[House Hearing, 115 Congress] [From the U.S. Government Publishing Office] THE EFFECTS OF TARIFF INCREASES ON THE U.S. ECONOMY AND JOBS ======================================================================= HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION __________ APRIL 12, 2018 __________ Serial No. 115-FC10 __________ Printed for the use of the Committee on Ways and Means [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] __________ U.S. GOVERNMENT PUBLISHING OFFICE 33-810 WASHINGTON : 2019 ----------------------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).E-mail, [email protected]. COMMITTEE ON WAYS AND MEANS KEVIN BRADY, Texas, Chairman SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts DEVIN NUNES, California SANDER M. LEVIN, Michigan DAVID G. REICHERT, Washington JOHN LEWIS, Georgia PETER J. ROSKAM, Illinois LLOYD DOGGETT, Texas VERN BUCHANAN, Florida MIKE THOMPSON, California ADRIAN SMITH, Nebraska JOHN B. LARSON, Connecticut LYNN JENKINS, Kansas EARL BLUMENAUER, Oregon ERIK PAULSEN, Minnesota RON KIND, Wisconsin KENNY MARCHANT, Texas BILL PASCRELL, JR., New Jersey DIANE BLACK, Tennessee JOSEPH CROWLEY, New York TOM REED, New York DANNY DAVIS, Illinois MIKE KELLY, Pennsylvania LINDA SANCHEZ, California JIM RENACCI, Ohio BRIAN HIGGINS, New York PAT MEEHAN, Pennsylvania TERRI SEWELL, Alabama KRISTI NOEM, South Dakota SUZAN DELBENE, Washington GEORGE HOLDING, North Carolina JUDY CHU, California JASON SMITH, Missouri TOM RICE, South Carolina DAVID SCHWEIKERT, Arizona JACKIE WALORSKI, Indiana CARLOS CURBELO, Florida MIKE BISHOP, Michigan DARIN LAHOOD, Illinois Gary Andres, Staff Director Brandon Casey, Minority Chief Counsel C O N T E N T S __________ Page Advisory of April 12, 2018, announcing the hearing............... 2 WITNESSES Kevin Kennedy, President, Kennedy Fabricating, LLC............... 6 John Wolfe, Chief Executive Officer, Northwest Seaport Alliance.. 10 Roger K. Newport, Chief Executive Officer, AK Steel Corporation.. 18 John Heisdorffer, President, American Soybean Association........ 24 Calvin Dooley, President and Chief Executive Officer, American Chemistry Council.............................................. 29 Ann Wilson, Senior Vice President, Motor & Equipment Manufacturers Association...................................... 35 Scott N. Paul, President, Alliance for American Manufacturing.... 43 SUBMISSIONS FOR THE RECORD Acuity Brands, Incorporated...................................... 103 Advanced Medical Technology Association (AdvaMed)................ 107 American International Automobile Dealers Association (AIADA).... 111 American Farm Bureau Federation.................................. 117 Americans for Farmers and Families (AFF)......................... 120 Associated General Contractors of America (AGC).................. 124 Beer Institute................................................... 127 Edge Dairy Farmer Cooperative.................................... 132 Flexible Packaging Association (FPA)............................. 133 Garmin International, Incorporated (Garmin International)........ 139 Greater Houston Partnership...................................... 143 Interstate Natural Gas Association of America (INGAA)............ 145 Freedom Partners Chamber of Commerce (Freedom Partners) and Americans for Prosperity....................................... 147 Methanol Institute (MI).......................................... 151 Organizations representing U.S. manufacturers, farmers and agribusinesses, retailers, technology companies, importers, exporters, and other supply chain stakeholders................. 153 National Restaurant Association.................................. 158 National Association of Trailer Manufacturers (NATM)............. 160 ProAmpac Intermediate, Incorporated (ProAmpac)................... 163 Chambers of Commerce representing some of Texas' largest metro regions........................................................ 169 RV Industry Association (RVIA)................................... 171 THE EFFECTS OF TARIFF INCREASES ON THE U.S. ECONOMY AND JOBS ---------- THURSDAY, APRIL 12, 2018 U.S. House of Representatives, Committee on Ways and Means, Washington, DC. The Committee met, pursuant to notice, at 10:06 a.m., in Room 1100, Longworth House Office Building, Hon. Kevin Brady [Chairman of the Committee] presiding. [The advisory announcing the hearing follows:] ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS CONTACT: (202) 225-3625 FOR IMMEDIATE RELEASE Thursday, April 12, 2018 FC-10 Chairman Brady Announces Hearing on the Effects of Tariff Increases on the U.S. Economy and Jobs House Ways and Means Chairman Kevin Brady (R-TX), announced today that the Committee will hold a hearing on the effects on the U.S. economy and jobs of the tariff increases related to Section 232 and Section 301 investigations. The hearing will take place on Thursday, April 12, 2018, in room 1100 of the Longworth House Office Building, beginning at 10:00 a.m. In view of the limited time to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http:// waysandmeans.house.gov, select ``Hearings.'' Select the hearing for which you would like to make a submission, and click on the link entitled, ``Click here to provide a submission for the record.'' Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Thursday, April 26, 2018. For questions, or if you encounter technical problems, please call (202) 225-3625. FORMATTING REQUIREMENTS: The Committee relies on electronic submissions for printing the 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. When it comes to trade, how do you avoid punishing Americans for China's misbehavior? Does even the prospect of potentially higher tariffs damage our U.S. economy and harm our local farmers and businesses? Especially now that due to President Trump, we have one of the most pro-growth tax codes in the world. Today we will hear from a wide range of local American job creators about the real-world impact of increased tariffs and how to ensure that trade enforcement, which is important, does not inflict collateral damage on hard-working American manufacturers, farmers, and families. We will focus specifically on the U.S. tariff increases relating to the Section 232 action on steel and aluminum, which took effect on March 23. We also want to hear about the proposed tariff increases related to the Section 301 investigation into China's aggressive theft of America's intellectual property and technologies. We will also discuss the ongoing processes that determine how and when tariffs are imposed, including the country-by- country and product-by-product exclusions for steel and aluminum, as well as your thoughts about the effects of retaliation against our made-in-America products and services being sold abroad. We will start from common ground. It is clear that China's dishonest and unfair trade practices are hurting the American economy and costing us thousands of jobs here at home. The President is right to take a hard line against China's predatory policies in significant trade violations, including the theft of American intellectual property and policies compelling American businesses to hand over their most valuable technology to Chinese competitors. These severe trade abuses have gone on for too long and cannot be allowed to continue. The challenge for every president, however, is how to change China's behavior and punish it if necessary, without harming our families, businesses, and farmers. We know that tariffs are, after all, taxes, and will ultimately be passed on to consumers. And like taxes, they also curtail economic growth, discourage new investment, delay new hiring, and put American workers at a huge disadvantage to foreign competitors. The mere threat of potential tariffs can stunt the economic momentum of the new Tax Cuts and Jobs Act. In Texas, manufacturing in February was booming. But factories cut production growth by more than half in March due to concerns over higher costs from the potential steel and aluminum tariffs. Worldwide economic growth is on the verge of finally bursting out of a decade of stagnation, but now is pulling back on fears of a significant trade dispute. Back home, in my district, one of our manufacturing plants in the oil field services industries was planning to grow by up to 500 more jobs as energy recovers, but now could face job layoffs if their fairly-traded steel is not excluded and they lose sales to foreign competitors. I appreciate the President has put in place a process to exclude products like this and give all sides in this trade dispute ample time to resolve it. I cannot think of a better way to address these challenges than to get input directly from U.S. stakeholders. That is exactly what we are doing today. Our panel today brings a broad range of perspectives, and we are looking forward to hearing from all of you. Over the last several weeks, many of you have experienced-- and some for a longer term--the effects of China's unfair trade practices or the impact of tariffs on steel and aluminum, whether as a steel producer, a user of steel or aluminum, or an exporter facing retaliation. And although Section 301 tariffs have not been imposed, many of you certainly also experienced market effects of the proposed U.S. tariffs and proposed retaliation by China. I continue to believe it is vitally important for us to use a targeted approach in enforcing our trade laws, whether it is Section 232 or Section 301 tariffs. China's distortions to the steel and aluminum market and its IP theft and forced technology demands are global problems that ultimately require global solutions. We should work as closely as possible with our allies, we should never create disincentives for our allies to join us in taking strong action. The world, not just the United States, must stand up to China's unfair trade practices. In addition, we must make sure that those who would be hurt by tariffs have a full opportunity to make their case and to seek an exclusion for fairly-traded products. I remain committed to working with President Trump and the White House on strong and forceful trade policies that will target bad actors and encourage economic growth here at home. At the same time, we must avoid unintended consequences that hurt Americans. Finally, it is in everyone's best interest to find a path forward with respect to fair trade. Today and throughout the coming months, we will continue to listen to our constituents and our job creators across the country to make sure we take their concerns into account each step of the way. And now I yield to the distinguished Ranking Member, Mr. Neal, for the purposes of his opening statement. Mr. Neal. Mr. NEAL. Thank you, Mr. Chairman. Today's hearing is an important opportunity to discuss the tariffs that the Administration has started imposing recently as a result of its Section 232 investigations, and the tariffs that the Administration has announced that it will impose as part of its Section 301 investigation. Discussing the impact of these tariffs on the U.S. economy and jobs is obviously important for us to hear from our stakeholders about the process that the Administration has established for finalizing and implementing the tariffs to ensure that they are fair, transparent, and effective. It seems just as obvious to me that in discussing these tariffs, we also need to talk about what these tariffs are intended to accomplish and whether we think the tariffs will be successful in accomplishing their intended goals. It is important to keep in mind that the reasons for both Section 232 and Section 301 investigations that are leading to this discussion about tariffs are China's unfair trade practices that undercut American workers and businesses. Section 232 investigations determined that global steel and aluminum imports are threatening U.S. national security. Our producers and workers in these two industries have been seriously hurt by global overcapacity and the crisis it has created. It is no secret that China has been the leading driver of this challenge. The Chinese government owns many of the steel firms in China and has provided massive government subsidies to many of the firms that it does not outright own. As a result, China has started producing steel and aluminum at a pace that is simply not based on economics and fair competition. China now produces about half of the world's entire supply of steel and singlehandedly produces as much steel as the entire world did in 2000. During that same timeframe, the U.S. share of global production has been cut in half. China's aggressive, state- sponsored economic intervention goes beyond just the steel and aluminum sectors. As the USTR Section 301 investigation report has already documented, China's government has used its economic and political leverage over a sustained period of time to extort, force, or outright steal intellectual property and technology from American innovators. I have heard the stories of individual inventor small businesses that--and of our largest multinational corporations and our intelligence community about the harmful impact that these IP-related policies have had on the U.S. economy and our national security. Now we are in a situation where the Administration has decided to respond to both of these problems, or at least in part, through tariffs. In the case of the Section 232 steel and aluminum tariffs, this logic is pretty direct. Tariffs could, if implemented and designed thoughtfully, bring about a recovery of U.S. steel and aluminum production. In the case of the Section 301 proposed tariffs, the logic is less direct. It seems that for the Administration, these tariffs are intended to be used as leverage to bring about changes in China's practices, or to recalibrate the U.S.-China trading relationship. In both cases, the tariffs will bring disruption to the U.S. economy, and the tariffs certainly will raise costs for some, disrupt supply chains, and they are also likely to provoke threats of retaliation and real retaliation from countries like China. The key policy question that we are grappling with now is whether the Administration has a plan to use these tariffs effectively. It seems to me that after today's hearing, we should seriously consider holding another hearing specifically on trade--China's trade strategy. I look forward to hearing from our witnesses today, and if I could sum up what I think would be a general--a context of this hearing this morning, I think our goal is pretty clear, and that is to push China to the precipice, but in terms of a trade war, not over the edge. It is but a delicate balancing challenge that we all have, so I thank you, Mr. Chairman. Chairman BRADY. Thank you, Mr. Neal. And without objection, other Members' opening statements will be made part of the record. Today's witness panel includes seven experts. First, I would like to offer a special welcome to Kevin Kennedy, President of Kennedy Fabricating, a great family-owned business in Splendora, Texas. It employs hundreds of my constituents. John Wolfe is the Chief Executive Officer of Northwest Seaport Alliance. Roger Newport is the Chief Executive Officer of AK Steel Corporation. John Heisdorffer is President of the American Soybean Association. Calvin Dooley is a former Member of the U.S. House of Representatives and President and Chief Executive Officer of the American Chemistry Council. Ann Wilson is Senior Vice President of Motor & Equipment Manufacturers Association, and Scott Paul is President of the Alliance for American Manufacturing. The Committee has received your written statements. They will all be made part of the formal record. We have reserved 5 minutes to deliver your oral remarks, and we will begin with Mr. Kennedy, who hails from the home of the Splendora Wildcats in the 8th congressional district of Texas. Welcome and, Mr. Kennedy, you may begin when you are ready. STATEMENT OF KEVIN KENNEDY, PRESIDENT, KENNEDY FABRICATING, LLC Mr. KENNEDY. Thank you. Chairman Brady, Ranking Member Neal, other distinguished Committee Members, I want to thank you for allowing me to discuss the impact of the Section 232 tariffs on our business. Well, the impact is that it is already shifting our jobs and work outside of the United States. What was presented as a tariff on foreign steel has effectively become a tax on U.S. manufacturers like us. My name is Kevin Kennedy. I am the President of Kennedy Fabricating, a steel fabrication business in Splendor, Texas. My father, Odie Kennedy, founded our company 30 years ago with one employee. We now employ 350 people in a town of less than 2,000. We fabricate the products that make up our country's infrastructure: things like drilling rigs, cell phone towers, commercial buildings, pipelines, and industrial plants. We are the ones that buy the steel that our U.S. mills produce. In the last decade, we have grown our business over 40 times. That is not common in U.S. manufacturing these days. We are proof that American manufacturers can compete and win against cheaper foreign labor. There are lots of examples I could give of obstacles we have faced and overcome as a business if time would permit, but that is not why I am here. Today I am here to discuss an obstacle put in front of us that really no U.S. manufacturer should have to face. We face the challenge of our own government subsidizing foreign manufacturers at our expense by giving them a huge cost advantage through the Section 232 steel tariffs. See, these tariffs practically eliminated steel imports overnight, and without the competition, U.S. steel producers have already raised prices over 40 percent. So a 25 percent tariff has led to a 40 percent price increase. This extra 40 percent that we pay means that a company in China can now buy a raw steel beam from a Chinese mill at a 40 percent discount to us. They can drill some holes in it and ship it to the United States as a fabricated beam without a tariff. So China's still making beams, they are just using a loophole to get them here. And this is why the AISC recommends that fabricated steel also be covered by the tariff. And it is not just China that is winning. One of our Canadian competitors, Canada, just went from losing projects to us to now winning projects at our expense. Because they can import the same steel from China without a tariff and buy it 40 percent cheaper than we can buy it from our own domestic suppliers. They can build their structures and ship them to our U.S. customers, having never paid a tariff. And this scenario is not a hypothetical scenario. This one has already actually happened, and it has cost us millions of dollars in work. You know, up until now, we were an exporter. We have been manufacturing driller rigs for years and exporting them to countries like India, Russia, even Mexico. That is not the case now. We went from exporting to having the U.S. Government force our U.S. customers to import the products we make from all of our foreign competitors. You know, they would buy them from us if these tariffs hadn't made it so expensive. And it has been said that these tariffs are not significant to downstream prices. Well, that may be true for those things that only have a small steel component to them--canned beverages, Boeing 777s--but it is not true for what we make. The raw steel targeted with these tariffs makes up half the cost of our products. And our customers will not pay for a 40 percent increase, at least that is what they have told us. And our lack of new orders recently confirms it. You know, we understand, we want to protect the U.S. steel producers from unfair competition. The producers that are here today, they will likely attempt to explain how these tariffs have already increased demand and added jobs, and it sounds nice and everybody feels great, but that is definitely temporary. Because that demand spike was actually from us, people like us, other manufacturers. See, we tried to buy all the steel we could right away as soon as the tariffs were announced, even right before. Because we had existing projects, so we wanted to buy all the steel we could before the prices skyrocketed, because inevitably, we knew they would. But those projects already existed. And with these tariffs, new projects will go elsewhere. Who is going to buy the U.S. steel that our mills produce if our government forces our customers to go abroad and buy the steel prefabricated? Now, people may try to say that that is not going to happen, but I am here to confirm it is already happening. For 30 years, our company has adapted to obstacles. But the transfer of our jobs and customers across our borders at the directive of our government is the one obstacle to which we cannot adapt. So who wins with Section 232? Well, not U.S. manufacturers. Not our workers. We both lose. If a healthy steel-producing industry is in our national security interest, then do not the producers need someone to buy the steel? That is supposed to be us. It is---- [The prepared statement of Mr. Kennedy follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Mr. Kennedy, I apologize, that 5 minutes goes fast in Washington, D.C. We will continue the discussion in a moment. Mr. Wolfe, you are recognized for 5 minutes. STATEMENT OF JOHN WOLFE, CHIEF EXECUTIVE OFFICER, NORTHWEST SEAPORT ALLIANCE Mr. WOLFE. Thank you, Chairman Brady, Ranking Member Neal, and Members of the Committee, for inviting me to testify on the effects of U.S. tariff policy on the economy and jobs today. I also want to offer a special thanks to Subcommittee on Trade Chairman Reichert, and to Representative DelBene for their support of strong trade policies that contribute so much to the success of Washington State's economy. The Northwest Seaport Alliance is a marine cargo operating partnership of the ports of Tacoma and Seattle, and the fourth- largest container port complex in the country. I am also here on behalf of the Port of Seattle's Seattle-Tacoma International Airport, which includes a thriving international cargo facility. We are deeply invested in U.S. trade policy discussions because they directly impact our core business, the success of our customers and the lives of our local residents. Our marine cargo operations in the Seattle and Tacoma harbor support more than 48,000 jobs, while Sea-Tac air cargo operations help create over 5,200 jobs. The Port and the Northwest Seaport Alliance gateways are truly national assets, with more than 60 percent of the goods imported through the Northwest Seaport Alliance destined for the rest of the country. For example, $2.5 billion in imports of industrial and electric machinery move through our ports to Illinois, while Ohio and Indiana respectively import $1.9 billion and $1.2 billion worth of these products through our ports. This is true for exports as well. Last year, our gateways sent $1.89 billion in soybeans to China, yet none are grown in the State of Washington. Our success as an airport and seaport gateway is inextricably linked to China. Last year, more than $27 billion in imports from China came through Seattle and Tacoma cargo terminals, with an additional $1.1 billion in imports from China via Sea-Tac. In addition, almost $5 billion in exports to China traveled through our cargo terminals in 2017, plus another $2.2 billion in exports to China through Sea-Tac. Creating a fair and level playing field for our U.S. exporters competing in the global economy is one of the most important goals of U.S. trade policy. From opening new markets through trade agreements to enforcing existing trade rules, we all win when American businesses and entrepreneurs can sell more goods to more people throughout the world. There is clearly more that must be done to achieve that goal, and I think it is fair to say that the only debate we are having in this country is regarding what are the best tactics to achieve our desired outcome. While there are justifiable concerns about China's trade practices, we continue to believe that productive engagement and negotiations are the best path to ensuring a fair and level playing field for mutually beneficial trade. The United States must be clear on the desired remedy sought, and then tariffs should be a measure of last resort that are narrowly targeted to address a problem and minimize the unintended impacts on Americans. While it is impossible to truly estimate the impacts of these tariffs, roughly $8 billion in two-way trade through our airport and seaport will potentially face some level of increased tariff. The American Association of Port Authorities estimates that for every $1 billion in exports shipped through the U.S. seaports, 15,000 jobs are created. And conversely, it is likely true as well, which means that this $8 billion in trade likely represents 120,000 jobs. Cherries are a good example of this potential impact. The Northwest cherry harvest creates an estimated 19,000 jobs and $540 million in economic impact. About 30 percent of this crop is exported, and the majority shipped through air through Sea- Tac airport. China is the top export market for Washington cherries, buying 2.9 million cases valued at $127 million each year. If the Chinese market is closed to these exporters, they are going to have a very difficult time finding alternative markets for their seasonable perishable crop. In closing, as a large gateway for two-way trade, the Port of Seattle and the Northwest Seaport Alliance are deeply invested in U.S. trade policy discussions because they impact our core business. We believe that over the long term, we must continue to advocate loudly and consistently for new market access opportunities throughout the globe. Thank you again for the chance to participate in today's hearing, and I look forward to responding to your questions. [The prepared statement of Mr. Wolfe follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Mr. Wolfe. Mr. Newport, you are recognized. STATEMENT OF ROGER K. NEWPORT, CHIEF EXECUTIVE OFFICER, AK STEEL CORPORATION Mr. NEWPORT. Thank you, Chairman Brady, Ranking Member Neal, and Members of the Ways and Means Committee. I am Roger Newport, Chief Executive Officer of AK Steel, and I thank you for the opportunity to testify on behalf of our 9,200 employees. I have worked at AK Steel for 33 years and have seen first hand the challenges confronting the domestic steel industry because of unfair trade. At no time in our history have those challenges been more severe than in the last 3 years, during which unfairly-traded imports spiked to record highs. While finished steel imports grew to an average of 27 percent of the U.S. market over that time, America's steel mills operated less than 75 percent full. The domestic steel industry has been fighting back through trade cases, but the import surge has continued and has only increased. Countries not subject to the trade case orders rushed in with their dumped and subsidized imports and continue to injure the U.S. steel manufacturers and threaten our national security interests. Recognizing the global reality we now face and the inadequacies of our trade laws to address it, President Trump took the bold action to impose tariffs on foreign steel under Section 232, and we fully support those actions. AK Steel makes carbon, stainless, and electrical steels. However, we are the last U.S. producer of grain-oriented electrical steel, or GOES. Our facility in Butler, Pennsylvania, located in Congressman Kelly's district, is the only facility in all of North America that melts this electrical steel. GOES is the critical component in the cores of transformers that move electricity across the entire grid and deliver power to our homes and businesses. Damage to this infrastructure would threaten America's national security and the economy. Thus, it is imperative that we have a domestic electrical steel supply chain that can react quickly following a natural disaster or terrorist attack. I think it is important to put into context what some are calling a new trade war. The reality is that China has been fighting to take out the American steel industry for many years, and electrical steel provides a great example. Prior to 2009, AK Steel had a healthy export business of electrical steel to China. But China slapped illegal duties on GOES products. By the time the WTO declared those duties illegal many years later, China had already flooded the global market with cheap, subsidized electrical steel. In 2013, we filed trade case petitions against imports of GOES from 7 countries, including China, Japan, and Korea. The Department of Commerce ruled that GOES from these countries was being sold unfairly in the United States, however, the ITC ruled against the domestic industry. This decision was wrong, as imports of GOES have only continued to surge, and forced the only other U.S. manufacturer to exit the market altogether in 2016. Last year, imports of GOES nearly doubled compared to 2016. That is why tariffs under Section 232 are essential. It is important to understand, however, that trade relief must not apply only to electrical steel, but to downstream products like cores, core assemblies, and transformers. Core-making is simply cutting a coil of electrical steel into sheets and stacking it or winding it into a core. As such, it is easy and inexpensive to set up these minor processing facilities outside of the United States in order to simply evade a trade remedy. In fact, imports of cores and assemblies in 2017 increased two to six times the 2016 levels. These imports came primarily from Canada and Mexico, where they make no GOES products. This shows that producers will import semi-finished products in order to evade any remedy on GOES. Similarly, our so-called allies, Korea and Japan, have dramatically increased their shipments of GOES in the first quarter of this year. Korea has already shipped as much GOES in the first 3 months of 2018 as they shipped in total for the 5-year cumulative period of 2012 to 2016. Thus, any significant increases in imports over historical norms must be taken into account if the Administration is to achieve its goal of bringing the domestic steel industry to at least 80 percent of capacity. While the steel industry has taken the brunt of unfair trade over the last several decades, no industry is immune, as we have seen with washing machines, solar panels, and many other manufactured products. That is why this Administration is to be commended. We must fight back to make American manufacturers stronger here in the United States, given how critical it is to our economy in ensuring Americans have jobs with family-sustaining wages that contribute to the health, our local economies, and our communities across this great country. Thank you. [The prepared statement of Mr. Newport follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Mr. Newport. Mr. Heisdorffer, welcome and please proceed. STATEMENT OF JOHN HEISDORFFER, PRESIDENT, AMERICAN SOYBEAN ASSOCIATION Mr. HEISDORFFER. Good morning, Chairman Brady, Ranking Member Neal, and Members of the Committee. My name is John Heisdorffer, and I am a soybean farmer from Keota, Iowa. I also grow corn and I feed 10,000 head of hogs a year. I am the current President of the American Soybean Association, and have been on the ASA board since 2010. ASA represents U.S. soybean farmers on policy and international issues. Thank you for inviting us to testify before the Committee today on the potential impact of Chinese tariffs on U.S. soybeans. I have also submitted written comments for the record. In 2017, U.S. farmers produced a record 4.4 billion bushels of soybeans and exported 2.3 billion bushels, valued at $27 billion. For the last 20 years, soybeans have contributed more to the U.S. trade balance than any other agricultural product. We are very proud of this record and of our role in helping to feed a growing world. China is the world's largest soybean importer, buying 93 million metric tons of soybeans in 2016. In 2017, China imported 1.4 billion bushels of U.S. soybeans, or 62 percent of total U.S. exports. This represents nearly one-third of our annual soy production. Over the next 10 years, Chinese demand for soybeans will grow annually by the size of our exports to the European Union. Since last year, the U.S. soybean industry has been very concerned about getting into a trade war with China. This concern was heightened when President Trump announced his decision to impose tariffs on steel and aluminum imports. Since this announcement, ASA has raised concerns about the potential for retaliation from our top customers like China. ASA believes that there is room for our industry to grow our exports to China, and we want to focus on ways to expand trade instead of restricting it. Our fears of retaliation were confirmed after the Administration announced tariffs on an additional $50 billion of Chinese imports under Section 301, when China stated its intention to place a 25 percent tariff on imports of U.S. soybeans and other products. With this announcement retaliation is no longer a ``what if.'' The prospect of an escalating trade war has already created significant uncertainty in the U.S. soybean market, and has driven up premiums for Brazilian soybeans from $10 to $30 per metric ton. ASA has partnered with the U.S. Government for decades and spent considerable time and money to establish foreign markets for U.S. soybeans. China is perhaps our most impressive success story. Through a long-term and comprehensive program to demonstrate the value of soy-based feeds, ASA and the U.S. Soybean Export Council helped build demand for soybeans to the level Chinese imports are today. The value of U.S. soybean imports to China has grown 26-fold, from $414 million in 1996 to roughly $14 billion in 2017. According to a study for the U.S. Soybean Export Council conducted by economists at Purdue University, soybean exports to China could drop dramatically if China chooses to impose a 25 percent tariff on U.S. soybeans. The Purdue study projects that China soybean imports from the United States would fall by 65 percent, total U.S. soybean exports would drop by 37 percent, and U.S. soybean production would decline by 15 percent. It has been argued that trade in agricultural products is fungible, and that the loss of one market to a competitor will be replaced by other markets which that competitor will no longer sell to. In the case of soybeans, this argument fails to recognize that our largest competitor, Brazil, is continuing to expand soybean production on new lands. Brazil is already the world's largest soybean exporter, including to China, and would respond quickly in the event U.S. trade actions trigger retaliation against our soybean exports. In addition to the concerns of U.S. soybean farmers, other commodity producers are at risk of losing critical sales to a China market. As a result of the prospective U.S. tariffs, China has already retaliated against U.S. pork imports, and has threatened retaliation against sorghum, wheat, cotton, corn, and beef. Actions that threaten these markets have the potential to upend the farm and rural economy and put the livelihoods of farmers in jeopardy. As producers of the number one agricultural export, soybean farmers want to be an essential part of helping lower our trade deficit with China. We believe that expanding market access can play a vital role in increasing our agricultural trade surplus. We ask this Committee and Members of Congress to help allow soybean farmers to be part of the solution instead of collateral damage from a potential trade war. Chairman BRADY. Thank you, Mr.---- Mr. HEISDORFFER. Thank you for inviting me to testify. I look forward to answering your questions. [The prepared statement of Mr. Heisdorffer follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Mr. Heisdorffer. Congressman Dooley, welcome and please proceed. STATEMENT OF CALVIN DOOLEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN CHEMISTRY COUNCIL Mr. DOOLEY. Thank you, Mr. Chairman, and Members of the Committee. I represent the American chemistry industry in the United States, and thanks to the American shale gas revolution, in little over a decade, the chemical industry in the United States has gone from one of the most high-cost manufacturers of chemicals to today maybe the most competitive place to produce chemicals in the world. And the reason for this change is because of the increased supplies of natural gas, which our industry uses as an energy- intensive industry, which is very important to lowering our cost. But also, like flour is to a bakery, natural gas is our raw material in the chemical sector. This has resulted in an unprecedented level of new investment in chemical manufacturing in the United States. In the last 8 years, about $194 billion in new investment in chemical manufacturing has come into the United States. And importantly, over 62 percent of that is foreign direct investment. According to the Department of Commerce, in 2016 and 2017, almost 50 percent of all investment and manufacturing in the United States was accounted for by the U.S. chemical industry. And that expansion is providing for a foundation for a renaissance in manufacturing in the United States, and just with the chemical industry, it is going to create about 850,000 new jobs. Much of this new capacity is intended for export, reflecting the industry's belief that the United States is the most competitive platform to serve global markets. And today, American chemical manufacturers account for 14 cents of every dollar of exports from the United States. We have a--currently about $174 billion, and importantly, in 2017 we had a trade surplus of about $33 billion. And with this enhanced competitive advantage, we expect by the year 2020 that that will more than double to about $73 billion. The tariffs proposed by President Trump are intended to reduce our country's trade deficit, an objective that has some merit. But when we impose import tariffs in the hopes of protecting domestic industries that have struggled to be competitive in an increasing global marketplace, we invite retaliation that will inevitably be targeted at America's most competitive and most successful sectors, including chemicals as well as U.S. agriculture. Nearly 40 percent of the products on China's list of retaliatory tariffs are chemicals and plastics. The ACC estimates that approximately $5 billion in U.S. chemicals and plastics trade to China would be exposed to these increased tariffs. And a recent Brookings study determined that China's retaliatory tariffs would expose 2.1 million American workers to increased tariffs, and the U.S. chemical sector would account for about 40 percent of that 2.1 million. ACC shares President Trump's concerns about China's inadequate protections of intellectual property and forced technology transfer practices. We share the Administration's concern about China's refusal to appropriately address their policies that resulted in an overcapacity of steel manufacturing. China needs to open their market. U.S. consumers, U.S. workers, and the U.S. economy does not win if the tariffs we have proposed result in the implementation of China's proposed retaliatory tariffs that target those sectors of our economy that are global leaders. U.S. chemical manufacturers, U.S. energy producers, and U.S. farmers are competing and winning in the global marketplace. They are generating increasing trade surpluses, and we cannot allow them to become casualties of trade disputes. We urge the United States and Chinese governments to put aside talk of a trade war and stop the volley of potential tariffs. We believe the Trump administration should work with our allies across the world to demand that China responds and modifies their unfair and market-distorting trade policies. In the absence of a full withdrawal of the proposed Section 232 tariffs, we urge the Trump administration to modify the steel and aluminum tariffs to make countries' exemptions permanent, allowing associations to request exclusions on behalf of their members, allowing product exclusions to all companies rather than requiring on a company-by-company basis, and exempting key U.S. allies without conditions. Thank you for your time today. We are hopeful with the support from Congress, the Administration and the Chinese government will recognize that it is in the best interests of both countries to commit to a process that will produce mutually beneficial agreements before the proposed tariffs go into effect. [The prepared statement of Mr. Dooley follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Mr. Dooley. Ms. Wilson, you are recognized. STATEMENT OF ANN WILSON, SENIOR VICE PRESIDENT, MOTOR & EQUIPMENT MANUFACTURERS ASSOCIATION Ms. WILSON. Good morning, Chairman Brady, Ranking Member Neal, and Members of the Committee. My name is Ann Wilson, and I serve as the Senior Vice President of Government Affairs for the Motor & Equipment Manufacturers Association. Thank you for the opportunity to speak with you today. MEMA member companies manufacture motor vehicle parts, components, and systems for the automotive, heavy vehicle, and after-market industries. Vehicle suppliers are the largest sector of manufacturing jobs in the United States, directly employing over 871,000 Americans in all 50 States. Supplier jobs have actually increased by more than 19 percent in the last 5 years. MEMA supports the Administration's agenda to ensure free, fair, and reciprocal trade and a level playing field for all Americans. Our industry counts on a strong domestic steel and aluminum industry, and has long supported aggressive policies to protect intellectual property rights and enforce IPR laws here in the United States and around the globe, including in China. However, MEMA is very concerned about the adverse impact on manufacturing jobs relating to the Section 232 and 301 tariffs. I wanted to take the opportunity today to connect the dots with you. I know all of you have heard repeatedly that the vehicle industry counts on a global marketplace. But our industry also counts on regulatory and market certainty. Our industry buys the vast majority of its steel and aluminum domestically, but imports specialty materials as well as finished parts. Often, these parts are manufactured further and made into other parts, subcomponents, and systems by U.S. workers at facilities all over the country. This allows the U.S. supply chain, as part of the global economy, to be competitive and prosperous, creating hundreds of thousands of U.S. jobs. So today I brought one of those parts with me. This is a fuel injector. Fuel injectors are safety-critical parts that must be durable and dependable. The manufacturer of this particular part purchases most of their steel in the United States. However, this particular part requires specialized stainless steel for the housing, and that is only available today from a supplier in Germany. This specialty steel ensures the performance of the injector. The South Carolina plant responsible for this fuel injector makes 40 million of these a year, and employs 1,700 Americans. Being able to bring this steel into the United States is a cost-effective way and allows suppliers to produce and to expand in the United States, hiring U.S. workers, and making more U.S. investment. The steel from this housing is subject to the 232 tariffs. This manufacturer does not know if the EU will be exempt from the tariff, if their individual petition for product exclusion will be accepted, and how long these exemptions or exclusions will be in effect. This situation is repeated multiple times for our many companies. We have a member, a U.S. company, who must now pre- pay their importer a portion of $100 million of 232 tariffs in order to get their steel into the United States. This manufacturer makes 90 percent of the product line subject to the tariffs, in New York in a plant with 1,500 employees. The payment of this tariff puts profits, investment, and potential expansion at risk. Another one of our members' imports are potentially subject to the $7 million tariff because of the Section 301 decision. These imported goods support over 600 jobs in Illinois. I am here today because these examples are not isolated. Over the last week, our offices fielded calls from members with operations all over the country. Please understand, the tariffs will cost companies, but they will also cost our country. The price will be current jobs and future investment. Regarding the Section 232 tariffs, MEMA has urged the Department of Commerce to simplify the process--develop clear procedures and processes for product exclusion applications. Also, we have urged a regular review of the impact of the tariffs on the consuming industries in the U.S. economy. As to the Section 301, we have been heartened by United States--by China's recent announcement regarding excluding motor vehicles from potential retaliatory actions. We urge the Administration to continue to prioritize a negotiated resolution of the issues before imposing broad-based tariffs. The imposition of these tariffs prior to bilateral discussions between the United States and China will hurt our industry, job creation, and the U.S. economy. We agree with the Administration and many of you that the United States must take strong action to protect our economy and our Nation's work force. However, we believe that the recently-implemented and proposed tariffs will have a detrimental impact. I look forward to your questions. [The prepared statement of Ms. Wilson follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Ms. Wilson. Mr. Paul, you are recognized. STATEMENT OF SCOTT N. PAUL, PRESIDENT, ALLIANCE FOR AMERICAN MANUFACTURING Mr. PAUL. Thank you, Chairman Brady, Ranking Member Neal, and Committee Members. On behalf of the Alliance for American Manufacturing, we appreciate the opportunity to testify. There is no disagreement that China cheats, which is why these tariffs are now on the table. The testimony by Mr. Newport on steel as well as the Section 301 report prepared by the USTR on intellectual property rights violations both ably demonstrate that. The United States has only ever made progress with serial trade cheats through extraordinary pressure applied by Congress and the Administration, including but not limited to the threat of tariffs. So now is not the time for anybody to demonstrate to the governments of China, Russia, or other mercantilist nations that our resolve to eliminate unfair trade practices is anything less than strong and unified. AAM supports the trade actions on steel, aluminum, and intellectual property. We view the possibility of tariffs as a necessary step to achieve real progress, which includes reforming anticompetitive practices and reducing market- distorting behaviors. Withdrawing the threat of tariffs without achieving results would be tantamount to waving the white flag of trade surrender, signaling to China and other trade cheats that there will be no consequences for predatory trade behaviors. If a negotiated solution with specific disciplines and automatic enforcement provisions can be agreed to, then and only then should we look at lifting tariffs. Otherwise, we would be abandoning the best leverage we have had in years. On steel and aluminum, we are already seeing positive results, with nearly 3,500 American jobs announced and new cooperation from trade partners like South Korea and Canada. JSW USA plans an expansion of its steel plant in Baytown, Texas, a move that will add up to 500 new jobs at an average salary of $65,000. New steel and aluminum jobs have also been announced in Illinois, Ohio, Florida, Missouri, Indiana, Kentucky, and elsewhere. More broadly, manufacturing contributed a whopping 21 percent of all private sector job growth last month when the tariffs kicked in, and employment in metals-consuming industries rose substantially. Internationally, we now see allies joining the United States to combat unfair trade practices. Canada is now working to strengthen its anticircumvention and evasion provisions. The EU is ready to adopt safeguards on imported steel and aluminum. The agreement with South Korea to better level the playing field on steel and autos is also an encouraging sign. Chinese President Xi Jinping has again promised a new phase of opening up and allowing more imports. But after years of China making unkept promises, the United States must impose a sustained and credible threat of consequences should China, yet again, fail to deliver, particularly with Made in China 2025 looming on the horizon. Meanwhile, the product exclusion process under Section 232 should mitigate impacts for metal users. Let's acknowledge that the way in which this Administration is delivering tariffs is far from perfect. The Administration waited too long to conclude the Section 232 process. Steel imports soared over 15 percent in 2017, putting further pressure on an already-stressed sector. Mixed signals on timing, scope, and applicability put more emphasis on the tactics than on the overall strategy. Mr. Chairman, in closing, an observation: the three-legged stool of trade policy--expansion, enforcement, and adjustment-- was established through the Trade Expansion Act of 1962, and it provided a solid foundation of progress for our Nation. But enforcement and adjustment have been largely neglected as trade and imports have dramatically expanded. A growing body of evidence shows Chinese imports were a major cause in the loss of nearly one in three factory jobs since 1998. Trade-impacted workers are unlikely to ever find a better job than the one they lost, and many will never work full-time again. From the perspective of these workers, our Nation has been in a trade surrender for decades. Americans do not view the Administration as having fired the opening shots of a trade war. We should not be afraid to enforce trade laws. We have the leverage to do so. The tariffs, many of which are still aspirational, represent a fraction of our $20 trillion economy. Goods exports to China amount to less than seven-tenths of a percent of U.S. GDP, while more than 20 percent of China's exports head straight to the United States. If China will not play by the rules, it should lose some access to our markets. [The prepared statement of Mr. Paul follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman BRADY. Thank you, Mr. Paul. Mr. PAUL. Thank you, Mr. Chairman. Chairman BRADY. Thank you all for your excellent testimony. We will now proceed to the question and answer period, and I will begin. Mr. Kennedy, your company employs 350 people in Splendora, a town of less than 2,000 people. It would be hard to overestimate just how important your company is to that community. Your family, your father, your business has a wonderful reputation, and you took it and expanded over many years of work over and over again. You have been involved in the community, you are involved in the Chamber of Commerce, the Rotary Club, and you have a heart for the poor, supporting schools in Guatemala that help Mayan children who would not get an education get an education. So you are Main Street, America. So recently, Congress, working with President Trump, redesigned the tax code, lowering the rates for businesses to the lowest in history and redesigning the tax code so our local businesses could compete and win anywhere in the world, including here at home. So first, can you describe the effects of the tax cuts on your business and the demand for your products? Mr. KENNEDY. Sure, thank you. The tax reform was good because one, it created certainty. I mean, it allowed us to invest in equipment and we had plans for spending a lot of the money that we were able to make. We were already competitive before the tax reform against foreign competition. All the tax reform did was make us even more competitive. Like, we were just planning and setting on winning more work, creating more jobs, and we had the opportunity to do that. Now, the tariffs, on the other hand, I think for us, specifically, more than offset that. Chairman BRADY. Yeah, let's talk about that a second. So look, it is not enough to merely buy American, we have to sell American all throughout the world. The tax code was designed to do that. You, in your testimony, said tariffs were effectively taxes that are paid by U.S. companies, and ultimately, workers. So what was the impact of the tariffs? How did they undermine any improved competitiveness from the tax cuts? Mr. KENNEDY. First of all, they created a lot of uncertainty in the market. Nobody invests when they do not know where the market is going to go. I mean, it completely halted uncertainty. What they are certain about is that they can go to our foreign competitors, manufacturers, and ship the stuff in at the same price they could before without a tariff. For us, they do not know where our pricing is going to go. We have already told them it is higher. We have gone back to every customer to say, ``Sorry, we are paying 40 percent more for steel, we cannot bear that cost.'' And our customer says, ``Well, we cannot bear that cost either.'' You know, the tariffs in some ways are good, and I hear across the panel they are--the attempt is to punish China, but, you know, this is not just punishing China. If you want to punish China, make it surgical. Punish China, we have a lot of free trade--fairly-traded steel that does not make its way here that we cannot get our hands on, and if the U.S. steel producers--which we need, we love U.S. steel producers--if they cared as much about American jobs, why does the price increase 40 percent? The tariff was only 25 percent. But they clearly took advantage of a market because of demand, everybody tried to buy their steel at one time, all of a sudden there is no imports coming in the water, and, you know, price gouging--there is laws against price gouging in many scenarios. But in this instance, we are doing it to our own manufacturers. And, you know, I do not necessarily blame all the mills for trying to recover some of the losses that China has put on them unfairly. I just think there is a more tactical, surgical way to address that. Chairman BRADY. So your point is target the unfairly-traded products---- Mr. KENNEDY. Right. Chairman BRADY [continuing]. And leave the fairly-traded products---- Mr. KENNEDY. And if you are going to do the tariff, include the whole chain. Do not create a giant loophole that makes it easy for these guys to self-fabricate their steel. Chairman BRADY. A final point. Do these tariffs help you sell more made-in-America products overseas, or less? Mr. KENNEDY. No, they absolutely hurt us. I mean, they do not just not help us, they hurt us. Chairman BRADY. Okay. Thank you. Mr. Neal, you are recognized. Mr. NEAL. Thank you, Mr. Chairman. We all acknowledge the complexities about how steel and aluminum tariffs will work and how they might become effective to achieve goals. But in some ways, we are still not sure that the Section 232 actions really are to play out, because country exemptions are still being negotiated and product exclusions are still being requested, and the Administration has made clear that it is reserving the right to revisit the overall tariff levels of 10 and 25 percent for aluminum and steel. And I think there is an opportunity to hear from our witnesses about these complexities. Mr. Paul, with respect to both the steel and aluminum tariffs, could you talk about why the next steps that the Administration takes on country exemptions are critical to whether or not these tariffs will be effective in achieving the intended goals? Mr. PAUL. Thank you, Mr. Neal, and I think that is the appropriate question. There has been a focus on China, and I will say people rightly point out that China is our number 11 importer of steel. But China's market-distorting behavior has an impact, a dramatic impact on global steel markets, which is why I think the Administration came forth with a global solution. The direction I think that we are headed in, if we look at South Korea, are negotiated agreements, particularly with trading blocs like the EU, that look at maintaining a level of market certainty in the United States that will allow the industry to recover some lost import market share. As Mr. Newport mentioned, imports are almost at an all-time high in the United States as a percentage of our market share. Capacity utilization for companies is still only at 75 percent, far below the level needed to assume any sort of sustainability to provide for our national security needs. What I would like to see as we move forward is both an agreement by our trade partners to approach China through the WTO and other means to essentially quarantine its unfair trade practices, because this is where most of it is originating from. The reason why some other nations have been included in this is that Chinese steel is transshipped; it comes through Vietnam, it comes through Korea, it comes through Malaysia, it comes through Indonesia. And we need commitments from these trade partners that they will not allow Beijing to undermine market disciplines. China has refused to operate by market disciplines in steel and aluminum since it joined the WTO in 2001. There is no single WTO case that any member could take against China that would change this. It is going to take a dramatic effort. I think the Administration has started the ball rolling. I want to see it keep going in the right direction. Mr. NEAL. Thank you, and as we hear from our witnesses that are involved in the product exclusion process, especially since the Department of Commerce has already received more than 800 specific exclusion requests, I think we might hear from Ms. Wilson, if you could speak to that issue. Ms. WILSON. Thank you, Congressman. So we represent a lot of what are called tier-one suppliers. They are very large global companies, but we have 1,000 members. A lot of our members are smaller, maybe have one or two manufacturing facilities in the United States. We have been very concerned, first of all, the product exclusion process is not necessarily transparent. There have been some changing rules on it, and it is hard for those suppliers to understand exactly how they get into the process, and that is part of the 800 applications. We would like to see, I think as Mr. Dooley mentioned, the ability to have a product exclusion over a wide range of products so that, you know, competitors do not have to go in multiple times asking for exclusions for the same product that is coming from the same place. We also would like to be able to--for our trade association to be able to apply for an exclusion, because as you can well imagine, many of our manufacturers do not have trade staff. They do not have legal staff. They are going to have to pay for that to be able to file for the exclusion. We also think a sunset would be important, or at the minimum, a Committee like this to be able to regularly review this and see what this is having an impact on in the consuming industries. And we would like to see the country exclusions to include things like Switzerland and Japan. We worked with Congresswoman Walorski, we really like the fact that we have the duty drawback piece. But we would also like to see--like you said, there are over 800 applications. In my understanding, as of this morning, about 50 of them are public. So we would like to see the duty drawback come from the time of applying for the exclusion, rather than the time that it is made public. Because, you know, a month of duties could be a lot of money for a lot of these companies. So we think there is some room for improvement, but we really have to help focus in on how they do it. I was real interested in talking about, you know, what we also have for finished product. We have things like aluminum wheels and bearings, they are subject to the tariff. That is difficult. Mr. NEAL. Thank you, Mr. Chairman. Chairman BRADY. No, thank you, Mr. Neal. Mr. Johnson, you are recognized. Mr. JOHNSON. Thank you, Mr. Chairman. Let me begin by saying I strongly oppose the tariffs on steel and aluminum. And as I have stated before, my primary concerns are that these tariffs pose a serious risk to our economy and could trigger a trade war, and they may damage our relationship with our key allies. I was, however, glad to see that President Trump has temporarily exempted a number of our key trading partners and allies from these tariffs. But make no mistake, the effects of these tariffs are wide-ranging and will affect folks across our Nation. It is not just affecting business. Collin College in my district serves about 53,000 students each year and offers more than 100 degrees and certificates. In fact, the college is planning a $600 million building program that will be completed over the next 7 years and will create nearly 400,000 square feet of new classroom space. And the project will allow the college to provide high-quality education to more folks. But Collin College is now concerned by the tariffs on steel and aluminum, due to the increased cost of construction materials. Dr. Pepper is another constituent of mine, which is headquartered in my home town of Plano, Texas. And I have heard from this company that they are concerned by the higher cost of aluminum used to make cans, potential retaliatory tariffs on other materials, and the impact higher costs will have on consumer consumption of their products. Mr. Kennedy, as a fellow Texan, I would like to welcome you to this Committee. And you know Texas leads all States when it comes to importing steel and aluminum products, so that is a big deal, it could really hurt Texas. Mr. Kennedy, can you tell me about how tariffs on steel and aluminum have impacted jobs and exports at your company? Mr. KENNEDY. Sure, thank you, Mr. Johnson. As I had, kind of, mentioned before, we compete directly with companies in Canada and Mexico, and they are not having to pay tariffs. So at the end of the day, they are able to fabricate and manufacture their goods, modify the steel to create a product, and sell it directly to our customers. The structures that we make are large enough that it makes sense to be able to ship them. There is a lot of labor that goes into them, and we have worked extremely hard over the last decade implementing technology-efficient processes in our manufacturing so that we can out-compete just about anybody when it comes to labor efficiency. You know, people say that American manufacturers have a hard time competing with labor. Maybe from a cost-per-dollar standpoint of the wages paid, because we pay decent wages here. We have made up for that with efficiency. But that efficiency goes out the door if our competitor has a 40 percent price advantage on material costs. And, you know, I can sympathize with our mills, but at the end of the day, we buy from the mills. And if we are not buying the U.S. steel mill-produced steel, then how are they--how are their jobs, how are all these jobs they are talking about creating, how are they going to be sustainable? You know, they are sustainable right now because the mills are producing at capacity today. Like, today, you have to get in line. But that is because everybody put their orders in right away. We are one of those. We had to, the costs were skyrocketing and we have projects that are due. So we had to buy right away and created a temporary demand. But we cannot pay those prices, and our customers will not pay them. Thank you. Mr. JOHNSON. Thank you, I appreciate that. Thank you, Mr. Chairman, I yield back. Chairman BRADY. Thank you, Mr. Johnson. Mr. Levin, you are recognized. Mr. LEVIN. Thank you, Mr. Chairman. Welcome to the panel. You effectively reflect the present clash of different interests in approaches to trade, that is very clear. For decades, our Nation's trade policy has been handicapped by allegiance to theories ill-equipped to respond to the realities of rapidly-advancing globalization. Japan used a tightly-knit economic structure, operating in its closed market, and manipulating its currency, to take full advantage of the open U.S. market with only a lurch in U.S. policy or action here and there. NAFTA represented the first major individual trade agreement with a developing nation, with a very different, deeply-imbedded, low-cost labor structure and woesome environmental standards. But the only safeguard was a non- enforceable side letter. And when China responded to its entry into the WTO with increased, huge governmental expenditures with state-owned enterprises and major currency manipulation, the United States failed to use the surge provisions and the annual review provided in PNTR, and engaged in innumerable discussions, but no actions on currency, action that was opposed by the majority here. There were some successes that changed the May 10 provisions on labor environment in retention of AD/CVD, a form of tariffs, which we fought to retain in the Uruguay round, but it has turned out not to be enough. Prevailing doctrine often became dogma. Essentially, alternatives for action were dismissed as protectionism. There was little acknowledgement that the notion of comparative advantage could be comparative disadvantage. Now these chickens have come home to roost. We are caught in years of inaction and ineptitude, and international trade policy with important roots after the Second World War came too often rigid and insensitive on steel and aluminum, I urge. It means using proposed tariffs as a way to achieve a long overdue global solution to a long-known problem of a huge glut caused mainly by China. Also it means addressing at long last China's perpetual mistreatment of intellectual property. On NAFTA, I urge we negotiate it. But only if Mexico effectively addresses industrial policy and practices. Keeping labor costs cheap at all costs, with workers without any rights and take-home pay at $1 or $2 an hour, not only keeps Mexican workers from becoming part of their middle class, for American middle-class workers, it is impacting their jobs and suppressing their wages. That issue has been acknowledged by the Administration, but so far, the search has been in every which way except the only way that can work. I want to point now, if I might, to what you said, Mr. Paul. And I urge we all take this seriously. On page one, you say, ``We view the threat or imposition of tariffs as a necessary step to achieve real progress, which includes reforming anticompetitive practices and reducing market- distorting behaviors,'' and later on you talk about the need for a global solution. So let's all try to focus on that for one second. A global solution. You say tariffs are necessary as a step in that direction. Right? Mr. PAUL. I do, Mr. Levin. Yes. Mr. LEVIN. And so I wonder if anybody here disagrees with that? You know, you do? Cal. Mr. DOOLEY. Yeah, I would just suggest that when you have the United States taking a unilateral action in the implementation of tariffs, now that invites a retaliation targeted at the most competitive sectors of the U.S. economy-- -- Mr. LEVIN. Okay, but let me---- Mr. DOOLEY. Just excuse me, if I can respond to my question. Now they are---- Mr. LEVIN. No, but you said a caveat---- Mr. DOOLEY. Now they are imposing retaliatory tariffs not against French wine makers, they are imposing tariffs---- Mr. LEVIN. Yeah, I understand that. I understand that. But you need to--and we have talked about trade for years--tell us how we are going to reach a global solution on a glut of Chinese steel that has cost American jobs. You need to answer that. Mr. DOOLEY. We do, and it takes---- Mr. LEVIN. You do not. Mr. DOOLEY [continuing]. Leadership to engage with our allies---- Chairman BRADY. Thank you all, time has expired---- Mr. LEVIN. We have been engaging for years, Mr. Dooley. Chairman BRADY. Thank you, all time is expired. Mr. Nunes, you are recognized. Mr. NUNES. Thank you, Mr. Chairman. I want to first welcome Mr. Dooley here, who is from the San Joaquin Valley. Glad to have you back, former Congressman, long-time Congressman. Thanks for being here. So one of the things that I--I think we have to proceed very, very carefully as it relates to these tariffs that are being imposed. Most people in Congress agree with the Administration that China has to be taken on for a number of reasons, and I could go off, number off, tick off a whole list, but I think I will focus mostly on the stealing of intellectual property that they continue to engage in. So we need to proceed very, very carefully as a country as we implement these tariffs, and be very, very careful that we do not have unexpected results from taking rash or quick decisions. So one of the concepts that I have talked about in the last trade hearing that we had was maybe focusing on a few Asian countries. The Administration has expressed an interest in doing bilateral agreements, and perhaps there are some Asian countries that we could focus on that were part of the TPP agreement that--where a lot of the negotiations have already taken place. I have talked about Vietnam and Japan as being a couple of those. There is another country, the Philippines, that wasn't directly involved in those negotiations. But I think that is another opportunity for us. They would open up a lot of market, so at the same time you are putting tariffs on China, you would be trying to open up markets as quickly as possible with allies who could take some of the American products. With that said, and I want to leave this up to the whole panel, but Mr. Dooley, you have been around these trade issues for a long time, and this maybe is not in your wheelhouse exactly, but if you could talk about maybe some of your experience in Asia and some of those opportunities that we may have moving forward in your mind, you know, where do you see the best opportunities for the United States where we could move the quickest to open up, you know, sizeable markets that would make a difference to the United States? Mr. DOOLEY. Yeah, thank you, Congressman Nunes. I think you referenced the Trans-Pacific Partnership. I mean, here was an example where the United States was engaged with a number of other Pacific Rim countries in a collective effort to try to advance the opening of markets. In large part, that--if you were trying to address some of the actions of China, it was pulling that group of countries together that was going to be one of the most effective ways to achieve that outcome. So we look at, you know, if you look at the rapid growth and the increase in the per capita GDP in the Asia region, this is going to be one of the most rapidly-growing consumer markets that will provide tremendous opportunities for chemical manufacturers, other manufacturers, and certainly U.S. agriculture. It also gives us the opportunity to engage in the issue of transshipment of products that Mr. Kennedy talked about. And it also gives us the opportunity to address, I think, again, a collective response to respond to some of the intellectual property practices that China has been taking advantage of that have--we have member companies that have really been harmed by that. Mr. NUNES. So Congressman, if I may ask, of those--we know that the TPP, for now, has been shelved, but a lot of the negotiations have taken place. I mean, a lot of them, and the deal was practically in its final stages. For your industry now that you are involved in, which of those countries, if you could pick a handful of them, which of--could you name two or three or four that might be beneficial if we were going to explore a bilateral arrangement? Mr. DOOLEY. Yeah, well it is hard for me to respond to that directly. I mean, we are concerned that if you try to engage in an--you know, strictly in bilateral negotiations, it really gets very, very difficult in terms of, you know, capitalizing on the real opportunity we have to maximize our competitive advantage. When we take a regional approach, you know, that is going to be much more effective in, again, in meeting the--I think the opportunities that our, you know, most competitive industries have to address. I will get back to you with the specific---- Mr. NUNES. Yeah. Mr. DOOLEY [continuing]. Countries of---- Mr. NUNES. And I am out of time, but maybe for the rest of you, if you could put any thought into this of--in your particular industries, I would be interested to have that for the record. Thank you, Mr. Chairman, I yield back---- Chairman BRADY. Thank you, Mr. Nunes. Mr. Lewis, you are recognized. Mr. LEWIS. Thank you, Mr. Chairman. Let me thank each and every one of you for being here. Mr. Paul, how important is it that we work with our friends and allies who share our concerns and our values? Mr. PAUL. I think it is critically important that we do that, which is why I am pleased with respect to the Section 232 process on steel and aluminum, that processes were set out for Canada and Mexico as well as the EU, Korea, Australia, Argentina, and Brazil to provide some level of exemption while specific details could be worked out. If we look to Korea as an example, where I think that I--at least from my perspective, the U.S.-South Korea Free Trade Agreement was inadequate to meeting the needs of domestic workers in manufacturing. We were able to use the process under Section 232 and the country exemption to make some progress with respect to balancing that trade relationship. South Korea agreed to limit its shipments of steel--much of which originates in China--to the United States at 70 percent of its recent levels, an effective quota; agreed to some additional market access for automobiles, although I do believe we have a long way to go there; and some recognition of currency. Again, I think we have a ways to go there. But I do think that this process can be useful in engaging our allies both to apply pressure to the overcapacity issue, most of which emanates from China, as well as to settle some-- what I would call irritants that we have in our own trade relationships with these nations. Mr. LEWIS. Mr. Chairman, I would like to yield the balance of my time to Mr. Pascrell. Chairman BRADY. The gentleman controls the time. Mr. Pascrell. Mr. PASCRELL. Thank you, Mr. Lewis, and thank you, Mr. Chairman. I will save my comments for later. I have some questions, though. It struck me that it depends on what part of the country you live in that really provides you with the impetus on what you feel and what you think about tariffs and trade, and which industries are protected, and which industries are not, winners and losers, like anything else. So I approach this, looking back over the last 20 years, the tariffs can be a tool, but I think we make a mistake when we use them as a weapon. I have a question. Mr. Dooley, in New Jersey, they have over 100,000 people that work in our chemical industry. These companies employ a lot of people, spend a lot of money, and those employees spend a lot of money. Recently, I visited one of these companies in my district, in Lyndhurst, New Jersey, Sika--S-i-k-a. They use chemicals in the manufacturing of products that go into our roads, our bridges, et cetera, et cetera. They are probably one of the top three companies in the country that do that. Can you explain how the chemicals in the tariff of 301 that we are talking about here, on that list, impact companies like Sika in my district? Mr. DOOLEY. Congressman Pascrell, I would maybe ask you to review the Brookings Institute study, I think it just came out yesterday or a couple days ago---- Mr. PASCRELL. Yes, it did. Mr. DOOLEY [continuing]. Where they identified those sectors of our economy that would be most impacted or most exposed to the increased tariffs. Number one on that list was plastics and chemical composites. Many of those would probably include the products that Sika is putting into the marketplace. So with that implementation of those tariffs, any market opportunity they had to export into China would adversely be impacted and would be able to create a market opportunity for other companies that were operating in other parts of the world. Mr. PASCRELL. So we are not debating here, are we, Mr. Dooley, whether or not China has been a bad actor. Mr. DOOLEY. Absolutely. Mr. PASCRELL. I do not think anybody, Democrat, Republican, Independent, would conclude from what--looking at their behavior that they need to, in some way, be impacted. And we need to think about that. Mr. DOOLEY. Absolutely. Chairman BRADY. Thank you. Mr. PASCRELL. Thank you. Chairman BRADY. All time is expired. Yes, Mr. Lewis, thank you. Mr. Reichert, Chairman of the Trade Subcommittee, you are recognized. Mr. REICHERT. Thank you, Mr. Chairman. I want to thank you all for being here today and for your testimony. And I would especially like to thank John Wolfe, Chief Executive Officer of Northwest Seaport Alliance, for joining us all the way from Washington State. I share the Administration's goal of addressing unfair trade and ensuring American workers and businesses can compete on a level playing field. But as we evaluate strategies to combat China's cheating, we need to put all American workers, all businesses first, and put forward the strongest approach. I think our response is strongest if we work with our global partners. And I thank the Chairman for holding this very important hearing so that we can consider the impact of both 232 and 301 tariffs on the consumer, on the worker, on small business owners, as well as on all the jobs that are tied to two-way trade. So it is not just about the direct importer, direct exporter; it is about the ripple effect across our country and our economy. It is about a family that is facing higher prices at the store or the aerospace employee putting the finishing touches on an airplane, the cherry grower who relies on sales to Chinese customers, and the longshoreman working at the port. In Washington State, we often refer to ourselves as the most trade-dependent State, highlighting the fact that we have at least 40 percent of our jobs directly tied to trade. And we do this because of examples like Mr. Wolfe has shared with us today. So my first question is to Mr. Wolfe. Can you describe the importance of your operations not just to Washington's economy, but to the entire country as a whole? Mr. WOLFE. Thank you, Congressman. As you mentioned, we consider ourselves not just a gateway for the State of Washington, but for many regions throughout the United States. Some 60 percent of the cargo moving through the State of Washington moves inland to other markets, and the reverse is true for exports. It is also important to note that there is a direct correlation between imports and exports, and that the trade supply chain is somewhat complex, yet intertwined. So if we take steps that damage our export opportunities, we can be sure that that will impact not just the State of Washington and the important jobs--some 40 percent of the jobs in the State, but certainly throughout the Nation. So as it has been mentioned before, we support the notion of holding our trading partners accountable to fair trade. Yet, I think we need to use caution in terms of that tool that we talk about, tariff, to apply to fair trade. We would rather see the Administration work closely with a valued trading partner, China, one of our most important trading partners, to address some of those issues that we are talking about today. Mr. REICHERT. And as the Administration receives and evaluates comments on the Section 301 tariffs, in your view, what is the most important message that you hope the Administration hears? Mr. WOLFE. I would say, that building upon what I have shared about the connection and correlation between imports and exports, if we damage our import opportunities as a result of trade barriers or tariffs, we damage our export opportunities. And there are small businesses that are seeking global markets. And if they do not have the equipment, the vessel space, the infrastructure to execute on their foreign trade strategy, then we limit the job creation and the benefits of free trade or fair trade throughout the Nation. So I would say that the most important thing is to understand that correlation between imports and exports, and make sure that we take a laser focus on those issues where we feel like there is unfair trade practice. Mr. REICHERT. Great, thank you. Mr. Heisdorffer, I am hearing from my community, they are concerned about losing market share. And I am assuming you are, too. If we do that, and China removes tariffs and we are back in the game again, do you expect to gain those market shares back? Mr. HEISDORFFER. At this point, yes, I think so if this is rescinded right now. Is that what you are talking about? Or---- Mr. REICHERT. Well let's say it goes on for a while, and finally China decides to do away with the tariffs, then we have a market share we have lost. How hard is that to get back? Mr. HEISDORFFER. That is very hard to get back, sir. Those market shares will probably go to South America. South America has much more land that can go into production. They are sitting there just--I will be loving every bit of this--you know, where we are in this situation. But right now---- Chairman BRADY. Mr. Heisdorffer, I apologize. Time has expired. I hope we will be able to get back to that answer, okay? Mr. Doggett, you are recognized. Mr. DOGGETT. Thank you, Mr. Chairman. Mr. Chairman, as you know, you and I are not regularly in agreement on issues before this Committee. But I think insofar as your opening comments emphasize the importance of focusing on the predatory practices of China and on supporting a targeted approach where we are not going it alone, but working with our allies, that you have it about right. The main problem I see in the immediate future there, since we are governed on everything from immigration to whether the Special Counsel's future is preserved by the majority of the majority, that a majority of the Republican Caucus has not joined your letter to the President, including one-fourth of the Members of this Committee. And I would hope that our witnesses will focus their attention while they are here in Washington on those many Republicans who have not joined that targeted approach, or who are, just as is so often the case, cowered by whatever tweet the President puts out. I would ask our panel members when Secretary Ross was here recently. And it is disappointing we do not have any Administration official or any real China expert on the panel here this morning to discuss what the Administration's policy is. But when he was here on other matters, I asked him about the third alternative, the targeted approach, that he advances. This was one of the three alternatives that he presented to the President on steel and aluminum--an approach that would have targeted the tariffs on China; on Russia, notably; and on some of the countries like Vietnam that are major transshipment points. And I really couldn't get any explanation as to why he did not--why that approach, that alternative was rejected by the White House and instead we took the, kind of, shotgun blunderbuss approach to cover everyone initially. Have any of you or your associations been advised of why the targeted approach against Russia and China and the other countries that he proposed was not utilized? Mr. Newport. Mr. NEWPORT. Yes, I would comment on that, and I believe the reason it wasn't taking that approach was because of the ease that we have seen of the--if we targeted, say, China, they have figured out how to cheat the system and how to beat it. So, you know, we have had trade cases and other things in which we have gone against China, and they have figured out how to go through other countries. So it will just appear elsewhere if you only picked a handful of people. And I think if you look at--there were three alternatives put out there, the President took option one. But with the exemption process that is being discussed, you are really falling into option two. Mr. DOGGETT. Well, he took an approach that covered everyone. He gave a bit of uncertainty to countries that we actually have a trade surplus with, if that is to be the measure. And it seems to me that in the list in option three, they had a number of the transshipment countries, and that the focus there would have gotten us a better result. In fact, an example of that is what has happened with Russian aluminum. For other good reasons, as you probably know, very belatedly, the Administration finally singled out the aluminum magnate from Russia that provides most Russian aluminum, and since singling him out with sanctions, Rusal's shares have lost half their value and the London Metal Exchange has said it will not stock Rusal metal. And that is a unique situation, but it seems to me to show the value of targeted sanctions rather than just applying it to everyone. Let me ask you in the minute that I have left if any of you can tell me, since we do not have an Administration official here, exactly what the Trump trade policy is on steel and aluminum? Or China generally, or anything--any aspect of it, if you could describe---- Mr. PAUL. Mr. Doggett. Mr. DOGGETT [continuing]. What the policy is. Mr. PAUL. Yeah, just with respect to steel--and I think it is worth reading the Section 232 report, that there is a--and Mr. Newport described this in his testimony, that there is a gross amount of overcapacity in the system that leaves both--it impacts from China, from transshipments from China, and then anticompetitive practices that result from oversupply that needs to be addressed that is having a material impact on our ability to supply for our own national defense. In addition to Mr. Newport's example, there is the example of armor plate. And there is only a handful of makers of that left. And so I think with respect to steel, it is this ability to provide some market certainty for domestic steel makers to provide for our national defense. Mr. DOGGETT. Thank you---- Chairman BRADY. Thank you. Mr. Roskam, you are recognized. Mr. ROSKAM. Thank you, Mr. Chairman. Mr. Kennedy, one of your opening sentences resonated with me. I represent suburban Chicago, and I have a lot of manufacturers, and very sophisticated manufacturers at that, many of them manufacturing five times to the right of a decimal. And I think the sentence that I--it was in your first paragraph, and I will paraphrase it. What is presented as a tariff on foreign steel has become a tax on U.S. manufacturing. And that is what I am hearing from my constituency. So I was out recently at a company in my district, they import specialty steel that is not available here domestically. They showed me a letter and, you know, here is the letter, it is from their supplier, that says, basically, ``Not it.'' This 25 percent is on you, you make the point that there is an exacerbating impact of that, and it is not just the 25 percent. What I wanted to explore is something I think you talked a little bit about, but maybe to press it a bit more deeply, and that is that the impact of the tariffs could have this really perverse effect of creating an incentive for more imports of finished products that are created outside the United States. You mentioned, you know, the Chinese doing an end-around and doing, sort of, de minimis changes to steel. Are you seeing that with your peers? Can you just give us a little bit more color commentary on that? Mr. KENNEDY. Sure. Absolutely, thank you, Mr. Roskam. Well, we see it every day. We were talking about the energy expansion and the building. You know, these LNG terminals on our coast, already half the steel comes from China. I mean, we are talking about billions of dollars of manufacturing and fabrication, and right now, the U.S. fabricators like myself and even some companies larger than us, we provide the other half. You know, the long-lead items they can get from China because it is cheaper. We have a geographic advantage, we have a time--a lead time advantage, we are right here. What is happening now is look, they can just fabricate all the steel. If I have to pay 40 percent more for my steel--and steel makes up half the cost of our end product--then China can just fabricate all the steel. And they send it through Malaysia, they send it through Singapore, they send it through Indonesia. And at the end of the day, I do not understand the inability for a targeted approach. We have to provide traceability on our steel. Because our customers want to know that the steel was made to a certain quality, a certain strength. Steel has a variety of grades and strengths. There is not one carbon steel out there. So I do not know why we cannot have a directed, targeted approach. We should force our Malaysian exporters, or force the other countries who are our trade partners, to show where they got the steel. It is easy, they come with MTRs, material traceability reports, which show up on every piece of steel. We can enforce that if we want to, we can target where the punishment goes. Right now, you know, we are talking about picking winners and losers. And look, if we are picking losers, let's pick the people--let's punish the people that need to lose. Right now, we are picking winners and losers within the United States. We are picking winners in one industry and losers in a lot of other industries. Mr. ROSKAM. Let me shift gears a little bit and switch to a process question now. We have heard that there is going to be, you know, the ability to get exclusions and so forth. I will go back to the company that I visited. They are now in the process of trying to navigate through petitioning for 200 different products that apparently they have to--you know, submit this and have this big review and so forth. Do you have any insight on that? Do you have that range of products? Is this not a problem for you, is this easier for you? What is your experience? Mr. KENNEDY. Well I can only really speak for my business, but I would imagine it is similar in that really what it is creating is uncertainty. I mean, timing is important. Mr. ROSKAM. Right. Mr. KENNEDY. You know, right now, we build drilling rigs. That is one thing that we compete against Canada for. Once we lose market share, I have 200 employees that touch a rig from the time it starts, until we buy the steel the time it finishes. Well if we lose that portion, and I lose those employees, we have spent years building up a manufacturing process with training personnel, getting people with the experience they need to build our products, to be better at building them than our competitor. When we build something for the first time, it is always worse than when we build it again. We get better and better at it. When we lose all of our intellectual property, which is our people, when we lose that temporarily, we may never get it back. Mr. ROSKAM. Yeah. That is good insight, thank you, Mr. Kennedy. I yield back. Chairman BRADY. Thank you. Mr. Thompson, you are recognized. Mr. THOMPSON. Thank you, Mr. Chairman, and I want to thank all of you for being here today telling us how these ongoing trade wars and potential for trade wars are affecting your particular sector. Hearing from you, I cannot tell you how important it is for us to hear from you, and how important it would have been had the President heard from you prior to launching his trade war efforts. I have voted for trade agreements, and I have voted against trade agreements. And I am not opposed to tariffs. I think they can be a very legitimate tool for trade when they are used strategically. But this Administration is using anything but strategy. The trade policies, they are all over the place. First, they want to renegotiate NAFTA. Then, they say they are going to walk away from NAFTA. First they say trade wars are good, then they say there are no trade wars. One thing is for sure, this type of Washington talk is bad for producers and it is bad for consumers. Just look at my State of California, in China's retaliatory tariffs. Ninety percent of California's top fruit and nut commodities are being hit. The Chinese already had a 48.2 percent tariff on wine, and as Congressman Dooley notedly pointed out, that when they put tariffs on wine, it is not against everything that is competing with the United States. Now, as a result of the President's trade war, we are facing a 67.7 percent tariff on wine. This is unsustainable, and it has already had major negative effects on orders in my home district. By not having a cohesive trade agenda with consultation from stakeholders and from Congress, this could mean a major loss of jobs across many sectors. The California wine industry employs almost 800,000 people nationwide. How many of those jobs are going to be lost because of this tariff trade war nonsense? I would hope that future hearings will focus on smart trade policies that will promote strong economic ties and building American companies and producers. So, Mr. Chairman, I have two statements from the California Wine Institute that I would like to ask unanimous consent to have placed on the record. Chairman BRADY. Without objection. [The submissions for the Record of Hon. Mike Thompson follow:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. THOMPSON. And I would like to yield the balance of my time to our Ranking Member on Trade, Mr. Pascrell. Chairman BRADY. Mr. Pascrell, you are recognized. Mr. PASCRELL. Thank you, Mr. Thompson, Mr. Chairman. Mr. Paul, you described in your testimony, which I read--I apologize, I wasn't here to hear all of it--how global excess capacity in steel devastated U.S. companies and workers. The problem has gotten worse since 2012, if you look at the numbers. Aluminum production has dropped 60 percent just in that time, and in 2016, the Global Forum on Steel Overcapacity--you are familiar with that--was created to find a multilateral solution, and the OECD has been working on this issue for years. Do you think that the Global Forum has been effective, in your view? And do you think that unilateral action actually has the chance to incentivize countries to more meaningfully engage in the Global Forum? Mr. PAUL. Mr. Pascrell, thank you---- Mr. PASCRELL. We are talking about consequences here. Mr. PAUL. Yes. It is an excellent question. And I do think the Global Forum has been helpful in putting some focus on the issues at stake. I will say it has been an excruciatingly slow process, that there are some key partners that are not engaged in the Global Forum that have pervasive unfair trade practices in steel. I will say the greater issue here, Mr. Pascrell, is that China first recognized that it had excess capacity about 8 or 9 years ago in steel, and its leadership has made continued promises to reduce that excess capacity. The opposite has, in fact, happened, and as China's economy waxes and wanes, the rest of the world is caught up in this trade tsunami. The American workers suffer the most because we have the most open steel market in the world. Our market is uniquely penetrated by imports--they account for about 20 percent of our consumption. And while other blocs in the EU may put up some safeguards, we are left for the industry filing after the fact very expensive trade cases to try to make up the difference. That is not a sustainable---- Chairman BRADY. Thank you, Mr. Paul. Mr. PAUL [continuing]. Policy. Chairman BRADY. Time has expired. Mr. PASCRELL. Thank you, Mr. Chairman---- Chairman BRADY. Mr. Smith, you are recognized. Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman. Thank you to all of our witnesses here today. And certainly, you bring some important perspectives, and Mr. Heisdorffer, I appreciate your perspective on agriculture. And obviously, heading up the Soybean Association, you bring that perspective, but also as a corn grower and a hog producer, I think you have an additional perspective. And so there is your formal testimony that we certainly appreciate, but also, you know, the impacts that are taking place or might take place. If you could share a little bit on how tariffs that are already in place or those that are proposed, how you see that affecting your community, not only your own business, but perhaps your neighbors' planting decisions. We know that those are very important, especially this time of year. And how, perhaps, banks and operating capital might be responding as well. Can you touch on those? Mr. HEISDORFFER. Yes, Congressman, I can. Right now, farm income is down 50 percent, crop prices are down 40 percent, and we are expecting--and that is over the last 5 years, since 2013--and we are expecting another possibly 6 to 7 percent this year of lower income. We cannot afford to lose a valuable customer like China. It is our number one customer, of course, with soybeans. All other countries combined do not come up to what China takes from the U.S. soybean producers. So yes, if we lose that and we lose our exports to South America we are going to end up losing farmers. It is already very close to happening out there now. We are going to lose some over the next year just because of the downed prices and things. I am putting in my 47th crop this spring, and I have served the soybean industry for 23 years, either on a State or a national level. My son farms with me. I am not so concerned about myself at this point, but I am concerned about my son's welfare for the future, and for the future young farmers that are out there. Mr. SMITH OF NEBRASKA. All right, thank you. I yield back. Chairman BRADY. Mr. Larson, you are recognized. Mr. LARSON. Thank you, Mr. Chairman, and let me commend you and the Democratic leader, Mr. Neal, for this panel. It is not often that you get to sit in a committee room and hear the dynamic differences that exist within the panel itself. And, Mr. Chairman, I would suggest that perhaps we need another hearing, maybe more extensive, where we get to refine these. Because I couldn't help but note the body language of individuals when Mr. Dooley was speaking, Mr. Newport's reaction when Mr. Paul was speaking, and Mr. Kennedy's reaction. And rather than having us inquire of you, it would have been great to see that dynamic contrast take place so that we can better sharpen our views. I say this because I think that what we are discussing here this morning is more tactical than in terms of policy, in terms of our response. And I think, Mr. Chairman, you were surgical in terms of how you discussed this in the beginning, and I think that points to a number of the things that individuals have said. So first, let me ask the panelists in very rapid order, are we experiencing globalization? Yes, Mr. Kennedy? Yes or no? Or is this a globalization issue? Mr. Wolfe. Mr. WOLFE. Absolutely. Mr. LARSON. Mr. Newport. Mr. Heisdorffer. Mr. Dooley. Ms. WILSON. Absolutely. Mr. LARSON. Mr. Paul. There is no question about the fact that what we are dealing with here is an issue of globalization. No one less than Richard Trumka has said what we need is a massive rewrite of the rules as they relate to global policy. Would you agree with that? Mr. Paul. Mr. PAUL. I think that is correct. I think that is a very aspirational goal---- Mr. LARSON. It is, but would you agree with it? Mr. PAUL [continuing]. Given the shortcomings of the WTO as it exists today. But yes---- Mr. LARSON. Ms. Wilson. Ms. WILSON. Our industries actually flourished in the United States with some globalization policies. I think there are areas, including IPR rights, that we need to take a look at. But overall---- Mr. LARSON. But you would not---- Ms. WILSON [continuing]. We have supported free trade. We have added jobs in the United States because of it. Mr. LARSON. Would you say that we need a rewrite as it relates to globalization and its impact? Ms. WILSON. I would use your word, Congressman, and I would say we need a tactical rewrite. Mr. LARSON. Mr. Dooley. Mr. DOOLEY. I like Ann's comment there. I think a tactical rewrite would be---- Mr. LARSON. A tactical rewrite? Mr. HEISDORFFER. Since we have had record crops of soybeans the last several years, we need global exports in order to maintain. Mr. LARSON. Mr. Newport. Mr. NEWPORT. Basically, we need fair trade. Mr. LARSON. Fair trade. Mr. Wolfe. Mr. WOLFE. I can see opportunities where fair trade has served us well, and trade policy, so I think we should leverage that as we look at a rewrite. Mr. LARSON. Mr. Kennedy. Mr. KENNEDY. I agree, I think we need free and fair trade, and we need it quickly, if we can, to eliminate some uncertainty. Mr. LARSON. Mr. Pascrell pointed out--and I think a number up here on the dais would agree, that tariffs can be an important tool, but not if they are used as a weapon. And there is more than I think a sense of concern up here from the dais about tariffs being used as a weapon. Mr. Newport, I noticed your response to Mr. Dooley's comments. I was wondering if you wanted to have an opportunity for an exchange on what Mr. Dooley was saying. I noticed you nodding your head in disapproval. Mr. NEWPORT. Oh, no, I think when you look at what has been going on we have been facing a trade war in our industry. What we want is fair trade. When we are exporting products overseas, we are facing tariffs and other duties as an industry. We sell steel overseas. There are tariffs in place, there are duties in place, a lot of industries face it. But they can come here with no tariffs, without duties. And, you know, we talked earlier about the exemption process, and should it be targeted. Well, actually, on our allies, in electrical steel, as I testified, Korea and Japan are our two biggest issues of what is being imported in, and what was imported in the first quarter of this year from Korea equated to what they imported in total from 2012 to 2016. Mr. LARSON. Mr. Dooley, do you think we could successfully target and utilize tariffs as a tool versus a weapon, or how would you respond to Mr. Newport? Mr. DOOLEY. My response is, if you listen to some of the comments here, you would think that our economy was failing or not being globally competitive. But our service sector is globally competitive, if not a leader, our energy sector has now become a global leader, the chemical manufacturing sector is a global leader, our U.S. agriculture sector is a global leader. And our concern is if you are not tactical, if you take an axe approach to, you know, heart surgery, and you have a unilateral implementation of a tariff that is targeted at one sector, it invites a retaliation. And that retaliation is going to go at our most competitive sectors. And that is where, you know, we have great concerns. Mr. LARSON. Thank you, Mr. Chairman, I---- Chairman BRADY. Yeah---- Mr. LARSON [continuing]. I do hope we have another hearing. Chairman BRADY. Thank you, Mr. Larson. Ms. Jenkins, you are recognized. Ms. JENKINS. Thank you, Mr. Chairman, and I want to thank all the panelists for joining us this morning. I have voiced my concerns many times about these recent tariffs and the harm that they could cause Kansas producers, manufacturers, and consumers alike. For instance, cattle producers, which Kansas ranks third nationally, note that beef exports account for around $300 a head, a point reiterated by several Kansas cattlemen who were just in my office yesterday. President Trump achieved a great victory last year by reopening the Chinese market to U.S. beef for the first time in more than a decade, but unfortunately, China has placed U.S. beef on a proposed tariff retaliation list, which could erase the gains our cattlemen and women have made in the Chinese markets. So in addition to family farmer ranch operations facing down retaliation over trade restrictions, extreme and exceptional drought is also creeping across most of Kansas, diminishing the odds for bumper crops and resulting in extraordinary measures to protect our livestock. Every producer knows that access to foreign markets and low trade barriers are crucial for rural America, even in the best weather conditions, but especially so when the weather turns sour. In fact, last month, the State of Kansas issued a statewide drought emergency, and the USDA recently reported that, nationally, just 32 percent of this year's winter wheat crop was in good or excellent condition, compared to 51 percent last year. In Kansas specifically, it includes rates of 13 percent very poor and 31 percent poor. For an additional frame of reference, some cattle producers in the State are having to feed cattle on those wheat fields because the pasture grass is yellow and brittle when it should be green and lush. So with that being said, Mr. Heisdorffer, how do you foresee the long-term ag economy shaping up if periods of drought continue to hamper production and prices for what farmers are able to produce are greatly diminished from these tariffs and other threats of trade retaliation? Mr. HEISDORFFER. Well, to start with, you know, if this drought continues, and it is in my area, too. I am in Southern Iowa. Northern Iowa is not quite that way, but Southern Iowa is. We drained the bucket last year, there is nothing left down underneath. And if that continues, yes, like I said, we are going to start to lose farmers. There is no doubt about it. And livestock, yes, we might be able to get a little bit out of crops, but they are going to start selling off livestock, which I am sure is going to happen in your State. And as that happens, farmers are just going to go out of business. There is no other way about it. We put everything forward to our families as farmers, and we try to continue that generation after generation. I am fourth generation, my son is a fifth, and we will keep that going, but I am so afraid for these young farmers nowadays, and not just that they may fail, but most of them are like me, who are in partnership with my son. And though I have had a lot of years of farming, they could take me along with them. Ms. JENKINS. Well, thank you. I guess you have confirmed my fear as well. And with that, Mr. Chairman, I yield back. Chairman BRADY. Thank you, Ms. Jenkins. Mr. Kind, you are recognized. Mr. KIND. Thank you, Mr. Chairman. Mr. Chairman, I think you said it very well in your opening statement, I think all the panelists agreed, too, that with China, we have a problem. I think we are all in agreement that they are stealing our intellectual property, they are requiring technology transfers, they are requiring joint ventures that place our companies in a minority position, they are dumping steel below market price in the global marketplace, and that is something that definitely needs to be fixed. But as someone who spent a strong proponent of a robust trade agenda in this Congress, I am afraid that America, we have a problem. We have an Administration that on day one turned their back on the most significant multilateral trade agreement in the 21st century, the Trans-Pacific Partnership, in the fastest-growing economic region in the globe, the Pacific Rim area. They put on ice the trade negotiations with the second-largest economic marketplace, Europe, with TPP. They threatened to blow up NAFTA, now they are moving down the unilateral road of 232 and 301 trade sanctions, and they have not embarked on one new bilateral trade agreement in the year-and-a-half that they have been in office so far. Our trade agenda is seriously off the rails, and it needs to get back on track quickly, or we are going to be suffering economically as a consequence. Mr. Dooley, I do subscribe to your viewpoint, but I think the unilateral approach makes it too easy for countries like China or anyone else to just retaliate in kind, and strategically hurt us where they know it is going to hurt the most. And that is something that should bother all of us. But I want to pick up on a comment that you mentioned in your opening statement, which I think bears a little fleshing out. Right now we are in the process, or the Administration put in a process exempting countries from the tariffs and requiring individual businesses to have to apply for exemptions, and you mentioned that we ought to be looking at allowing associations to be able to represent the members in the exemption. Why do you think that is important? Mr. DOOLEY. I think Ms. Wilson also commented on this as well. When you have the requirement that an individual company has to apply for an exemption--and it is also, kind of, a black box process--and if you look at a lot of the companies that do not have the internal capacity that have the expertise to even, you know, go through that process, it is a significant impediment. And it harms businesses such as Mr. Kennedy's, that are, you know, just--that is not what they do. They build and fabricate and, you know---- Mr. KIND. I have heard that there could be a number as high as 6,500 individual businesses applying for some form of exemption moving forward, is that right, Ms. Wilson? Or---- Ms. WILSON. I am not sure if it is 6,500, but we have almost 1,000 now, and if you just look at our membership, many of our companies are going to have to file multiple petitions for some kind of exclusion, product exclusion. I think the other thing that is of concern is the way I understand the process may have an initial application, and there may be a request for more information. And some of this information is going to be considered proprietary. I mean, as you can well imagine, one reason why we would like to see a blanket exclusion process is because many of our members bring in similar types of products. They do not necessarily want to say who that is---- Mr. KIND. Yeah. Well, I hope the Administration will take that into consideration as they move forward. Mr. Newport, listen, I really appreciate your willingness to stand up and defend your industry and the jobs that depend on it, but there is also an important ratio that we need to keep in mind, and that is 20 to 1. For every one job that is affected by the production of steel and aluminum, there are 20 jobs--and I am looking at Mr. Kennedy right now--that are affected by the consumption of steel and aluminum. Can you sit here today and reassure a business like Mr. Kennedy's that you can replace the lost steel, that they could suffer with these tariffs and still be price competitive in the marketplace so that they are not losing contracts as they move forward? Mr. NEWPORT. Yes, I think if you look over time, you know, we have been through it in the steel industry, whether it was 201 actions, et cetera, that the steel industry has been there to support manufacturing. And I think the key on the exemption process is making sure it is not another loophole. If we had trade cases that people had figured out how to get around, you have a 232 action becoming a process with exemptions that people are going to look for loopholes to get through. So the key is that it is effective, and that is really what the key needs to be. We have been here, we are also a supporter, and when you think about what is coming from the tier ones going into the auto industry, besides the steel manufacture, we actually supply parts into the auto industry. Mr. KIND. Mr. Kennedy, are you confident if the tariffs do move forward that you are going to be able to find replacement steel at a price competitive---- Mr. KENNEDY. Right now, our service suppliers have to get in line at the mill. I mean, there are hulls that are missing. A lot of that is the uncertainty. But there is a lot of fairly, freely-traded steel from our allies that we need. And then my question on the exemption is how do you exempt a new school or a new plant or a wing or a modification or product, a custom product, how do you exempt that? They are---- Mr. KIND. Yeah. Mr. NEWPORT. And a comment, the tariffs are not stopping the imports. Mr. KIND. Okay. Thank you, Mr. Chairman. Chairman BRADY. Thank you, Mr. Kind. Mr. Paulsen, you are recognized. Mr. PAULSEN. Well, thank you, Mr. Chairman. This has been a really good panel and a really good discussion. We absolutely need to target these unfair trade practices, especially by China, that absolutely has engaged in theft of American technology and innovation. China's actions have undercut our workers, stealing intellectual property, enacting hostile policies, forcing our American companies, again, to give up their technology. But these solutions do need to be targeted narrowly to avoid inflicting harm on our consumers as well, and our job creators, as we have heard, that rely on fairly-traded imports in order to be competitive. I have Minnesota medical device companies and supply industries that are very worried that the proposed tariffs under 301 on pacemakers, defibrillators, x-ray equipment, and orthopedics are going to end up making healthcare costs more expensive, drive them up. And, Mr. Chairman, I would like you to consent to enter into the record an April 6 article in the New York Times regarding this. If I could submit that for the record. [The submission for the Record of Hon. Erik Paulsen follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Mr. PAULSEN. Mr. Neal, if you want to sub in. Mr. NEAL. I am ready. Mr. PAULSEN. Okay. Without objection. But there are concerns here, as the article points out, that we are impacting consumers potentially with knee replacements, hip replacements that could go up because of orthopedic tariffs being put in place. And the Consumer Technology Association has outlined concerns that proposed tariffs on TVs and monitors will raise the price of a television 23 percent. And given Ambassador Lighthizer's testimony to us and to this Committee to minimize the impact to American consumers, this action just seems to contradict that testimony. And these are concerns that have been raised by the proposed $50 billion of tariffs coming up on products. We do not even know what might be on the next potential list of $100 billion that we are waiting on the Administration to potentially release. And look, I think the pro-growth policies that we have seen implemented, especially the tax overhaul, now implemented over the last year, has put our economy in a really good place, adding 600,000 jobs just in the last 3 months, unemployment is at its lowest rate since 2000, and the economic growth numbers are averaging 3 percent in the last 3 quarters. That is double what they were the year previous, and nearly every quarter. And I am opposed to broad-based tariffs that are going to essentially be taxes that can backfire and then reverse our ability for American businesses and jobs to grow and actually impose economic harm. So, Mr. Kennedy, I want to follow up real quick in the time I have. I have heard the same concerns that you have expressed today from some of my Minnesota metal fabricating and manufacturing companies. They have seen steep price increases in steel, for instance, similar to the 40 percent you mentioned. Now, they have also said that their supply has gone from maybe, like, a 6 to 8 week waiting outlook to jumping overnight to as high as 22 weeks. Can you talk a little bit about how that type of a jump in supply also impacts your pricing? Or your jobs---- Mr. KENNEDY. Sure. Mr. PAULSEN [continuing]. Or your manufacturing and your ability to plan with certainty for the future? Mr. KENNEDY. Sure, thank you, Mr. Paulsen. Yeah, we are affected a number of ways. One is obviously pricing. We are at a price disadvantage against our foreign competitors, and I would imagine those in Minnesota are really, really close to their Canadian foreign competitors. But lead times are an issue, too. If I cannot meet the expected delivery of my customer and my competitor can because they can get their hands on the steel, then they win the work. You know, we talked about--you just mentioned that they can supply the steel, our mills can keep up, and it does not prevent imports. Well, uncertainty does. Uncertainty prevents imports. Right away, the imports stopped coming. Who is going to send that over not knowing whether or not it is going to be taxed or whether or not they are going to have to turn the ship around or dump it at a loss, and they are not going to do that. And I can attest that our mills currently, a lot of those mills cannot keep up. And realistically, we should welcome competitive steel. We are not scared to compete, and I do not think that your Minnesota company fabricators are scared to compete. We want to compete, but we do not want our government putting up obstacles that prevent us from being able to compete. We worked hard to compete on our own and make ourselves competitive against our foreign competitors. But we cannot be at a price disadvantage to our competitors. Mr. PAULSEN. You know, Mr. Chairman, I think what we have heard, and I agree, is that our American manufacturers can compete and win anywhere. And so we just have to have that certainty, a level playing field in order to be able to do that. And we can win and sell American goods in every respect. Mr. KENNEDY. That is right, and you know what? Our mills can compete, too. I mean, Nucor Jewett is 2 hours from our facility. They are a U.S. steel producer, and they compete. They have hardworking guys. We come from the same stock of people over there. And they can compete. But not every mill can compete, and not every fabricator can compete, and we should not pick winners and losers. We should not prop up companies or industries that cannot at the expense of those that can. And that is exactly what is happening now. There are some mills that are going back to work, and that is great. There are some mills that should never go back to work. Mr. PAULSEN. Thank you, Mr. Chairman. Chairman BRADY. Thank you. Mr. Pascrell, you are recognized. Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, the title of the hearing is ``The Effects of Tariff Increases on the U.S. Economy and Jobs.'' This is about jobs. The Economic Policy Institute reports that 3.4 million jobs, American jobs, have been lost due to China trade since 2001. And I think it has been laid out here that our steel and aluminum production in this country has plummeted due to Chinese overcapacity. We seem to know what the problem is. The question is what is the response? Many China experts and former government officials agree that our current policy just is not working. We have tried for over a decade. Past attempts at dialogue have not worked. A new approach is needed. The question now is what is the new approach, and will it be effective? The threat of tariffs, however, may be necessary to getting China to reform its anticompetitive protectionist policies. We have seen the pros and cons of that. But an article in the Times the other day kind of sums up everything in our dilemma. That article was on April 10, it was entitled, ``How Long Can We Last Trump's Tariffs at Home in the United States?'' And it was about a company based in McKeesport, Pennsylvania. The company makes seamless vessels to store gasses at a high pressure. Steel cylinders of up to six tons that it sells to the likes of the Navy, NASA, and T. Boone Pickens Clean Energy. It has received the first bill from the 25 percent tariff that President Trump placed on steel from China and a few other countries: $178,703 assessed on steel pipe shipment scheduled to arrive at the port of Philadelphia today. That is equivalent to 2 weeks' payroll. Overall, tariffs on steel pipe that the company has ordered from China--some are already on the way across the Pacific-- will add more than half a million dollars in raw material costs over just 6 months alone. The article goes on to say, `` `How long can we last,' mused Michael Larson, the company's Chief Executive. `I do not know. We could go down relatively fast. The tariff will add 10 percent to the cost of CP Industries' ''--that is the company--`` `their cylinders, which can sell for up to $35,000.' '' Now, it would seem to me that we have a real dilemma when we try to respond. We have not been able to do it since this problem, as you pointed out, Mr. Paul, really struck us about 12 years ago, and onward. So how do we look at this? And how do we finally come to a settlement that is not just keyed in onto one industry, but it understands the effect that that industry may bring to other industries and the American consumer. That is not an easy thing to trace, is it, Mr. Paul? Mr. PAUL. If it were easy, it would have been done, Mr. Pascrell. I think that is fair to say. This is a process that is--we are at the beginning of it. I agree that we need to get to a better point. My hope is that Ambassador Lighthizer and Secretary Ross are moving in that direction. I will say that this has worked both ways. When our economy was humming along well, the steel industry was in a technical recession from about 2014 to about 2016 to 2017, and there was one reason for that and one reason only. And that was the overcapacity that generates all these other unfair trade practices that you see. For steel users, I think one of the solutions may, in fact, be downstream relief that should be temporary. I think the product exemptions---- Mr. PASCRELL. Well, some of these tariffs are temporary. Mr. PAUL. Pardon me? Mr. PASCRELL. Some of these tariffs--for instance, in the South Korean trade deal, we made them very temporary. Mr. PAUL. Yeah, there is a quota with respect to steel from South Korea. It is also important to understand that there are hundreds of dumping orders in place now on various products including steel, and that is an imperfect process. It is like playing whack-a-mole with trade policy. It is very hard to accomplish. My hope is that we speed toward this global solution that you referred to, Mr. Pascrell---- Mr. PASCRELL. Mr. Chairman, may I make--thank you--may I make a recommendation, if you will? Is it possible that in this next hearing, if we put it together as Mr. Larson suggested, which I think would be critical, we bring some economists in? It was just the report that came out yesterday about the consequences of what these tariffs are going to do. And I think we can get both sides together and talk about this, because we have to make decisions ultimately. Chairman BRADY. Thank you---- Mr. PASCRELL. Article 1, Section 8---- Chairman BRADY. We will certainly consider that. I would love, though, for some economists to be hearing from real-world people about these impacts---- Mr. PASCRELL. Yeah, I think it is a great idea. Chairman BRADY [continuing]. And balance out, so we really hear both views. Mr. PASCRELL. Good. Chairman BRADY. Mr. Marchant, you are recognized. Mr. MARCHANT. Thank you, Mr. Chairman. I am very privileged in my district to have some companies that have projects that they are building across the world. And they are projects that last 3 to 5 years when they start them. And one of the big concerns that they have is that they are mid-project in many of these, and they have no way to pass on. They did not contemplate, had no way to contemplate that these tariffs would hit them mid-project. And they are concerned about starting new projects or bidding new projects now, and unfortunately, some of them may get shelved or postponed because of just the sheer unpredictability of the cost. I think some of those industries will affect some of your production, Mr. Dooley. I am sure, Ms. Wilson, these are a lot of facilities. So, as these companies are beginning to deal with this, many of you deal with the production of the steel, fabrication of the steel. These are people that take the end product of your production and your fabrication and then try to piece them together into a very sophisticated module--a chemical plant, a power plant, you know, something like that. What do you see as things the Administration can do in their rules that they are making, their product exceptions, et cetera, that we can make sure that these projects are not disrupted, Ms. Wilson? Ms. WILSON. So the vast majority of our members make motor vehicle components for new vehicles, whether they are heavy trucks or light vehicles. The average---- Mr. MARCHANT. Toyota's headquarters is in my district. Ms. WILSON. I know. And, you know, the average cost of a new car is about $35,000. This is a major expenditure for most Americans. So what we see here is the cost of steel--and the vast majority of steel and aluminum comes from the United States. The cost of these specialty steels and aluminum, if it goes up, that cost is going to go down to the consumer. And at $35,000, are we going to really be able to continue to sell cars? That is a serious concern for our members. I think what we have to take a look at is this exemption process for the countries. We also have to really look at this exclusion process for products. Because, you know, a lot of the steels that go into something like this are not the steels that, you know, Mr. Paul has been talking about that we have problems with. They are very specialized, and what we would like to see is relief for those kinds of things immediately. And will it completely do away with the cost rise? Probably not. But it will help ameliorate it a little bit. Mr. NEWPORT. Just one comment in regard--we are big in the auto industry, it is about 70 percent of our business, and we are also a direct supplier of parts. I think you have to put in perspective, there is approximately, on an average vehicle, one ton of steel used. And let's just use $1,000 a ton on a high end for, you know, total metal products. And even if you put a 20 percent duty on that, you are talking $200 a ton on an average $35,000 vehicle. So when we are looking at this, we are looking at cost impacts on different products that are a fraction of a percent. So I think we have to keep in perspective something even Secretary Ross pointed out, both in the steel and the industry--the aluminum industry--is really what is the overall impact---- Mr. MARCHANT. Yeah, and my projects, the companies that I am talking about--Fluor, Exxon--they are building projects that, after they are bid, they are 3 to 5 years out. And, Mr. Kennedy, you must be the provider for some of those parts, and they are needing some certainty to finish projects and bid new projects that sometimes just the preparation to bid is 3 years out. So that is what I am looking for in this entire process, some certainty to proceed and continue, not to disrupt the main business. Mr. KENNEDY. Yeah, we are in the exact scenario. I mean, we have rights that are locked in on projects. We get on a vendor supplier list at the beginning of a 3-to-5-year project, and we put some level of uncertainty into our pricing as does every other fabricator in the world when they price it. But when you immediately add a 25 percent tariff or effectively a 40 percent price increase, we are locked in on those rates, and our customers, even, are locked in on their rates. We still have to supply the steel for a year. We still have to supply the product, but we get no relief. We are bearing the cost. I can promise you we didn't have 40 percent profit in our number. Mr. MARCHANT. Thank you, Mr. Chairman. Chairman BRADY. Thank you. Dr. Davis, you are recognized. Mr. DAVIS. Thank you very much, Mr. Chairman. I want to thank all of our very informative witnesses who have been with us this morning. Mr. Paul, let me ask you, according to the Guardian April 7, 2018, issue, the world's richest 1 percent already own one- half of the world's wealth. And it is on course to control as much as two-thirds of the world's wealth by 2030. The wealthiest 1 percent is growing on an average of 6 percent annually, faster than the 3 percent growth of the remaining 99 percent of the world's population. What type of jobs could be created with trade agreements and trade modifications that would encourage these individuals to invest and re-invest, and do you see tariff increases as bringing or attracting jobs and work opportunities back into the United States? Mr. PAUL. Mr. Davis, these are good questions, and I appreciate them. Let me speak to the types of jobs first. First, we obviously have a diverse economy, and one that has been in transition for a number of years. But manufacturing still plays an outsized role in our economy, both in terms of the types of jobs it provides--new evidence from the Economic Policy Institute shows that there is at least a 13 percent pay premium over the rest of the economy, and some studies show it to be larger than that--the types of manufacturing jobs tend to provide spin-off opportunities as well. You know, if AK Steel has a steel mill, there is a downstream and upstream and a whole environment that is supported by those types of jobs. It is also fair to say, and I think you know this from talking to your local economic development officials, that getting a manufacturing facility is the holy grail. Because they know if they get a manufacturing facility, they are likely to get mainstream small businesses to come along with that, they are going to get more income spent in the community. You cannot say that for all its virtues about a retail outlet. A retail outlet is not going to bring a factory in. But the opposite is certainly true. So there is a value to these jobs that cannot be understated. The types of jobs that are being established or reestablished at the steel mills and aluminum smelters around the country are well-paying. Sixty-five thousand, seventy thousand, in some cases eighty or ninety thousand dollars. One in particular in Granite City, Illinois, in your State, that is a community I have visited many times, was beset by extraordinary poverty because of these unfair trade practices. The fact that there could be a level playing field is restoring some hope. There are 500 jobs coming back. These are well- paying jobs that are simply irreplaceable in that metro area. Now, with respect to the effectiveness of the tariffs in bringing these jobs back, again, I think on a temporary basis, companies respond to market signals. And if you need to build your steel facility in the United States, or your aluminum smelter, you will add capacity, you will add jobs to meet that demand. I think at the end of the day, and something that probably unites us on the panel, is that none of us want Beijing calling the shots in the American economy. And having an authoritarian state capitalist regime is something that a private sector company should not be expected to compete against in a global economy. But that is the situation that we face right now. To me, tariffs are an emergency room measure. They are triage until we can get a much more sustainable approach, but they are absolutely necessary to achieving the objectives that we are seeking. Mr. DAVIS. Thank you very much, and of course, we know that China is the big elephant in the room. And would anyone quickly suggest something very concrete that we might be able to do with China? Mr. NEWPORT. So there is an industry we have been working on globally with global producers in trying to address the overcapacity. So I think what this has done, the action that has occurred has actually resulted in probably the most amount of activity that we have seen collectively in the last couple of years. There has been some slow progress, as was mentioned at the G20 in OECD, but we are seeing action now in discussions with how to address it from many countries. Mr. DAVIS. Thank you, Mr. Chairman, I yield back---- Chairman BRADY. Thank you, Doctor. Mr. Renacci, you are recognized. Mr. RENACCI. Thank you, Mr. Chairman. I share President Trump's concern about unfair trade, including the global problem of overcapacity in steel and aluminum and the theft of American technology innovation. China is distorting the market and hurting Ohio workers and businesses through its aggressive and unfair policies. At the same time, it is critically important that we understand and address any unintended consequences so we can collaboratively fine-tune the approach. As I always say to my staff, if you do the right thing in Washington, there are no hard decisions. That includes favoring free trade when everyone is playing by the rules, always putting America first when other countries are distorting the market, and being ever-vigilant not to create winners and losers along the way. Before coming to Congress, I spent 35 years in the business world. I started over 60 businesses I provided as context to explain how I view the product exclusion process from the 232 tariffs. While I understand the Commerce Department's need for detail before granting exclusions, it seems especially burdensome for small businesses lacking resources. So I ask each of you the following yes or no question: are small businesses with very limited resources in a burdensome situation in navigating the product exclusion process, and would allowing them to pull together on exclusions via an association or other means, would that seem like it might help diminish the burden? So start from the left and move forward. Mr. KENNEDY. Sure, but I would like to point out, how do you exclude certain products, like building a new school or a new hospital, or adding a wing to a facility or custom projects or modifications? How do you---- Mr. RENACCI. Well, that is why I am talking about the exclusion process. Is that burdensome, yes or no? Mr. KENNEDY. Absolutely. Mr. RENACCI. Mr. Wolfe. Mr. WOLFE. I believe it is as well. Mr. RENACCI. Mr. Newport. Mr. NEWPORT. I do not see how you can bring them together because they are so unique. Mr. RENACCI. Do you have any thoughts? Yes or no? Mr. HEISDORFFER. I agree. Yes. Mr. DOOLEY. Yes. Mr. RENACCI. All right. Ms. WILSON. Yes, we think it is very burdensome. Mr. PAUL. I do not view it as necessarily burdensome. I think it is a necessary step in the process to ensure there are no loopholes or unintended consequences. Mr. RENACCI. Again, it depends on whether you are the small business having to go through it, but I do understand. I am glad to see AK Steel represented here today as the last producer of grain-oriented electrical steel in the United States. As Mr. Newport mentioned, AK Steel was headquartered in Ohio. Their footprint includes Coshocton, Mansfield, Middletown, Walbridge, and Zanesville. I know Mr. Newport joins me in applauding the President's effort to crack down on unfair trade practice. We need hearings like this so we can work to avoid unintended consequences. One such unintended consequence starts with the fact that the 25 percent steel tariff under the Section 232 action does not cover goods made from electrical steel. Leaving out these goods will result in a workaround to the 232 action in that manufactures using electrical steel can avoid the tariff by simply manufacturing the product outside of the United States and then importing the goods back into the country. Said differently, the concern is who is the biggest winners of the steel tariff could be foreign and domestic companies who manufacture outside of the United States before sending their goods into the U.S. market. Mr. Newport, can you further explain the national security importance of the United States having the ability to produce electrical steel domestically? Mr. NEWPORT. If you think about electricity, you need it to run businesses, you need it to power our homes, you need it to power the financial markets, et cetera. When you think about when a hurricane hits, what that has done to our country sometimes when you have had that hit and you have to get the power restored; when you think of the attacks that occurred in New York when power was lost and, you know, the financial markets were down and needing power restored; et cetera, you think of how quickly you need to get that power restored. And we have taken actions in the industry to adjust our operations to make sure we prioritize our work to support that industry. And I think about it as if you have to rely on going to China, Japan, or Korea after a natural disaster or something else occurs, or have that product brought to our country if they choose to do so--and by the way, if they are the only ones producing it longer-term, what do you think will happen with the cost of that product if they choose to ship it to you. And I do not think, as a country, we want to put reliance on another country for something that is critical to run our businesses, to run our companies, and actually to have economic growth in our country. Mr. RENACCI. Thank you. I want to continue to work with all my constituents on how to make sure that we do not have any window between what the President wants to get done and what Ohio businesses and the economy really need. I am committed to helping all Ohioans in working through any issue that they have with the 232 or 301 tariffs. I appreciate the Chairman, the staff, and my colleagues working with American businesses on addressing unintended consequences of tariffs. I also encourage my friends in the Administration, my colleagues here in Congress, to continue to work collaboratively toward the best possible outcome for the American people. And I yield back the balance of my time. Chairman BRADY. Thank you, Mr. Renacci. Ms. DelBene. Ms. DELBENE. Thank you, Mr. Chairman, and thanks to all of you for being with us today. And, Mr. Wolfe, as you know, our home State of Washington is the most trade-dependent State in the country. We are the gateway to some of the fastest-growing markets in Asia, and 40 percent of our jobs are tied to trade. In an increasingly interconnected world, my constituents rely on open markets, whether that is selling berries and agricultural products overseas; being able to buy fresh, healthy produce in grocery stores year-round; or access to affordable technologies, like computers and smart phones that enable our students, our researchers, and our entrepreneurs to innovate. But the impact of trade on our region extends well beyond our State. Many agricultural products from across the country, including wheat, corn, and soybeans, make their way to China and other Asian countries through our ports. And on the other side, billions of dollars of imports headed to other parts of the country come through Sea-Tac in the ports of Seattle and Tacoma. Mr. Wolfe, you touched on this in your opening testimony, but could you please expand on the economic impact they could have on Washington State, and also, on how many jobs in our region could be affected by a slow-down in economic activity due to tariffs? Mr. WOLFE. Thank you. As you mentioned, some 40 percent of the jobs in the State of Washington are tied to trade. And we have talked about manufacturing jobs, and certainly manufacturing jobs are critically important to our economy. Yet, those are not the only jobs that are important to our economy. Trade creates a tremendous amount of valuable jobs not only for the State of Washington, but for all of the United States. I am talking about jobs like the longshore jobs on the working water front, the truck drivers that service our gateway, the railroads that service our gateway, the warehouse distribution companies, and certainly the exporters that provide those goods to foreign markets. So if we take a unilateral approach to trade policy where we are lobbing back and forth with our trading partner, China, we run the risk of damaging those valuable jobs, not just in the State of Washington, but throughout the United States. I would say the impact just in the State of Washington could be tens of thousands of jobs if we enter into a trade war with China, because China is our most trade-dependent partner in the State of Washington. So it would have a huge impact on the economy in the State of Washington, and, I believe, throughout the United States. Ms. DELBENE. Given supply chain disruptions and just uncertainty for businesses, we know that can cause people to lose long-term contracts. We also know that you can lose business quickly, and it is hard to get that business back. Between these tariffs, and the fact that Canada is participating in trade agreements in Asia and with the European Union, are you worried about trade being diverted to Canada in the Port of Vancouver? And how would that hurt the long-term competitiveness of the Ports of Seattle and Tacoma and Sea-Tac? Mr. WOLFE. Thank you for that question. Certainly, as we are situated geographically in close proximity to the Canadian gateway, we are seeing more and more trade move through the Canadian ports rather than using our gateway. There are a number of reasons for that, one of which is the potential risk of these tariffs on trade and the uncertainty that it creates for business. I was visiting with one of our valued export customers just recently, a fruit grower in Eastern Washington, and they shared with me that although there still is uncertainty about the impact of trade, they are looking at those other gateways, including the Vancouver BC gateway, as an alternative gateway for their exports as a result of the discussion around trade disruption in the State of Washington and nationally. So it is hard for me to measure the impact today, yet, that uncertainty is creating questions for the business community in our backyard and the potential of job loss. Ms. DELBENE. And do you agree that if you lose that business, it will be a lot harder to get it back? Mr. WOLFE. Absolutely. We have seen examples of where our customers have lost market share globally, and then we resolve whatever the issue was. I think even as an example, with the disruption on the West Coast between the employers and our labor partners a few years ago, there was a shift in the trade lanes as a result of that. And some of that market share, you never get back. And so there is certainly risk there. Ms. DELBENE. Thank you. I yield back, Mr. Chairman. Chairman BRADY. Thank you. Mr. Meehan, you are recognized. Mr. MEEHAN. Thank you, Mr. Chairman. I want to thank this panel for a robust discussion. I think we have all benefitted from the idea that there are complex issues here, and I think we also all agree that we need to be dealing directly with the implications of Chinese dumping and other kinds of activities. Mr. Chairman, I hope we also appreciate the 301 implications, because there is a lot of intellectual property and other kinds of issues, notwithstanding there are implications to what has been proposed. And, Mr. Dooley, in your presentation, you discussed, I think, some merging opportunities to the United States, which have been realized by virtue of the shale revolution and investment in this country, which has really driven job growth, which has given us opportunities for international markets in chemicals and other kinds of things. They are job creators, but one of the concerns I have, can you speak to the question of people who have not only made investments in those opportunities, but foreign-based investment that has come onto our shores to take advantage of this, and whether those long-term plans are implicated by this kind of inactivity, which causes an interruption that changes their projections? Mr. DOOLEY. Yeah, thank you for the question. You know, as I stated, our industry has had a dramatic increase in our global competitiveness. There has been $196 billion in new investment, half of which has already been completed or is in the process of construction, and the rest of it is in the permitting process. This is unprecedented. Sixty-three percent of that is foreign direct, so it is chemical companies from Europe, from China, from Brazil, from India that are recognizing that we have a global competitive advantage, and they are making significant investments here in the United States. They are making these investments not to serve the domestic marketplace, but to capitalize on the U.S.' competitive advantage to serve the global marketplace. They are making those also predicated that we are going to have sound trade practices that will not result in implementation of tariffs against our exports of chemicals globally. And that is what our concern is here, and that is where-- you know, no one disagrees, you know, with the inappropriate actions in the market-distorting practices that are used in China. But I think what we should be focused on is what are the metrics for success? How do we determine when we are winning? And that is what, if we are very concerned of the--right now, if you look at the Section 232s and the 301 tariffs, and we did an evaluation in terms of the metrics in terms of what were the economic impacts, you know, holistically, to the United States, we are convinced our industry would suffer. And I think you would say the soybean industry would suffer. You know, Ms. Wilson's constituency would suffer. It is just, you know, there are dramatic impacts. Maybe the steel industry and aluminum industry would see a marginal improvement. But is that the right policy that is going to maximize the economic benefits that will benefit workers, that will benefit companies, small and large, in the United States? And that is where it is not the objective, but it is the tactical, strategic approach that you take. And we think that what we are looking at right now, if there is not significant modification in terms of what is ultimately implemented, is that it will have an adverse impact on the broader U.S. economy. Mr. MEEHAN. And you talk about the implications. Mr. Newport, a question for you if you have a moment to answer it. Because I am concerned that when we look at the capacity to be able to supply here in the United States, if we are being challenged in terms of imports, do we have the capacity to meet these demands? And are there changes now with the abrupt, I guess, higher level that is being paid all over the investments that were made that were predicated on lower prices of steel? Are we going to be able to meet that capacity to fulfill the requirements that we have currently? And are we going to be losing by virtue of people making changes in the kinds of aluminum and steel that they are manufacturing to meet, you know, this demand so that aluminum goes into high-grade things like airplane parts, but I lose the aluminum that is necessary for a can manufacturer in my district? How are we going to be able to assure that while this is going on, that we can supply the steel that is necessary for American-based businesses? Mr. NEWPORT. I think two things: one, there is---- Chairman BRADY. Sorry, Mr. Newport---- Mr. MEEHAN. Maybe if there is an opportunity to---- Chairman BRADY. The time has expired. Perhaps you could answer in writing, Mr. Meehan---- Mr. MEEHAN [continuing]. Supplement the record in some way---- Chairman BRADY. Yeah, please. That is a great question. Thank you, Mr. Meehan. Ms. Chu, you are recognized. Ms. CHU. Mr. Paul, I would like your viewpoint on this particular issue. In addition to being on the Ways and Means Committee, I am also a Member of the House Small Business Committee. Small businesses are extremely important to our economy. They create two out of every three new jobs, and in my home of Los Angeles County, many of these small firms have developed their business models to export overseas, often to Asian countries across the Pacific Ocean. According to the Census Bureau, the majority of businesses engaged in importing and exporting goods are small or mid-sized businesses. In fact, 76 percent of exporters in the United States and 75 percent of importers have less than 20 employees. Also, I understand that with the rate of U.S. goods being exported to China increasing by 579 percent between 2001 and 2017, trade with China has been particularly robust. Among the U.S. businesses exporting to China, 53 percent of them have fewer than 20 workers. Given these statistics, I am concerned about whether imposing tariffs on China's exports in steel and aluminum and the retaliatory measures taken by China on U.S.-made products would have an impact on small businesses back in our districts. Can you speak to how small businesses may be impacted by the tariffs on steel and aluminum? Mr. PAUL. Ms. Chu, it is a good question, thank you so much for asking it. I agree that small businesses and the U.S. business community in general can benefit from exports, and certainly China has been a growing market. I would like to see it grow even further. And with respect to both the steel and aluminum actions on 232 and the Section 301 action on intellectual property rights violations, I think the strategy is to ensure that we have a level playing field and that we have more market opportunities in China. If you recall, Mr. Thompson talked about wine and the addition of the tariff on that. It is stunning to me that there is a 48 percent tariff on wine right now that China has and that we have not pushed back enough. Or with respect to soybeans, where there are limitations on value-added processed soybeans coming into China, they prefer to get the raw commodity. There are far too many restrictions that China has in place that are limiting our export opportunities, which is why the boats going into Seattle and Tacoma are a lot heavier than when they are going out. I would like to see much more balance to this trade relationship. And part of that is to eliminate the market-distorting and anticompetitive practices that China has. With respect to small businesses in particular, we are looking ahead at a lot of advanced technologies and thinking that the United States can have success because we are an innovation leader. I am thinking in particular of nanotechnology and biotechnology and artificial intelligence and robotics. All of these industries have been targeted by the Chinese government and its Made in China 2025 program to have national champions that will exclude competition from countries like the United States. I view the tariffs as the beginning of the conversation rather than as the exclamation point at the end of it. I think we have a lot of work to do. I think there is many sectors of the economy that could benefit from a much more balanced relationship with China than we have right now. Ms. CHU. Well, I am so glad you mentioned the wine, because, of course, that is a big issue in my State of California. China has increased tariffs on U.S. agricultural products such as wine, such as almonds, pistachios, and oranges that are grown in my home State of California. And according to the Wine Institute, China is one of the fastest-growing wine markets in the world and will soon be second only to the United States in value. The value of the U.S. wine exports to China has increased 450 percent in the past decade, and it is an important export market for U.S. wine producers. And in 2016, 11 percent of California wine, which was worth $160 million, was exported to China, and in addition, 12 percent of California produced almonds, worth $518 million, was exported to China. And overall, there were $2 billion worth of agricultural exports sent to China. So can you discuss how retaliation by China on these products may impact these industries in California's economy as a whole? Mr. PAUL. Yeah, I do think that the retaliation to the extent that it is extralegal should be vigorously challenged by our U.S. trade representative at the WTO and through other mechanisms, including bilateral consultations. And I think that all of those efforts should proceed expeditiously. Ms. CHU. Thank you. Chairman BRADY. Thank you. Mr. Holding, you are recognized. Mr. HOLDING. Thank you, Mr. Chairman. I appreciate you holding this hearing. It has been very informative. Like the other Members here, I completely agree that the issue of unfair trade practices by China must be addressed. North Carolina has a very diverse economy. I have heard from folks at home regarding how trade actions impact agriculture and manufacturing sectors, and if farmers from my district were here today with us, I think they would echo the points that have been raised by Mr. Heisdorffer. So, Mr. Heisdorffer, you mentioned in your remarks that there is room to expand our exports into China. And you mentioned that we should focus on expanding our trade rather than restricting it, and I would agree with you. So my question to you is can you elaborate on what specifically we can do in order to expand our exports to China, and what barriers that you see right now that prevent us from expanding our exports to China? Mr. HEISDORFFER. Yes, sir. Well, the United States Soybean Export Council works constantly through all countries, besides China. China was one of the first places they were in. It has been 20 or so years ago that ASA started in China to develop that trade, and now the Soybean Export Council does that in other countries, smaller countries. We are going to have to continue to expand just to maintain what we have. Because, like I said, we have South America, who is more than anxious to take a penny of our trade if they can, and Mexico is our number two customer in soybeans, and our number one customer of soybean meal. I cannot specifically tell you how we can just go in and-- you know, we have more soybeans to sell. Let us try to sell them to China. If we keep working with them, we have expanded that market over a number of years, it keeps growing. If we can continue to do that, it would put us in good shape. So---- Mr. HOLDING. We will be on a good trajectory. So maybe as a followup, you know, what are the successful tools that American farmers are using today, as far as increasing their availability for exports and so forth? And can we strengthen any of those tools? Mr. HEISDORFFER. That is correct. Where I said Brazil has more land, U.S. farmers have to use technology and new genetics in order to make up for larger production. And we have done that, and we are increasing the yields significantly every year, as long as weather permits. And so we will continue to use those technologies to expand our production. Mr. HOLDING. So we excel in technology, another reason why Chinese unfair trade practices and thievery of our intellectual property needs to be countered. Existing programs are out there to help farmers, are there any programs that you are aware of that are not working really as they are intended to work? Mr. HEISDORFFER. I do not know what programs we have--yes, we have the ARC and PLC programs in the farm program. Those are only if you have a loss. Mr. HOLDING. Right. Mr. HEISDORFFER. And just like crop insurance, you have to have a loss. And no one wants to have a loss. Mr. HOLDING. Right. Mr. HEISDORFFER. So really, they are not any kind of a subsidy. You know, China says we are getting subsidies. Well, there is no subsidy, as you know, when it comes to the U.S. farming---- Mr. HOLDING. Right. Well, thank you, and Mr. Chairman, I think we have agreement that China is a strategic trader that will play by the rules when it only behooves them, and ignore them when these rules do not work in their favor. So I look forward to continuing our work here in the Committee on this issue. And I yield back. Chairman BRADY. Thank you, Mr. Holding. Mr. Schweikert, you are recognized. Mr. SCHWEIKERT. Thank you, Mr. Chairman. Look, I am going to try not to go over the questions, because sometimes that is one of our bad habits is asking the same thing over and over. So let's actually take a slightly different approach. We know right now that a lot of our bilateral organizations that actually should have helped us head off massive excess capacity in China and other places are not working. And so this is going to be a novelty for me. I am going to actually start with Mr. Paul. If I came to you right now and said, ``As the United States and our trading partners, China being one of them, we need to change our bilateral organizations so they are no longer debating societies, where we sit there and talk and talk and talk and talk and talk and talk, and then we talk about talking. How do we actually move so things can move quickly, and that when there is actually a finding, that it is not just the marginal to that one sliver, but actually can move across the trading platform of the world?'' Mr. PAUL. That is a good question, Mr. Schweikert. I will first say that we are constrained somewhat by our obligations to the World Trade Organization. I am going to set those aside for a moment---- Mr. SCHWEIKERT. No. And I am living--this is on what being a utopian---- Mr. PAUL. Certainly. Mr. SCHWEIKERT [continuing]. Instead of these flare-ups where we have to, in many ways, threaten trade to actually force what bilateral organizations should have already fixed. Mr. PAUL. Absolutely. So you would need the collaboration of the major steel-producing companies of the United States, first of all. And you have most of that through the G20--not all, but most. And what you would want to do is add the countries to that. You would want to establish objective criteria, and to ensure that countries are committing to aligning their supply and demand as much as possible, and that there are no government interventions in their industries. For instance, 5 of the 10 largest steel companies in the world are owned or partially owned by the Chinese government. That is simply not a level playing field. You would have to provide some mechanism to---- Mr. SCHWEIKERT. Okay---- Mr. PAUL [continuing]. Alter that, and then there would have to be enforceable, agreed-upon--you would have to enforce those divisions---- Mr. SCHWEIKERT. Okay, so the checklist, I have had a fixation on timelines---- Mr. PAUL. Yeah. Mr. SCHWEIKERT [continuing]. And responses instead of on delays. And forgive me, it is just the hazard of the 5-minute rule. Mr. Newport, I was under the impression, because of the low prices of our natural gas futures, a lot of other energy that we actually, if things were--what is the term, ceteris paribus, you know, level--we should be a low-cost producer in the world. Your opinion? Mr. NEWPORT. Yeah, I believe we are very competitive. The thing we do not have that others have, like China, is government subsidies to support the business. So that is really what is key is having a level playing field. Mr. SCHWEIKERT. Let's just do baseline energy costs compared to our other competitors, particularly Europe and other places where their hydrocarbons are imported in. What is the differential? What is our energy production cost? When you produce a ton of steel, you know, the dollars it costs, how much of that ton of steel was energy? Mr. NEWPORT. It is a smaller percentage when you look at it. Raw materials and energy are probably about 60 percent of our cost. So the key component is your scrap and your iron ore that you buy. Mr. SCHWEIKERT. Okay. Mr. NEWPORT. And alloys and a lot of things from the chemical industry that we use for processing steel, et cetera. So energy is a piece of it, especially in the electrical and furnace business. Mr. SCHWEIKERT. All right, and I am running out of time, and I wanted to get to this. How do you respond to Mr. Kennedy and--forgive me--even some of my family that is in the fabricating world that appreciate and have love and caring for the mill, but they make things, and there is a lot more of them making things, and the cascade effect of the price surges, particularly over the last, you know, 6 weeks, has not been particularly helpful to their contracts? What do I tell them? Mr. NEWPORT. Well, I would comment on a couple of things. Just one, I think the market will settle down some. There has been overreaction, there has been a lot of uncertainty, I agree, there is a lot of uncertainty, which creates a lot of issues in all of our businesses and that we have to address. Also, in regard to supply material, imports have not stopped. We have had successful trade cases, we have had these 232 reports flooding in---- Mr. SCHWEIKERT. Yeah. But it is just my fear that--and this is a horrible--I mean, you want to save, because we need the capacity, but there are multiples and multiples out there on the fabricating side, and they are also our brothers and sisters, and they should not be cast aside either. I yield back. Chairman BRADY. Thank you, the gentleman's time has expired. Mrs. Walorski, you are recognized. Mrs. WALORSKI. Thank you, Mr. Chairman. Thanks to all of you witnesses for taking the time to be here. It has been a fascinating discussion, I am thankful that you are here. We are here to examine the effects of tariffs on jobs and the economy, so I want to share some observations from my district. I want to provide some context before I do. My district is in Northern Indiana, which has the second- highest concentration of manufacturing jobs in the country. They manufacture RVs, boats, trailers, and other heavy equipment. Plenty of suppliers are also in the area. The unemployment rate now in Cook County is around 2 percent, but there are thousands of jobs open on any given day, so really, it is more like zero. These are good-paying jobs, too. The average RV worker's salary was $68,000 in 2016, so this is what is at stake. With that in mind, I just want to relay some of the information that I have received from business owners in my district. If they were sitting here today, this is what they would tell you. One manufacturer said, ``We have seen a 50 percent increase in the price of steel, mostly since the tariffs were announced. Additionally, there is a shortage of steel. We are furloughing the production line in one facility today and will probably have to furlough some of the guys in our main facility later in the week due to lack of availability of material. We have raised our prices to customers because our product is a low- margin item. The combination of the increase and the lack of availability is affecting sales.'' Another manufacturer that produces bearings said, ``We cannot switch to a U.S. source, it would take 1 to 2 years for us to get approval from our customers if there was a U.S. source. We will continue to import steel and we will pay the duties. So far, we have incurred about $15,000 in tariff costs with the potential of another $240,000 based upon the orders we have already booked with our Japanese steel supplier. We are moving forward with our exclusion requests. So far, the cost has been close to 100 hours to complete these exemption forms, along with some legal costs for review and advice. We are beginning to talk to our customers regarding possible price increases this summer.'' A trailer manufacturer said, ``We have rolling shortages of steel and we are on allocation from our supplier in Utah. Prices have already gone up 25 to 30 percent respectively on aluminum and steel because of speculation. Now we are seeing a trend past 30 to 35 percent each, and of course, I am livid. The manufacturer also cancelled a factory expansion that he was planning with his tax cuts.'' A steel fabricator said, ``We observed steel prices starting to move up in early 2017 on just the talk of potential steel tariffs, and a sharp escalation in steel prices in the last 3 months as a tariff started to become reality. This has resulted in a 15 to 29 percent increase in the cost of our steel. To put this in perspective, our increase in steel cost is larger than the entire cost of providing health insurance to our work force.'' A component manufacturer said, ``We are the sole manufacturer left in the United States that manufactures this type of product. Our competitors import all or most of their finished product from either Mexico, China, or Vietnam, et cetera, therefore, avoiding any impact on this tariff. The bottom line in this is if you raise our steel and aluminum prices, our prices will have to increase in order to cover the cost. Our foreign competitors will not be affected. We currently purchase all of our steel and aluminum from domestic sources.'' A canning company said, ``We are in the process of trying to build a 147,000 square foot warehouse. The company building the warehouse gets their steel from Canada, a country exempted from the steel tariff. However, we are unable to get a firm quote even out of Canada, because prices are beginning to rise there as well with so much demand shifted to Canada. It is not on hold, we have to build it. So we are at the mercy of a volatile market.'' And the final story I would share with you is a steel processer said, ``When purchasing raw materials, we give preference to domestic steel mills wherever possible. We enjoy long, outstanding relationships with many domestic mills. We want them to thrive. The actual dynamics of the entire metalworking market have evolved in the last 40 years. In some cases, we find the domestic mills cannot meet the quality standards required by our customers, or they cannot meet the quality standards at a competitive cost. In those cases, we will buy foreign material. Why put a tariff on these items?'' And, Mr. Chairman, with that, I yield back. Chairman BRADY. Thank you. Mr. LaHood, you are recognized. Mr. LAHOOD. Thank you, Mr. Chairman. I want to thank the witnesses for being here today and for your important testimony. I represent a heavy ag district in Central Illinois. Ours is the eighth-largest in terms of corn and soybean production in the country. Also, I am blessed to have Caterpillar have their operational headquarters there. And whether it is Caterpillar or John Deere, or our farmers, obviously, they are affected by the Administration's current trade policy. And I have described the Administration's trade policy as in some ways unorthodox, unconventional. We have had Ambassador Lighthizer here, and Secretary Ross. And, I guess, Mr. Heisdorffer, when I look at our ag community and I look at what is going on with NAFTA in our current negotiations, which, obviously, we are having our eighth round this week, and the concerns there in looking at the potential tariffs on steel and aluminum and the retaliation there, what we hear from the Administration is that give them some time in terms of negotiating. But I look at the commodities markets, and I look at the prices, and the prices continue to go down. But I also look at what our farmers have to do to, you know, think out 6 months, 10 months, a year in advance, and so much of what our farmers do is looking at the future and what they are going to do. And the uncertainty that we have right now is what I hear every day from my farmers, many of which supported the President when he ran. You look at how well he did in Iowa and my part of the country, and we just had Secretary Ross here a couple weeks ago, and, you know, he was trying to reassure us and give them some time. I guess, I would ask you, what gives you comfort or reassurance with the direction we are heading as you talk to farmers in your area, and other soybean producers? Mr. HEISDORFFER. More exports is, of course, our biggest push. We all have to make decisions, as you said, a year in advance, more or less. We are going to put in a corn crop, we have to start putting nitrogen on the year before. I am a livestock person, so we have that swine manure that we have to take care of in the fall, and we inject that into the ground, according to our manure management plan, and that is our nitrogen for our corn crop the following year. So those acres are committed. And so soybeans work the same way. Whatever acres do not go to corn usually gets rotated. Understanding that your State is the number one soybean producer here--in the last few years, anyway--we are proud that we can produce a protein that will help feed the world. And soybeans are that protein. And we will continue to do that as long as we can, but any kind of interruption in our exports really hurts us. Mr. LAHOOD. Thank you. Congressman Dooley, I appreciate your comments as it related broadly to trade. I want to maybe ask your comments when I look at the justification of what this Administration is looking at in terms of these tariffs on aluminum and steel and national security, and using that as the reliance and looking at the standard with the WTO and how these cases have been dealt with, it seems to me--particularly when you hear from our Defense Department on what they say about national security as it relates to steel and aluminum--and you couple that with the fact that we have not really partnered with our European partners or the Canadians or our other allies in terms of a trade strategy that would go after the Chinese a little bit more. Can you comment on that? Mr. DOOLEY. Thank you, and I think that is--you know, when we look at the implementation of the 232s, it was on national security grounds. You know, there needed to be, from our perspective, a little consideration given to who are our strongest allies. Is our national security really jeopardized because Canada is a source of steel to the United States? I would suggest not. Nor would I suggest that Mexico or Brazil or our allies in the EU were going to jeopardize their security and the U.S. national security by failing to import critical steel to the United States. That group of allies, though, should be more aligned and prepared to engage with this Administration in a more aggressive, collaborative effort to put pressure on China to address some of their inappropriate practices that are leading to the excess capacity. Mr. LAHOOD. Thank you. Chairman BRADY. Thank you, Mr. LaHood. Before I recognize Mr. Kelly, I want to thank the witnesses for being here. I apologize, I have to scoot down to the White House. You know, April 17 is the last time Americans will have to file their taxes under this old, broken tax code that burdened American manufacturing and farmers with the highest tax rates in the world. I want to thank you for being here. I am just going to--you have been a remarkable panel, and very insightful. Mr. Kelly, thank you for providing witness for us as well, and you are recognized. Mr. KELLY. Thank you, Mr. Chairman. And thank you all for being here. I think we need to start talking about trade. There are so many different ways to look at it, but one of the things that I have been marveled at is that for decades now, we have complained about our loss of market share, somehow thinking that there is an honor system out there that people will just stop doing bad things to us because we are nice to them. I have to tell you, being in the automobile business and watching the loss of market share has been incredible. You do not get it back once it is gone. You do not get it back. Mr. Newport, I cannot tell you how much I appreciate you being here today. You know, last week, during our work week, we actually went down to AK to watch them make the electrical steel. We watched them make that grain-oriented electrical steel. We also were up in Sharon--and Wheatland, too--when we were in Farrell looking at the crankshaft business up there at Sharon Crankshafts. So with all that in mind, I was looking at some things here, and it says, ``The U.S. power system is comprised of 3,300 utilities, 3,300 utilities that work together to deliver electric power through 200,000 miles of high-voltage transmission lines, 55,000 substations, and 5.5 million miles of distribution lines that bring electricity to millions of American homes and businesses.'' And any of the system's principal elements--power generation, transmission, or distribution--could be targeted, and we know that. And the question is when you go to AK--and I watched the hardworking men and women of AK and what they are doing, and I have been there my whole life, so I know what they do, and I would really suggest that Members of Congress, instead of talking at it, go look and see what these people do. Actually see what it is we are talking about. Do not let somebody give you a bunch of talking points and say, ``This is what it is.'' You are the last producer of electrical steel in the United States. I am constantly told about how fragile our power grid is, and how it is at the very--we could lose that, and if we were to lose that, what would the effect be on our national security? And I understand the concern about, well, what is going on now, and how this talk is being harmful to futures, and how it is disrupting. I would just suggest that this idea, again, that people telling you, ``Oh, no, no, Kelly, you know, free trade as long as it is fair trade.'' I say, ``You know what, and so what do you do when you find that it is not fair trade?'' And they say, ``Well, you go to the WTO.'' I say, ``That is fine. And how many years does it take to get a ruling on it?'' ``Well, you know, sometimes three, sometimes four.'' I said, ``Okay, that ship has sailed. Okay, you win the case, you lose the market.'' I wish we would stop talking about unfair trade practices and change them to illegal trade practices. If we sit back--and we finally have a President that just didn't talk about it when he was campaigning or she was campaigning, but when the rubber meets the road, when you actually get in the office, well, it has only been 14 months, and I know we have passed no judgment on the previous couple decades that we just talked about it and did nothing. Mr. Newport, could you talk about the effect, if we were to lose AK, if we were to lose the only producer of electrical steel in the United States, what kind of jeopardy that puts our power grid in? Mr. NEWPORT. Yeah, when you think about it, if you would have something that would occur, whether it be a national disaster, you have a terrorist attack, or something else, or you just have something failing the system--which there have been blackouts that have occurred over the last decade or two in our country, and think about what that has done to businesses, what that has done to the financial markets, et cetera--how critical an impact, or how big of an impact that would have to our industry. I can tell you, you know, the other competitor that produced the product went out of the business in 2016. Our business levels have not gone up, they actually have gone down. So our utilization is actually lower than it was a year ago, despite the other competitor that made it going out of the business. But I can tell you also what will happen is if something would occur that they continue to flood the market and take over the market, if we weren't making it, when they are the only supplier, a foreign producer coming in, I can tell you what I believe would happen is the price of that is not coming down. You think about that, what that could do to our energy costs, and what that can do to our businesses when we become solely reliant on something overseas, and I agree with you. It is getting fair trade. We have already, you know, taking on the trade wars, we have already faced it. It has been going on for decades. We have seen it, as I gave examples, on electrical steel. And because people were unfairly and illegally trading steel does not give them the right to buy that steel. What we want is fair trade. If we cannot compete, that is fine. I have no problem with that. And we addressed that. Mr. KELLY. Yeah, good. I wish I had time--we really do need to talk to all of you for a much longer time than this. You flew in from all over the United States and you get 5 minutes to talk about your concerns. So we want to keep doing that, but I really do believe that at some point, you are going to not just talk the talk, you better walk the walk. And for us to sit back and allow the rest of the world to pick our pockets, and say, ``I wish they would not do it,'' somewhere along the line, we are going to get caught up with this. I have to tell you, being in the automobile business, there is very few people out of work that can buy a car or a truck. And I am watching this, and us losing. Our base, our manufacturing base, puts us in one hell of a bad position in a global economy right now, in a situation where everything is just so fragile. So I want to thank you all for being here, you guys are tremendous for coming in. Ladies, thank you all for being here, we really appreciate it. Ms. JENKINS [presiding]. Mr. Reed, you are recognized. Mr. REED. Well thank you, Madam Chairwoman, and it is great to be way over here. I feel like I am in Kansas. It is good to see you. Anyway, I just want to thank the panel for being here, and I want to echo some of the things that Mr. Kelly, my good friend from Pennsylvania, indicated. And as this Administration goes down this clearly new trade policy and Putting America First agenda, I join in looking forward, not backward. And one of the things that I know my colleagues have already touched upon a little bit is I do not think most Americans, when I go back to my district in Western New York-- it is a rural area, my home town is Corning, New York, it is up near Buffalo, Rochester, the Pennsylvania border--they have no idea, as has been confirmed here today, that we do not have a trade agreement with China. China is operating under the WTO standards. Nobody knows what that is, that is a DC term, to a large degree, to the people that are working hard day in and day out in Western New York. And so one of the things that I wanted to stress today and question the panel on, as we put these new tools in this trade policy, and as we go after that even, level playing field that we are looking to achieve--and I hear pretty much consistent agreement from the panel, that is, kind of, the outcome everyone is looking for here--as we go into that future negotiation possibly with China--and I was glad to see the president of China indicate a willingness in his public comments to engage in a conversation, I think that is critical to being successful here--what would you offer us, from your perspectives? When we sit down at some point in time in the future-- because I do believe we will sit down with these representatives from China and other trading partners--to address that even and level playing field, what are the priorities? How do we take on the overcapacity issue of steel coming out of China? What are you looking for, what would you say to us as we build that next trade agreement? What would you say are the key provisions that have to be in that agreement to make it enforceable and ensure that American workers have that opportunity to compete on that even and level playing field? Anybody like to go first in regard to that? Go right ahead. Mr. PAUL. Sure, Mr. Reed, I would be happy to. And I appreciate your leadership on manufacturing---- Mr. REED. I appreciate that. Mr. PAUL [continuing]. I know you have done a lot of policy work on that. You can start with the Section 301 report. There are a number of commitments that China has repeatedly made to protect intellectual property, to stop cyber-hacking, to eliminate forced technology transfers, and to eliminate other anticompetitive practices that they have failed to implement. And there have to be, again, consequences for that, whether it is a loss of market access or tariffs or some other mechanism, there needs to be consequences for that lack of market norms. The second thing, and this is the more troubling and difficult thing, is that China wants to be treated like a market economy, yet, it is fundamentally an authoritarian state capitalist regime that has resisted both bilateral and multilateral efforts to conform to world trade rules. There is not an easy question for--or, there is not an easy answer for that, particularly with President Xi, kind of, doubling down on the desire to build national champions, and as I mentioned, Made in China 2025, which is targeting the next generation of our industries. It is steel today, it is robots tomorrow. We have a lot at stake here with respect to American innovation and American jobs. But fundamentally, what hasn't worked is simply kicking the can down the road. We have been willing in the past--and I do not want to touch on it like you suggested--but we have been willing in the past to simply accept China's word and move on to get to the next negotiation. That has been a failed strategy. It has not worked. I am---- Mr. REED. Sanctions, so I am hearing---- Mr. PAUL [continuing]. I am glad, in a way, that the President has laid the cards on the table because---- Mr. REED. I appreciate that. Mr. PAUL [continuing]. This is a long overdue conversation. Mr. REED. And that is exactly where I am not going to go. And one of the things that I have not heard a lot of conversation on today, because we are talking about steel and aluminum: currency manipulation, to me, is one of the biggest things that is sticking out there unaddressed and is the elephant in the room. So does anybody want to touch on that in my short time left? I would appreciate it. But are there any other comments? When we negotiate this with China, what are we looking for? Ms. WILSON. I do not necessarily disagree with Mr. Paul. I think we have long been a champion on IP rights with our manufactured products. But I think what we are hearing from our suppliers is because we have cast a wide net, we are bringing in product and we are having consequences that are going to affect U.S. workers. Mr. REED. And I appreciate that short-term consequence---- Ms. WILSON. That is the reason that has brought me here. There is no---- Mr. REED. I am looking at the long-term---- Ms. WILSON [continuing]. Yeah, I understand. Mr. REED [continuing]. The long-term effects. Anyone else-- -- Ms. WILSON. The short-term would hurt us. Mr. REED [continuing]. Want to offer anything, especially on currency? Yes, sir. Mr. WOLFE. Yes, I would just encourage us to look at leveraging the export opportunities and some of our small- and mid-sized business and the growth markets in China. Mr. REED. Perfect, thank you. Well at that, my time has expired. Thank you, Madam Chair. And thank you to the witnesses. Ms. JENKINS. Mr. Smith. Mr. SMITH OF MISSOURI. Thank you, Madam Chairwoman. Thank you all for being here. I definitely appreciate the conversation. I represent Southeast Missouri. We have been devastated by the illegal dumping practices of the Chinese when it comes to aluminum. In March of 2016, I saw 900 jobs vanish because we could not smelt aluminum the way we had for decades, because of the illegal subsidizing of the Chinese government of aluminum. Let me give you some interesting numbers that need to be reiterated, because some people may not understand it, based on the conversations I have heard today. In 2000, the Chinese produced roughly 10 percent of the world's aluminum. This was in the recent report that was put out by Secretary Ross at the Department of Commerce. As of 2015, they produced over 55 percent of the world's aluminum. In 15 years, they went from 10 percent to 55 percent, roughly. In that same timeframe, in 2000, we had just under 20 aluminum smelters in the United States. Up until just recently, we had two fully operational aluminum smelters. High-purity aluminum is very important for our national defense efforts. We all know that. That is what came out in the report. But we only had one plant doing it. Now we are going to have two. The day after the President issued his aluminum tariffs, I stood in New Madrid, Missouri, with the announcement of 450 new jobs that were opening up. My district is an agriculture-based district. The largest community is 38,000 people. We grow more soybeans in Southeast Missouri in seven counties than the entire State of Missouri. But we also have an aluminum smelter. Granite City, Illinois, is 50 miles from my congressional district. We have been hit hard by the illegal Chinese practices. When we talk about a trade war, and people talk about a trade war, Mr. Paul, do you know how many tariffs the Chinese impose on products that come into their country? How many different tariffs? Could you guess? Mr. PAUL. The Chinese have significant tariffs on virtually every American product coming into its country. Mr. SMITH OF MISSOURI. They have over 19,000 tariffs on goods coming into China. We need to remember that as U.S. citizens, that the Chinese are not looking out for the American citizen. The Chinese are not looking out for the American worker. The Chinese are not looking out for the American farmer. That is why they have all kinds of tariffs on added- value soybean products. And that is why they decided to go after the soybean farmers in Southeast Missouri with a 25 percent tariff. I hope that the president of the Chinese government will decide to work and negotiate with President Trump. That is what he is asking for, that is what we are needing. We are needing fair agreements, fair deals, to look out for the Americans. They are pulling out billions, hundreds of billions of dollars of our wealth by unfair trade practices, by over 19,000 trade tariffs. Whether it is steel, aluminum, soybeans, corn, biodiesel, pork, or beef. All of it. And we need to do everything we can in supporting the President to make sure we get the best agreement possible so that we are treated fairly and appropriately. And so I thank you for the conversations, but I think we need to understand that the true problem that we have to look at are these countries that are not treating us fairly. We just want to be treated fairly. We want to be good neighbors, whether it is Canada or Mexico or China or South Korea. We want to be good trading partners and good neighbors, but we want to be treated fairly and appropriately. We want to make sure the soybean farmers in Southeast Missouri are getting the best, best value for the products that we grow. We want to make sure that the aluminum industry and steel industry are thriving and surviving. But we have to do that by making sure we are not taken advantage of. And we have been taken advantage of for way too long. And it has been on the backs of American farmers, American workers, and American manufacturers. And let me just point out, the Wall Street Journal, on April 6, talked about aluminum decreasing since March 1 by 4 percent. They got a 10 percent tariff, but the price of aluminum has decreased by 4 percent. That is the opposite of what everyone said prior to the President proposing that. We just need to make sure things are fair and free, but when 19,000 tariffs are imposed by one country, that is not fair. Let's look at the Chinese. Thank you, Madam Chairwoman. Ms. JENKINS. I, too, would like to thank our panelists for appearing before us today. Please be advised that Members have 2 weeks to submit written questions to be answered later in writing. Those questions and your answers will be made part of the formal hearing record. With that, the Committee stands adjourned. [Whereupon, at 1:16 p.m., the Committee was adjourned.] [Submissions for the Record follow:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]