
    American Fuel & Petrochemical Manufacturers (AFPM)...............   138
    Air-Conditioning, Heating, & Refrigeration Institute (AHRI)......   144
    Berry Global, Incorporated.......................................   150
    Center for Fiscal Equity.........................................   152
    Consumer Technology Association (CTA)............................   156
    Flexible Packaging Association (FPA).............................   158
    Learning Resources, Incorporated (LR)............................   164
    National Association of Home Builders (NAHB).....................   170
    National Foreign Trade Council (NFTC)............................   174
    National Lumber and Building Material Dealers Association
      (NLBMDA).......................................................   176
    Precious Metals Association of North America (PMANA).............   182
    Small Business & Entrepreneurship Council (SBE Council)..........   185
    Association for Accessible Medicines (AAM).......................   189

                            U.S. TRADE POLICY AGENDA

                                  ----------

                           WEDNESDAY, MARCH 21, 2018

                         U.S. House of Representatives,
                                   Committee on Ways and Means,
                                                        Washington, DC.

        The Committee met, pursuant to call, at 10:05 a.m., in Room
    1100, Longworth House Office Building, Hon. Kevin Brady
    [Chairman of the Committee] presiding.
        [The advisory announcing the hearing follows:]

    ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                    CONTACT: (202) 225-3625
    FOR IMMEDIATE RELEASE
    Wednesday, March 21, 2018
    FC-08

                      Chairman Brady Announces Hearing on

                            U.S. Trade Policy Agenda

        House Ways and Means Chairman Kevin Brady (R-TX), announced today
    that the Committee will hold a hearing on the U.S. trade policy agenda
    with U.S. Trade Representative Robert Lighthizer. The hearing will take
    place on Wednesday, March 21, 2018, in room 1100 of the Longworth House
    Office Building, beginning at 10:00 a.m.

        In view of the limited time to hear the witness, oral testimony at
    this hearing will be from the invited witness only. However, any
    individual or organization may submit a written statement for
    consideration by the Committee and for inclusion in the printed record
    of the hearing.

    DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

        Please Note: Any person(s) and/or organization(s) wishing to submit
    written comments for the hearing record must follow the appropriate
    link on the hearing page of the Committee website and complete the
    informational forms. From the Committee homepage, http://
    waysandmeans.house.gov, select ``Hearings.'' Select the hearing for
    which you would like to make a submission, and click on the link
    entitled, ``Click here to provide a submission for the record.'' Once
    you have followed the online instructions, submit all requested
    information. ATTACH your submission as a Word document, in compliance
    with the formatting requirements listed below, by the close of business
    on Wednesday, April 4, 2018. For questions, or if you encounter
    technical problems, please call (202) 225-3625.

    FORMATTING REQUIREMENTS:

        The Committee relies on electronic submissions for printing the
    official hearing record. As always, submissions will be included in the
    record according to the discretion of the Committee. The Committee will
    not alter the content of your submission, but we reserve the right to
    format it according to our guidelines. Any submission provided to the
    Committee by a witness, any materials submitted for the printed record,
    and any written comments in response to a request for written comments
    must conform to the guidelines listed below. Any submission not in
    compliance with these guidelines will not be printed, but will be
    maintained in the Committee files for review and use by the Committee.

        All submissions and supplementary materials must be submitted in a
    single document via email, provided in Word format and must not exceed
    a total of 10 pages. Witnesses and submitters are advised that the
    Committee relies on electronic submissions for printing the official
    hearing record.

        All submissions must include a list of all clients, persons and/or
    organizations on whose behalf the witness appears. The name, company,
    address, telephone, and fax numbers of each witness must be included in
    the body of the email. Please exclude any personal identifiable
    information in the attached submission.

        Failure to follow the formatting requirements may result in the
    exclusion of a submission. All submissions for the record are final.

        The Committee seeks to make its facilities accessible to persons
    with disabilities. If you are in need of special accommodations, please
    call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four
    business days' notice is requested). Questions with regard to special
    accommodation needs in general (including availability of Committee
    materials in alternative formats) may be directed to the Committee as
    noted above.

        Note: All Committee advisories and news releases are available at
        http://www.waysandmeans.house.gov/

        Chairman BRADY. Good morning. The Committee will come to
    order. Before we get started this morning I just wanted to take
    a moment to express my sincerest condolences on the passing
    last week of our friend and colleague, Representative Louise
    Slaughter. She was truly an institution within this body, and
    her candor, intelligence, her humor, and her passion will be
    deeply missed.
        Today our Committee is honored to welcome back U.S. Trade
    Representative Robert Lighthizer to testify on President
    Trump's trade policy agenda. Ambassador, thank you so much for
    joining us.
        Our country was born because of trade. We have led the
    world in commerce and trade for the last century. Trade is part
    of everything we do as Americans. The freedom to trade is our
    greatest economic freedom. So freedom to buy, sell, and compete
    anywhere in the world with as little government interference as
    possible. Through trade America has built roads and bridges,
    towns and cities. We have brought peace, freedom, and hope to
    our people and the nations of the world.
        At this moment we stand at a crossroads. If we stand still
    or worse take the path of isolationism we will abandon our
    greatest freedom in the very DNA of what makes us Americans.
    There is a better path. We are already seeing benefits from the
    historic tax cuts that President Trump just signed into law,
    which is increasing America's competitiveness and making us the
    best place on the planet to do business in. Our trade policy
    must build on that growth.
        In the competitive world it is not enough to merely buy
    American, we have to sell American to billions of customers
    outside America. That is how we help our local businesses and
    farmers create American jobs and spur American economic growth.
    Mr. Ambassador, America must continue to lead. And we lead and
    Americans win when we open up markets for our products and
    services through high standard, ambitious and enforceable trade
    agreements. This has to be our top priority.
        If we don't break open new markets through trade agreements
    with countries like Japan, the U.K., and the Trans-Pacific
    Partnership 11 we will be left behind. China and Europe will
    write the rules, and they will cut American producers and
    workers out of other markets. We can't wait any longer while
    others pass us by.
        I strongly support President Trump's request for TPA
    renewal. I look forward to your report showing how you will use
    it to negotiate agreements that are consistent with
    congressional objectives and good for America as you have set
    out to do, Mr. Ambassador.
        I am pleased with your progress to modernize NAFTA, the
    largest and most successful trading relationship in the world.
    U.S. Trade Representatives' office and you, Ambassador, your
    team have worked tirelessly to achieve bold and ambitious
    standards. I am hopeful we will be able to vote on and pass a
    new modern NAFTA for America by year end.
        That said, the road ahead isn't easy. Congress wants strong
    protections for intellectual property, increased market access
    for our dairy farmers and an end to Canada and Mexico's harshly
    restrictive customs barriers, such as unreasonably low de
    minimis levels. We need workable solutions on rules of origin
    and procurement that recognize how Americans benefit from
    global supply chains, otherwise we lose out to China. I also
    caution that any agreement without a binding dispute
    settlement, including investor state dispute settlement, won't
    find sufficient support in Congress. Congress explicitly set
    out this requirement in TPA knowing it is the only way to hold
    trading partners accountable to make sure that strong agreement
    you negotiate, Mr. Ambassador, our trading partners will be
    held accountable.
        America must also lead on China. China's chronic oversupply
    in steel and aluminum has put many Americans out of work and
    companies out of business. It is a blatant theft of our
    company's technology and intellectual property, and it can't be
    tolerated. I believe strong enforcement is needed, and I
    appreciate President Trump's leadership on holding China
    accountable. But we can't do this alone. If we hurt our allies
    America will ultimately lose.
        Our challenge--every President's challenge is to target
    remedies to address true national security risk to eliminate
    unfair trade and take into account our entire economy. The
    wrong remedy puts significant American jobs at risk. We have to
    make sure we don't punish American families and workers for
    China's misbehaviors. Oftentimes indiscriminate tariffs are not
    the right approach, and before the Administration puts those in
    place it also should provide a strong opportunity for public
    comments so the effect of these tariffs on our economy can be
    properly assessed. It is not about backing down, it is about
    hitting the target, which is China and its bad practices, not
    our allies or other U.S. sectors.
        And finally, I want to be clear, the Constitution vests
    Congress with the authority of the U.S. trade policy agenda.
    The relationship between Congress and executive branch is a
    true partnership in implementing that agenda. We want to
    partner with you, Mr. Ambassador, to ensure that America
    continues to choose the freedom to trade. America must continue
    to lead the world and to find what it means to have an open and
    free economy our jobs and our values depend upon it.
        Again, Ambassador Lighthizer, thank you so much for being
    here today on a snow day. We look forward to your testimony.
        And I now yield to the distinguished Ranking Member, Mr.
    Neal, for the purposes of his opening statement.
        Mr. NEAL. Thank you, Mr. Chairman, and for those of us from
    New England, we don't even consider this a snow day.
        Thank you, Mr. Ambassador, and I want to welcome you on
    behalf of Committee Democrats. Today's hearing is an
    opportunity for us to hear from you and you to hear from us
    about all of the activity that is happening on the trade front.
        Over the past year we have seen a great deal of activity
    and commentary from the Administration. We are currently in the
    process of renegotiating NAFTA to update it, and more
    importantly, to rebalance it. You are also renegotiating the
    U.S.-Korea Free Trade Agreement to improve it and to ensure
    that it delivers more reciprocal outcomes for U.S. workers,
    exporters, and businesses.
        The Administration has recently decided to impose tariffs
    on steel and aluminum imports under Section 232 and is
    currently in the process of deciding on country exemptions and
    product exclusions. As we are reading in news reports in a
    matter of days the Administration will announce its findings in
    the Section 301 investigation into Chinese intellectual
    property abuses and may also be prepared to impose substantial
    tariffs on imports from China.
        The President certainly has tapped into raw feelings in
    some important communities about our economy and trade
    policies. We have seen in the past months that this
    Administration and you personally, Mr. Ambassador, have not
    been shy about challenging the status quo.
        For many of us we have taken notice of the promises that
    the Administration has made to improve U.S. trade policy and to
    make it work for all Americans. Many of us in the past have
    been skeptical about the promises that have been made for
    better enforcement because oftentimes they are big promises,
    and we must say we have heard them before. But we have seen
    evidence of your commitment. For example, we hear that when you
    say that your task is not just to renegotiate NAFTA but to
    update it and to fundamentally restructure it to fix important
    flaws of the original agreement, flaws that prevented Members
    of Congress like me from supporting it originally.
        In the tariffs on steel and aluminum imports we recognize
    the intention of providing much needed relief to industries and
    workers that have called for action for a very long time. But
    we also have a lot of questions, and we are watching closely to
    determine whether the promises the Administration has made will
    be delivered upon, whether that is in NAFTA, the 232 tariffs,
    the Korean agreement, or China's 301 investigation.
        Finally in the bigger picture, I think it should be clear
    to all of us that some of the greatest challenges facing our
    economy and our values are being posed by countries that rely
    heavily on state intervention and do not operate, despite what
    they say on market-based principles. We should all be on the
    same team in talking about these challenges. In fact, if we
    want to be really effective it seems to me that it will make a
    good deal of sense that we should build upon what already has
    been happening between Democrats and Republicans as we address
    many of these challenges.
        I look forward to hearing from you today about your vision
    and plan for delivering this Administration's promises on trade
    about how we take on global competitive challenges effectively
    and how the Administration partners with Congress.
        Thank you, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Neal.
        Today's sole witness is Ambassador Robert Lighthizer, U.S.
    Trade Representative. The Committee, Mr. Ambassador, has
    received your written statement. It will be made part of the
    formal hearing record. We have reserved 5 minutes to deliver
    your oral remarks. You may begin when you are ready, and again,
    welcome.

    STATEMENT OF HONORABLE ROBERT E. LIGHTHIZER, AMBASSADOR, UNITED
                      STATES TRADE REPRESENTATIVE

        Ambassador LIGHTHIZER. Thank you very much, Mr. Chairman
    and Ranking Member Neal, and Members of the Committee. I'm
    pleased to be here today.
        We at USTR greatly appreciate the expertise of the Members
    of this Committee. We're grateful for all the time you give us
    in working up truly bipartisan trade policy, the efforts you've
    helped us with on NAFTA and the many issues we face.
        Before I continue with my statement let me just say since I
    generally when I come here complain about the fact that I have
    no deputies I, in fact, have deputies now. So I thought it
    would be appropriate since they're all going to be senior
    members I believe but members of your staffs that I probably
    ought to at least have you know who's working for you now
    besides me.
        Jeffrey Gerrish, maybe if you would stand up, Jeff, is our
    deputy for Europe, the Middle East, and Asia. C.J. Mahoney is
    our deputy for Africa, China, the western hemisphere, and he's
    also going to do investment and services. And he will be our
    transparency officer. You'll recall that we selected an
    appointed official as our transparency officer. So those are
    the two people that I wanted you to focus on, if you would,
    since they're brand new.
        First I would like to draw the Committee's attention to the
    fact that this year the trade deficit in goods and services
    rose to $565 billion and in goods alone it was $811 billion. Of
    course these numbers there are lots of causes for these
    numbers, but the President believes and I also agree that
    longstanding trade deficits to some extent reflect market
    distortions and that they're having a negative effect on U.S.
    workers and businesses.
        We also, of course, have a massive trade deficit with China
    which we ought to speak about at some point of $375 billion so
    the numbers essentially got worse last year. I know that
    Members have a variety of views on these figures, but the
    President believes that they raise significant concerns. They
    indicate that sometimes the global rules of trade make it
    harder for U.S. companies to compete and specifically to
    export. Trade deficit also indicate that the United States--
    that in the United States the cost of globalization are falling
    more heavily on blue-collar workers, and this is something that
    is bad for the economy and bad for the society. Finally, they
    tend to undermine the support for the global trading system, so
    trade deficits are a problem.
        Quickly I would outline the President's trade agenda.
    First, we at USTR will support the President's national
    security strategy. If you haven't looked at that I would
    recommend it to you. That means that our trade policy will help
    to build a stronger America, preserve our national sovereignty,
    respond to hostile economic competitors, recognize the
    importance of technology and seek opportunities to work with
    other countries that share our goals.
        Second, for U.S. companies and workers to be competitive in
    overseas markets we need a strong and robust economy at home,
    and I commend the Committee for the work they did on the tax
    cut bill.
        Third, we are negotiating trade deals that will work for
    all Americans. As Members of this Committee well know, the
    President directed us to seek significant changes to NAFTA. We
    have already had seven rounds with our partners in Canada and
    Mexico, and I believe that we've made a great deal of progress.
    We've also begun discussions, as most of you know, with South
    Korea on updating KORUS. Now that we have a full team of
    deputies, we intend to aggressively pursue other potential free
    trade agreements. We have a trade working group with the United
    Kingdom. We have told Japan that we're interesting in having a
    free trade agreement with them at the appropriate time. We are
    prepared to explore the possible countries in Africa and South
    Asia who might be appropriate for us to enter into free trade
    agreements, and as you said, Mr. Chairman, the President has
    asked for the extension of trade promotion authority to
    accomplish this.
        Fourth, we are enforcing our trade laws. The President
    indicated he would use all available trade laws to defend U.S.
    workers, farmers, and ranchers against unfair trade, and he is,
    in fact, doing that.
        Finally, we seek to reform the multilateral trading system.
    For too long the WTO has failed to promote trade
    liberalization. Too many WTO members view it as a litigation
    forum and not as a negotiation forum. In short, USTR under the
    direction of President Trump is seeking to build a better,
    fairer system of global trade that will lead to higher
    standards for all Americans.
        Thank you, and I look forward to taking your questions, Mr.
    Chairman.
        [The prepared statement of Ambassador Lighthizer follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman BRADY. Thank you, Mr. Ambassador, and thank you
    for introducing your chief negotiators. Mr. Neal and I did send
    a letter to the Senate after your last testimony discussion
    with us urging the Senate to move, so we are pleased to in a
    bipartisan----
        Ambassador LIGHTHIZER. Let me just say that I view that as
    unprecedented and extremely helpful, so I am very grateful to
    the Committee for intervening in that matter.
        Chairman BRADY. You need a full team. USTR is a very small
    and nimble agency. It needs everyone on board at this critical
    moment. So congratulations on that.
        So I am convinced NAFTA done right can create incredible
    job growth and paycheck growth for America, our farmers, our
    workers, our local businesses. I think a modern NAFTA is our
    number one economic priority this year, and I believe not only
    will it grow jobs in America but when combined with our trading
    partners can make our American businesses and farmers more
    competitive as China, Europe, and the rest of the world. I want
    to ask you a question about that in a moment.
        But first let's start with the steel and aluminum tariffs.
    We strongly support President Trump's efforts to target
    unfairly traded steel and aluminum, but as you know we have
    made it clear it is important that we allow fairly traded steel
    and aluminum to move forward. It is critical for nearly every
    economic sector in America.
        In the President's determination was included an exemption
    process for countries to negotiate with you, Mr. Ambassador,
    and the President directly in order to address transshipment
    issues, multinational efforts against China's unfair trade
    practices, and strengthening America's national security
    footprint. Can you give us an update on the exemption process?
        Ambassador LIGHTHIZER. Thank you, Mr. Chairman. As you say,
    the President did set in force a process that would allow
    products to get out in specific circumstances, and that is
    something that's being handled by the Department of Commerce.
    And then USTR working with all the appropriate agencies
    including the Department of Commerce is working on this
    question of country exemptions. So initially the NAFTA
    countries are out of the 232, subject to certain conditions and
    subject to a successful NAFTA negotiation, so that's the first
    part of it.
        We have a similar circumstance with respect to Korea
    because we're in the process of renegotiating KORUS. I guess I
    have to be careful because we're not using TPA, I won't say
    renegotiating but refurbishing, perhaps, KORUS, but we're
    talking about the Koreans about KORUS.
        There have been other countries that have come up and that
    I believe we are in the process of talking to now, Australia,
    Argentina and the EU I would put in those categories. There are
    a couple of other--there have been a number who have asked--a
    great number as you can imagine. Another one that we will I
    think soon begin talking to is Brazil, but there are a number
    of countries that have come forward and they're in various
    levels of the process. The kinds of things we have talked
    about--well, maybe I will let it go at that, Mr. Chairman, and
    then follow up on the criteria later if you----
        Chairman BRADY. Great. Thank you. What is the timeframe for
    those discussions and ultimate decisions roughly?
        Ambassador LIGHTHIZER. I believe that countries will get
    out as we come to agreement that some countries will be in a
    position where the duties will not apply to them during the
    course of the negotiation just so that you don't have--for
    example, Canada and Mexico but others, so that you don't have a
    situation where you have the status quo, 25 percent tariff and
    then they get out and there's this kind of bump and it changes
    real commercial relationships.
        So but our hope is that by the end of April we have this
    part of the process resolved. Having said that, the President
    has the authority at any time during the course of the program
    to let people out if he thinks it's in the national economic
    interest of the United States.
        Chairman BRADY. And those discussions are ongoing?
        Ambassador LIGHTHIZER. Yes, sir they are ongoing.
        Chairman BRADY. Thank you. So let me turn to NAFTA for a
    final question. You know, I am confident you and your team are
    going to negotiate a progrowth NAFTA that makes America
    stronger economically. To do that and to maximize the economic
    growth from our now one of the most competitive tax codes in
    the world to maximize on that we need more customers, and many
    of those customers live outside the United States. Many of them
    are in Mexico and Canada and when we compete and win on a level
    playing field we grow American jobs here, but to do that we
    oftentimes have to invest in those home countries to compete
    and win against China, Europe and the rest of the world.
        But if that investment in those countries is to benefit
    America, our investors have to receive fair treatment from
    other governments, and many countries don't provide basic,
    substantive, or procedural protections for American businesses.
    That means American investors have to rely on the investor-
    state dispute settlement process to ensure that they are
    treated fairly and they aren't discriminated against in these
    other countries, that the rule of law, the property and
    investment is protected as it is in America and without ISDS
    Americans' property is left unprotected against discrimination,
    foreign seizure, regulatory abuses and other forms of unfair
    action.
        This issue is basically a question, when other countries
    treat American investment unfairly who has their back? The
    answer should be America has their back. I am deeply concerned
    about reports Mexico and Canada have begun negotiating
    bilateral ISDS provisions without us. Because USTR has said it
    doesn't want to participate in that. Mr. Schweikert from
    Arizona has wrote a letter that many of us have signed now
    signed by 103 Republicans affirming that inclusion of a strong
    ISDS is essential in the NAFTA agreement.
        Mr. Ambassador, we have had many discussions about that.
    This is a key part of passing the strong NAFTA agreement that
    we are convinced you will negotiate well for us, so how do you
    square USTR's current proposal against the congressional
    objectives that are in law and that 103 of us have as of today
    said are crucial for passage of this agreement?
        Ambassador LIGHTHIZER. Well, thank you, Mr. Chairman. Yes,
    I'm aware that there is some controversy surrounding ISDS.
        Chairman BRADY. You picked up on that?
        Ambassador LIGHTHIZER. Yes, I have picked up on that. I
    would say this about it, first of all, that whatever happens on
    ISDS the kinds of issues that Members are concerned about in
    terms of U.S. investment overseas will be able to be handled
    within the context of what we call Chapter 20 or the State-to-
    State dispute settlement. So it isn't like we will be in a
    position where there will be no recourse. So that is the first
    thing I would say.
        The second thing I would say that we have proposed an opt-
    in-opt-out-proposal. We are skeptical about ISDS for a variety
    of reasons, which I would like to go into if I have a second to
    do it.
        Number one, on the U.S. side there are questions of
    sovereignty. Why should a foreign national be able to come in
    and not have the rights of Americans in the American court
    system but have more rights than Americans have in the American
    court system? It doesn't strike me--it strikes me as something
    that's at least we ought to at least be skeptical of and
    analyze.
        So a U.S. person goes into a court system, goes through the
    system, and they're stuck with what they get. A foreign
    national can do that and then at the end of the day say I want
    three guys in London to say we are going to overrule the entire
    U.S. system. So on the inward bound it strikes me as a question
    of sovereignty, and I view myself as a conservative and a
    sovereigntist so this is troubling in that respect.
        On the outgoing side there are many people who believe that
    in some circumstances, and I can discuss the varieties of them,
    in some circumstances it's more of an outsourcing issue. So
    what is it? It's a situation where somebody says I want to move
    a plant from Texas and I want to put it in Mexico, and when I
    go down there I don't want to take the political risk that AMLO
    is going to win in Mexico and change my bargain, so I want the
    U.S. Government essentially to buy political risk insurance for
    me.
        Our view tends to be that if you want to move a plant from
    the United States to Mexico, and the economics suggest that,
    that you should go with the economics and it's too bad, and
    your responsibility as a Congress is to make the United States
    more competitive so that that isn't a problem. But if you are
    going there because we are underwriting the investment, we are
    putting our finger on the scale, we're encouraging you to move
    your plant down there that is not the job in my opinion at
    least of the United States Government.
        I would say, also, this is an area that's not without
    controversy. The National Association of States Attorney
    General think this is a mistake. The Cato Institute, an issue
    which I don't always agree with, all indications, they think
    ISDS is something that we shouldn't have.
        The National Association of State Legislatures, which is
    controlled by Republicans is on record as against ISDS. So
    there are a whole variety of issues. I can go on and on and on.
    There are people who respond, well, we haven't lost cases in
    the United States in our position, and while, in fact, that is
    the case we have come close to losing some, but more
    importantly, we've had situations where real regulation which
    should be in place which is bipartisan and everybody's interest
    has not been put in place because of fears of ISDS.
        So I think it is something we have to think about very
    carefully. Our view was that rather than have this mandatory
    ISDS provision, which we think is a problem in terms of our
    sovereignty in the United States, encourages outsourcing and
    losing jobs in the United States, and by the way, lowering
    standards in a variety of places, that we should be very
    careful before we put something like that into play.
        So you say what are the alternatives for these companies?
    The first alternative, as I say, is State-to-State dispute
    settlement. The second alternative is if you go to any one of
    these companies and ask them why do you need this, why don't
    you put in place an arbitration provision in your contract?
    They'll all say, well, we can do that, and indeed, they did do
    it. They did it before we had ISDS. And in a country like
    Mexico they subscribe to all the conventions, and they have to
    enforce those.
        If they put that contract, an arbitration provision in
    their contract, these things are then resolved in a similar
    manner but without the United States ceding sovereignty in
    order to encourage people to outsource jobs. It's just not a
    good trade in my opinion. I realize, however, that it is
    controversial provision and that my view is in the minority in
    some very intelligent caucuses.
        Chairman BRADY. Mr. Ambassador, thank you for that defense.
    A couple quick thoughts before I turn to Mr. Neal.
        Secondly, there is no threat to sovereignty. Foreign
    investors have no more rights than American investors because
    American--in our country you have the greatest standards and
    protections for property rights, investment rights in the
    world, bar none.
        Secondly, your client is Congress in speaking out for our
    ag community that wants you to have America's back when they
    have to invest in other countries to win customers, energy,
    manufacturing, technology services, every key industry in
    America that has to compete against China and the rest of the
    world and other countries is saying we need to have their back
    when they make their investments.
        And so you are right there is a disagreement there. We are
    going to continue to work together with you, Mr. Ambassador, to
    get to a good place and make sure we are keeping this in the
    trade agreement and we have the backs of our American
    investors.
        Mr. Neal.
        Ambassador LIGHTHIZER. Just briefly the strongest argument
    in favor of ISDS, Mr. Chairman, is that you're in favor of it.
    That is the strongest argument in my opinion.
        Chairman BRADY. Some would disagree with that, Mr.
    Ambassador.
        So Mr. Neal, you are recognized for your questions.
        Mr. NEAL. Thank you, Mr. Chairman, and thank you, Mr.
    Ambassador. In Massachusetts and in New England trade and
    energy with Canada is critical to powering our engines of
    innovation, manufacturing and indeed people's lives. In
    renegotiating NAFTA to ensure the reliable and preferential
    terms of that trade is a priority certainly for communities
    across New England.
        In trade I understand that there are some issues with
    verifying origin right now that are having the effect of
    burdening trade and making power more expensive for people
    across New England. Is this something that is on the radar
    screen and are you willing to prioritize the resolution of
    these burdens as part of the renegotiation?
        Ambassador LIGHTHIZER. Yes, Mr. Neal, they are, and free
    flow of energy is something that I've testified about before,
    and I know--I believe that the Committee is universally in
    agreement on that provision, and we certainly support it, and
    we're aware of your situation, and it is something that we're
    concerned about.
        Mr. NEAL. Thank you. China. As I mentioned earlier we are
    reading about substantial tariffs on a wide variety of consumer
    product imports from China that apparently will be announced
    before the week is over. Can you talk about the goals of the
    Administration and what you are trying to achieve through
    Section 301, and do the goals in China's abusive practices
    correspond to the types of products that you are thinking of
    subjecting to tariffs.
        Whether it is an electronics or toys iconic companies in
    many of our districts and consumers that rely upon them and
    enjoy these goods are profoundly concerned that some of these
    penalties will end up penalizing them as well. And can you talk
    about from your perspective what makes sense for our economy or
    are we simply proposing to discipline China?
        Ambassador LIGHTHIZER. That is a great question and one
    that is----
        Chairman BRADY. Mr. Ambassador, could you touch that
    microphone?
        Ambassador LIGHTHIZER. I am sorry. I am sorry. That is a
    great question, and one that is quite topical as you suggest.
    The President is going to make a decision, I believe, in the
    very near future on this issue of this 301, which we started in
    August and which we have--has been very thoroughly examined at
    USTR. We've studied it. We've had hearings. We've spent
    thousands of hours reading tens of thousands of pages in
    Chinese. We have studied with American companies.
        And our view is that--and once again there is no decision
    until the President makes it, but our review is that we have a
    very serious problem of losing our intellectual property, which
    is really the biggest single advantage of the American economy
    in my opinion is our intellectual property and our ability to
    generate new intellectual property. We are losing that to China
    in ways that are not reflective of the underlying economics.
        So it's an enormously important issue. I'm happy to talk
    about it at some length. We think it is perhaps the most
    important thing that will have been done in a long time in
    terms of rebalancing trade and trade specifically with China.
        This problem of intellectual property with China has been
    something that has been going on for a long, long time. If you
    look back in George Herbert Walker's presidency in 1992--1991
    there was a 301 on the Chinese basically not protecting
    intellectual property in China and taking the technology--1991.
    We had another one in the Clinton administration, both of which
    really didn't amount to much.
        We had a third one in the Obama administration where there
    was cybertheft in an agreement. Of course none of this changed
    any of the activity in my judgment. So the question becomes,
    one, do you think there's a problem that strikes me as without
    question clear that there is. Do you thoroughly study it, which
    I believe we did. If there is a problem if it's so important to
    the economy, what are the likely remedies that you would have?
    The remedies in my judgment at least would be, one, doing
    something on the tariff front, and, two, doing something on the
    investment front and then perhaps other things because these
    are the crucial areas where it comes together.
        In terms of what you would do on the--on the tariff front,
    which was your specific question, the USTR has the power, at
    the direction of the President, to raise tariffs in these
    circumstances. The way we would approach it if the President
    should make this decision is, one, to study it. We have an
    algorithm which will decide the extent to which there is a
    problem among things that are quantifiable because it is a huge
    number of things that are not quantifiable but are worth
    hundreds of billions, but you take what you believe is
    quantifiable and you come up with a number. Then you apply
    tariffs to that number.
        The process that you would use presumably would be, one,
    you would develop an algorithm that will put maximum pressure
    on China, minimum pressure on U.S. consumers and then there are
    certain products which are clearly high tech products, which
    are in the focus point of this. And the combination of those
    two would be the kinds of things that you would decide to put
    tariffs on if you were going to do it, and then you would take
    additional action.
        Now, I can go through at some detail if the Committee wants
    to do it now or at another time, I know this is a matter of
    great interest to the Committee, and I am happy to talk about
    it now or just beyond that or just go on and wait for other
    Members to ask questions.
        Mr. NEAL. Thank you, Mr. Ambassador.
        Chairman BRADY. Thank you, Mr. Neal. Mr. Johnson, you are
    recognized.
        Mr. JOHNSON. Thank you, Mr. Chairman.
        Ambassador, welcome. As you know, I flew F-86s in Korea and
    had my share of dog flights over there, and that is a dangerous
    area of the world, and one of our allies in South Korea needs
    to know that we have their back. As you may know, I voted for
    the U.S.-South Korea Free Trade Agreement back in 2011 and
    since that time hundreds of thousands of jobs have been created
    right here in America from the trade agreement. In fact, over
    40,000 jobs in Texas are directly tied to that agreement.
        By the way, according to your own agency, exports of goods
    have increased as a result of the agreement. So as the
    President looks to renegotiate this trade agreement I would
    like to express my support for doing it in a way that
    strengthens the alliance with South Korea.
        Mr. Ambassador, can you give me an update on the South
    Korea negotiations and when will they wrap up, do you think?
        Ambassador LIGHTHIZER. Thank you very much.
        So we are in the process of having discussions, but the
    President announced his desire to update and rebalance to the
    extent we cannot using TPA, so it's a more limited kind of a
    negotiation. Several months ago we spent the first several
    months with the Koreans going through their process to get a
    mandate from their own legislature to discuss it. We've now had
    several rounds with the Korean minister.
        Minister Kim is in town right now. I think we are down to
    the last few issues. I'm hopeful that we will be able to come
    to some agreement that will make the Committee happy, and in
    addition to KORUS of course we're also talking about steel and
    aluminum because it has now come up, and in the opinion of many
    people Korea is a particular problem in the area of steel
    primarily. But we're trying to work our way through all of
    those things.
        I'm hopeful that we can make headway on it, and it
    certainly is my objective would be to get a good agreement--let
    me say to have amendments to the agreement that will satisfy
    this Committee, and I think we're moving in that direction
    right now, Congressman.
        Mr. JOHNSON. Thank you, sir. I would like to take my
    remaining time to highlight the importance of NAFTA for Texas
    and the Nation as whole. As you know, over a million jobs in
    Texas are supported by trade with Canada and Mexico, and
    nationwide this trade supports nearly 14 million American jobs.
    That is a lot of American workers, and while I support the
    efforts to update NAFTA I am concerned by the proposed sunset
    clause. I don't think that is a good policy necessarily.
    Businesses need certainty.
        Can you tell me what the status of the proposed NAFTA
    sunset clause is and what are you trying to accomplish with it?
        Ambassador LIGHTHIZER. Absolutely, Congressman. So the way
    the sunset clause works is that at the end of 5 years the
    President would make a decision as to whether or not the
    agreement should continue. It would not require congressional
    action. It would not be a difficult decision. The thought
    behind it is, number one, we have a number of Members in this
    Committee particularly on the Republican side that believe we
    ought to be sunsetting things, so I would have thought this
    would have been something that would be consistent with that.
        The idea is if it's such a good agreement then we'll
    naturally roll it over. If it's not a good agreement, we won't.
    So after a period of time--the idea is that after a period of
    time we ought to be sitting down and reviewing what happens to
    these agreements. There is nothing about trade in my opinion
    that makes it above all other logic in the way we approach a
    legislation.
        So the basic idea of an agreement like this is that you
    have baseline WTO trade, and then we're giving someone a
    benefit, a benefit versus the rest of the world, and they're
    giving us approximately similar benefits, and that's how you
    create an FTA. If you find yourself in a position at some
    point, and I would suggest 5 years is a reasonable period of
    time, where the--what we gave and what we got is so out of
    balance it is reasonable to suggest that we ought to try to
    rebalance it. Things change, the economy changes.
        Indeed, I would think that NAFTA is a classy example of why
    we have this problem. We have a 24-year--we have a 24-year
    agreement and that agreement, the whole economy has changed.
    We've gotten way out of whack in terms of what our deficits
    are. It's having a peculiar effect on various industries, and
    it's reasonable to sit back and take a look at it. But if the
    agreement is as business people tell me going to be so
    spectacular it strikes me that the President looking at it
    after 5 years won't be a particularly large hurdle, but it's a
    reasonable thing to expect people to do, and that is the nature
    of it.
        Chairman BRADY. Mr. Ambassador, I apologize, time has
    expired. We will be able to discuss I think some of this
    further as we go through. Mr. Johnson, thank you.
        Mr. Levin, you are recognized.
        Mr. LEVIN. Ambassador, welcome. The two major trade issues
    NAFTA and steel have a major common attribute. The clash over
    both of them has been decades in the making.
        After the failure to act by the U.S. Government and to be
    acknowledged as a problem by traditional trade theorists.
    Outsourcing in manufacturing to Mexico increased dramatically
    lured by Mexico's industrial policy of cheap labor. During much
    of this same period, as you know so well, China undertook a
    massive increase in steel production often using state-owned
    enterprises reaching 10 times that of U.S. production in
    contrast to their equal amounts of production nearly 20 years
    earlier.
        The impact in the industrial sector from these two
    developments was loss of middle class jobs and suppression of
    wages. In both cases the response was the lack of any
    coordinated action in this country either handcuffed by
    allegiance to theories ill-equipped for the realities of
    rapidly advancing globalization by a willingness to settle for
    talk in conference after conference or by putting profits over
    the personal impact on working families. This created a vacuum.
    Like any problems left to foster it has made it more difficult
    to remedy them effectively and responsively. They must be.
        As to steal and aluminum I suggest we all look at a
    recommendation in the recent remarks of AFL-CIO president Rich
    Trumka where he said, and I quote, These tariffs will be most
    effective if used strategically targeting China and other
    countries that are the source of the problem.
        In fact, instead of retaliating against the United States
    as some have threatened our allies should work together with us
    to address this global glut that threatens our economic and
    national security.
        As to NAFTA there cannot be a successful renegotiation, Mr.
    Ambassador, which I believe most Democrats want unless the
    central problem as we have discussed is fixed. Mexico must tear
    down its structures of an industrial policy, built on
    suppressing its workers that impacts American jobs and wages.
    Instead there is evidence that in its Congress Mexico is now
    moving backward.
        Mexican workers today often make less in real dollar terms
    than they did 25 years ago and less on the average now than
    those in China. I recently met two workers in Mexico from the
    auto parts industry who said their take-home pay was 75 cents
    an hour in one case and $1.25 in the other. The President has
    spoken about this suppression; now he must deliver.
        Mr. Ambassador, we have talked about this and are you now
    addressing this problem? Steel we will talk about tomorrow with
    the Commerce Secretary, though you are an expert. In terms of
    Mexico and their industrial policy, their endless so-called
    protection agreements, where are the discussions?
        Ambassador LIGHTHIZER. Well, thank you, Congressman Levin.
    As you know, every time I've testified here I've taken the
    position that wage increases in Mexico are in the U.S.
    interests. It's better for our own competition. It also creates
    customers for us, so it's something that we have as a priority.
        I think that in the Mexican political system there are a
    number of people who agree completely with that process. So I
    mean with that thought. We are in the process of having these
    negotiations really even as of today.
        My focus has been on trying to get to a position where
    Mexican workers actually vote on--have real secret ballot votes
    on their collective bargaining agreements, and if Mexican
    workers have real votes and they decide for bad contracts
    that's none of our business, but it's reasonable for American
    workers to expect that there would be a process whereby Mexican
    workers have this.
        Mr. LEVIN. Good. Let me just say on ISDS, and I will finish
    with this and there will be discussion, it is an important
    issue, and when we raised it in TPP Republicans just sat doing
    nothing.
        But it isn't the basic problem in terms of Mexico. They are
    using moneys to lure industry, not cracking down on American
    investment.
        Chairman BRADY. The gentleman's time has expired.
        Mr. Nunes, you are recognized.
        Mr. NUNES. Thank you, Mr. Chairman.
        Ambassador, welcome and congratulations on finally getting
    your deputies in place. I want to go first into another region
    of the world and that is Asia. You have talked a little bit
    about what you may do in the coming weeks, and I can assure you
    that we have tremendous concerns about investment that is being
    made here in the United States buying up companies, stealing
    our intellectual property. A lot of that is not actually being
    done through trade it is just the way they make investments
    into the United States.
        And on the Intelligence Committee we continue to
    investigate that and we have legislation pending in the
    Congress now on CFIUS reforms as it relates to some of these
    concerns we have with what China is doing here in the United
    States.
        I would also submit that I heard you--I think you have
    talked a little bit about the Philippines, possibly Vietnam,
    perhaps another direction that we can go in the coming weeks
    and months would be to look at is it possible to do bilateral
    agreements with the Philippines, Vietnam, fixing the South
    Korean agreement possibly Japan, and I don't know if you can
    comment on any of those negotiations because I know you are in
    the middle of them, but in terms of planning for the
    Philippines and Vietnam I would be very interested in.
        Ambassador LIGHTHIZER. Thank you, Congressman.
        First of all, the issue of Chinese investment in the United
    States is as I say in the 301 is something that we're
    completely focused on. In my judgment this is going to help to
    define whether or not we have all succeeded or failed in terms
    of what we were sent here to do, and any Members who are not on
    the Intelligence Committee I hope they access themselves of the
    information the Intelligence Committee has because I think in
    making these judgments it's really important that you know the
    basic facts.
        Having said that, now that I have a deputy I've spoken
    generally about the idea of having a bilateral agreement or an
    FTA with some of these people and that in that part of the
    world, in the Pacific part of the world. Some of the TPP
    countries but also some others who weren't in the TPP like the
    Philippines.
        So Ambassador Gerrish, my deputy, is going to undertake to
    do a thorough study of that both within the Administration, but
    as importantly within Congress to find out where the targets
    are. We have spoken and thought ourselves about the Philippines
    as a reasonable first step in that direction. It's extremely
    important that we have a positive agenda. It's extremely
    important that we show that part of the world that we're very
    interested in them.
        Besides the Philippines, which is kind of a smaller kind of
    a deal generally, smaller economy, you mentioned Vietnam,
    Vietnam is one that there's been a number of Members and people
    in the Administration that also thinks we ought to be moving
    there. Each of these has their own kind of complications, of
    course.
        Japan we have indicated that we are interested in at the
    appropriate time having an FTA with Japan. Right now I believe
    is not that time. Japan is in the process of having the TPP
    become implemented, and it was just signed on the 8th of this
    month, so there is kind of a process there, but they are very
    much aware that we think having a closer economic relationship
    with them is in our interest and is in their interest.
        Mr. NUNES. Well, Ambassador, thank you for that, and I
    appreciate that and I would be willing to work with you on any
    of the countries in Asia that you would be interested in making
    bilateral agreements or beginning the discussions at least.
        Let me switch quickly to NAFTA. The NAFTA renegotiations,
    and then the Chairman mentioned in his opening statement but
    for a long time Canada has been getting away with murder in
    their dairy industry. It is causing tremendous problems for
    farmers here in the United States. They have a very
    protectionist program, have for a long time. They are dumping
    in product into this country and if anything it is one of the
    reasons why you are trying to update NAFTA.
        And I don't know if you can update us on the process and
    where we are at in the negotiations on specifically on dairy,
    but we would be interested to hear what you have to say.
        Ambassador LIGHTHIZER. Well, this is something that we have
    focused on. It was one of our objectives, their dairy program
    but also their agriculture programs and other areas, eggs and
    poultry is another one where they have what you would consider
    to be very not market oriented, very protectionist approaches
    on these things.
        It's difficult for them to change their policies in these
    areas because they're sensitive just like they are in every
    single district in America. Having said that, it's a very high
    priority to make changes in the Canadian dairy programs so that
    we have the kind of access that U.S. farmers did have and even
    greater access.
        So it's a high priority. I am hopeful that when we put the
    final deal together it's something that we make real headway
    on.
        Mr. NUNES. Thank you, Mr. Ambassador.
        Thank you, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Nunes.
        Mr. Doggett, you are recognized.
        Mr. DOGGETT. Thank you, Mr. Chairman, and thank you,
    Ambassador.
        NAFTA is very important in Texas. It was signed in the
    district that I currently represent in San Antonio, and I
    sincerely appreciate your efforts to significantly improve it
    learning from the experience of the last two decades. Though I
    personally continue to support more trade through a NAFTA and
    around the world, one of the major reasons that I have voted
    against a number of previous trade agreements is the way they
    have been subverted by various special interests to serve their
    own selfish agenda to the detriment of our public health.
        Big tobacco, Big Pharma have been examples of that in the
    past, and I am very troubled by this morning's New York Times
    front page story that advises that your office is currently
    involved in NAFTA negotiations to serve the obesity lobby. You
    are aware, Ambassador, that the Center for Disease Control
    reports that almost a third of American youth between the ages
    of 17 and 24 are too overweight to serve in our military, that
    the defense department reports that one in 13 American
    servicemembers is clinically obese.
        Now, I know there is no panacea for this problem, and I
    don't endorse every action taken by a foreign government, but I
    think that it is wrong to limit the power of American States
    and local governments, as well as foreign governments to
    address this challenge.
        I want to draw your attention specifically to that Times
    article in which it is said, ``The Trump administration's
    proposal and the corporate pressure behind it hold the
    potential to handcuff public health interests for the decades.
    The American provision seeks to prevent any warning symbols,
    shape, or color that,'' and this is apparently drawn from the
    documents you are advancing, ``inappropriately denotes that a
    hazard exists from consumption of the food or nonalcoholic
    beverages.''
        Is it correct that your office is urging adoption of that
    provision as a part of the NAFTA renegotiation?
        Ambassador LIGHTHIZER. First of all, I would like to put my
    office on the record as being against obesity.
        Mr. DOGGETT. I am glad to hear it. The question is whether
    you are against things that prevent us addressing that problem,
    and if you are supporting this provision you are certainly not.
        Ambassador LIGHTHIZER. Well, I guess I would say,
    Congressman, that for us it is slightly more nuanced than that.
        Mr. DOGGETT. Well, just answer. First, is this a provision
    that is being advanced by the American government?
        Ambassador LIGHTHIZER. The idea is--yes. The idea of
    putting limits on the ability of countries to put warning
    labels or symbols or products is something that we are
    concerned about----
        Mr. DOGGETT. So it is accurate that this provision, the
    language that I just read to you, is being advanced by our
    negotiators?
        Ambassador LIGHTHIZER. I mean, I can't comment on the exact
    language in the statute, I don't have that--I've looked in the
    article, I don't have the article in front of me, but the issue
    is with one that we are concerned about. The other--your point
    is an excellent one, and I agree with it.
        On the other side of it there are lots of examples of
    countries that are using this loophole to basically create a
    protectionist environment. So we have--that's why I say it's
    more nuanced from our point of view. We have companies that
    come in with products that literally they're on shelves with no
    wrapping on them. There is a kind of an extreme between one way
    or another. This can be used as protectionism. To the extent
    it's used as protectionism we have to be very careful of it
    that is----
        Mr. DOGGETT. We certainly do, and I will welcome any
    further written answer you might have. I want to turn to
    investor state because there is one that I applaud your answer
    to the Chairman. When he asked the question who has our back,
    the corporate lobby basically wants it to be three lawyers
    operating behind closed doors as much as possible.
        We know from the Bilcon case that corporate interests went
    around Canadian law with rights they couldn't have there, and
    they are only asking for half a billion dollars now because
    they were denied the right to expand a quarry. I hope you will
    stand firm for protection of American investors but not a
    mechanism that allows them to invade our sovereignty as you
    correctly noted and to subvert and undermine health and safety
    regulation.
        There is no reason foreigners should be given more rights
    than American citizens and American companies have, and that is
    what is happening through the investor state mechanism. You are
    right to be skeptical on it, and I hope you will continue to
    urge that position because if we don't see some genuine reform
    of the investor state mechanism, renegotiation of NAFTA will
    not have met the objectives that we have set out initially.
        Thank you, and I look forward to your further response
    about this very troubling issue on obesity.
        Ambassador LIGHTHIZER. I will do that, sir.
        Chairman BRADY. Mr. Reichert, you are recognized.
        Mr. REICHERT. Thank you, Mr. Chairman.
        Ambassador, thank you for your time today.
        Mr. DOGGETT. Mr. Chairman, may I just ask unanimous consent
    to put the Times article into the record, as well as the
    earlier stories from the Times about Mexico and Chile.
        Chairman BRADY. Without objection.
        [The submissions for the Record of Hon. Lloyd Doggett
    follow:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. DOGGETT. Thank you.
        I am sorry, Mr. Reichert.
        Mr. REICHERT. That is okay, Mr. Doggett.
        Ambassador, thank you for being here today, and welcome to
    Jeffrey and C.J. I look forward to working with all of you and
    your team.
        I know that you and I have a few shared priorities,
    including successfully updating NAFTA and combatting unfair
    trade practices, and just I want to continue to work with you
    to accomplish both. In doing so we should build upon our work
    done during tax reform to boost the competitiveness of American
    workers and businesses.
        Even though I am very appreciative of your, as some have
    defined, unconventional approach I still have concerns about
    several actions that have been taken by the Administration that
    I believe could undermine the good work that we have
    accomplished through the tax reform effort. To successfully
    update NAFTA our farmers and manufacturers require certainty. I
    know you are keenly aware of that and accountability. They need
    to know their investments will be protected and the agreement
    will be enforced. They need to know that they can rely on this
    agreement.
        In targeting unfair trade practices we must take a targeted
    approach and work in cooperation with our global partners. We
    cannot take actions that put our consumers, manufacturers, and
    exporters at risk.
        I am deeply troubled by the questions that remain with
    Section 232 exclusion process and the possibility of tariffs
    from Section 301 investigation. It is American manufacturers
    and consumers that will be hurt by an ineffective exclusion
    process and the placement of tariffs on imports.
        I implore you to think about my constituents, for example,
    the family in Maple Valley who will face higher prices, the
    manufacturer in Auburn who will pay more or will lose access to
    imported parts, and the apple exporter in Wenatchee who will
    suffer from retaliation.
        We must also begin to focus on opening markets. As our
    trading partners move forward without us our farmers, workers,
    and businesses fall behind. Whether it is dairy, wine,
    potatoes, wheat or tree fruit, Washington's producers will lose
    market share to their foreign competitors without new trade
    agreements.
        Trade agreements ensure Washington's businesses are treated
    fairly and can sell their high quality products around the
    world. I believe the U.S.-Korea Free Trade Agreement is an
    example of a successful agreement for America and for the State
    of Washington.
        I do agree with you, however, that Korea's implementation
    of the agreement has been disappointing and that any remaining
    issues related to Korea's implementation need to be resolved
    quickly. I am glad to see the KORUS Committee system being used
    for this purpose. Of course the downside to using the joint
    Committee is that there is less transparency surrounding these
    discussions, and maybe with Jeffrey and C.J.'s help we can lend
    some transparency to the process.
        So I recommend and would strongly suggest, Mr. Ambassador,
    that USTR publish detailed negotiating objectives in KORUS to
    signal to the public the changes that you are seeking within
    that agreement and those talks.
        Can you comment on the transparency of the process and
    maybe providing those detailed negotiating objectives? Do you
    have a timeline on that?
        Ambassador LIGHTHIZER. Well, first of all, I agree that
    KORUS is an important agreement. On the issue of transparency I
    guess I would say since we're not using TPA we don't have that
    statutory umbrella. What I've tried to do is to the extent
    possible talk to Members, and I'm happy to talk to any Members
    individually or in groups to talk about this. It's not always a
    good idea to talk openly about negotiating objectives and
    certainly negotiating tactics.
        But from the point of view of the United States we are
    troubled by implementing a whole variety of implementing
    issues. We are troubled by the speed with which some tariffs
    are going to come off on important products in the automotive
    industry but also in others. We have issues with currency. We
    have a variety of issues. I'm happy to talk to Members about
    this. In terms of publishing something it's probably unlikely
    that I am going to do it. My hope is what we will do is talk
    privately to Members and have some kind of an agreement in
    principle quickly.
        My objective is to try to do this as quickly as possible
    with as little disruption as possible, and it really is why we
    decided we are better off limiting what we were going to do,
    not go through the TPA process and overload the system and just
    try to work with Members and deal with this on a smaller level
    and a smaller way than a normal big agreement would be.
        But to the extent Members view themselves as not knowing
    what our specific objectives are I'm happy to talk to the
    Members and look forward to doing that, and my hope is this is
    a process that comes to a conclusion fairly quickly because I
    think it's having negative effects in a lot of different ways.
        Chairman BRADY. Thank you, Mr. Ambassador.
        Mr. Thompson, you are recognized.
        Mr. THOMPSON. Thank you, Mr. Chairman.
        Mr. Ambassador, thank you for being here this morning and
    taking our questions and hearing our concerns.
        Mr. Ambassador, I am pleased that you acknowledge not only
    my colleague Mr. Nunes' issue regarding dairy but also went on
    to talk about other agricultural problems: eggs and poultry.
        I want to ask you, though, about the U.S. wine exports
    because they continue to face some highly burdensome trade
    barriers in Canada. Canada's discriminatory policy in British
    Columbia, Ontario, and Quebec are restricting market access for
    American wine, and giving Canadian wine producers a real
    competitive advantage against us.
        As you know--you and I have talked about this before, USTR
    requested WTO dispute settlement consultations with Canada on
    the British Columbia matter last year, but that really hasn't
    yielded any resolve or any benefit. And since then, Australia
    has also launched its own complaint on discriminatory practices
    affecting Australian wine exports.
        In addition to that, we have another agricultural problem
    with China. That is our ongoing effort to get exported U.S.
    rice into the Chinese market. For 10 years, we have been trying
    to find some equitable resolve to that issue. We have had
    promise after promise, but still those markets haven't been
    open to us.
        So I would like to know what it is you are doing to make
    sure that U.S. wine exports are treated fairly in Canada and
    what you are doing to make sure that U.S. rice exports are
    treated fairly in China.
        Ambassador LIGHTHIZER. Thank you, Congressman.
        I would say, first of all, the wine problem is exactly as
    you say: it's just rank protectionism at the provincial level
    in Canada. And it is something that, in fact, is spreading.
        As you say, we brought a WTO case against them. WTO cases
    take time, and we're in the process of aggressively litigating
    that action.
        Having said that, we are far better off trying to resolve
    this issue in the context of a NAFTA negotiation. It's more
    likely to have a near-term solution that is satisfactory to the
    industry.
        So it is something that we are negotiating on. Our hope is,
    with respect to that, we can see improvement in the NAFTA
    talks.
        Mr. THOMPSON. Other than telling us that you are working on
    it, are there any specifics? Is there any progress that you can
    report?
        Ambassador LIGHTHIZER. Well, it's one of these issues
    that--and there are a number of them in this category--you
    won't know whether you're making progress until you get to the
    end.
        If you look at the kinds of issues, generally, it's the
    tough issues--it's IP issues, and it's agriculture issues--that
    are sort of brought together at the end of an agreement,
    because no one is going to say they are going to do anything in
    that area.
        So you go through and you make progress in 30 or 33
    chapters, and when you get to the ag one, there's just no
    progress. You talk it through, and the reason is that no one is
    going to make any concessions here, other than as part of a
    final agreement.
        Having said that, I believe we will make headway in this
    area.
        Mr. THOMPSON. How about China and the rice?
        Ambassador LIGHTHIZER. Well, on China and rice, we have two
    WTO cases, as you know, on China and rice. It's another example
    of both, on the subsidy side, but also on the market access
    side, they are not doing what they, in our judgment, are
    obligated to do. We're pursuing those, and we'll retaliate.
    We'll do whatever is required. There are limitations on the WTO
    process to solve these kinds of issues, and you are seeing it
    just heads up in the issue of all of those products.
        Mr. THOMPSON. Well, I guess it is certainly frustrating to
    have been trying to deal with this for quite some time now, and
    even more frustrating now to hear that we don't know until we
    fix it. As I point out, the China problem with the rice has
    been going on for 10 years. The wine issue has been going on
    for quite some time too. Both, in my view, are pretty obvious
    and pretty blatant violations.
        I guess I would like to hear more about what we can expect.
    And if things start to go better in your negotiations, if you
    could let us know, if you could circle back and let me know how
    that is going, I would appreciate it. But, to date, it just
    doesn't look like we are making much progress.
        Ambassador LIGHTHIZER. On the wine thing, I'm happy to talk
    to you.
        On the rice and other WTO issues, that's a difficult
    process. It's a slow difficult process, which is seriously
    flawed.
        Chairman BRADY. Thank you. Your time has expired.
        Mr. Roskam, you are recognized.
        Mr. ROSKAM. Thank you, Mr. Chairman.
        Ambassador, just a personal word and then two questions.
        The personal word is: I appreciate the candor with which
    you approach things. My wife tells me that the older I am
    getting, the more direct I am becoming. I find your ability to
    engage us on these things really refreshing. I am not trying to
    embarrass you, but I just find it refreshing.
        Two questions. Let me give them both to you, and then if
    you could just respond, I would appreciate it.
        The first is, shifting gears on 232, and press is
    reporting--and I don't need you to comment whether this is
    true--but they are saying: Well, there is all this criterion by
    which you are evaluating these country decisions. And they are
    all rational, as far as I can tell. You know, a country's
    participation in other questions as it relates to trade and so
    forth.
        Here is my question: With Ukraine, for example, are you
    considering the strategic interest of the United States as it
    relates to changes for Ukrainian steel? Ukraine is in a
    situation under incredible pressure and incredible duress. It
    is a country that has been invaded by Russia. We have sanctions
    on Russia. You know the whole story. So is there a national
    security element to your consideration? That is question number
    one.
        Then shifting gears entirely, question number two is, as it
    relates to catfish--this is not an unfamiliar issue to you--we
    have a situation in the United States where there is double
    evaluation. USFDA has a program, and Ag has a program. It is
    pretty ridiculous. And there is a number of us that are trying
    to correct that. So my question is, can you speak to how the
    catfish issue, in particular, has an impact on the
    negotiations?
        Ambassador LIGHTHIZER. Let me say with respect to the first
    element, I've outlined--and we didn't put it on our website. We
    find that if we say something to anyone, it is in the paper. So
    it saves the issue of having to actually type things on your
    website. Everything becomes public in 5 minutes. We have
    criteria, and one of the elements, of course, is the national
    security interest of the United States. So we do have that as
    an issue.
        The final criteria is that the President makes that
    judgment. And that's a kind of a broad decision on his part. He
    defines national security in the conventional way, but also
    more broadly, as affecting U.S. economic security as part of
    national security. You will see that is a theme that runs
    through the National Security Strategy. It's run through our
    trade agenda, and it's run through the entire Administration.
    National security is defined broadly, and the United States
    can't defend its allies or itself unless it has a strong
    economy. So that's something the President has broadened.
        The issue of the Ukraine, specifically, there clearly are
    national security issues why that would be a consideration. I
    would say the likelihood at this point right now is that we're
    starting to focus more on trade and economic issues once you
    get below a threshold of national security interests. And, of
    course, it's clear that the Ukraine meets that threshold, but
    there are a lot of other issues that are probably more
    difficult for them to do it. So I guess that answers that.
        On the question of catfish, catfish is a problem in our
    trade negotiations in some areas. We do have a complicated
    regulatory process in the United States. We've had cases
    involving people critical of our system as being basically a
    protectionist system. On the other hand, we do have a situation
    where, in some other countries, there are legitimate health
    issues. So it's kind of a complicated issue. It is one that we
    are familiar with. I would be misleading if I suggested it rose
    to the level of some of these other things. But to the extent
    it does for you, then it does for us, and we're happy to work
    on it. And to the extent we can have influence on your effort
    to sort your way through this to try to clean it up, we're
    happy to have our people do it and to work with you on it.
        Chairman BRADY. Thank you.
        Mr. Larson, you are recognized.
        Mr. LARSON. Thank you, Mr. Chairman.
        And thank you, Ambassador.
        Along the same lines with respect to section 232, with
    regard to aluminum tariffs, but, perhaps, as seen through the
    eyes of people downstream who are impacted, now, I represent a
    district that hails many manufacturers--including Pratt &
    Whitney, Hamilton Standard, Sikorsky, Command, General
    Dynamics--and, throughout the State of Connecticut, precision
    manufacturers to downstream people who will be impacted and
    have grave concerns about the impending tariffs.
        One such manufacturer, Jarvis Airfoil, in my district,
    makes compressor and turbine blades for jet engines. They were
    asking me this recently about what can they expect. And here is
    the questions--and I couldn't agree more with Mr. Roskam about
    your candor and your ease of going through a number of these
    issues--but from their perspective not only is--and I
    appreciated the national security interests when you talked
    about what is the criteria for exempting countries--but what is
    the timeline for exempting countries, and what type of
    alternative arrangements are you seeking from those countries?
        And I say that in perspective of this perspective. Do you
    plan on making these decisions on all the exemptions by the
    time the tariffs go into effect, which, if I understand it
    correctly, will be Friday? And so you can imagine the
    intensified concern that creates about that large supply chain,
    not to mention, of course, the manufacturers themselves, in
    general. I am wondering if you might give us more clarity on
    that.
        Ambassador LIGHTHIZER. Yes, sir.
        First of all, these matters are a balance, in terms of the
    consumer impact and the producer impact. This is something the
    President and people in the Administration have tried to
    balance.
        In terms of the aluminum, generally, it's a pretty clear
    case that the U.S. industry is under assault and is really
    close to being completely destroyed. Ninety percent of the
    primary aluminum is coming in through imports. It's a very,
    very serious problem. That's not in any way to minimize the
    effect it is having on consumers. That is what the President
    tried to do with balance.
        In terms of the timeline, our hope is to get these things
    resolved by the end of April.
        Mr. LARSON. So I am to assume from that, with respect to
    making decisions on all exemptions, by the time tariffs go into
    effect on Friday that would not be the case, you are shooting
    for April?
        Ambassador LIGHTHIZER. That is correct.
        So there will be two categories of countries. And setting
    aside--your constituent may very well have a product exclusion
    issue--so setting that--I am sure he knows that. He's doing
    whatever he is going to do, and he may very well not have a
    problem on that.
        Mr. LARSON. I will submit that to you in writing, and, if
    you can respond on that, I would appreciate it, that specific
    concern. Thank you.
        Ambassador LIGHTHIZER. And that's important. That's being
    done at the Department of Commerce. But we will certainly be a
    part of the process to the extent it helps your interest.
        So, in terms of the countries, you'll have a certain group
    of countries, I believe. Now, once again, there has no
    decision, and there is no decision until the President makes a
    decision. As far as I am concerned, when he signs something,
    there's a decision.
        But there are certain countries--the principal examples, of
    course, which would be Canada and Mexico--where during the
    process of this negotiation of trying to decide whether they're
    going to get out of this--and I should say ``get out'' means
    they can't be in a position where they get out and take
    advantage of all the benefit. It doesn't go to U.S. producers,
    so there ought to be some limitation on their own shipments,
    but, presumably, not one that's a problem.
        During the course of that process, with respect to certain
    countries, the tariffs will not go into effect. That's how I
    envision it. Now, whether this happens is up to the President.
    But I envision it, during the course of this negotiation
    between now and the end of April, that those countries do not
    see their tariffs go into effect.
        There are other countries who think they should be excluded
    that it will go into effect, and it will go into effect on
    Friday. For those people, there'll be more of a disruption.
        But in terms of access for your constituent, I don't think
    you are going to see an enormous shortage of aluminum. Now,
    once again, I am not an economist, and we can all make our own
    guesses. But you're going to have a variety of countries--in
    the case of aluminum, the very fact you're negotiating with
    Canada is enormous, right, because they are such an important
    supplier. And the other countries I also mentioned, those
    countries will not see an increase, as I believe this will work
    out.
        But with respect to the others, you will see a 10-percent
    tariff increase as of Friday.
        Mr. LARSON. Thank you, Ambassador.
        Chairman BRADY. Thank you. Your time has expired.
        Mr. Buchanan, you are recognized.
        Mr. BUCHANAN. Thank you, Mr. Chairman.
        And thanks, Ambassador, for being here today. I am excited
    to see you get some of your team put together. It has been a
    while, so it is great to have that.
        Like many of us, I have two situations in our district that
    I would like to have you just give some thought to in terms of
    NAFTA, one good and bad. But, kind of like the Chairman, my
    sense is I want it to be whatever we do pro-growth for the
    United States and jobs.
        But one company is Tropicana. It was founded in my district
    in the Manatee County, Bradenton area. It creates over 1,000
    jobs. It was acquired by PepsiCo. But, in terms of NAFTA, it
    has been good for them and good for their industry, in terms of
    eliminating tariffs. So that is one thing I would like to have
    you just talk about a little bit: Tropicana. Basically, they
    are, as you know, an orange juice business. You can't imagine
    Florida without orange juice.
        And let me just mention, also, on the second scenario, as
    you know, we have pretty much the same growing season as Mexico
    does. So, in terms of the second situation, unfair trade
    practices, a lot of people feel, in Florida, as it relates to
    tomatoes, strawberries, and peppers, it has cost that industry,
    that business, about $2 billion a year, $1 billion to $3
    billion, in terms of unfair trade practices.
        So I would like to have you take a minute to address both
    of those, as quickly as you can, because I have one other
    question.
        Ambassador LIGHTHIZER. I'm not very good at the quick part,
    but I'll try to be quick.
        Mr. BUCHANAN. I will let you know.
        Ambassador LIGHTHIZER. First of all, of course, there's a
    big advantage in--I mean, one of the principal advantages in
    NAFTA is the reduction in those tariffs. I'm not sure exactly
    which tariff we are talking about and what the numbers are. But
    the reality is that if we end up with a successful agreement,
    the tariff benefit will be preserved. So I think that will
    probably be less of a problem, and it's more in favor of them
    saying: We want to get NAFTA through. That's a provision that I
    am aware of.
        The seasonality provision is an important, significant, and
    controversial provision. So I start with the proposition that
    with all the great things of sales in Mexico of agriculture
    products--and there's a lot, whether there is $18 billion or
    $19 billion worth of sales by the United States in Mexico of
    agriculture products--the reality is that we have a trade
    deficit with Mexico on agriculture products. A good part of
    that are exactly the ones that you're very familiar with.
        So the idea is that these producers, even if they are
    victims of unfair trade, can't take advantage of the unfair
    trade laws because they really weren't constructed to deal with
    products that are perishable. So the idea is to put in place
    some kind of a provision that shrinks the amount of time you
    look at, in terms of calculating dumping margins and injury so
    that these products--if you spread it out over a year or over
    three years on injury, are always going to lose--you give them
    a shot at proving unfair trade. That is the nature of the
    proposal. It is extremely controversial with respect to a
    variety of people who don't like it.
        Mr. BUCHANAN. We will take some time a little bit later and
    talk a little bit more about that.
        Let me just hit you quickly on, because you got some of
    your team here, your new team, is on TTIP. There was a lot of
    work that I think, or let's say some work, that was being done
    by the last Administration in terms of Europe. And the thought
    is there we have a lot of the same values, a lot of the same
    background; it seems like it makes a lot of sense, and it is a
    real opportunity for America. Especially as you look at wages
    and benefits, there are a lot of comparable things with the
    United States. And, overall, it has been pretty fair both ways.
    So maybe you can comment on that now that you have a little bit
    more of your team in place.
        Ambassador LIGHTHIZER. Well, thank you. I will.
        It is something that we have looked at. Clearly making
    headway with Europe is a top priority. We have with the
    European Union a $150 billion trade deficit. After China, it's
    literally our biggest problem. And it is, basically, Germany,
    60; Ireland, 38; Italy, 30; and France, 15; and then everyone
    else we are basically, more or less, in balance with. So it is
    a problem.
        Making headway in that area is very important. It is
    something we are looking at. They're a little bit in flux right
    now. But I think making headway on Europe is a high priority.
    It's clearly something the President wants to do. Whether it is
    in the form of TTIP, which some people think is more cumbersome
    than we need, or in another form, your point is one that we
    completely endorse and think that we have to make headway on
    that front, and I believe we'll make headway.
        Mr. BUCHANAN. Thank you.
        I yield back, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Buchanan.
        Mr. Kind, you are recognized.
        Mr. KIND. Thank you, Mr. Chairman.
        Mr. Ambassador, thank you for your time here today. I
    really appreciate it.
        Just a word of advice. When it comes to KORUS
    renegotiation, or however you want to call it, it is much
    better to have Congress with you on the takeoff rather than
    just the landing. We know that we are getting into sensitive
    discussions with them, but there have been many businesses in
    my district that have benefited under that agreement, too, and
    they are getting nervous about where the stage of these talks
    are going.
        And, secondly, I am all for NAFTA modernization and
    bringing it into the 21st century. The global economy has
    changed. I am all for aggressive enforcement of our trade
    agreements, 301 or otherwise.
        What I have a problem, with and what I hesitate about, is
    this go-it-alone attitude with this Administration in trying to
    promote a trade agenda by further isolating ourselves. America
    First does not mean America alone. There is a huge benefit to
    having friends and allies around the globe that we can work
    with in order to establish a trading system that works for all
    of us at the end of the day.
        Either this President, or this Administration, has
    conveniently forgotten, or maybe never learned, the lesson of
    our preeminence since the Second World War. It was not only our
    military strength, but it was our willingness to take the lead
    in shaping a rules-based global trading system with countries
    across the globe with shared values.
        By isolating us and by demonizing many of our friends and
    allies with a broad scope of retaliatory action, I think makes
    our trade agenda that much more complicated. I am worried about
    the potential for retaliation when it comes to the steel and
    aluminum tariffs. I think the whole approach to that was ill-
    considered. It was chaotic. It was confusing. Now we are going
    on a business-by-business exemption basis. And now we are going
    to allow some of our friends and allies to apply for exemptions
    without clearly defining criteria.
        And I hope this Administration is thinking about what plan
    B is going to look like if there is retaliatory action taken
    against us. Back home in my State, in Wisconsin, my dairy
    farmers' backs are up against the wall. If we lose market share
    down in Mexico, that could destroy our dairy industry in this
    country overnight because of the number one export market being
    taken away from us. That could cause a lot of problems in the
    heartland of our country.
        And dealing with steel and aluminum, for every job that is
    involved in steel or aluminum producing in this country, there
    are 200 jobs that are involved in consuming this material. As
    we learned from the 2002 steel tariff case, which was quickly
    rolled back under the Bush administration, the unintended
    consequences can be pretty severe for many workers and for many
    businesses and industries throughout our country. So I ask you
    to consider that as we move forward, including the 301 approach
    to China, and what type of action they could take against us.
        But what troubles me, perhaps, more than anything today,
    sitting here, is this love affair that our President seems to
    have with Vladimir Putin. And I come to a very fearful
    conclusion that the President of Russia owns the President of
    the United States. That manifested itself in a telephone call
    yesterday, where the President called to congratulate Vladimir
    Putin on a completely bogus and fraudulent election and then
    failed to even raise the issue of a chemical weapons attack on
    one of our allies' soils--Great Britain--and failed to raise
    the issue of Russia's direct meddling in our democratic process
    as a Nation.
        And so it leaves us scratching our heads, just what is
    going on with this President and this Administration in our
    relationship with Russia. We passed enhanced sanctions last
    year, almost unanimously, through the House and the Senate,
    only to see it sat on with the Administration for months before
    any action was taken with it. And that was problematic and very
    troubling as well.
        And, right now, I couldn't think of Vladimir Putin having a
    better straw man occupying the Oval Office, given all the
    missed opportunities that this President has passed up when it
    comes to standing up and defending our values and our strategic
    interests throughout the globe against Russia, who is not our
    friend, and they are not our ally, and yet somehow the
    President misses this important ingredient.
        So I was just wondering whether you were part of the
    economic team involved in the application of sanctions against
    Russia that was passed almost on a unanimous basis last year by
    this Congress and why it took so long before any action was
    taken on it.
        Ambassador LIGHTHIZER. Thank you, Congressman.
        I only have 18 seconds. So I'll just say: With respect to
    the stuff you are talking about on trade, yes, we're worried
    about retaliation, and, yes, we don't want to go it alone. And
    with respect to all this Russian stuff, I completely disagree
    with every single thing you said.
        Mr. KIND. Were you a part of that decision, as far as the
    application of sanctions?
        Ambassador LIGHTHIZER. I'm the U.S. Trade Representative. I
    do trade work. I don't do sanctions work. It has nothing to do
    with me at all--not for 5 minutes in my entire life. But I
    appreciate you bringing it up.
        Chairman BRADY. The gentleman's time has expired.
        Mr. Smith, you are recognized.
        Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman.
        Thank you, Mr. Ambassador, for your time here today, as we
    have very important discussions, whether it is NAFTA, whether
    it is KORUS or whether it is various trade issues that we know
    are important to American producers, particularly Nebraska ag
    producers. That is my focus. But we know that consumers live in
    every one of our districts, obviously, and we always want to be
    mindful of that.
        As it does relate to agriculture--and certainly I have
    expressed to you and I have expressed to the President, as
    well--that as we modernize our trade agreements--certainly I
    appreciate that--if we could also, obviously, do no harm to
    those areas we have done particularly well with, namely
    agriculture. Energy has been discussed, as well.
        Forty-five percent of Nebraska's agriculture exports go to
    Canada and Mexico. So it is no surprise that NAFTA is important
    as we do move forward. And I just continue to strongly urge you
    to keep this in mind of how important these exports are,
    especially as I can appreciate the need to close the gap, the
    trade gaps that do exist. One thing, agriculture exports do
    help us on narrowing those gaps, and I hope that we can
    continue to expand our international reach and expand
    international markets for agriculture.
        Briefly, the President touched on the possibility of
    reengaging the countries in TPP. I have two questions. That
    would be one of them, is if you could elaborate, perhaps, or
    reflect on the potential of reengaging a TPP that, as you know,
    has moved forward without the United States.
        And then, also, the President has touched on the bilateral
    trade agreements that he would like to pursue, perhaps. And if
    you could also reflect on that and how we might be able to
    utilize that moving forward, whether it is with Japan or other
    countries, that we would like to see more exports of U.S.
    products heading in those directions.
        Go ahead.
        Ambassador LIGHTHIZER. Thank you, Congressman.
        First of all, we appreciate your intervention on this issue
    of the importance of agriculture. We completely agree with it.
    Not only have you raised it repeatedly here, but in all other
    contexts. It's very important to us, both in terms of the
    consequences of our other action on agriculture, but, more
    importantly, probably, using the trade agenda to promote
    agriculture.
        So we sit back and we talk about the fact that we have,
    whatever it is, $140 billion worth of agriculture sales. In
    most of the markets we go into, we could sell vastly more. And
    we're really facing protectionism. I mean, Europe is a good
    example, and China is a good example. There is enormous,
    enormous opportunity. And a lot of things that we design, we
    design with that in mind. So agriculture is important. It's
    crazy to sit back and be defensive in agriculture, however,
    because the reality is we're being stopped in a lot of places
    from just local political pressure creating protectionism.
        On the issue of TPP, I guess I would say the following:
    It's complicated to get in and renegotiate that. But if you
    analyze TPP, you have 11 countries in TPP. With respect to six
    of them, right now, we already have a free trade agreement. So
    the idea of upgrading that and getting those in a position
    where you think that what you want is fine.
        With respect to the other five, by far, the most important
    is Japan, which we already raised. I don't know what the total
    amount is. Japan is maybe a $5 trillion economy. I bet all the
    rest of them together weren't $1 trillion. Because the next
    biggest one is Malaysia, which is just over $300 billion. And
    then Vietnam is the next one after that.
        So I am saying, of the five, if you got an agreement with
    Japan, you've essentially solved the whole problem. Certainly,
    if you got one with Japan, Vietnam, which some people have
    suggested, or Malaysia, you have basically taken care of 95
    percent of what is outside of the United States albeit right
    now that's in the TPP sphere.
        I think when people think about TPP, sometimes they think
    of it as something that we are not a part of. We already have
    FTAs with six of these countries--not to say that they can't be
    improved, and they should be improved.
        But the way I analyze it, I say, number one, you have a
    problem because you want to work it out with Japan, because
    they're, by far, the biggest economy in the world, and by far
    the biggest of those. And then somebody has to sit down and
    decide, do you allocate resources to Malaysia, or do you
    allocate resources to Vietnam? And there are reasons for that.
    You can argue all of them. And our view is that is the job this
    deputy has to do. We have to come to grips with that. Japan is
    clear, but the next tier we have to kind of get to that, and we
    have to get the opinion of this Committee.
        Chairman BRADY. Thank you. The gentleman's time has
    expired.
        Mr. Pascrell, just a reminder, after your questioning, we
    will go to two to one, so we can balance out the rest of the
    hearing.
        Mr. Pascrell, you are recognized.
        Mr. PASCRELL. Thank you, Mr. Chairman.
        Thank you, Mr. Ambassador.
        I think it is clear, after Montreal and Mexico City, and
    thank you for your indulgences up there, that we are
    approaching, I think, a culminating part of the negotiations.
    That is my judgment. We have a lot of tough issues to address.
    I quickly went through the document that we are supposed to be
    talking about today. Part of it is NAFTA.
        Some of your NAFTA proposals have really challenged the
    status quo of U.S. trade policy and I think have been creative
    in trying to make the agreement work for the many and not just
    the few. All the boats have to rise. And I have confidence,
    still, that you are working to ensure the labor chapter of
    NAFTA is fully enforceable, building on the strength of the May
    10th agreement as a floor and not a ceiling. And I want you to
    interrupt me if I say something that is not in place. Please
    feel free to do that.
        Enforceable labor standards alone will not entirely solve
    the key driver of outsourcing under NAFTA. We all know that.
        For 25 years, Mexico has engaged in a purposeful strategy
    of labor and wage suppression in order to attract investment at
    the expense of the United States and the expense of Canadian
    workers in ways that have expanded poverty for Mexican families
    instead of--the record is clear on this, the numbers are
    clear--building a middle class market for U.S. exports.
        You identified in the trade agenda report--you identified.
    You said this: Since NAFTA went into effect, the gap in Mexican
    wages and labor productive with the United States has widened.
    The OECD, the organization that we know about for many years,
    reports that the average annual wage in Mexico fell from
    $16,008 in 1994 to $15,311 in 2016, unquote.
        I met with the workers in Mexico City just a few weeks ago
    because reading about it and looking at statistics is very
    different than hearing anecdotal stories about actual
    situations that are tangible. And no Democrat and no Republican
    can deny these.
        They are in the auto parts factory, many of them, and were
    making less than a dollar an hour. No options to bargain for
    better treatment. Both the labor rules in NAFTA and in Mexico--
    Mexico's own labor law and practice--must be upgraded to make
    real changes for workers, both in Mexico and my district.
        Do you agree that Mexico has failed to live up to its
    obligations with respect to NAFTA's labor side agreement, yes
    or no?
        Ambassador LIGHTHIZER. Yes.
        Mr. PASCRELL. So please explain how USTR is working to
    solve the problem of low wages in so-called protection unions,
    which you identified yourself--not I--you, in Mexico, and I
    agree with you wholeheartedly. How are we working to get this
    done? Explain.
        Ambassador LIGHTHIZER. I would say, first of all, that
    while wages have been stagnant--and that was not our
    expectation at all when we entered into this agreement. If you
    look at the way it was sold, it was clearly sold as wages go up
    in Mexico, they became customers for us and we get to sell a
    lot more stuff, and that has not happened.
        I would say, from the point of view of Mexico, it has
    created a lot of jobs, though--low-income jobs, in our opinion,
    but a lot of jobs. And a lot of those have been in the auto
    industry. And I would suggest many of those at the expense of
    U.S. jobs.
        Mr. PASCRELL. And that is important, isn't it, Mr.
    Ambassador, to understand the relationship between how low
    wages--I am putting it as simple as possible--in Mexico do
    affect jobs--can I at least finish what I am saying?
        Chairman BRADY. I am sorry, Mr. Pascrell, all time has
    expired. Maybe another Member can yield to you.
        Mr. PASCRELL. I don't want anyone to yield.
        I am asking a question. Can I answer finish my question?
        Chairman BRADY. I am sorry, Mr. Pascrell.
        Mr. PASCRELL. Well, do you know what? That stinks.
        Chairman BRADY. Thank you.
        Mr. PASCRELL. You are welcome.
        Chairman BRADY. Ms. Jenkins, you are recognized.
        Ms. JENKINS. Thank you, Mr. Chairman.
        And thank you, Mr. Ambassador, for being here.
        I want to reiterate my support for the continuation of
    strong investor protections, like Investor-State Dispute
    Settlement in NAFTA. And I have grown concerned about reports
    to weaken, remove, or make protections optional.
        ISDS ensures U.S. investors in foreign countries benefit
    from the same process and due compensation rights that foreign
    investors enjoy in the United States under our Constitution.
    That sounds a lot like the reciprocity and trade deals that
    this Administration wants.
        Foreign investment by U.S. companies also creates and
    supports U.S. jobs. For example, the family farm and ranch
    operations in my district who depend on exporting their
    products to Mexico utilize Kansas City Southern Railroad to
    provide that vital link to reach these crucial markets. This
    cross-border infrastructure will not be possible without the
    $4.5 billion in Kansas City Southern invested in Mexico over
    the past 20 years.
        Additionally, when the House and the Senate last passed
    trade promotion authority, it established ISDS as a negotiating
    objective. So not including ISDS in NAFTA would be a direct
    rebuke to Congress' explicit direction and could undermine
    critical support for a renegotiated NAFTA lacking such
    protections.
        Ambassador Lighthizer, I urge you to reconsider your
    position on ISDS. Continuing to include ISDS in NAFTA makes
    good policy and political sense.
        And to speak just a little more broadly, Ambassador
    Lighthizer, I can't overstate the importance of NAFTA for the
    farmers, ranchers, and manufacturers in my district. In fact,
    about two-dozen county Farm Bureau members from eastern Kansas
    were just in my office yesterday to hammer this point home.
    They depend and rely on being able to sell to Mexico and Canada
    as though their livelihoods depend upon it, because they do.
        The message I received is the need for certainty that NAFTA
    benefits, which have allowed Kansas exports to surge, remain in
    place. This certainty is paramount to providing desperately
    needed assurance to all aspects of the Kansas economy.
        The small towns across my district that make up America's
    agriculture heartland are depending on the Administration
    getting this modernization right and moving on to expanding
    into new markets and joining new trade deals. That is why I
    strongly support NAFTA and why I encourage this Administration
    to follow through on its promise of doing no harm.
        With that, Mr. Chairman, I yield back.
        Chairman BRADY. Thank you, Ms. Jenkins.
        Mr. Paulsen, you are recognized.
        Mr. PAULSEN. Thank you, Mr. Chairman.
        And thank you, Mr. Ambassador, for being here, and also for
    your work and progress on the NAFTA renegotiations,
    particularly in the area of regulatory practices,
    anticorruption issues, customs issues, and digital trade.
    Modernizing NAFTA with a digital chapter is essential, not only
    to protecting American innovation but also access to markets
    through e-commerce that many of our American products and
    services are sold from.
        But I have to tell you: The President's decision to invoke
    a very little used 1962 law to impose these broad tariffs is
    creating a lot of uncertainty, and it does threaten to derail
    some of the economic gains and benefits that we have seen
    recently in our economy. And it seems like every time now that
    I speak to a Minnesota company, they have a lot of questions
    about some of this uncertainty to the current trade climate
    that we have.
        I usually begin the conversation by talking about the real
    economic benefits that they have already seen right now from
    the Tax Cuts and Jobs Act. And they tell me how they are
    investing more in new equipment, they are reinvesting in their
    employees, and that is a good thing. But then they also will
    talk about some of the bad news regarding the new tariffs and
    maybe pulling--the threat to pull out of NAFTA, for instance.
        There was one Fortune 500 company in Minnesota recently
    that produces engines and generators. They said that half of
    their economic benefit made by tax reform will be wiped out by
    the steel and aluminum tariffs that are being imposed.
        And it is not just large employers that are being impacted
    or putting these projects on hold now. We have small
    manufacturers and small businesses, like R&M Manufacturing that
    shared their thoughts with me directly, saying they are opposed
    to the steel and aluminum tariffs that are under section 232,
    saying it would be disastrous for them as well as other small
    metal-forming companies, because raising their prices means
    they are going to no longer be competitive, and they are going
    to get clobbered.
        So I support the President's objective, and your objective,
    of really fighting for the American worker that needs that
    support in helping employees of U.S. steel companies. But some
    of those gains are going to be swamped by some of the larger
    losses that could be felt by much larger losses at metal-
    consuming companies and other areas across the economy if we
    have those retaliation tariffs.
        Economists now are saying, with the trade partnership, for
    instance, the study says, the United States would lose five
    jobs for every job created in steel and aluminum savings. And
    that is without retaliatory tariffs. If you take in
    retaliation, it could be a net loss of 18 jobs for every job
    gained, and it is not even close. That is 470,000 jobs. Most of
    those jobs are production. They are blue collar. They are
    exactly the type of jobs that I think you and the President are
    intent on protecting.
        And I think we are on pins and needles with the upcoming
    potential announcement later this week because retailers like
    Best Buy in Minnesota are concerned about the upcoming section
    301 tariffs. And I am all for targeting Chinese intellectual
    property violations and holding them accountable, but let's be
    targeted in what we want China to change and let's go after
    that, because consumer electronics don't have domestic
    production.
        And I hope we won't be seeing tariffs imposed on products
    that a lot of American families and consumers and small
    businesses purchase every day. It wouldn't make sense to raise
    the cost of a laptop for a college student or a couple of
    hundred dollars on a computer for a small business, for
    instance. I would say, I would ask: How is that going to help
    change the Chinese minds?
        And I know, in Minnesota, we have 800,000 jobs now that
    rely on trade. It is one of the reasons that we weathered the
    economic storm a lot better than most States: we have a lot of
    high-value manufacturing. And those jobs, by the way, pay a lot
    higher than average salaries.
        So let's just not shoot ourselves in the foot. I don't
    believe any country wins a trade war. I think all countries
    lose. And, Mr. Ambassador, I think every one of the companies I
    highlighted and I have heard from, they share the exact same
    goal that you have: to change China's behavior.
        I just want to ask, would you be willing to meet with some
    key industry leaders or make sure some folks are sitting down
    and we continue to work together on solutions that are really
    going to be effective in that capacity?
        And I will ask some more followup targeted questions that
    are more specific in the written record, Mr. Ambassador.
        Ambassador LIGHTHIZER. Well, there's a lot there.
        First of all, with respect to that trade partnership study,
    I haven't looked at this one particularly. I've looked at those
    in the past. The accuracy of them is so slow that I wouldn't
    let it keep me awake at night. That is not to say that the
    basic point that we have to balance downstream effects is very
    important, and we understand that.
        Nobody wins from a trade war. We certainly don't want a
    trade war. On the other hand, you have to ask yourself, can we
    go on with an $800 billion, and growing, billion dollar trade
    deficit? There is only a handful of countries in the whole
    world that have a GDP the size of that. So we have to do
    something.
        And the people who are benefiting from the status quo are
    always going to be against it. And we understand that, and we
    have to balance their interest. But the reality is, if you are
    on a course that is unsustainable, you have to figure out
    something to change.
        Am I willing to sit down and meet with business people? I
    am happy to do that. And I would say I and my deputies do it
    every day. We have had an enormous amount of contact with
    business people, and I think it's an extremely important part
    of what we do.
        Mr. PAULSEN. Thank you, Mr. Ambassador.
        Chairman BRADY. Thank you. The gentleman's time has
    expired.
        Mr. Higgins, you are recognized.
        Mr. HIGGINS. Thank you, Mr. Chairman.
        Ambassador Lighthizer, what is your view of the U.S. trade
    relationship with Canada? Does the United States have a trade
    deficit or a trade surplus, in your view?
        Ambassador LIGHTHIZER. One of the great questions of all
    times.
        This is something on which I have spoken about for years.
    Here is the situation, and the numbers are all confusing, and
    when I am finished it will be appropriate to ask, ``If you are
    not confused, then you are not paying attention,'' all right,
    so you will be confused.
        Mr. HIGGINS. Quickly. I only have 5 minutes.
        Ambassador LIGHTHIZER. I'm sorry. But you can't ask a 2-
    hour question. I'll give you the shortest version of it.
        The fact is that, if you look at goods on a customs basis,
    yes, we have a $17 billion deficit with Canada.
        If you look at a customs basis, what does Canada say their
    surplus is, which should be the contrary, that turns out to be
    $97 billion.
        So Canada thinks on a customs basis, they have a $97
    billion surplus with us whereas the number is somewhere in
    between. And what's the cause? The cause is a lot of things.
    But the biggest one is it is products that come into the United
    States and go up to Canada, in many cases, we count them as a
    U.S. export, even though they are not U.S. exports. If they are
    duty free, they can just be trucked up there and have nothing.
        The Canadians, however, look upon it as an import from the
    appropriate country. Now, if you look at it on a balance of
    payments basis, then the numbers are different.
        And if you look at it on a customs basis for goods only at
    17--and then people sometimes will say, what's the services
    surplus, because we do have a services surplus--but on a
    customs basis, there is no services number, so you have to take
    a services number from another dataset. And if you do that and
    you use our number, then we have a small surplus. If you use
    that and use their number, we still have an enormous deficit.
        Mr. HIGGINS. Okay. Has the strong-arm tactics of the
    President as it relates to tariff threats, have they helped or
    hurt the negotiations?
        Ambassador LIGHTHIZER. Well, first of all, I don't buy your
    premise. I don't think there's been any strong-arm tactics. I
    would be interested to know specifically what you are referring
    to.
        Mr. HIGGINS. Specifically, I am referring to tariff
    threats. In other words, the President in published reports has
    stated that he is issuing tariff threats against Canada and
    Mexico as leverage to get a better deal in NAFTA negotiations.
    It is pretty simple.
        Ambassador LIGHTHIZER. Oh, I see what you are saying. You
    are saying, does the 232 affect the negotiations?
        Mr. HIGGINS. No. I am saying, does the strong-arm tactics
    of the President threatening tariff threats help or hurt the
    negotiations? It is a very simple question.
        Ambassador LIGHTHIZER. Well, then the answer is I have seen
    no strong-arm tactics, so they've had no effect on the
    negotiations.
        Mr. HIGGINS. Ninety-three percent of the heroin seized by
    the United States Drug Enforcement Agency came from Canada--or
    from Mexico--81 metric tons of heroin today. The President has
    demanded that Mexico do more to prevent drugs from entering the
    United States as a condition for lifting steel and aluminum
    tariffs. Is that something that has found its way into the
    negotiations?
        Ambassador LIGHTHIZER. Well, in the first place, there is a
    lot going on between the United States and Mexico to try to
    deal with the heroin problem. It is a legitimate problem on
    which no one can disagree. And there is a lot of stuff going
    on, and it's not something that I am the slightest bit involved
    with. But I know it's going on. I sort of hear about a lot of
    important stuff, and I think it will make a significant
    difference.
        Mr. HIGGINS. So there is discussion going on.
        I have a final question because this is important.
        What, in your opinion, optimally and realistically, will be
    in the renewed NAFTA discussion outcome, final agreement? What
    will it look like as it relates to net benefits to the United
    States? Specifically, name three net new provisions that will
    benefit American workers.
        Ambassador LIGHTHIZER. Well, I mean, there are so many of
    them, some of which would be controversial, so I won't mention
    them.
        But, clearly, rules of origin would be an enormous increase
    in benefit to the United States.
        The IP provisions are going to be an enormous and just an
    unarguable benefit to the United States. Huge improvements will
    be made in digital trade, which will be extremely important to
    the United States. And I could literally go down. There is
    services trade. We have 33 chapters. And of all those chapters,
    I personally don't think there is a single one that won't be a
    significant improvement for the United States. And I would say
    that, of the 33, the Members here would agree that 90 percent
    of them are huge improvements to the United States, assuming we
    get an agreement. But, yes, I think it's a very powerful, very,
    very important improvement in a whole variety of areas.
        Chairman BRADY. Thank you. The gentleman's time has
    expired.
        Mr. Marchant, you are recognized.
        Mr. MARCHANT. Thank you, Mr. Chairman.
        Thank you for being here today, Ambassador.
        My district is in north Texas. It is the home of the
    Dallas-Fort Worth Airport. So our area basically is involved
    more in the administration, distribution, marketing, and
    storage of NAFTA goods and services more than the production of
    the actual product. That has created just a boom-town type
    economy in Dallas.
        And so my home builders have come to me since we gained
    90,000 jobs last year. It has put a lot of pressure on our home
    building and our apartment building and our whole building
    community. So they are concerned because of the tariffs that
    are involved in lumber, mainly with Canada, I think, and have
    provided me with charts that show that the lumber prices have
    escalated 40 to 60 percent in just the last year.
        And I would like to just have a discussion with you about
    maybe just the purpose of the tariffs. Are they serving a
    purpose? Is there some relief in sight? Is the NAFTA agreement
    going to address these tariffs? Are they separate? And just
    general information for my home builders back home.
        Ambassador LIGHTHIZER. Thank you, Congressman.
        So, if we are talking about the softwood lumber tariffs
    between the United States and Canada, those are the result of
    sometimes people talk about those as if there's some kind of
    Administration policy. There's no Administration policy on
    this, other than the policy that everyone here believes, which
    is that you have to enforce your laws against unfair trade.
        So you have affected U.S. companies, who bring cases. They
    get duties. They go through and prove what the level of the
    dumping economy and subsidies are. Then they go and they prove
    that they've been injured at the ITC, and then they get orders
    put into effect. That is the process that has gone on, and it
    will go on.
        And then, in the past, and to some except ongoing, there is
    an effort to try to get the U.S. industry to give up their
    rights under those in exchange for some kind of a package or
    something that will sort of smooth things out. That's a process
    which goes on every now and then. In the past, there have been
    a number of memorandums of understanding and numerous attempts
    to kind of work this out, that have worked it out.
        Right now, I would say there's probably not much going on
    in terms of those negotiations. Are they part of NAFTA? Not as
    far as I'm concerned, they're not part of NAFTA. As far as I'm
    concerned, this is a function of the trade laws working the way
    Congress designed them to work. When this happens, sometimes
    prices go up, and sometimes it's unfair to people, and
    sometimes the fact is they were just taking advantage of an
    unfair situation before and making money on low prices. And I
    don't know which it is in this case, but they could both be a
    factor.
        But, to me, it is unlikely, I think--I wouldn't put it at
    zero--but it is unlikely that I am going to end up solving this
    issue or trying to resolve this issue. Right now, the positions
    are kind of intractable. And the people that brought the
    litigation have the right, just like anyone else here, and any
    your constituents are who bring a case and win it, have the
    right to get the benefit of a lawsuit.
        Mr. MARCHANT. Okay. I appreciate your answer. Thank you.
        Chairman BRADY. Mrs. Black, you are recognized.
        Mrs. BLACK. Thank you, Mr. Chairman.
        And thank you, Ambassador, for being here today.
        My district and my State of Tennessee has really benefited
    greatly from NAFTA because it has helped to bring some of the
    large-scale manufacturing automobiles to the State of
    Tennessee. It is quite an operation there across our entire
    State. These operations are tremendously important to our
    communities, especially one right there in the middle of
    Tennessee, Smyrna, which is the home of the Nissan plant that
    produces more than 150,000 automobiles in that plant annually.
    So it is a big issue for that middle Tennessee area.
        There has been considerable press regarding USTR's auto
    rules of origin proposal, which, if the press reports are
    accurate, appears to be wholly unworkable for the industry and
    could have some perverse effect of costing American jobs rather
    than creating them, which, again, is a real concern for us
    there in middle Tennessee, in particular.
        I understand that Canada presented a framework of ideas as
    a counterproposal during round six in Montreal, but that
    Canada's proposal could result in less regional content than we
    have now. So can you update us on whether Canada has been able
    to provide additional details regarding their proposal or
    whether Mexico has provided its own proposal on the autos rules
    of origin, because it is really critical for our communities
    like Smyrna, and we need to get it right?
        Ambassador LIGHTHIZER. Thank you, Mrs. Black.
        I would say this. First of all, the auto plants,
    particularly what we used to call transplants, coming to
    Tennessee and other places has been an enormous boon, very
    important not only to Tennessee but for the country. So I think
    we have to acknowledge that, number one.
        Number two, the rules of origin will have no effect on cars
    made in Tennessee and sold in the United States. They are kind
    of irrelevant to that whole equation. They have no effect on
    them at all.
        What Nissan was worried about is that Nissan would say: I
    have a plant in Mexico that wants also to sell in the United
    States, and that plant, in fact, has very, very little U.S.
    content, so that plant has a problem. But it will have no
    effect on anybody working in Tennessee for a Nissan plant for
    any car sold in the United States. I want to make that point
    because sometimes when they go around and talk about this, they
    kind of conflate those two things, and they're completely
    separate.
        In terms of our working, we are working with the industry
    very closely on rules of origin. We want to be in a position
    where more of these jobs that are in Mexico right now come back
    to the United States. The basic model that Mexico has had--and
    there has been reference to it over here. It is a smart model
    from their point of view. They want to lure companies to come
    to Mexico to make cars and sell them in the United States. Take
    advantage of their low wages, but take advantage of other
    things, too, like subsidies and like duty drawbacks and the
    like.
        So that's a strategy, which is buy from Mexico, that is not
    necessarily a strategy that is smart for the United States. So
    our objective is to have more U.S. content, but even really
    Canadian content. The idea is it shouldn't just be a model
    where you come in, you are subsidized, you make stuff in
    Canada--I am sorry--in Mexico, and sell it to 80 percent the
    United States. That's not a very good model from our point of
    view.
        So our objective is to try to find the line where we can
    encourage them to move some of that production parts--cars, but
    also parts--back to the United States. And we're in the process
    of talking to the companies and trying to do that. Our hope is
    that we get something that at least some of the large
    manufacturers will find useful.
        With respect to others, I suspect they're going to be in a
    position where any change is going to move them to the point
    where they will have to pay the 2.5 percent tariff. But none of
    those will involve companies' workers who are in Tennessee or
    in the United States. I wanted to make that clear.
        If we are going to improve the situation in NAFTA, we have
    to get rules of origin to get more jobs to come back to the
    United States. Will they all come back? No, of course not. Not
    a chance. But a lot of them can come back, and that's our
    objective.
        And the Canadians, to be honest, have a similar objective.
    They also have been seeing a diminution in their auto industry,
    and they have a similar objective. And the Mexicans are in a
    position where they have to balance. But we are trying to work
    our way through that.
        Mrs. BLACK. Thank you. I yield back.
        Chairman BRADY. The gentlelady yields back.
        Ms. Sewell, you are recognized.
        Ms. SEWELL. Thank you, Mr. Chairman.
        And welcome, Mr. Ambassador. Thank you for joining us.
        I want to spend my time, limited time, focusing on the
    current U.S.-South Korea trade agreement renegotiations. As you
    know, auto manufacturing is critical in Alabama's economy. I
    have a Hyundai plant in my district that employs 3,000 workers
    and provides many of my constituents with high-paying jobs.
    Therefore, the U.S.-Korean relationship is very important to
    Alabamians and especially to the Seventh Congressional
    District.
        I understand that this Administration has concerns about
    the implementation of the original agreement, and I can
    appreciate those concerns. I, like many of my colleagues who
    have spoken earlier, really just want to reemphasize the
    importance of transparency. I share with my colleagues the
    concerns about lack of transparency in this renegotiation
    process, and my question really is, as I understand it--the
    reason why I would assume that you are invoking TPA for NAFTA
    but not doing so for the KORUS agreement you have stated was
    because there are only minor amendments, and I guess I am
    questioning the unilateral decision that the executive branch
    can make as to, you know, to keeping the legislative branches
    and Members of Congress out of the loop. Can you talk a little
    bit about, you know, your ability to not come before us for TPA
    on KORUS?
        Ambassador LIGHTHIZER. Sure. And that's an excellent
    question. The bottom line is that TPA creates a process that
    has a number of steps that Congress is involved, as are cleared
    advisers and the like, and it takes more than a year to do
    realistically and, in fact, probably a lot more than a year.
    So, if you are in a negotiation like we had with KORUS--like we
    have with KORUS--you're in a position where there is a real
    price to the uncertainty of waiting for the negotiations to go
    forward.
        Ms. SEWELL. Well, I appreciate it takes a lot of time
    obviously to go through the TPA process. I really was
    questioning what the ability of this Administration or any
    executive to actually make that decision versus, you know,
    coming before Congress and asking for our blessings on this
    renegotiation.
        Ambassador LIGHTHIZER. Sure. So there is an amendment
    process within the agreement, and to the extent you follow the
    amendment process within the agreement, there are certain
    things you can do and certain things that you can't do. Things
    that require changes of law, for example, you probably cannot
    do, and that is why you would almost in that circumstance say:
    Okay, fine, we are going to have to go to TPA.
        But there are a number of things that you can change. You
    can speed up tariffs. There is a whole variety of things you
    can do, and it was I would suggest contemplated by Congress
    when they passed the law implementing that agreement but also
    of similar agreements. It was contemplated that this process
    could be used for certain things and not for other things. So--
    --
        Ms. SEWELL. Well, I just want to reclaim--I am running out
    of time. I wanted to reclaim my time. I just really wanted to
    reiterate what you have heard from lots of my colleagues that
    this agreement, the KORUS renegotiation is just as important as
    NAFTA, and there are lots of Members of Congress who will be
    directly impacted by any changes in that agreement, like my
    district, and we obviously would want to be kept abreast and in
    the loop as to the changes that are going to be made and asked
    our consideration as to how will it affect our districts.
        The other thing I wanted to discuss is this Administration
    has shown a link between national security and trade, and I
    also sit on the Intelligence Committee, and I see the threats
    that this country faces every day. I also have commerce--have
    seen how commerce can foster international cooperation and
    bolster national security. So I agree that the trade and
    national security are linked, but President Trump recently
    alluded to the possibility of pulling out American troops out
    of South Korea if South Korea doesn't give into our demands on
    the Korea negotiations. I just want to make sure that and know
    your thoughts about how it is we can threaten strategic allies
    in the process of this renegotiation. I think that there is a
    balance, sir, that must be maintained when we are renegotiating
    with our strategic allies, and threats like that, I don't think
    help. Your thoughts about that?
        Ambassador LIGHTHIZER. Well, I mean, we are in the process
    of doing a lot of things. We certainly agree with you that
    South Korea is a very important ally, and they are not only an
    important ally but an important ally at a particular spot right
    now where there is a great deal of vulnerability. And in terms
    of my negotiations with my counterpart on the Korean-U.S.
    agreement, troops and the like have nothing to do with what I
    am talking about. I don't get involved with it at all.
        Now, there are other people who would say that, in other
    parts of the strategic relationship, from the point of the
    United States, that worry about who's paying for what and all
    these kinds of things, and I know there is a whole world of
    stuff there that's very important that somebody has to sort
    out----
        Chairman BRADY. Mr. Ambassador, I apologize, the time has
    expired.
        Ambassador LIGHTHIZER. I am sorry.
        Chairman BRADY. Mr. Kelly, you are recognized.
        Mr. KELLY. Thank you, Chairman. Mr. Ambassador, thanks for
    being here, and I am glad your team is starting to get filled.
    I know you have been doing yeoman's work on this. Look, you
    know, where I am from in western Pennsylvania--and I am going
    to go through this as quickly as I can because I know there are
    others waiting to talk--but at one time, steel and aluminum
    were such a big part of that area and now our mills are
    shuttered; our towns are decimated. And I think the President's
    talking about putting tariffs on aluminum and steel has been a
    big boost to those folks that live there, giving them hope
    again, because for so many years, people talked about it. And
    if you can repeat, what is the trade imbalance right now,
    because I think people talk about us getting into a trade war?
    And the imbalance right now, is it, what, $800 billion?
        Ambassador LIGHTHIZER. Correct.
        Mr. KELLY. So I guess that is considered a skirmish, not
    really a war.
        Ambassador LIGHTHIZER. $800 billion is the goods numbers,
    the goods and services number is like 565 or some number like
    that.
        Mr. KELLY. Well, we are in a real battle right now to
    maintain our jobs. One of the things I understand that you are
    going to be--you are going to be leading the country exemption
    process for the President, and it has been reported that there
    will be roughly five criteria for granting tariff exemptions
    for countries related to fighting over capacity, blocking
    dumped steel from this market, participating in the global
    forum on steel excess capacity, and supporting antidumping and
    countervailing duty disputes lodged by the United States at the
    WTO. One of the things I want to bring up, one of the companies
    in the district that I represent is a company called NLMK. They
    are in Farrell, Pennsylvania. They have 600 people that work at
    the Farrell plant, and down in Sharon, they have another 150.
    And I think they are pretty much on board with what is going on
    with the tariffs, but they are a Russian-owned company, and I
    know this disturbs so many people; any time the word ``Russia''
    comes up, we go running around with our hair on fire. What they
    are feeling is that any of these tariffs should be applied to
    overseas companies that have been dumping steel or manipulating
    currency for years, and one of the men up there who represents
    the steelworkers, Terry Day, has said that let's go after the
    people that have been the bad actors. They get the Russian
    steel in, but then they reheat it, and then they roll it out,
    and they make coils with it. I think that some people put
    everybody in the same category. So I just want to make sure
    that, when we go after these folks and these exclusions are
    granted, there are some people that do have a model already in
    place; they have not been taking advantage of a bad trade
    situation, but they have actually, in fact, worked to get
    through it. These are, by the way, American workers that are
    actually producing this product. So, if you can, can you just
    give me an idea on how the country exemption discussions are
    proceeding at this point, and how would a company like NLMK and
    the rest of the foraging companies, because we have a lot of
    foraging companies, too, in Pennsylvania that are looking at
    all this, so how that would work out and how--would they or
    would they not be included in the exclusions, and how would it
    work?
        Ambassador LIGHTHIZER. Let me say, first of all, that there
    are two levels of exclusion. There are product exclusions, and
    I don't know if in their case they have a product coming in
    that is somehow unique in a way that it doesn't reduce the
    efficiency of the program. So there will be--there are--there
    will be a number of countries, and when we've done this in the
    past, because I have been around this before, there's always a
    process where somebody comes in and says this is a unique
    process and a unique product and that price should be excluded,
    so there is that.
        With respect to the countries, I would say there is a
    cognizance on our part that some countries are bigger
    contributors to the problem than others, and a number of people
    believe that Russia is in that group of countries that are
    contributors. So, if you look at when this was originally set
    up, you had option one, which was 25 percent across the board;
    you had option two, which picked out 12 countries, and those
    countries would have higher duties, but others would not. So
    that's the options; the President went with option number one.
        With respect to option number two, one of the countries
    that was viewed to be a significant contributor to the problem
    was Russia, so I'm not exactly sure that, in all cases, people
    would say they are basically operating in clean hands. That is
    not to say that, in your situation, that it is necessarily
    reflective of that. So what these countries tended to be were
    people that imported product from China and exported product to
    the United States. So you even had basically like Costa Rica,
    you had places where you think, what, where does that come
    from? And the presumption was that they were taking in steel
    from China and shipping either that or their own steel and
    replacing it with--to the United States. So I would suggest
    that Russia is at least, in the opinion of some people, is a
    problem. I would say--and there's a number of others who I can
    go through. I would say that there is an effort made to try to
    separate out these things. I don't think you are going to see a
    lot of exclusions done in any event, but I would say this, that
    to the extent exclusions are offered and product exclusions
    come in, it does have a dampening effect in terms of the effect
    on prices and the product, which would have a dampening effect
    on any negative consequences that go down the road.
        Chairman BRADY. Time has expired.
        Mr. Renacci, you are recognized.
        Mr. RENACCI. Thank you, Mr. Chairman. Ambassador
    Lighthizer, from one Ohioan to another, thank you for being
    here. Ashtabula says hello. And thank you for your testimony. I
    would like to tell you about two Ohio farmers I have recently
    spoken to Jerry Bambauer and Dave Dotterer. Jerry and his son
    farm nearly 900 acres in Auglaize County, Ohio. He is the third
    generation of his family to farm the land and hopes his
    grandson eventually steps up to be the fifth generation farming
    the land. His family started with owning 8 acres back in the
    1930s. Through hard work and dedication, the farm eventually
    grew to its current size. The main crop farmed on this land is
    soybeans.
        Jerry's friend Dave Dotterer lives over in Wayne County,
    which is in my district, and also farms soybeans. Dave grew up
    on a dairy farm but didn't really care for milking cows as much
    as his older brother. He knew he wanted to farm land and wanted
    to own his land, so he made it happen. He eventually purchased
    1,100 acres that he farms with his son. His current focus is on
    building up the farm a bit further before he passes it along to
    his son.
        I am telling you about Dave and Jerry because both of these
    men personally identify the American Dream that many farmers in
    Ohio can relate to. But I am also telling you about them so you
    are aware of their concerns.
        As you know, U.S. soybean farmers are very concerned about
    recent suggestions from China that it may target soybeans if
    trade disputes escalate. Given that the United States is one of
    the world's largest exporters of soy and China is one of the
    largest importers of soy, their concerns are valid, especially
    since Ohio is the ninth largest producer of soybeans in the
    United States. So my questions for you, Ambassador, are
    threefold.
        First, in your conversations with other countries, how are
    you addressing the devastating effect that these types of
    retaliatory measures could have on the U.S. farmers? Also, what
    steps might the United States take to prevent this potential
    issue from becoming a real problem? And, finally, is there any
    message you would like to relay to all the concerned soybean
    farmers back in Ohio?
        Ambassador LIGHTHIZER. Well, thank you, Congressman. First
    of all, we're very much aware of the problem, and I made this
    point from the beginning, not only in the context of the steel
    and aluminum but in the context of anything we do with China.
    We clearly have a problem with China. We're clearly going to
    have to do something to stick up for our own interests and to
    prevent ourselves from further seeing our national wealth
    eroded. And when they do, one of the first things they always
    talk about and what we always think about is $14 billion worth
    of soybean sales. They are by far our biggest market, and if
    you look at what they import, even among agriculture product,
    it is sort of like 14 and then the next--14 billion--the next
    falls down to about a billion and a half. I mean, it is
    enormous spike. It's extremely important, and it is a real
    vulnerability.
        I would say also that, even without any of this going on
    right now, the Chinese are cutting back. They're limiting their
    soybean imports, nothing to do with any of this. They're doing
    it for their own reasons because they find that there are
    advantages to Brazilian soybeans, and they have their own
    bureaucracy doing whatever it is going to do.
        So it is a major concern. It's something that we worry
    about. I would say I'm focusing on soybeans because you brought
    it up, but it is all agricultural products that are vulnerable
    in this kind of circumstance. So it is something we have to be
    very, very cognizant of as we take any steps. I don't think
    it's a sufficient worry that you would say, therefore, we are
    not going to stand up for American intellectual property or do
    the kinds of things that we have to do. But we are trying to do
    everything in a measured--appropriate and measured way. And if
    there is retaliation, then the United States is going to have
    to take action to stick up for our farmers because we can't be
    in a position where when we do something that is not crazy or
    radical but is necessary to keep the United States' economy
    going, that somebody threatens farmers, and therefore, you
    don't do it. Right? We can't have a $375 billion trade deficit
    and not do anything to defend ourselves. But I think it's
    extremely important that we're aware of it and that we have to
    be prepared, working with Congress and others, to take
    countermeasures if it turns out that they are acting unfairly
    with respect to retaliating with respect to soybeans but also
    other agricultural products and other products too, but we
    generally tend to focus on agriculture.
        Mr. RENACCI. Thank you, Mr. Ambassador.
        Mr. Chairman, I yield back.
        Chairman BRADY. Thank you.
        The gentleman yields back.
        Ms. Sewell, you are recognized.
        Excuse me. Ms. DelBene, you are recognized.
        Ms. DELBENE. Thank you, Mr. Chair.
        And thank you, Mr. Ambassador, for joining us today.
    Digital trade is an important part of our trade agenda and
    should be a major focus area as we look to modernize our trade
    agreements. But digital trade is also making trade work for
    Americans across the country. We know that many small sellers,
    constituents in my district but across the country, are
    harnessing the power of the internet to reach customers abroad
    in ways that were really impossible a decade ago. In 2015, the
    United States led an effort to expand the information
    technology agreement, and 53 countries, including China, agreed
    to remove 201 tariffs on information and communications
    technologies, ICT, products, products like next-generation
    semiconductors that are manufactured in America and used in
    products around the world.
        So your trade agenda acknowledges the importance of digital
    trade. However, the foundation of a strong and a vibrant
    digital economy includes access to affordable ICT products such
    as smartphones and tablets. The biggest beneficiaries of low
    tariffs or low tariffs on ICT products are our students,
    entrepreneurs and small businesses who use these devices to
    innovative and to sell their goods and services around the
    world.
        So recent press reports, as we have discussed today,
    indicate the Administration is considering a $60 billion tariff
    package on consumer products, including consumer electronics
    from China, as part of the section 301 investigations
    enforcement actions, and so I wondered if you could explain for
    us how these tariffs would help make it easier for our
    businesses and entrepreneurs around the country to compete in a
    global economy.
        Ambassador LIGHTHIZER. So I guess the question is, will the
    301--because we are not putting tariffs on for any reason other
    than the assault on the U.S. information technology industry.
    So we have an issue that China has a policy of, one, forcing
    technology transfer in the case of inward bound investment;
    two, forcing companies to license technology at less than the
    economic value of it; three, state-subsidizing and directing
    massive amounts, and I think in some of these sectors $300
    billion worth of investment to take over U.S. technology firms;
    and then, four, the absolute theft of technology through cyber
    theft. So those are kind of the premises of the--the reason we
    have launched the 301.
        Now, the question is, if you go through this, you have the
    study, and you decide there's a serious problem there, the
    issue then is, what do you do? One of the things that you would
    do is impose tariffs. The way you would impose the tariffs, and
    I tried to allude to this at the beginning, is there are
    certain technology products that are under assault. You have to
    give consideration as to whether or not you would put tariffs
    on those products. Another issue is you would create an
    algorithm that would maximize the pressure on China and
    minimize the pressure on U.S. consumers. And the combination of
    those two would be the way you would get to the amount you
    have. So you would come up with the economists' study and say,
    ``Here is a measured amount of what the relief should be,'' and
    then you try to find a system that allows you to impose it in a
    way that is most rational.
        And if the President makes the decision to do this--and he
    has not made that decision; we haven't done anything, but it is
    imminent that he will come to a decision--that's the way we are
    going to approach it. So you say, how does U.S. technology--my
    view is this whole system vastly benefits U.S. technology
    companies, vastly, because it protects their intellectual
    property, which is the very heart of what they are. There is no
    set----
        Ms. DELBENE. Excuse me, before we run out of time, are you
    saying then that you are taking into account in any enforcement
    action that you take that the impact it would have on
    consumers, the impact it would have on small sellers across the
    country and on innovation and entrepreneurs across our country?
        Ambassador LIGHTHIZER. Yes, we certainly have a logarithm
    that tries to minimize the negative effect on us and maximize
    it on them. It is a logarithm that is created, and it is the
    kind of thing that you would expect us to do, and if we do
    this, that's the kind of thing we will do. So, for sure, that
    is right.
        Ms. DELBENE. Thank you.
        Mr. Chair, I yield back.
        Chairman BRADY. Thank you.
        Mr. Meehan, you are recognized.
        Mr. MEEHAN. Thank you, Mr. Chairman.
        And thank you, Mr. Lighthizer, for being here today and for
    all of your continuing work in this space. I want to, for the
    record, have an opportunity to express an issue. I know we have
    talked about it, but I represent a district in which QVC is a
    business which it broadcasts around the country and is able to
    take advantage of sales of goods. Canada prevents that
    broadcast from going across the borders using something called
    a cultural exemption, and it is not clear to me that the basis
    upon which they claim a cultural exemption would apply to
    something like this. It looks really more like a way in which
    they are effectively preventing, you know, what we would hope
    would be the fair competition working to, you know, the
    distinct disadvantage of QVC.
        I know you have a lot of big issues with NAFTA, but I hope
    when we get to the crossing the t's and i's, that something
    important like this is an issue that is also on the negotiating
    table, that and the idea that products of small people that
    have small products, there is a cost associated with moving
    goods into Canada for the small, you know, producer; somebody
    in the same way may have a knickknack that they are selling in
    Canada, but there are exclusions on getting those things in
    there. I hope those kinds of things will be part of the
    negotiations but get to conclusions.
        Let me just switch, as well. I appreciate the work that you
    are doing holding China accountable for what they are doing
    dumping steel on the global stage. What concerns me and I am
    hoping that, with your language about flexibility, that there
    is a recognition that there are countries out there who are
    going to be impacted by the tariffs. And, you know, the EU can
    speak as a block. We have done things with Mexico and Canada. I
    do a lot of work with Brazil in the sense of my
    responsibilities here on the Committee and studying their
    circumstances. I look at that as the kind of a country with a
    trade surplus with the United States or the United States has a
    trade surplus with them. This question about the transshipment
    of steel, you know, this is a country who I do not believe is
    engaged in that. We have a parallel trade in the sense that a
    lot of United States coal goes to Brazil in order to be used in
    some of the, you know, the preparation of that steel, which
    comes in as a semifinished product which augments manufacturing
    here. So there are a lot of characteristics which are, I think,
    speaking to the idea that, even though people have been
    identified, that these are the kinds of considerations that I
    would hope would qualify for, you know, exclusions. I know that
    you said that there was going to be flexibility in that, and so
    I am asking if you believe that those are the kinds of criteria
    that will be relevant in the determinations about whether or
    not there is a basis for exemptions for countries like Brazil.
        Ambassador LIGHTHIZER. First of all, on your first point
    cultural----
        Chairman BRADY. Mr. Ambassador, if you can hit that
    microphone.
        Ambassador LIGHTHIZER. Sure. On the first point, the
    cultural exemption really is very often just cultural
    protectionism, and you noted their de minimis standards are
    another example of just raw protectionism. And when we talk
    about wanting to limit people using standards and warning
    labels and the like, I always think all these things can be--I
    mean, there is a legitimate case for some cultural exceptions,
    but it's not this kind of thing, and this is another example of
    protectionism, I fear.
        In the case of Brazil, there are a lot of things that would
    make Brazil an unusual circumstance. As we talked about before,
    you and I, yesterday and prior, the fact that they are a huge
    semifinished producer and the fact that they have--a lot of
    their production is basically a model, which is they send slab,
    which we would call semifinished steel, to related countries--
    companies in the United States, and then that's made into
    steel. So there are things that are unique about the Brazilian
    situation that at least we know is going to be taken into
    consideration. That isn't to say that they would be successful
    in getting a remedy, of getting an exclusion. I mean, that
    ultimately is going to be a question for the President, but
    there are factors there that are important.
        Chairman BRADY. Thank you.
        Mrs. Noem, you are recognized.
        Thank you, Mr. Meehan.
        Mrs. NOEM. Thank you, Mr. Chairman.
        And thank you, Mr. Ambassador, for being here today. I
    represent the State of South Dakota. And this time of year,
    there is a lot of snow, it is really cold, and we watch a lot
    of basketball games, so--and my son plays basketball, so that
    is what we end up doing on a lot of winter evenings when I
    happen to be back in the State. But recently I was sitting at
    one of those basketball games and I had something happen that
    has happened all too often recently. A local farmer came up and
    sat beside me and said: Kristi, do you know what the
    Administration is thinking on trade right now? It seems like
    every time they take a position, soybeans drops 40 cents a
    bushel, and we can't hardly pay our bills today.
        And so it happens over and over again where a lot of
    farmers and ranchers are very concerned based on comments that
    come out of the Administration or positions on what could
    happen to their commodity markets. It is because 73 percent of
    our commodities that are grown in South Dakota are exported to
    Mexico or Canada, and times are hard in farm country, a part of
    America that really strongly supported President Trump. They
    have endured a 45-percent drop in net farm income over the last
    3 years, and its only indication is that it is going to get
    worse. So these farmers are very worried that the
    Administration that they supported is going to lose them a
    trade deal over provisions that may be widely unpopular.
        A perfect example might be the sunset provision, which
    requires the deal to be renewed every 5 years. In my opinion,
    trade deals are meant to foster trust between nations and
    eliminate uncertainty in order to create more opportunities to
    sell our goods overseas, and the sunset provision undermines a
    trade deal's ability to develop necessary certainty to
    encourage businesses to invest. So I am curious, Mr.
    Ambassador, if you would accept a final trade deal, a trade
    agreement without the provision in it?
        Ambassador LIGHTHIZER. In the first place, I'm not going to
    sit here and negotiate with you in public. So that is not going
    to happen. I don't think that a sunset provision has any
    negative effect at all on farm sales.
        Mrs. NOEM. You don't think it creates uncertainty every 5
    years?
        Ambassador LIGHTHIZER. No, I don't think it has any effect
    at all. In fact, I think exactly the opposite. I think when you
    get close to that fifth year, what you're going to see is what
    you saw this year with Korea. That is to say another billion
    dollars' worth of sales. So what we did is the President
    created this so-called uncertainty in KORUS, and you saw a
    billion dollars of additional sales of agricultural products in
    Korea and in--because what they want to do is get the deficit
    down, and in my opinion, what you are going to see is, as you
    approach that fifth year, you are going to see additional
    sales. So I think they are--the people who say that I think are
    exactly wrong.
        Mrs. NOEM. Do you have other examples besides that one
    instance? Because consistency, and that would be incredibly
    important that we have a background in historical examples of
    where--because all indications historically is, when there is
    uncertainty in a trade provision, that you have commodity
    prices fluctuating and uncertainty for producers, and many
    producers market their grain a year in advance, or they may
    have to hang on to it waiting for better markets, and
    uncertainty causes them a lot of heartburn. So is that the one
    instance that you could point to where it was actually
    advantageous, or is there more----
        Ambassador LIGHTHIZER. Well, to be honest, we have only
    renegotiated two agreements. We're in the process of KORUS, and
    we are in the process of NAFTA. So it's a fairly small
    universe. But clearly there is a desire on behalf of people,
    when you are going to look at the trade deficit, to get the
    trade deficit down. That is number one.
        Number two, I don't see it as an enormous amount of
    uncertainty. The idea is to have you look back at an agreement
    after 5 years and determine whether or not the agreement is in
    the interest of the United States. If it is going to be as
    popular as everyone says that it's going to be, and if it is
    going to be as great for farmers as everyone says it is going
    to be, why would we get rid of the agreement?
        Mrs. NOEM. As far as adding clarity to how important the
    sunset provision is, you don't want to be more specific on if
    you would sign an agreement or agree to finalize an agreement
    that did not have it in it?
        Ambassador LIGHTHIZER. I think it is extremely important to
    me, and I am not going to negotiate with you here in this forum
    for sure on this or any other provision.
        Mrs. NOEM. All right. Okay. Thank you.
        I yield back, Mr. Chairman.
        Chairman BRADY. Thank you.
        Ms. Chu, you are recognized.
        Ms. CHU. Ambassador Lighthizer, I know that you want to
    close NAFTA negotiations soon, but the IP chapter still has
    many outstanding issues. Stakeholders are worried that, in
    trying to quickly close the chapters, the United States will
    not honor its commitments to reform and modernize the IP
    chapters or that it may even negotiate away some of the key IP
    provisions for U.S. exporters that would in turn harm the U.S.
    economy.
        Now I represent the Los Angeles area, the heart of the
    creative industries, and I am co-chair of the Creative Rights
    Caucus, and so strong intellectual property protections are
    very, very important to me and really important to the United
    States. When movies, television shows, and songs are consumed
    around the globe, the royalties are injected back into the U.S.
    economy, and, in fact, the United States is widely recognized
    as the leader for the creative industries, the IP-intensive
    industries, these particular ones account for $6.6 trillion in
    value added and more than 38 percent of the U.S. GDP, and it
    supports 45.5 million jobs.
        While, unfortunately, Canada and Mexico don't place the
    same value on strong intellectual property, particularly
    copyright protections, as the United States does, since the
    NAFTA IP discussions have remained at an impasse for months
    now, what assurance can you give me that USTR is working to
    ensure Mexico and Canada protect U.S. intellectual property in
    their markets?
        Ambassador LIGHTHIZER. So, first of all, I would say, with
    respect to what progress has gone on until now, there has been
    an enormous amount of time spent, people have talked back and
    forth, so we understand each other. This is one of those issues
    that is never resolved until the very end of a negotiation, as
    I am sure you know. The reality is exactly as you say: Canada
    and Mexico are both takers of intellectual property. They are
    not protectors of intellectual property. Most people are not
    surprised about that with respect to Mexico, but it is
    surprising with respect to Canada. Canada has third world
    intellectual property protection, and getting them to accept
    first world is not easy. However, the speed with which we close
    NAFTA, and many people would say, if we close it in the next
    few months, it would still not have been fast, but that won't
    have any effect on where we come out on this. This is a very
    important issue. We understand it's an important issue.
        I believe there are forces in Canada who understand that
    they have to at some point become a fully developed country on
    this issue because they certainly have a lot of intellectual
    property potential. So I am inclined--there are people there
    who think they should be on our side of this issue, but I can't
    give assurances. It certainly is our position that we want to
    have strong protection for intellectual property. We think it's
    not only important for the United States but important for all
    the rest of these countries to do it. It's in their interest to
    do it.
        Ms. CHU. Well, you are saying that this is one of those
    chapters that might be saved for the last, but can you show me
    that the intellectual property provisions, historically some of
    the most technically and politically sensitive free trade
    agreement provisions, will not be negotiated away or conceded
    in the final hours of NAFTA renegotiations?
        Ambassador LIGHTHIZER. Well, it is certainly not my
    intention to do that, but I can't very well negotiate with you.
    I wouldn't negotiate with her; I can't negotiate with you
    either. It just wouldn't be fair. But this is a very important
    issue for us. We are completely in your camp, and we hope that
    you call and say what a great job we did when the time is over.
    I know you'll call.
        Ms. CHU. Okay. Well, on another subject, one of the keys to
    ensuring our trade agreements is strong enforcement
    particularly of our labor obligations. Now, we have agreements
    with Colombia, the Dominican Republic, Peru, and Honduras, and
    there have been labor violations that have been filed in each
    one of these countries. In fact, there are numerous violations
    that include violence against unionists, inadequate labor
    inspections and enforcement actions and so forth, and yet, in
    most of these cases, there hasn't even been an update from the
    Administration. What are you going to do to enforce these labor
    agreements?
        Ambassador LIGHTHIZER. Well, we have provisions in each of
    the trade agreements with these people that have labor
    provisions, and we are in the process of following the process
    that we have to follow for dispute settlement in those cases.
    It's clearly something that we brought to their attention. It's
    very troubling. It's a very troubling trend, and unfortunately,
    it is not just these countries. It's in a lot of other
    countries in that part of the world. So it's something that we
    agree with you on, and we are in the process of prosecuting
    these cases following the process that is set out in the
    agreement.
        Ms. CHU. Thank you. I yield back.
        Chairman BRADY. Thank you, Mr. Smith. You are recognized.
        Mr. SMITH OF MISSOURI. Thank you, Mr. Chairman.
        Thank you, Ambassador, for taking your time out and being
    here today. The folks in southeast and south central Missouri
    are very optimistic about the future. If you look at the past
    year under President Trump's leadership, we passed a $5.5
    trillion dollar tax cut for American farmers and small
    businesses. We have repealed hundreds of burdensome regulations
    and created over 1.6 million new jobs. Speaking of new jobs, as
    of just the day after the President did his tariffs on aluminum
    and steel, I was in southeast Missouri announcing 450 new jobs
    with a new aluminum smelter opening up. So these are real
    changes and real aspects that are affecting real people that
    have not always been on the right side of victory.
        The next step for us is to go out and negotiate the best
    possible trade deals so that American farmers, businesses, and
    workers win around the world. We couldn't have a better person
    leading the way. The President wrote a book on creating great
    agreements. In the book he quoted: The worst thing you can
    possibly do in a deal is to seem desperate to make it. The best
    thing you can do is to deal from strength, and leverage is the
    best strength you can have--on page 53, in fact. The President
    knows where our strengths are. They are in our hardworking
    people, our superior goods, and our world-leading services.
        Mr. Lighthizer, you know this as well, and the task before
    you in NAFTA and potentially KORUS and other deals is not an
    easy one. While those are the hot topics, I want to talk to you
    about some unfair trading practices.
        I do want to applaud you and the President for its trade
    enforcement actions in the World Trade Organization. Like I
    mentioned before, America is ready to compete as long as the
    playing field is level. But unfair trading practices
    disadvantage American farmers. To ignore violations of trade
    agreements does not strengthen free trade. In fact, it weakens
    free trade. There has been mounting evidence that certain
    countries are ignoring WTO obligations by providing price
    supports to farmers well above the commitments they agreed to.
    It results in surplus production that ends up in the world
    markets displacing sales of U.S. farmers. It is not
    conservative to allow for rampant breaches of contracts. It is
    just wrong.
        In what ways is this Administration leaning into the WTO to
    ensure that these countries play by the rules?
        Ambassador LIGHTHIZER. First of all, I agree with
    everything you've said.
        Mr. SMITH OF MISSOURI. Well, then I must be right. That is
    great.
        Ambassador LIGHTHIZER. There are some people that disagree
    with me from time to time in this Committee. So I completely
    agree. You are absolutely right. We are seeing a proliferation
    of agriculture subsidies. We just have. In the last ministerial
    round we had in Bueno Aires, I ended up hanging up the round or
    the negotiations because people wanted to--their idea of an ag
    negotiation was a negotiation wherein countries could have more
    subsidies rather than fewer subsidies. They called this food
    programs, but the reality is what it was going to do was going
    do nothing but encourage more subsidies in agriculture. So we
    have gone all this far to try get ourselves in a market
    environment, and we said: No, we are not going to be in a
    position to change that.
        And it really was India who was very much a new subsidizer.
        Mr. SMITH OF MISSOURI. With their rice and the grains?
        Ambassador LIGHTHIZER. You're exactly right. And they were
    very much in favor of having negotiations really, in my
    judgment at least, about increasing subsidies. So we said: No,
    we are not going to do that.
        Every time we find a situation, we bring a WTO case. The
    WTO, however, is not the greatest forum for enforcement of
    these kinds of actions, and it's always a problem if somebody
    does subsidies or dumps. In our market, we have tools to deal
    with that. If they're hurting us because they are doing
    something as a result of subsidies in their market or in a
    third market, the tools are not that good so you have to go to
    the WTO, and it is a cumbersome far from flawless forum. So we
    are aggressively bringing these cases. We completely agree with
    you. We are using the tools we have at hand, and hopefully we
    can improve those tools and make a difference.
        Mr. SMITH OF MISSOURI. Please continue. Thank you.
        Chairman BRADY. Thank you.
        Mr. Rice, you are recognized.
        Mr. RICE. Thank you, Mr. Chairman.
        Thank you, Ambassador Lighthizer, for being here today. I
    have told you publicly and privately that your presence in the
    Administration and Mr. Ross' are two of the main reasons I have
    so much faith in this Administration. I appreciate a man of
    your experience taking on this job, and it is so important for
    the American worker. I am a big believer in American
    competitiveness. I think our Tax Code went a long way toward
    helping our economy be competitive in the world, and trade is
    very important in American competitiveness; obviously also
    infrastructure, a lot of the things that the President--
    immigration, a lot of the things the President is trying to
    work on. If we can get two or three more of those notched, our
    economy would be well poised in the world.
        With respect to the tariffs, my opinion is, as you said,
    nobody wins in a trade war, but nobody disagrees that there are
    people who have been bad actors in the world, China
    particularly, and we have ignored it for too long to the
    destruction of the American middle class, and so we just can't
    accept that anymore. We have to respond, and it needs to be
    targeted, and I appreciate your efforts in that regard.
        But I wanted to talk a little bit more about NAFTA. You
    know, I have been to Montreal. I mentioned Montreal. I have
    been to Mexico City. I met with Mexican officials and
    regulatory people and business people and chambers of commerce.
    And in Canada, the same. And in America, the same. And I
    haven't met anybody who doesn't think that NAFTA doesn't need
    to be continued and that it doesn't need to be modernized.
    Everybody is pretty much on board. And the same topics are
    brought up, the same four or five things you have raised today:
    rules of origin and de minimis rules and all these things. So
    it sounds like you are making great progress there, and I just
    am comforted having been in both of those places that everybody
    recognizes that this modernization process is a good thing and
    needs to be pursued.
        But I wanted to zero in on one question that was asked to
    you at the American Chamber of Commerce in Canada, and I loved
    your response to it. And I just wanted to ask you so you could
    respond publicly to everybody. What would you see as a win in
    NAFTA? What is your goal? What are you shooting for when you
    are trying to renegotiate this? Can you explain that to the
    public?
        Ambassador LIGHTHIZER. Can you give me a hint what I might
    have said? If it was such a good answer, I don't want to change
    it at this point. Look, from our point of view--first of all,
    we have to have--we have to have an agreement that is good for
    all three countries, right? I mean, we have to have that.
        Secondly, we want an agreement that is going to end up
    getting these trade deficits down. We have large trade
    deficits, and it has to move, has to move more jobs to the
    United States and create better jobs, not only more jobs but
    higher paying jobs. You know, I am in the group that thinks
    what we really need is a little bit of wage inflation. So I
    want to do something--in the first place, I think it has to be
    in everyone's interest, or you won't get an agreement, but I
    want it to be something that gets the trade deficit down. I
    want it to be something that creates jobs, that moves some of
    these jobs back to the United States, and they're all not
    coming back. We all understand that completely. But this notion
    that none of them are coming back has been proven wrong by all
    of you because you have seen what happened after your tax bill.
    It has moved jobs back. It has. So jobs, wages are what the
    President is focused on, that's what I am focused on, and I
    think that this agreement will lead to efficiency, and it will
    lead to higher wages and more jobs in the United States.
        Mr. RICE. That is pretty much the same answer you gave in
    Canada, except you said one other thing: I want to eliminate
    incentives to offshore.
        All those are great objectives. I want to point out one
    anecdotal thing when we were in Canada having lunch with the
    Canadian American Business Council. And a tax consultant from
    Canada said: Where we have clients that have positions in
    America and in Canada, we are advising them to ramp down in
    Canada and ramp up in America because of the tax reform bill;
    it seems we have lost our competitive advantage.
        And under my breath, I said: Yes. So I appreciate very much
    your efforts to lift the American middle class. It is smaller.
    It hadn't had a raise since 1990, and I think tax reform and
    your efforts will change that.
        Thank you, sir. I yield back.
        Ambassador LIGHTHIZER. Thank you very much.
        And I would like to think--going to get credit, you know,
    some of the credit for this tax bill. They are going to say:
    Look, the trade deficit went down, and I am not going to give
    you any credit when that happens. It will be entirely the trade
    policy.
        Chairman BRADY. We know how that works, Mr. Ambassador.
        So, Mr. Blumenauer, you are recognized.
        Mr. BLUMENAUER. Thank you, Mr. Chairman.
        Mr. Ambassador, thank you. I appreciate your patience here
    for the last 3 hours dealing with our questions and comments. I
    must say that I appreciate the role that USTR has assumed on an
    area that I have been working on for the last 10 years dealing
    with illegal logging, particularly what is going on in Peru. It
    has been sort of a struggle. I thought it was harder than it
    should have been in the last Administration, but I appreciate
    the work that you and your team have done. This, as you know,
    is not just an issue of enforcing trade obligations. Illegal
    logging damages the environment. It undercuts the rule of law
    in developing countries, and it has negative impacts on
    Americans who play by the rules, and I just wanted to say how
    much I appreciated that. And I do want to identify myself with
    comments that my friends Mr. Thompson and Mr. Doggett mentioned
    earlier. I won't take my time or yours, but I am concerned
    about having American wine industry, particularly in the
    Pacific Northwest, on a level playing field, and I am concerned
    about American interference with the ability of other countries
    to protect the health of their citizens, and I appreciate there
    are nuances there, but historically, I think we could have done
    more to be more open. I think it is a larger issue, and I hope
    that we can collectively focus on this because I think it is
    very significant.
        I listened to--my friend from Missouri referenced ``The Art
    of the Deal'' or some such publication by the President. I
    think there is a pretty significant difference when you are
    negotiating in real estate when you can, as he states in his
    book, exaggerate as you can go bankrupt and leave other people
    holding the bag when things collapse and move onto the next
    project. We are talking about the American economy. We are
    talking about our role in the world, and I think, for example,
    exaggerating or making things up in a discussion with the head
    of the State of an ally and admitting it publicly doesn't help
    us on the world stage. And I identify with some of my
    colleagues who say we feel more comfortable knowing that you
    are in the role that you are in. You have broad experience and
    I think understand some of these dynamics.
        And it is in that context I would like to just raise one
    point with you, and that deals with some of the impacts of the
    imposition of tariffs under the 301 with China, particularly as
    it affects retail trade. And Mr. Reichert and I have some
    involvement with companies that are involved with apparel and
    footwear, and we have been working for a long time to try and
    see if we can have some more rational policy as it relates to
    tariffs.
        As you well know, tariffs are not just magically imposed on
    somebody else. It is a cost of doing business. It affects what
    happens with American manufacturers and retail. And they are
    ultimately paid by the consumer, and we have a system now that
    is tilted against low- and moderate-income people. When you
    look at clothing and footwear, the percentage that is paid at
    the lower end is really quite outrageous, and I am hopeful that
    we don't rush into something with China that ends up actually
    making it worse. So I am hopeful that this is an area that can
    be entered with great sensitivity.
        Mr. Chairman, I would request unanimous consent to enter
    into the record correspondence addressed to the White House but
    also to the Ambassador and the Committee that speaks to this in
    terms of tariff, understanding the dynamic, and I wondered if
    you had any observations----
        Chairman BRADY. Without objection.
        [The submissions for the Record of Hon. Earl Blumenauer foll
    ow:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. BLUMENAUER. Thank you, sir.
        If you could offer any observations that might make some of
    my constituents feel better.
        Ambassador LIGHTHIZER. I would say, first of all, when you
    talked about the quote from ``The Art of the Deal,'' all I was
    thinking was I hope I don't look desperate, so I had a
    different take on it than you did. We understand and I kind of
    went through this, if there are tariffs, one, you have to
    establish through an algorithm what the amount is and use as
    much science as you can; and, two, when you pick the products
    on which you would put a tariff, you start with a logarithm
    that tries to maximize the effect on China and minimize the
    effect on U.S. consumers. And if you think about products on
    a--you have kind of a line over here of products where they are
    minimally a problem for U.S. consumers and maximally a problem
    for Canada. Now you can't always follow that, but that is one
    of the big factors, and that is part of the logarithm, and we
    are very--we are aware of that and are cognizant of it. And if
    we end up doing this, it won't be perfect, but you will see a
    methodology which you will say, yes, that is a sensible----
        Chairman BRADY. Time has expired.
        Mr. Schweikert, you are recognized.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman. Mr. Ambassador,
    first, just a quick comment on sort of a global basis and
    particularly more for even some of your newer staff. Long term,
    some of us have a fascination of what worldwide trade can do,
    particularly considering our demographic issues. You know, as a
    country, as we are getting much older, we are going to need
    populations of folks in the prime consumer ages for us to sell
    stuff to. So that is always in a long term, there are some
    great articles about, you know, trade actually may help us with
    some of our demographics that we are facing, and it is just
    math.
        Mr. Ambassador, I first want to thank you on the de
    minimis. The last time you and I had an opportunity to talk
    about it, you not only got it; you were an amazing advocate.
    Particularly, as some of the other countries we are presently
    negotiating with are listening to this hearing right now, there
    are many of us on this Committee that are absolutely just
    fixated on the de minimis value with Mexico and Canada and the
    inequities that creates. Do you think they are hearing that
    part of the discussion?
        Ambassador LIGHTHIZER. I certainly hope so. It's one of
    those issues where anybody who starts focusing on it, it
    becomes more and more important to them because it doesn't--it
    affects a lot of product, and the more you study it, the more
    it's bothersome of products coming into other countries in
    bulk, being broken up into smaller things and being shipped.
    The fact that most of the Canadian--one of the articles I read
    is most of the Canadian online sellers sell far more in the
    United States than they do in Canada, and we can't go in that
    direction essentially at all. I mean $20 versus $800 is just
    ridiculous. It's a hugely important issue. It affects an
    enormous number of sectors. So it is something that is very
    important to us. And I--look, everybody knows the right answer
    is to be above $20. There's no one that can argue that. You can
    argue 800, but it has to go up.
        Mr. SCHWEIKERT. And you make a--look, for those of us being
    a border State, Arizona, where we are trying to set up trade
    hubs and inland ports, and yet if you look at the current de
    minimis, particularly with our trading partner of Mexico, it is
    all going to be inbound because our ability for small
    retailers, for high-tech commerce to go upbound, it just
    doesn't work.
        Just because time is so precious, I am one of those States,
    communities, because being in the desert Southwest, has intense
    concern on seasonal tariffs just because, if you actually sort
    of game theory it, it creates distortions and then retributions
    on the distortions. And if you actually start thinking about
    when certain crops come in and the seasonalities, it ends up
    becoming very, very ugly. And particularly for those of us who
    do a lot of cash crop growing because we--Arizona provides the
    winter lettuce crop for the country, and if you are doing
    seasonal tariffs, the tails of those tariffs end up creating
    some real pricing distortions, particularly for our consumers
    on both sides of the border.
        Ambassador LIGHTHIZER. So you are against the proposal.
        Mr. SCHWEIKERT. Absolutely livid.
        Ambassador LIGHTHIZER. There are an enormous number of
    products that would be subject to these that come in from
    Mexico through Arizona, and so it's basically--it is the
    interest of importers in that State, and I just wanted to make
    sure that I was understanding. I have heard the argument, you
    know----
        Mr. SCHWEIKERT. It actually gets a little more complicated.
    If you are doing certain types of cash crops and you have just
    had a seasonal tariff that benefitted the growing season in one
    part of the country and then it falls off, all of the sudden,
    you are on the pricing fall side, and so it is just that if you
    think of that constant moving of that sort of bell curve.
        Last thing, and, look, you have spoken about this
    elegantly, though I substantially disagree with some of the
    characterization, ISDS. And I know so often rhetorically we
    have speakers that will say, ``Well, it is sovereignty,'' but
    if you actually really walk through the mechanisms, it
    absolutely is not. It is to that issue. It doesn't rewrite our
    laws or the Mexican laws or the Canadian laws. It is not--it is
    not a precedent for the next case. Ultimately, it is--think of
    it more like, if we were to ever lose, which we have not, you
    would have to pay compensation, but it does not rewrite your
    sovereign statutes. And so when people use the sovereignty
    quotes, I think it is an absolute distortion of how it actually
    works.
        Thank you, Mr. Ambassador.
        Chairman BRADY. Time has expired.
        Mrs. Walorski, you are recognized.
        Mrs. WALORSKI. Thank you, Mr. Chairman.
        Ambassador, it is good to see you. It will come as no
    surprise to you I want to talk about 232, just a couple of--
    point of clarifications. So it is my understanding, and I just
    wanted you to confirm this, that you are considering
    participating in the Global Forum on Steel Excess Capacity that
    is under consideration?
        Ambassador LIGHTHIZER. I mean, we do participate, and one
    of the things we've asked people who might get an exclusion is
    that they participate and help us with that, and most of these
    countries do, by the way.
        Mrs. WALORSKI. The recent Global Forum on Steel Excess
    Capacity held a first minister-level meeting last November, but
    you were not there, correct?
        Ambassador LIGHTHIZER. That's correct. I had no deputies in
    place at that time, so I was staying here.
        Mrs. WALORSKI. I understand. Will you in the future attend
    those yourself since the rest of the world is looking at this
    with incredible significance and bringing their ministerial
    level folks to the table?
        Ambassador LIGHTHIZER. Well, I mean, I wouldn't guarantee--
    I would say I think, at that meeting, I think there were maybe
    three ministers. So it might have been a ministerial level, but
    I think about 30 countries did not send ministers and about
    three did. And the three that did----
        Mrs. WALORSKI. But the one that I am concerned about is you
    and this country.
        Ambassador LIGHTHIZER. Well, I understand, but I just want
    to suggest--the idea was that it was like this ministerial
    level. So you had Europe send one because it was basically
    around the corner; you had the German minister who doesn't have
    competence in the area, but it was good to be there; and I
    think there may have been one or two others.
        Mrs. WALORSKI. Yes, but the reason I am asking the
    question, Ambassador, is because while all of those countries
    have irons in the fire here, you are the Ambassador that is
    going to go forth under all these rules in 232, and I want you
    to do as best as you can for our Nation and for my district,
    and that is my concern. And I believe that you can, and I
    believe that you will.
        I want to switch gears, though, really quickly to this
    issue of retaliation. In my district in northern Indiana, with
    the second largest concentration of manufacturing jobs in the
    country, there is a whole host of ag that I am concerned about:
    corn, soybeans, dairy, pork, poultry, beef, eggs, tomatoes, and
    the list goes on.
        But half of the soybeans grown in Indiana are exported to
    China. Honeywell makes brakes and avionics in South Bend that
    go into Boeing airplanes. China is threatening retaliation
    against both. In fact, today China's state-run Global Times ran
    an article alleging that the United States is dumping soybeans
    into China and calling for strong restrictive measures.
        Corn and motor boats are exported from my district to the
    EU. Both of those are the EU's retaliation list.
        Setting aside the tariffs, there is an incredible amount of
    anxiety in my district over the threat of retaliation. That
    anxiety is shared regardless of industry because manufacturers,
    suppliers, farmers, and workers will be affected. Are you
    considering the devastating effect that retaliatory measures
    could have, especially on small business and family farms that
    absolutely do not have the resources to absorb big losses?
        Ambassador LIGHTHIZER. Yes.
        Mrs. WALORSKI. In what way?
        Ambassador LIGHTHIZER. We are gaming out what would happen,
    what the most likely areas are that you would have retaliation,
    what kind of things that you would do. We can't be in a
    position where we take no action because of threats of
    retaliation. That is how you end up having an $800 billion
    trade deficit, which cost literally millions and millions of
    jobs in America.
        But there is a legitimate threat. And as I have said a few
    times here today and many times in the past, agriculture is
    always on the front line of retaliation. I said that when I
    first testified. Members would say to me: Do you think we
    should be concerned? I said: If you're in agriculture, you
    always have to be concerned.
        Anything that happens, they are going to figure we can get
    it and do something on agriculture.
        It's an unfair situation, but it's one that we have to come
    to grips with. You have to think about counterretaliation. You
    have to think about programs for farmers who are in this
    situation. There are a lot of things that are outside of my
    realm that have to be considered. But it's a serious problem,
    and we are very aware of it.
        Mrs. WALORSKI. Thank you.
        Thank you, Mr. Chairman. I yield back.
        Chairman BRADY. Thank you.
        Ms. Sanchez, you are recognized.
        Ms. SANCHEZ. Thank you, Mr. Chairman, and to Ambassador
    Lighthizer for joining with us today to talk about the Trump
    administration's trade agenda.
        For many years now, Democrats have been talking about the
    impacts that trade agreements have on American workers, and we
    lament the fact that they have caused countless good-paying
    American jobs to be shipped overseas, most notably in the
    manufacturing sector. Those jobs are really the bedrock of the
    American middle class and critical for our economy. Those jobs
    have been lost to countries whose labor standards are
    impossible for our workers to compete with on a level playing
    field.
        I think that a lot of us were really hopeful when the
    President talked about bringing American manufacturing jobs
    back and creating new jobs through renegotiating our existing
    trade deals. This Administration time and time again has said
    that they want a level playing field for American workers, but
    I have yet to hear the Administration lay out a clear vision
    for how you plan to achieve this goal.
        It is no secret that we met with Secretary Ross last year.
    When I pressed him on that issue, ``What is your strategy for
    bringing back American jobs or maintaining American jobs
    here,'' the only answer that he provided us was that they are
    going to renegotiate the rules of origin for autos. That was
    it. That was his single sole idea or plan for bringing back
    manufacturing jobs.
        I think we have to do a lot more than that if we are going
    to create the kind of jobs that we want here and ensure that
    American workers and industries are not on an unlevel playing
    field, first of all, and, second of all, in a race to the
    bottom for wages and working conditions. Workers in Mexico earn
    a pittance of what U.S. workers make, and is it any wonder that
    we are losing jobs to Mexico? I think Canada, as well, as a
    vested interest because their labor standards are similar to
    ours.
        Mr. Ambassador, I would like to know, the President has
    said that he will bring back jobs through renegotiating trade
    deals, what pieces of NAFTA specifically are you negotiating
    that you think is going to deliver on that promise?
        Ambassador LIGHTHIZER. Well, first of all, the most
    important thing that has been done so far is to pass the tax
    bill, so that was a very important part, in terms of bringing
    jobs back.
        Ms. SANCHEZ. I am not talking about the tax bill. I am
    talking about renegotiation of NAFTA.
        Ambassador LIGHTHIZER. I understand that.
        Ms. SANCHEZ. I want to know, specifically, what parts of
    NAFTA would you renegotiate to ensure that U.S. jobs stay in
    this country or that we bring back jobs that we have lost?
        Ambassador LIGHTHIZER. I think the regulatory improvements
    you have made helped also.
        Ms. SANCHEZ. I am not talking about regulatory--can we
    stick to the subject matter of this hearing, please.
        What pieces of NAFTA will you renegotiate to ensure that we
    keep U.S. jobs here and bring back manufacturing jobs that we
    have lost?
        Ambassador LIGHTHIZER. Well, I would say the first thing is
    the rules of origin. The rules of origin not just for----
        Ms. SANCHEZ. Okay. Aside from auto rules of origin, what is
    the plan?
        Ambassador LIGHTHIZER. We have a plan for labor standards.
    We have a plan for----
        Ms. SANCHEZ. What is the plan for labor standards? Lay that
    out for me. Specifics.
        Ambassador LIGHTHIZER. Well, in the first place, there is a
    limit to how much I am going to talk about this in a public
    forum. I'm sure you can understand that, since I am involved in
    negotiations with two countries.
        Ms. SANCHEZ. I understand that.
        Ambassador LIGHTHIZER. All right. Good.
        I have already talked about this a couple of times, but
    I'll do it again.
        It is our view that U.S. workers have the right to expect
    that collective bargaining agreements in Mexico are the result
    of secret ballots and legitimately verified to be such. There's
    a whole series of processes that were involved with in
    negotiating that element, including even today. So that's a
    hugely important issue. And the objective is to try to get
    wages up in Mexico, which makes the United States more
    competitive, but also creates customers for the United States.
        Ms. SANCHEZ. So would it be fair to say that you are
    seeking labor standards with our trading partners that are on
    the level with U.S. labor standards, or do you intend to bring
    U.S. labor standards down to the lowest common denominator?
        Ambassador LIGHTHIZER. Did I say anything at all about U.S.
    labor standards? If I did, I misspoke. We're doing nothing
    about U.S. labor standards.
        Ms. SANCHEZ. I am just asking a simple question.
        Ambassador LIGHTHIZER. And the answer is we are dealing
    with the Mexican labor standards. We are not dealing with the
    United States labor standards.
        Ms. SANCHEZ. So is it fair to say you are trying to raise
    the standards of our trading partners comparable to that of the
    United States? Is that what I am hearing?
        Ambassador LIGHTHIZER. No. What I'm trying to do is raise
    the standards in Mexico.
        Ms. SANCHEZ. So you raise it, but not to U.S. standards,
    not that high, somewhere in between?
        Ambassador LIGHTHIZER. It is not my point.
        What I'm focusing on is the basic elements of what you
    expect in basic labor law. That's what I am talking about. I am
    not talking about U.S. standards.
        Ms. SANCHEZ. ILO conventions of labor law?
        Chairman BRADY. All time has expired.
        Ms. SANCHEZ. Mr. Chairman, if I could simply just make the
    request that we receive the answer to the last question in
    writing.
        Chairman BRADY. In writing, absolutely.
        Ms. SANCHEZ. Thank you. I yield back. Thank you, Mr.
    Chairman.
        Chairman BRADY. Thank you, Ambassador.
        I will tell you, I see significant wins for the United
    States in energy, agriculture, telecommunications, digital
    trade, services, technology, and manufacturing because you are
    being so aggressive in these areas, and we appreciate the work
    there.
        Mr. Curbelo, you are recognized.
        Mr. CURBELO. Thank you, Mr. Chairman.
        Welcome, Ambassador. Thank you so much for your time.
        I first want to say I was thrilled to hear earlier your
    statements regarding engagement with Argentina and Brazil. I
    think that our country, in many ways, has been absent in our
    own neighborhood over the last few decades. And I think in both
    those countries, we are seeing very positive developments. This
    is very exciting for south Florida, as you can imagine, because
    we are poised to grow and to benefit greatly from further
    engagement in the region, specifically with countries like
    Brazil and Argentina.
        On a couple issues that have been discussed extensively
    here, I want to associate myself with the comments made by
    Chairman Brady and others on ISDS. I think it is an important
    tool for American companies, for American stakeholders, and
    also with Chairman Johnson on the sunset clause.
        I do believe that one of the major components to a
    successful business and to enterprise generally is certainty.
    And I think that if companies are operating under the threat of
    the expiration of a deal, that could inhibit their ability to
    invest. And, by the way, it is not just American companies'
    investments abroad, but the investments of Canadian and Mexican
    companies in the United States.
        So I really hope that we have a strong provision to review
    the deal, to revisit the deal, to make sure we keep it up to
    date, which we haven't done over the last 25 years, but
    certainly not always to have the threat of a potential
    expiration.
        Another issue I wanted to bring up is the effect trade
    agreements have on the farmers of my south Florida district.
    Many people not from south Florida might be surprised to know
    that Miami-Dade County is one of the largest ag producing
    counties in the State. We have avocados, mangos, tomatoes, and
    hundreds of specialty crops. And because south Florida is
    significantly warmer than even central parts of the State,
    crops can be grown year-round. For example, Ambassador, it is
    not snowing in south Florida today, something that we are very
    pleased with.
        So, as we renegotiate NAFTA, I am concerned with how the
    deal will affect the farmers across Florida, but specifically
    with how it will impact the agriculture community I am honored
    to represent in south Dade. I know the Administration has been
    advancing a seasonable and perishable proposal that could help
    provide relief to our growers from Mexican dumping by making it
    easier to prove entry.
        Could you give us a brief update on where we are and what
    the nature of the Administration's commitment with this
    provision is at this time?
        Ambassador LIGHTHIZER. Well, it is a provision that's very
    important and not without its controversy.
        The point that I try to make is that while we have a lot of
    agricultural sales in Mexico--with Mexico, we have an
    agricultural sales deficit of about $5 billion. So we're not on
    the positive side of our agricultural sales with Mexico.
        The area that is most affected negatively are the
    seasonable and perishable fruits and vegetables, as you
    suggest. So we have a provision that we have designed that
    allows those people, only in cases where there is unfair trade,
    to take advantage of the unfair trade statutes. Until now, they
    are essentially precluded by the nature of the way the statutes
    are taken up.
        So we have put forward this proposal. It has not been
    wildly popular with our trading partners, I would say in all
    candor at this point. But it's an important provision, and one
    that we are negotiating on right now.
        Mr. CURBELO. Thank you, Ambassador. I encourage you to do
    the best you can in this area. We know that the specific
    proposal you have put forward may not be able to make it, but I
    think anything that improves the status quo for these farmers,
    which have been decimated, quite frankly, would be something
    that we would welcome.
        And I am more concerned with fairness and less concerned
    with this deficit issue. I always tell people: I have a
    deficit. My family has a trade deficit with the supermarket,
    and we want to keep it that way. We are not interested in
    changing that.
        I think the key question is: Is it fair? And are American
    companies, in this case American farmers, being given the same
    opportunities to compete as Mexican farmers and as Canadian
    farmers? And I think in this area of seasonable products, it is
    certainly not the case.
        So I appreciate your commitment to this provision and your
    commitment to the farmers of south Florida, which are counting
    on us to improve the status quo.
        Thank you, Ambassador.
        I yield back.
        Chairman BRADY. The gentleman yields back.
        Mr. Bishop, you are recognized.
        Mr. BISHOP. Thank you, Mr. Chairman.
        And thank you, Mr. Ambassador, for being here today, and
    for your time and effort. I know this is a long hearing, and
    you have waited all this time. I appreciate it.
        NAFTA is vitally important to the State of Michigan, the
    State that I represent. It is important to our economy, and it
    is important to the U.S. automakers.
        I want to applaud your efforts for the way you have
    conducted yourself. I had the opportunity to attend the last
    round in Montreal. It is evident to me and to all of us that
    you have done a spectacular world-class job in representing the
    United States and in preserving, to the extent that you can,
    the great relationship that we have with Canada and Mexico, so
    I want to thank you for that. I also want to thank you for your
    efforts to update and improve NAFTA so that it better
    represents the 21st century global economy.
        I would like to continue, if I could--the subject has been
    raised ad nauseam here, but important--it has to do with the
    rules of origin. And the concern I have specifically, on behalf
    of the U.S. automakers, is that there is substantial concern
    that the proposed rules of origin will jeopardize their global
    competitive position and that, furthermore, will likely cost
    vital U.S. manufacturing jobs. And that is especially true in
    the State of Michigan.
        Now, I know this is high on your mind. You have indicated
    it in your original testimony. You said that the purpose of the
    rules of origin proposal was to move more jobs back to the
    United States. But are you concerned that the aggregate impact
    of the proposed rules of origin might have the exact opposite
    effect than what you intended? And also, we are also aware that
    the Canadian Government introduced, in the last round in Mexico
    City, a modified version of their proposed rules of origin. I
    wonder if you might elucidate on that proposal and also whether
    or not Mexico has its own proposal regarding the rules of
    origin.
        Thank you, sir.
        Ambassador LIGHTHIZER. Thank you, Congressman. And thank
    you for your kind remarks.
        The rules of origin are extremely important, as you say.
    Our objective is to bring more jobs back to Michigan, and we
    think that the direction that we're moving will have that
    effect.
        The United States had a proposal. Canada had a proposal, I
    think, and Mexico has been engaged on the issue. And I think we
    are in a position where we're finally starting to converge. We
    are working very closely with the U.S. industry. I had people
    on Monday, and I think maybe even until yesterday, in Detroit
    trying to work out the details of this kind of an agreement.
        Once again, I can't really say exactly what is going to end
    up happening, but I think we're in a pretty good place. But our
    objective is to stop the hemorrhage of jobs from the United
    States and to bring jobs back to the United States. That's our
    objective.
        The way we analyze this thing is that Canada and Mexico
    basically sell their cars to the United States. So, in the case
    of the United States, we sell 900,000 cars to Canada, and they
    sell almost 2 million to us. In the case of Mexico, they sell
    us, I don't know what the numbers are, but maybe 2.3 million,
    and we send them 200,000. So basically these are industries
    that are designed to sell cars in the United States.
        It is not unreasonable for us to say: If you are going to
    do that, we ought to have rules of origin to get some fair
    share of that manufacturing in the United States.
        So how much are you actually working with? In the case of
    trucks, it's 25 percent. We have an enormous amount of
    leverage. In the case of cars, it is 2.5 percent. So that is
    $900 a car. That is what we are talking about.
        Our view is that if you are going to save $900, it is not
    unreasonable to say some part of that should come back in
    employment in the United States. At some point--you're right--
    you make it to the point where they can't compete, and clearly,
    we are aware of that. That's not our objective. Our objective
    is to sort of find that sweet spot where we get some of these
    jobs back.
        We are the market--we can't forget that--we are the market
    for all these cars. It is not like they are going north and
    south, except in small numbers.
        Mr. BISHOP. Thank you, sir. I appreciate your sharing that
    information with us.
        I agree with you 100 percent, the goal is to try and get as
    many jobs back to the United States. We like to hear that in
    Michigan. The number one part of our economy is our
    manufacturing sector, especially in autos. So we appreciate
    your efforts, and we appreciate your attention to this. And I
    am glad to hear that your team has been in Detroit to talk to
    our folks.
        Thank you, sir.
        Mr. Chairman, I yield back.
        Chairman BRADY. The gentleman yields back.
        Mr. LaHood, you are recognized.
        Mr. LAHOOD. Thank you, Mr. Chairman.
        And thank you, Ambassador Lighthizer, for your service to
    our country.
        Ambassador, my district is the eighth largest ag district
    in the country in terms of corn and soybean production. We have
    some of the most fertile farmland in the entire world.
        There is real concern with farmers and agriculture folks on
    the Administration's position on NAFTA and withdrawal. A couple
    statistics that I think are important: 98 percent of the corn
    that Mexico imports comes from the United States, much of it
    from the Midwest; about one-third of the products produced in
    Illinois go to Canada or Mexico; about 35,000 jobs tied
    directly to NAFTA. And that is just in agriculture. By the way,
    agriculture is the number one industry in the State of
    Illinois.
        And when I have heard repeatedly about withdrawal, the
    groups that I work with--National Pork Producers Council,
    American Farm Bureau Federation, National Cattlemen's Beef
    Association, National Corn Growers Association, Corn Refiners
    Association, American Soybean Association, Americans for
    Farmers & Families--all agree that withdrawal is not an option
    here.
        I guess my question to you, Ambassador, is, do you know any
    ag groups that think withdrawal is the right approach?
        Ambassador LIGHTHIZER. Our objective is not to withdraw.
    Our objective is to get a good and improved agreement. I don't
    know of any ag groups that want to withdraw, but I don't know.
    There may be some out there. I am not aware of them, no.
        But our objective is not to withdraw either. Our objective
    is to get the best agreement we can. It's an important
    agreement. It's whatever it is--we always say, Mr. Chairman,
    it's a tradeoff. The reality is, last year, it was like $1.1
    trillion or $1.2 trillion worth of trade. There is an enormous
    amount of trade between those three countries, and our
    objective is to figure out a way to have disagreements be more
    beneficial to the United States, and that certainly means more
    benefits to American agriculture.
        Mr. LAHOOD. Thank you. I appreciate those comments on that.
        And I, for the record, will submit an article from Farm
    Week in February that is titled ``NAFTA is American farmers'
    Lifeline.'' And in there, they talk about, if the United States
    quits on NAFTA, it quits on its farmers.
        And the other thing is, I know the President recently
    tweeted: ``NAFTA is a bad joke!''
        Do you agree with that sentiment?
        Ambassador LIGHTHIZER. I have no idea about that quote.
        Mr. LAHOOD. Well, it was a tweet.
        Ambassador LIGHTHIZER. I have no knowledge. I didn't see
    that.
        Mr. LAHOOD. Well, I would just tell you: That causes a lot
    of concern, Mr. Ambassador, when farmers--and, by the way, the
    farmers in my district and in rural America overwhelmingly
    support the President and continue to support him, particularly
    in all the things we have talked about today. But I can't
    emphasize enough the concern with farmers in rural America when
    it comes to NAFTA.
        Let me switch subjects here.
        Rules of origin has been talked about a lot here. And when
    we think about the constituencies that we all deal with, Mr.
    Ambassador, can you name a constituency that agrees with your
    position on rules of origin? For instance, Chamber of Commerce,
    National Federation of Business, Heritage Foundation.
        Ambassador LIGHTHIZER. How about the AFL-CIO, do they
    count?
        Mr. LAHOOD. Okay. That is fair. So AFL-CIO. Any business
    groups that you can cite?
        Ambassador LIGHTHIZER. Listen, I don't know. There are
    business groups all over the place. I have no idea where they
    are on rules of origin.
        Mr. LAHOOD. Could you submit those for the record, whatever
    those are?
        Ambassador LIGHTHIZER. No, I can't. I don't have the
    resources. If the Chairman wants me to go out and have my
    people use resources to find out where business groups are on
    rules of origin, I will do it, but otherwise, I won't.
        Mr. LAHOOD. Well, I guess the concern is, as we look at the
    trade agreements we have in place in FTAs, when we look at
    these provisions--ISDS, we have talked about, rules of origin,
    sunset provision--these all appear to be very unorthodox and
    unconventional as we negotiate NAFTA, as we look at our other
    trade agreements.
        And so I think there is real concern, Mr. Ambassador, with
    the position that we have had there and having a trade policy.
    With that, I want to just mention, last year, when you had gone
    through your Senate confirmation, the Administration quoted:
    You will be shocked by the speed at which bilateral trade
    agreements will begin to materialize.
        And so I am a supporter of bilateral trade agreements. Many
    of us are. But we are 15 months into this Administration, and
    we have not seen a template or a model for bilateral trade
    agreements. And I understand you haven't had people in place,
    and I am cognizant of that, but when we look at, well, is there
    a model, is there a mechanism out there, particularly with your
    position on ISDS, rules of origin, and sunset, can you comment
    on that?
        Ambassador LIGHTHIZER. Well, I will comment on all of it,
    but I am not going to do it in 9 seconds, however.
        Number one, of course, we are going to have different
    policies than the Chamber of Commerce. Their policies are what
    have gotten us $800 billion worth of trade deficits. So, of
    course, we're going to have unconventional policies if we are
    going to have a different result. If we do exactly the same
    thing, nothing is going to change. This is an unsustainable
    trade deficit. We have a $560 billion goods and services trade
    deficit. We have a deficit with China which can't go on. It's
    $375 billion. We are going to do things differently,
    absolutely.
        I personally believe that these people who voted for the
    President voted for him because they didn't want it to be
    exactly like half of those groups want it to be. So, of course,
    it's going to be different, number one.
        Number two, in terms of--I am out of time.
        Chairman BRADY. Way out of time.
        Thank you, Mr. Ambassador.
        Ambassador LIGHTHIZER. Thank you.
        Chairman BRADY. Mr. Reed, you are recognized.
        Mr. REED. Mr. Ambassador, way over here.
        It is a pleasure to have you here today. I want to just
    follow up.
        The unconventional nature of what this Administration is
    doing is something I applaud, and I have stood with, because I
    agree that we just cannot maintain the status quo, because, as
    to your point, this policy is unsustainable.
        But I think we all want to get to the same outcome, and
    that is where I think we have broad agreement in regard to the
    issues before us today.
        Mr. Ambassador, I would be remiss not to go on the record
    to raise the issues of dairy and wine coming from western New
    York. The Finger Lakes wine industry is blossoming. And the
    access to--and our dairy farmers in western New York. The
    access to Canada, obviously--and I have shared this with you
    and I shared this with Prime Minister Trudeau directly, is very
    critical to our future. So I just put that on the record.
        But what I want to do is ask some questions that maybe
    haven't been covered here. And one of the issues that I have
    been very concerned about in my entire tenure as a Member of
    Congress on the issue of trade is currency manipulation and
    state-owned enterprises. My understanding of the negotiations
    that you are having right now with Canada and Mexico are that
    those issues are being discussed; those issues are being
    potentially put on the table in regard to updating NAFTA.
        And, one, do you agree that there are issues of currency
    manipulation across the world with other trading partners, such
    as China, Japan, European Union members, and, if that is the
    case, how do you see the present negotiations being a tool to
    put us in a position where we can take on truly what I believe
    is one of the unfair practices that is out there that has gone
    unaddressed for decades?
        Ambassador LIGHTHIZER. First of all, Congressman, I
    completely agree with you. I think it's one of the absolutely
    fundamental problems, is this issue of currency manipulation.
    And it's China, which everyone agrees to.
        If you go to the auto companies, they are going to tell you
    it is Japan, and it varies, but it's 6, 7, 8, 9 percent. We are
    worried about 2.5 percent on our auto tariffs. If the currency
    manipulation is 6 percent, then it is multiples of that.
        It's also an issue we believe with Korea.
        So the Administration is dealing with this on a variety of
    areas. And I tell you that I sit down with the pros who do this
    who work for me, my professional people who have done this for
    30 years, and I will say: Well, what did you do the last time
    you had this or that kind of conversation with the Treasury
    Department on the issue of currency manipulation?
        And do you know what they say? ``We've never had a serious
    conversation with any Treasury Department before this Treasury
    Department.''
        Secretary Mnuchin is completely engaged on this in a way
    that no former--literally, my career people, Republicans and
    Democrats, are like: We have never had a conversation like this
    where people really have to come to grips with the issue of
    currency manipulation.
        So we are dealing with it in the context of NAFTA, even
    though we realize these countries are not really currency
    manipulators. But they have the same interests we do in
    tackling this problem.
        And where you go, we'll see. Clearly, a huge, huge impact
    is, or factor, is transparency. We start with the position we
    don't even know what these people are doing. And competitive
    currency devaluation is going to be something that is
    unacceptable.
        It is a complicated issue. It is something that we are
    involved with, but it is a Treasury issue more than it is ours.
    And we have Treasury officials, besides the Secretary, David
    Malpass and the Secretary are completely locked in on this
    issue, and they are going to get absolutely as much as you can
    get on it.
        But I don't think you can overstate how important it is.
    And I think it will be more important in 10 years than it is
    now if we don't do something about it.
        Mr. REED. Well, I totally agree with you, Mr. Ambassador. I
    look forward to working with you, as well as the Treasury
    Secretary, as I have raised this issue with prior Treasury
    Secretaries in our tenure here.
        The other issue that I wanted to just highlight and stress
    to you is, as we deal with intellectual property, and I know it
    has been touched on a little bit here across the panel, but
    coming from an area with some interests that have really been a
    bright spot in regard to our innovation economy and the
    development of technology, I just wondered what your commitment
    or thoughts are on how we can best protect our intellectual
    property, our innovation, in the next generation of the
    economy, opportunities I see coming down the pipeline for us?
        Ambassador LIGHTHIZER. First of all, you understate the
    importance of intellectual property in your district. It is
    extremely important, and we understand that. Because it is
    important, those companies--particularly, one company is
    important for the whole economy.
        So we are completely committed, both in NAFTA, where I have
    talked about what our provisions are. Until now, there has
    really been a movement away from protection of intellectual
    property. In the last Administration, there was a movement away
    from the protection of intellectual property. We are
    recentering that, in our opinion.
        But even more importantly, I would suggest the whole 301,
    the whole IP protection with China, that is the absolute front
    line of protection of intellectual property.
        Mr. REED. I appreciate the hard work, Mr. Ambassador. I
    look forward to working with you.
        I yield back.
        Chairman BRADY. The gentleman yields back.
        Mr. Holding, you are recognized.
        Mr. HOLDING. Thank you, Mr. Chairman.
        Ambassador, thank you for being here. You have missed an
    incredible winter wonderland that is going on outside today.
    You will be glad you are going down the hill after this, rather
    than having to come up the hill.
        Regarding the tariffs on aluminum steel, I just encourage
    you to move expeditiously to determine which of our trading
    partners will be exempt from these new tariffs. There are
    countries that we, obviously, know are routinely engaged in
    unfair trading practices, but there are other countries which
    are undeniable allies to the United States, not only
    economically but for our national security, as well.
        You and I have talked before about the special relationship
    the United States has with the United Kingdom, and we have
    discussed the tremendous opportunity that is presented to the
    United States as the United Kingdom exits the European Union.
    The United Kingdom and the United States have a longstanding
    relationship. It goes without saying: it is certainly one of
    our closest allies.
        So, as you go through the exclusion process for specific
    countries, I had hoped that the United Kingdom is quickly
    identified by your office as being exempt.
        And I am sure you are also aware that, on Monday, there was
    a draft agreement put forward between the United Kingdom and
    the EU, so they are another step forward to finalizing their
    exit. And, in my opinion--and I think the opinion of a number
    of my colleagues--this is a time when we need to be encouraging
    the United Kingdom. They are undeniably a defense partner, they
    are a NATO partner, and I think not exempting them would be a
    step in the wrong direction.
        A potential free trade agreement would be particularly good
    at services. But I would say that not only are they a NATO
    partner, but if you look at how we are aligned with them in the
    promotion of capitalism, very few countries promote it the same
    way the United States and the United Kingdom do. Promotion of
    free markets.
        And perhaps, most importantly of all, is entrepreneurism.
    Entrepreneurism is alive and well in the United States, and it
    is alive and well in the United Kingdom, and it is not really
    alive and well, in our sense of the word, in a lot of other
    places around the world.
        So I would encourage you to work on that as expeditiously
    as possible. I know that Liam Fox was here last week, the
    Minister of International Trade. I am sure that you all had
    several meetings. I will just give you a minute or so if you
    wanted to recap and have anything to say about those meetings
    and about any thoughts that you and the Administration might
    have on our potential bilateral trade agreement.
        Ambassador LIGHTHIZER. Well, I would say, first of all, it
    is exactly as you say. I have met many times with Dr. Fox and
    found them all to be informative and enjoyable. We have an
    enormous amount in common. They clearly are--I think that it is
    probably the universal view in the Administration that we
    should, at the appropriate time, have--explore the idea of an
    FTA with the U.K.
        When that time is, is more up to them than it is to us. In
    the meantime, what we are trying to do is do the kinds of
    things that are in areas where they haven't seen the competence
    of the EU. So, for example, certifications of professionals.
    There are a lot of things we can do.
        We have a working group that we started, I guess, just
    about a year ago, that has had a number of meetings, a number
    of staff-level meetings. So we are getting a lot of the work
    done that would have to be done in advance of an FTA so that,
    at the right time, we can move quickly.
        The issue of the U.K. and 232 is a complicated one because
    of the fact that they are in the EU. So that is something that
    sort of has yet to be worked out. But, clearly, an FTA with
    them. Clearly other examples of working together or something
    is very high on our priority list, and I see no impediments at
    all to moving in that direction at the appropriate time.
        Mr. HOLDING. I am glad to hear you say that. I believe that
    a bilateral agreement with the United Kingdom could be a
    signature accomplishment of this Administration and would be
    the first time that we have encapsulated in writing what the
    special relationship means. It is a great opportunity for this
    Administration to leave a lasting mark, not only on
    geopolitical politics but on trade and trade policy.
        So thank you, Mr. Ambassador.
        Chairman BRADY. Thank you, Mr. Holding.
        Mr. Ambassador, thank you for being our witness today.
        Clearly, there is strong bipartisan support that the best
    way to lower our trade deficits are not to buy less but to sell
    more. We are confident in your ability in renegotiating NAFTA
    and other agreements to create a level playing field for
    American farmers and workers and businesses because when you
    do, we win. And there is no doubt there is strong support for
    your very aggressive stance in opening these markets and
    modernizing NAFTA in a significant way.
        That is why 103 Republicans--your strongest supporters--are
    encouraging you, urging you, to include strong accountability
    provisions because we want your strong new trade agreement for
    America to be accountable and to be supported here in Congress.
    We look forward to being your partners and your clients as we
    go forward.
        Ambassador, please be advised, Members of the Committee
    have 2 weeks to submit written questions to be answered later
    in writing. Those questions and your answers will be made part
    of the formal record.
        With that, Mr. Ambassador, thank you.
        The Committee stands adjourned.
        [Whereupon, at 1:40 p.m., the Committee was adjourned.]
        [Questions for the Record follow:]

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