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


                    THE EFFECTS OF TARIFF INCREASES
                      ON THE U.S. ECONOMY AND JOBS

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

                                HEARING

                               BEFORE THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 12, 2018

                               __________

                          Serial No. 115-FC10

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

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

                      Gary Andres, Staff Director

                 Brandon Casey, Minority Chief Counsel


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 12, 2018, announcing the hearing...............     2

                               WITNESSES

Kevin Kennedy, President, Kennedy Fabricating, LLC...............     6
John Wolfe, Chief Executive Officer, Northwest Seaport Alliance..    10
Roger K. Newport, Chief Executive Officer, AK Steel Corporation..    18
John Heisdorffer, President, American Soybean Association........    24
Calvin Dooley, President and Chief Executive Officer, American 
  Chemistry Council..............................................    29
Ann Wilson, Senior Vice President, Motor & Equipment 
  Manufacturers Association......................................    35
Scott N. Paul, President, Alliance for American Manufacturing....    43

                       SUBMISSIONS FOR THE RECORD

Acuity Brands, Incorporated......................................   103
Advanced Medical Technology Association (AdvaMed)................   107
American International Automobile Dealers Association (AIADA)....   111
American Farm Bureau Federation..................................   117
Americans for Farmers and Families (AFF).........................   120
Associated General Contractors of America (AGC)..................   124
Beer Institute...................................................   127
Edge Dairy Farmer Cooperative....................................   132
Flexible Packaging Association (FPA).............................   133
Garmin International, Incorporated (Garmin International)........   139
Greater Houston Partnership......................................   143
Interstate Natural Gas Association of America (INGAA)............   145
Freedom Partners Chamber of Commerce (Freedom Partners) and 
  Americans for Prosperity.......................................   147
Methanol Institute (MI)..........................................   151
Organizations representing U.S. manufacturers, farmers and 
  agribusinesses, retailers, technology companies, importers, 
  exporters, and other supply chain stakeholders.................   153
National Restaurant Association..................................   158
National Association of Trailer Manufacturers (NATM).............   160
ProAmpac Intermediate, Incorporated (ProAmpac)...................   163
Chambers of Commerce representing some of Texas' largest metro 
  regions........................................................   169
RV Industry Association (RVIA)...................................   171

 
                    THE EFFECTS OF TARIFF INCREASES
                      ON THE U.S. ECONOMY AND JOBS

                              ----------                              


                        THURSDAY, APRIL 12, 2018

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

    The Committee met, pursuant to notice, at 10:06 a.m., in 
Room 1100, Longworth House Office Building, Hon. Kevin Brady 
[Chairman of the Committee] presiding.
    [The advisory announcing the hearing follows:]

               ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Thursday, April 12, 2018
FC-10

                Chairman Brady Announces Hearing on the

                   Effects of Tariff Increases on the

                         U.S. Economy and Jobs

    House Ways and Means Chairman Kevin Brady (R-TX), announced today 
that the Committee will hold a hearing on the effects on the U.S. 
economy and jobs of the tariff increases related to Section 232 and 
Section 301 investigations. The hearing will take place on Thursday, 
April 12, 2018, in room 1100 of the Longworth House Office Building, 
beginning at 10:00 a.m.
      
    In view of the limited time to hear witnesses, oral testimony at 
this hearing will be from invited witnesses only. However, any 
individual or organization may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
written comments for the hearing record must follow the appropriate 
link on the hearing page of the Committee website and complete the 
informational forms. From the Committee homepage, http://
waysandmeans.house.gov, select ``Hearings.'' Select the hearing for 
which you would like to make a submission, and click on the link 
entitled, ``Click here to provide a submission for the record.'' Once 
you have followed the online instructions, submit all requested 
information. ATTACH your submission as a Word document, in compliance 
with the formatting requirements listed below, by the close of business 
on Thursday, April 26, 2018. For questions, or if you encounter 
technical problems, please call (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
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:]
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  Chairman BRADY. Thank you, Mr. Newport.
    Mr. Heisdorffer, welcome and please proceed.

                STATEMENT OF JOHN HEISDORFFER, 
            PRESIDENT, AMERICAN SOYBEAN ASSOCIATION

    Mr. HEISDORFFER. Good morning, Chairman Brady, Ranking 
Member Neal, and Members of the Committee. My name is John 
Heisdorffer, and I am a soybean farmer from Keota, Iowa. I also 
grow corn and I feed 10,000 head of hogs a year. I am the 
current President of the American Soybean Association, and have 
been on the ASA board since 2010.
    ASA represents U.S. soybean farmers on policy and 
international issues. Thank you for inviting us to testify 
before the Committee today on the potential impact of Chinese 
tariffs on U.S. soybeans. I have also submitted written 
comments for the record.
    In 2017, U.S. farmers produced a record 4.4 billion bushels 
of soybeans and exported 2.3 billion bushels, valued at $27 
billion. For the last 20 years, soybeans have contributed more 
to the U.S. trade balance than any other agricultural product. 
We are very proud of this record and of our role in helping to 
feed a growing world.
    China is the world's largest soybean importer, buying 93 
million metric tons of soybeans in 2016. In 2017, China 
imported 1.4 billion bushels of U.S. soybeans, or 62 percent of 
total U.S. exports. This represents nearly one-third of our 
annual soy production. Over the next 10 years, Chinese demand 
for soybeans will grow annually by the size of our exports to 
the European Union.
    Since last year, the U.S. soybean industry has been very 
concerned about getting into a trade war with China. This 
concern was heightened when President Trump announced his 
decision to impose tariffs on steel and aluminum imports. Since 
this announcement, ASA has raised concerns about the potential 
for retaliation from our top customers like China. ASA believes 
that there is room for our industry to grow our exports to 
China, and we want to focus on ways to expand trade instead of 
restricting it.
    Our fears of retaliation were confirmed after the 
Administration announced tariffs on an additional $50 billion 
of Chinese imports under Section 301, when China stated its 
intention to place a 25 percent tariff on imports of U.S. 
soybeans and other products. With this announcement retaliation 
is no longer a ``what if.'' The prospect of an escalating trade 
war has already created significant uncertainty in the U.S. 
soybean market, and has driven up premiums for Brazilian 
soybeans from $10 to $30 per metric ton.
    ASA has partnered with the U.S. Government for decades and 
spent considerable time and money to establish foreign markets 
for U.S. soybeans. China is perhaps our most impressive success 
story. Through a long-term and comprehensive program to 
demonstrate the value of soy-based feeds, ASA and the U.S. 
Soybean Export Council helped build demand for soybeans to the 
level Chinese imports are today. The value of U.S. soybean 
imports to China has grown 26-fold, from $414 million in 1996 
to roughly $14 billion in 2017.
    According to a study for the U.S. Soybean Export Council 
conducted by economists at Purdue University, soybean exports 
to China could drop dramatically if China chooses to impose a 
25 percent tariff on U.S. soybeans. The Purdue study projects 
that China soybean imports from the United States would fall by 
65 percent, total U.S. soybean exports would drop by 37 
percent, and U.S. soybean production would decline by 15 
percent.
    It has been argued that trade in agricultural products is 
fungible, and that the loss of one market to a competitor will 
be replaced by other markets which that competitor will no 
longer sell to. In the case of soybeans, this argument fails to 
recognize that our largest competitor, Brazil, is continuing to 
expand soybean production on new lands. Brazil is already the 
world's largest soybean exporter, including to China, and would 
respond quickly in the event U.S. trade actions trigger 
retaliation against our soybean exports.
    In addition to the concerns of U.S. soybean farmers, other 
commodity producers are at risk of losing critical sales to a 
China market. As a result of the prospective U.S. tariffs, 
China has already retaliated against U.S. pork imports, and has 
threatened retaliation against sorghum, wheat, cotton, corn, 
and beef. Actions that threaten these markets have the 
potential to upend the farm and rural economy and put the 
livelihoods of farmers in jeopardy.
    As producers of the number one agricultural export, soybean 
farmers want to be an essential part of helping lower our trade 
deficit with China. We believe that expanding market access can 
play a vital role in increasing our agricultural trade surplus. 
We ask this Committee and Members of Congress to help allow 
soybean farmers to be part of the solution instead of 
collateral damage from a potential trade war.
    Chairman BRADY. Thank you, Mr.----
    Mr. HEISDORFFER. Thank you for inviting me to testify. I 
look forward to answering your questions.
    [The prepared statement of Mr. Heisdorffer follows:]
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    Chairman BRADY. Thank you, Mr. Heisdorffer. Congressman 
Dooley, welcome and please proceed.

           STATEMENT OF CALVIN DOOLEY, PRESIDENT AND 
      CHIEF EXECUTIVE OFFICER, AMERICAN CHEMISTRY COUNCIL

    Mr. DOOLEY. Thank you, Mr. Chairman, and Members of the 
Committee. I represent the American chemistry industry in the 
United States, and thanks to the American shale gas revolution, 
in little over a decade, the chemical industry in the United 
States has gone from one of the most high-cost manufacturers of 
chemicals to today maybe the most competitive place to produce 
chemicals in the world.
    And the reason for this change is because of the increased 
supplies of natural gas, which our industry uses as an energy-
intensive industry, which is very important to lowering our 
cost. But also, like flour is to a bakery, natural gas is our 
raw material in the chemical sector.
    This has resulted in an unprecedented level of new 
investment in chemical manufacturing in the United States. In 
the last 8 years, about $194 billion in new investment in 
chemical manufacturing has come into the United States. And 
importantly, over 62 percent of that is foreign direct 
investment.
    According to the Department of Commerce, in 2016 and 2017, 
almost 50 percent of all investment and manufacturing in the 
United States was accounted for by the U.S. chemical industry. 
And that expansion is providing for a foundation for a 
renaissance in manufacturing in the United States, and just 
with the chemical industry, it is going to create about 850,000 
new jobs. Much of this new capacity is intended for export, 
reflecting the industry's belief that the United States is the 
most competitive platform to serve global markets.
    And today, American chemical manufacturers account for 14 
cents of every dollar of exports from the United States. We 
have a--currently about $174 billion, and importantly, in 2017 
we had a trade surplus of about $33 billion. And with this 
enhanced competitive advantage, we expect by the year 2020 that 
that will more than double to about $73 billion.
    The tariffs proposed by President Trump are intended to 
reduce our country's trade deficit, an objective that has some 
merit. But when we impose import tariffs in the hopes of 
protecting domestic industries that have struggled to be 
competitive in an increasing global marketplace, we invite 
retaliation that will inevitably be targeted at America's most 
competitive and most successful sectors, including chemicals as 
well as U.S. agriculture.
    Nearly 40 percent of the products on China's list of 
retaliatory tariffs are chemicals and plastics. The ACC 
estimates that approximately $5 billion in U.S. chemicals and 
plastics trade to China would be exposed to these increased 
tariffs. And a recent Brookings study determined that China's 
retaliatory tariffs would expose 2.1 million American workers 
to increased tariffs, and the U.S. chemical sector would 
account for about 40 percent of that 2.1 million.
    ACC shares President Trump's concerns about China's 
inadequate protections of intellectual property and forced 
technology transfer practices. We share the Administration's 
concern about China's refusal to appropriately address their 
policies that resulted in an overcapacity of steel 
manufacturing. China needs to open their market.
    U.S. consumers, U.S. workers, and the U.S. economy does not 
win if the tariffs we have proposed result in the 
implementation of China's proposed retaliatory tariffs that 
target those sectors of our economy that are global leaders. 
U.S. chemical manufacturers, U.S. energy producers, and U.S. 
farmers are competing and winning in the global marketplace. 
They are generating increasing trade surpluses, and we cannot 
allow them to become casualties of trade disputes.
    We urge the United States and Chinese governments to put 
aside talk of a trade war and stop the volley of potential 
tariffs. We believe the Trump administration should work with 
our allies across the world to demand that China responds and 
modifies their unfair and market-distorting trade policies.
    In the absence of a full withdrawal of the proposed Section 
232 tariffs, we urge the Trump administration to modify the 
steel and aluminum tariffs to make countries' exemptions 
permanent, allowing associations to request exclusions on 
behalf of their members, allowing product exclusions to all 
companies rather than requiring on a company-by-company basis, 
and exempting key U.S. allies without conditions.
    Thank you for your time today. We are hopeful with the 
support from Congress, the Administration and the Chinese 
government will recognize that it is in the best interests of 
both countries to commit to a process that will produce 
mutually beneficial agreements before the proposed tariffs go 
into effect.
    [The prepared statement of Mr. Dooley follows:]
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    Chairman BRADY. Thank you, Mr. Dooley.
    Ms. Wilson, you are recognized.

    STATEMENT OF ANN WILSON, SENIOR VICE PRESIDENT, MOTOR & 
              EQUIPMENT MANUFACTURERS ASSOCIATION

    Ms. WILSON. Good morning, Chairman Brady, Ranking Member 
Neal, and Members of the Committee. My name is Ann Wilson, and 
I serve as the Senior Vice President of Government Affairs for 
the Motor & Equipment Manufacturers Association. Thank you for 
the opportunity to speak with you today.
    MEMA member companies manufacture motor vehicle parts, 
components, and systems for the automotive, heavy vehicle, and 
after-market industries. Vehicle suppliers are the largest 
sector of manufacturing jobs in the United States, directly 
employing over 871,000 Americans in all 50 States. Supplier 
jobs have actually increased by more than 19 percent in the 
last 5 years.
    MEMA supports the Administration's agenda to ensure free, 
fair, and reciprocal trade and a level playing field for all 
Americans. Our industry counts on a strong domestic steel and 
aluminum industry, and has long supported aggressive policies 
to protect intellectual property rights and enforce IPR laws 
here in the United States and around the globe, including in 
China.
    However, MEMA is very concerned about the adverse impact on 
manufacturing jobs relating to the Section 232 and 301 tariffs. 
I wanted to take the opportunity today to connect the dots with 
you. I know all of you have heard repeatedly that the vehicle 
industry counts on a global marketplace. But our industry also 
counts on regulatory and market certainty.
    Our industry buys the vast majority of its steel and 
aluminum domestically, but imports specialty materials as well 
as finished parts. Often, these parts are manufactured further 
and made into other parts, subcomponents, and systems by U.S. 
workers at facilities all over the country. This allows the 
U.S. supply chain, as part of the global economy, to be 
competitive and prosperous, creating hundreds of thousands of 
U.S. jobs.
    So today I brought one of those parts with me. This is a 
fuel injector. Fuel injectors are safety-critical parts that 
must be durable and dependable. The manufacturer of this 
particular part purchases most of their steel in the United 
States. However, this particular part requires specialized 
stainless steel for the housing, and that is only available 
today from a supplier in Germany. This specialty steel ensures 
the performance of the injector. The South Carolina plant 
responsible for this fuel injector makes 40 million of these a 
year, and employs 1,700 Americans.
    Being able to bring this steel into the United States is a 
cost-effective way and allows suppliers to produce and to 
expand in the United States, hiring U.S. workers, and making 
more U.S. investment. The steel from this housing is subject to 
the 232 tariffs. This manufacturer does not know if the EU will 
be exempt from the tariff, if their individual petition for 
product exclusion will be accepted, and how long these 
exemptions or exclusions will be in effect.
    This situation is repeated multiple times for our many 
companies. We have a member, a U.S. company, who must now pre-
pay their importer a portion of $100 million of 232 tariffs in 
order to get their steel into the United States. This 
manufacturer makes 90 percent of the product line subject to 
the tariffs, in New York in a plant with 1,500 employees. The 
payment of this tariff puts profits, investment, and potential 
expansion at risk.
    Another one of our members' imports are potentially subject 
to the $7 million tariff because of the Section 301 decision. 
These imported goods support over 600 jobs in Illinois. I am 
here today because these examples are not isolated. Over the 
last week, our offices fielded calls from members with 
operations all over the country. Please understand, the tariffs 
will cost companies, but they will also cost our country. The 
price will be current jobs and future investment.
    Regarding the Section 232 tariffs, MEMA has urged the 
Department of Commerce to simplify the process--develop clear 
procedures and processes for product exclusion applications. 
Also, we have urged a regular review of the impact of the 
tariffs on the consuming industries in the U.S. economy. As to 
the Section 301, we have been heartened by United States--by 
China's recent announcement regarding excluding motor vehicles 
from potential retaliatory actions.
    We urge the Administration to continue to prioritize a 
negotiated resolution of the issues before imposing broad-based 
tariffs. The imposition of these tariffs prior to bilateral 
discussions between the United States and China will hurt our 
industry, job creation, and the U.S. economy.
    We agree with the Administration and many of you that the 
United States must take strong action to protect our economy 
and our Nation's work force. However, we believe that the 
recently-implemented and proposed tariffs will have a 
detrimental impact. I look forward to your questions.
    [The prepared statement of Ms. Wilson follows:]
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    Chairman BRADY. Thank you, Ms. Wilson.
    Mr. Paul, you are recognized.

            STATEMENT OF SCOTT N. PAUL, PRESIDENT, 
              ALLIANCE FOR AMERICAN MANUFACTURING

    Mr. PAUL. Thank you, Chairman Brady, Ranking Member Neal, 
and Committee Members. On behalf of the Alliance for American 
Manufacturing, we appreciate the opportunity to testify.
    There is no disagreement that China cheats, which is why 
these tariffs are now on the table. The testimony by Mr. 
Newport on steel as well as the Section 301 report prepared by 
the USTR on intellectual property rights violations both ably 
demonstrate that.
    The United States has only ever made progress with serial 
trade cheats through extraordinary pressure applied by Congress 
and the Administration, including but not limited to the threat 
of tariffs. So now is not the time for anybody to demonstrate 
to the governments of China, Russia, or other mercantilist 
nations that our resolve to eliminate unfair trade practices is 
anything less than strong and unified.
    AAM supports the trade actions on steel, aluminum, and 
intellectual property. We view the possibility of tariffs as a 
necessary step to achieve real progress, which includes 
reforming anticompetitive practices and reducing market-
distorting behaviors. Withdrawing the threat of tariffs without 
achieving results would be tantamount to waving the white flag 
of trade surrender, signaling to China and other trade cheats 
that there will be no consequences for predatory trade 
behaviors. If a negotiated solution with specific disciplines 
and automatic enforcement provisions can be agreed to, then and 
only then should we look at lifting tariffs. Otherwise, we 
would be abandoning the best leverage we have had in years.
    On steel and aluminum, we are already seeing positive 
results, with nearly 3,500 American jobs announced and new 
cooperation from trade partners like South Korea and Canada. 
JSW USA plans an expansion of its steel plant in Baytown, 
Texas, a move that will add up to 500 new jobs at an average 
salary of $65,000. New steel and aluminum jobs have also been 
announced in Illinois, Ohio, Florida, Missouri, Indiana, 
Kentucky, and elsewhere.
    More broadly, manufacturing contributed a whopping 21 
percent of all private sector job growth last month when the 
tariffs kicked in, and employment in metals-consuming 
industries rose substantially. Internationally, we now see 
allies joining the United States to combat unfair trade 
practices. Canada is now working to strengthen its 
anticircumvention and evasion provisions. The EU is ready to 
adopt safeguards on imported steel and aluminum. The agreement 
with South Korea to better level the playing field on steel and 
autos is also an encouraging sign.
    Chinese President Xi Jinping has again promised a new phase 
of opening up and allowing more imports. But after years of 
China making unkept promises, the United States must impose a 
sustained and credible threat of consequences should China, yet 
again, fail to deliver, particularly with Made in China 2025 
looming on the horizon. Meanwhile, the product exclusion 
process under Section 232 should mitigate impacts for metal 
users.
    Let's acknowledge that the way in which this Administration 
is delivering tariffs is far from perfect. The Administration 
waited too long to conclude the Section 232 process. Steel 
imports soared over 15 percent in 2017, putting further 
pressure on an already-stressed sector. Mixed signals on 
timing, scope, and applicability put more emphasis on the 
tactics than on the overall strategy.
    Mr. Chairman, in closing, an observation: the three-legged 
stool of trade policy--expansion, enforcement, and adjustment--
was established through the Trade Expansion Act of 1962, and it 
provided a solid foundation of progress for our Nation. But 
enforcement and adjustment have been largely neglected as trade 
and imports have dramatically expanded.
    A growing body of evidence shows Chinese imports were a 
major cause in the loss of nearly one in three factory jobs 
since 1998. Trade-impacted workers are unlikely to ever find a 
better job than the one they lost, and many will never work 
full-time again. From the perspective of these workers, our 
Nation has been in a trade surrender for decades. Americans do 
not view the Administration as having fired the opening shots 
of a trade war.
    We should not be afraid to enforce trade laws. We have the 
leverage to do so. The tariffs, many of which are still 
aspirational, represent a fraction of our $20 trillion economy. 
Goods exports to China amount to less than seven-tenths of a 
percent of U.S. GDP, while more than 20 percent of China's 
exports head straight to the United States. If China will not 
play by the rules, it should lose some access to our markets.
    [The prepared statement of Mr. Paul follows:]
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    Chairman BRADY. Thank you, Mr. Paul.
    Mr. PAUL. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you all for your excellent testimony. 
We will now proceed to the question and answer period, and I 
will begin.
    Mr. Kennedy, your company employs 350 people in Splendora, 
a town of less than 2,000 people. It would be hard to 
overestimate just how important your company is to that 
community. Your family, your father, your business has a 
wonderful reputation, and you took it and expanded over many 
years of work over and over again. You have been involved in 
the community, you are involved in the Chamber of Commerce, the 
Rotary Club, and you have a heart for the poor, supporting 
schools in Guatemala that help Mayan children who would not get 
an education get an education. So you are Main Street, America.
    So recently, Congress, working with President Trump, 
redesigned the tax code, lowering the rates for businesses to 
the lowest in history and redesigning the tax code so our local 
businesses could compete and win anywhere in the world, 
including here at home. So first, can you describe the effects 
of the tax cuts on your business and the demand for your 
products?
    Mr. KENNEDY. Sure, thank you. The tax reform was good 
because one, it created certainty. I mean, it allowed us to 
invest in equipment and we had plans for spending a lot of the 
money that we were able to make. We were already competitive 
before the tax reform against foreign competition. All the tax 
reform did was make us even more competitive. Like, we were 
just planning and setting on winning more work, creating more 
jobs, and we had the opportunity to do that.
    Now, the tariffs, on the other hand, I think for us, 
specifically, more than offset that.
    Chairman BRADY. Yeah, let's talk about that a second. So 
look, it is not enough to merely buy American, we have to sell 
American all throughout the world. The tax code was designed to 
do that. You, in your testimony, said tariffs were effectively 
taxes that are paid by U.S. companies, and ultimately, workers. 
So what was the impact of the tariffs? How did they undermine 
any improved competitiveness from the tax cuts?
    Mr. KENNEDY. First of all, they created a lot of 
uncertainty in the market. Nobody invests when they do not know 
where the market is going to go. I mean, it completely halted 
uncertainty. What they are certain about is that they can go to 
our foreign competitors, manufacturers, and ship the stuff in 
at the same price they could before without a tariff. For us, 
they do not know where our pricing is going to go. We have 
already told them it is higher.
    We have gone back to every customer to say, ``Sorry, we are 
paying 40 percent more for steel, we cannot bear that cost.'' 
And our customer says, ``Well, we cannot bear that cost 
either.'' You know, the tariffs in some ways are good, and I 
hear across the panel they are--the attempt is to punish China, 
but, you know, this is not just punishing China. If you want to 
punish China, make it surgical.
    Punish China, we have a lot of free trade--fairly-traded 
steel that does not make its way here that we cannot get our 
hands on, and if the U.S. steel producers--which we need, we 
love U.S. steel producers--if they cared as much about American 
jobs, why does the price increase 40 percent? The tariff was 
only 25 percent. But they clearly took advantage of a market 
because of demand, everybody tried to buy their steel at one 
time, all of a sudden there is no imports coming in the water, 
and, you know, price gouging--there is laws against price 
gouging in many scenarios. But in this instance, we are doing 
it to our own manufacturers.
    And, you know, I do not necessarily blame all the mills for 
trying to recover some of the losses that China has put on them 
unfairly. I just think there is a more tactical, surgical way 
to address that.
    Chairman BRADY. So your point is target the unfairly-traded 
products----
    Mr. KENNEDY. Right.
    Chairman BRADY [continuing]. And leave the fairly-traded 
products----
    Mr. KENNEDY. And if you are going to do the tariff, include 
the whole chain. Do not create a giant loophole that makes it 
easy for these guys to self-fabricate their steel.
    Chairman BRADY. A final point. Do these tariffs help you 
sell more made-in-America products overseas, or less?
    Mr. KENNEDY. No, they absolutely hurt us. I mean, they do 
not just not help us, they hurt us.
    Chairman BRADY. Okay. Thank you. Mr. Neal, you are 
recognized.
    Mr. NEAL. Thank you, Mr. Chairman. We all acknowledge the 
complexities about how steel and aluminum tariffs will work and 
how they might become effective to achieve goals. But in some 
ways, we are still not sure that the Section 232 actions really 
are to play out, because country exemptions are still being 
negotiated and product exclusions are still being requested, 
and the Administration has made clear that it is reserving the 
right to revisit the overall tariff levels of 10 and 25 percent 
for aluminum and steel. And I think there is an opportunity to 
hear from our witnesses about these complexities.
    Mr. Paul, with respect to both the steel and aluminum 
tariffs, could you talk about why the next steps that the 
Administration takes on country exemptions are critical to 
whether or not these tariffs will be effective in achieving the 
intended goals?
    Mr. PAUL. Thank you, Mr. Neal, and I think that is the 
appropriate question. There has been a focus on China, and I 
will say people rightly point out that China is our number 11 
importer of steel. But China's market-distorting behavior has 
an impact, a dramatic impact on global steel markets, which is 
why I think the Administration came forth with a global 
solution.
    The direction I think that we are headed in, if we look at 
South Korea, are negotiated agreements, particularly with 
trading blocs like the EU, that look at maintaining a level of 
market certainty in the United States that will allow the 
industry to recover some lost import market share.
    As Mr. Newport mentioned, imports are almost at an all-time 
high in the United States as a percentage of our market share. 
Capacity utilization for companies is still only at 75 percent, 
far below the level needed to assume any sort of sustainability 
to provide for our national security needs.
    What I would like to see as we move forward is both an 
agreement by our trade partners to approach China through the 
WTO and other means to essentially quarantine its unfair trade 
practices, because this is where most of it is originating 
from. The reason why some other nations have been included in 
this is that Chinese steel is transshipped; it comes through 
Vietnam, it comes through Korea, it comes through Malaysia, it 
comes through Indonesia. And we need commitments from these 
trade partners that they will not allow Beijing to undermine 
market disciplines.
    China has refused to operate by market disciplines in steel 
and aluminum since it joined the WTO in 2001. There is no 
single WTO case that any member could take against China that 
would change this. It is going to take a dramatic effort. I 
think the Administration has started the ball rolling. I want 
to see it keep going in the right direction.
    Mr. NEAL. Thank you, and as we hear from our witnesses that 
are involved in the product exclusion process, especially since 
the Department of Commerce has already received more than 800 
specific exclusion requests, I think we might hear from Ms. 
Wilson, if you could speak to that issue.
    Ms. WILSON. Thank you, Congressman. So we represent a lot 
of what are called tier-one suppliers. They are very large 
global companies, but we have 1,000 members. A lot of our 
members are smaller, maybe have one or two manufacturing 
facilities in the United States. We have been very concerned, 
first of all, the product exclusion process is not necessarily 
transparent. There have been some changing rules on it, and it 
is hard for those suppliers to understand exactly how they get 
into the process, and that is part of the 800 applications.
    We would like to see, I think as Mr. Dooley mentioned, the 
ability to have a product exclusion over a wide range of 
products so that, you know, competitors do not have to go in 
multiple times asking for exclusions for the same product that 
is coming from the same place.
    We also would like to be able to--for our trade association 
to be able to apply for an exclusion, because as you can well 
imagine, many of our manufacturers do not have trade staff. 
They do not have legal staff. They are going to have to pay for 
that to be able to file for the exclusion. We also think a 
sunset would be important, or at the minimum, a Committee like 
this to be able to regularly review this and see what this is 
having an impact on in the consuming industries. And we would 
like to see the country exclusions to include things like 
Switzerland and Japan.
    We worked with Congresswoman Walorski, we really like the 
fact that we have the duty drawback piece. But we would also 
like to see--like you said, there are over 800 applications. In 
my understanding, as of this morning, about 50 of them are 
public. So we would like to see the duty drawback come from the 
time of applying for the exclusion, rather than the time that 
it is made public. Because, you know, a month of duties could 
be a lot of money for a lot of these companies.
    So we think there is some room for improvement, but we 
really have to help focus in on how they do it. I was real 
interested in talking about, you know, what we also have for 
finished product. We have things like aluminum wheels and 
bearings, they are subject to the tariff. That is difficult.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman BRADY. No, thank you, Mr. Neal. Mr. Johnson, you 
are recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. Let me begin by 
saying I strongly oppose the tariffs on steel and aluminum. And 
as I have stated before, my primary concerns are that these 
tariffs pose a serious risk to our economy and could trigger a 
trade war, and they may damage our relationship with our key 
allies.
    I was, however, glad to see that President Trump has 
temporarily exempted a number of our key trading partners and 
allies from these tariffs. But make no mistake, the effects of 
these tariffs are wide-ranging and will affect folks across our 
Nation. It is not just affecting business.
    Collin College in my district serves about 53,000 students 
each year and offers more than 100 degrees and certificates. In 
fact, the college is planning a $600 million building program 
that will be completed over the next 7 years and will create 
nearly 400,000 square feet of new classroom space. And the 
project will allow the college to provide high-quality 
education to more folks. But Collin College is now concerned by 
the tariffs on steel and aluminum, due to the increased cost of 
construction materials.
    Dr. Pepper is another constituent of mine, which is 
headquartered in my home town of Plano, Texas. And I have heard 
from this company that they are concerned by the higher cost of 
aluminum used to make cans, potential retaliatory tariffs on 
other materials, and the impact higher costs will have on 
consumer consumption of their products.
    Mr. Kennedy, as a fellow Texan, I would like to welcome you 
to this Committee. And you know Texas leads all States when it 
comes to importing steel and aluminum products, so that is a 
big deal, it could really hurt Texas. Mr. Kennedy, can you tell 
me about how tariffs on steel and aluminum have impacted jobs 
and exports at your company?
    Mr. KENNEDY. Sure, thank you, Mr. Johnson. As I had, kind 
of, mentioned before, we compete directly with companies in 
Canada and Mexico, and they are not having to pay tariffs. So 
at the end of the day, they are able to fabricate and 
manufacture their goods, modify the steel to create a product, 
and sell it directly to our customers.
    The structures that we make are large enough that it makes 
sense to be able to ship them. There is a lot of labor that 
goes into them, and we have worked extremely hard over the last 
decade implementing technology-efficient processes in our 
manufacturing so that we can out-compete just about anybody 
when it comes to labor efficiency.
    You know, people say that American manufacturers have a 
hard time competing with labor. Maybe from a cost-per-dollar 
standpoint of the wages paid, because we pay decent wages here. 
We have made up for that with efficiency. But that efficiency 
goes out the door if our competitor has a 40 percent price 
advantage on material costs.
    And, you know, I can sympathize with our mills, but at the 
end of the day, we buy from the mills. And if we are not buying 
the U.S. steel mill-produced steel, then how are they--how are 
their jobs, how are all these jobs they are talking about 
creating, how are they going to be sustainable? You know, they 
are sustainable right now because the mills are producing at 
capacity today.
    Like, today, you have to get in line. But that is because 
everybody put their orders in right away. We are one of those. 
We had to, the costs were skyrocketing and we have projects 
that are due. So we had to buy right away and created a 
temporary demand. But we cannot pay those prices, and our 
customers will not pay them. Thank you.
    Mr. JOHNSON. Thank you, I appreciate that. Thank you, Mr. 
Chairman, I yield back.
    Chairman BRADY. Thank you, Mr. Johnson. Mr. Levin, you are 
recognized.
    Mr. LEVIN. Thank you, Mr. Chairman. Welcome to the panel. 
You effectively reflect the present clash of different 
interests in approaches to trade, that is very clear. For 
decades, our Nation's trade policy has been handicapped by 
allegiance to theories ill-equipped to respond to the realities 
of rapidly-advancing globalization. Japan used a tightly-knit 
economic structure, operating in its closed market, and 
manipulating its currency, to take full advantage of the open 
U.S. market with only a lurch in U.S. policy or action here and 
there.
    NAFTA represented the first major individual trade 
agreement with a developing nation, with a very different, 
deeply-imbedded, low-cost labor structure and woesome 
environmental standards. But the only safeguard was a non-
enforceable side letter.
    And when China responded to its entry into the WTO with 
increased, huge governmental expenditures with state-owned 
enterprises and major currency manipulation, the United States 
failed to use the surge provisions and the annual review 
provided in PNTR, and engaged in innumerable discussions, but 
no actions on currency, action that was opposed by the majority 
here.
    There were some successes that changed the May 10 
provisions on labor environment in retention of AD/CVD, a form 
of tariffs, which we fought to retain in the Uruguay round, but 
it has turned out not to be enough. Prevailing doctrine often 
became dogma. Essentially, alternatives for action were 
dismissed as protectionism. There was little acknowledgement 
that the notion of comparative advantage could be comparative 
disadvantage. Now these chickens have come home to roost.
    We are caught in years of inaction and ineptitude, and 
international trade policy with important roots after the 
Second World War came too often rigid and insensitive on steel 
and aluminum, I urge. It means using proposed tariffs as a way 
to achieve a long overdue global solution to a long-known 
problem of a huge glut caused mainly by China. Also it means 
addressing at long last China's perpetual mistreatment of 
intellectual property.
    On NAFTA, I urge we negotiate it. But only if Mexico 
effectively addresses industrial policy and practices. Keeping 
labor costs cheap at all costs, with workers without any rights 
and take-home pay at $1 or $2 an hour, not only keeps Mexican 
workers from becoming part of their middle class, for American 
middle-class workers, it is impacting their jobs and 
suppressing their wages. That issue has been acknowledged by 
the Administration, but so far, the search has been in every 
which way except the only way that can work.
    I want to point now, if I might, to what you said, Mr. 
Paul. And I urge we all take this seriously. On page one, you 
say, ``We view the threat or imposition of tariffs as a 
necessary step to achieve real progress, which includes 
reforming anticompetitive practices and reducing market-
distorting behaviors,'' and later on you talk about the need 
for a global solution. So let's all try to focus on that for 
one second.
    A global solution. You say tariffs are necessary as a step 
in that direction. Right?
    Mr. PAUL. I do, Mr. Levin. Yes.
    Mr. LEVIN. And so I wonder if anybody here disagrees with 
that? You know, you do? Cal.
    Mr. DOOLEY. Yeah, I would just suggest that when you have 
the United States taking a unilateral action in the 
implementation of tariffs, now that invites a retaliation 
targeted at the most competitive sectors of the U.S. economy--
--
    Mr. LEVIN. Okay, but let me----
    Mr. DOOLEY. Just excuse me, if I can respond to my 
question. Now they are----
    Mr. LEVIN. No, but you said a caveat----
    Mr. DOOLEY. Now they are imposing retaliatory tariffs not 
against French wine makers, they are imposing tariffs----
    Mr. LEVIN. Yeah, I understand that. I understand that. But 
you need to--and we have talked about trade for years--tell us 
how we are going to reach a global solution on a glut of 
Chinese steel that has cost American jobs. You need to answer 
that.
    Mr. DOOLEY. We do, and it takes----
    Mr. LEVIN. You do not.
    Mr. DOOLEY [continuing]. Leadership to engage with our 
allies----
    Chairman BRADY. Thank you all, time has expired----
    Mr. LEVIN. We have been engaging for years, Mr. Dooley.
    Chairman BRADY. Thank you, all time is expired. Mr. Nunes, 
you are recognized.
    Mr. NUNES. Thank you, Mr. Chairman. I want to first welcome 
Mr. Dooley here, who is from the San Joaquin Valley. Glad to 
have you back, former Congressman, long-time Congressman. 
Thanks for being here.
    So one of the things that I--I think we have to proceed 
very, very carefully as it relates to these tariffs that are 
being imposed. Most people in Congress agree with the 
Administration that China has to be taken on for a number of 
reasons, and I could go off, number off, tick off a whole list, 
but I think I will focus mostly on the stealing of intellectual 
property that they continue to engage in.
    So we need to proceed very, very carefully as a country as 
we implement these tariffs, and be very, very careful that we 
do not have unexpected results from taking rash or quick 
decisions. So one of the concepts that I have talked about in 
the last trade hearing that we had was maybe focusing on a few 
Asian countries. The Administration has expressed an interest 
in doing bilateral agreements, and perhaps there are some Asian 
countries that we could focus on that were part of the TPP 
agreement that--where a lot of the negotiations have already 
taken place.
    I have talked about Vietnam and Japan as being a couple of 
those. There is another country, the Philippines, that wasn't 
directly involved in those negotiations. But I think that is 
another opportunity for us. They would open up a lot of market, 
so at the same time you are putting tariffs on China, you would 
be trying to open up markets as quickly as possible with allies 
who could take some of the American products.
    With that said, and I want to leave this up to the whole 
panel, but Mr. Dooley, you have been around these trade issues 
for a long time, and this maybe is not in your wheelhouse 
exactly, but if you could talk about maybe some of your 
experience in Asia and some of those opportunities that we may 
have moving forward in your mind, you know, where do you see 
the best opportunities for the United States where we could 
move the quickest to open up, you know, sizeable markets that 
would make a difference to the United States?
    Mr. DOOLEY. Yeah, thank you, Congressman Nunes. I think you 
referenced the Trans-Pacific Partnership. I mean, here was an 
example where the United States was engaged with a number of 
other Pacific Rim countries in a collective effort to try to 
advance the opening of markets. In large part, that--if you 
were trying to address some of the actions of China, it was 
pulling that group of countries together that was going to be 
one of the most effective ways to achieve that outcome.
    So we look at, you know, if you look at the rapid growth 
and the increase in the per capita GDP in the Asia region, this 
is going to be one of the most rapidly-growing consumer markets 
that will provide tremendous opportunities for chemical 
manufacturers, other manufacturers, and certainly U.S. 
agriculture. It also gives us the opportunity to engage in the 
issue of transshipment of products that Mr. Kennedy talked 
about. And it also gives us the opportunity to address, I 
think, again, a collective response to respond to some of the 
intellectual property practices that China has been taking 
advantage of that have--we have member companies that have 
really been harmed by that.
    Mr. NUNES. So Congressman, if I may ask, of those--we know 
that the TPP, for now, has been shelved, but a lot of the 
negotiations have taken place. I mean, a lot of them, and the 
deal was practically in its final stages. For your industry now 
that you are involved in, which of those countries, if you 
could pick a handful of them, which of--could you name two or 
three or four that might be beneficial if we were going to 
explore a bilateral arrangement?
    Mr. DOOLEY. Yeah, well it is hard for me to respond to that 
directly. I mean, we are concerned that if you try to engage in 
an--you know, strictly in bilateral negotiations, it really 
gets very, very difficult in terms of, you know, capitalizing 
on the real opportunity we have to maximize our competitive 
advantage. When we take a regional approach, you know, that is 
going to be much more effective in, again, in meeting the--I 
think the opportunities that our, you know, most competitive 
industries have to address. I will get back to you with the 
specific----
    Mr. NUNES. Yeah.
    Mr. DOOLEY [continuing]. Countries of----
    Mr. NUNES. And I am out of time, but maybe for the rest of 
you, if you could put any thought into this of--in your 
particular industries, I would be interested to have that for 
the record. Thank you, Mr. Chairman, I yield back----
    Chairman BRADY. Thank you, Mr. Nunes. Mr. Lewis, you are 
recognized.
    Mr. LEWIS. Thank you, Mr. Chairman. Let me thank each and 
every one of you for being here. Mr. Paul, how important is it 
that we work with our friends and allies who share our concerns 
and our values?
    Mr. PAUL. I think it is critically important that we do 
that, which is why I am pleased with respect to the Section 232 
process on steel and aluminum, that processes were set out for 
Canada and Mexico as well as the EU, Korea, Australia, 
Argentina, and Brazil to provide some level of exemption while 
specific details could be worked out.
    If we look to Korea as an example, where I think that I--at 
least from my perspective, the U.S.-South Korea Free Trade 
Agreement was inadequate to meeting the needs of domestic 
workers in manufacturing. We were able to use the process under 
Section 232 and the country exemption to make some progress 
with respect to balancing that trade relationship.
    South Korea agreed to limit its shipments of steel--much of 
which originates in China--to the United States at 70 percent 
of its recent levels, an effective quota; agreed to some 
additional market access for automobiles, although I do believe 
we have a long way to go there; and some recognition of 
currency. Again, I think we have a ways to go there.
    But I do think that this process can be useful in engaging 
our allies both to apply pressure to the overcapacity issue, 
most of which emanates from China, as well as to settle some--
what I would call irritants that we have in our own trade 
relationships with these nations.
    Mr. LEWIS. Mr. Chairman, I would like to yield the balance 
of my time to Mr. Pascrell.
    Chairman BRADY. The gentleman controls the time. Mr. 
Pascrell.
    Mr. PASCRELL. Thank you, Mr. Lewis, and thank you, Mr. 
Chairman. I will save my comments for later. I have some 
questions, though.
    It struck me that it depends on what part of the country 
you live in that really provides you with the impetus on what 
you feel and what you think about tariffs and trade, and which 
industries are protected, and which industries are not, winners 
and losers, like anything else. So I approach this, looking 
back over the last 20 years, the tariffs can be a tool, but I 
think we make a mistake when we use them as a weapon.
    I have a question. Mr. Dooley, in New Jersey, they have 
over 100,000 people that work in our chemical industry. These 
companies employ a lot of people, spend a lot of money, and 
those employees spend a lot of money. Recently, I visited one 
of these companies in my district, in Lyndhurst, New Jersey, 
Sika--S-i-k-a. They use chemicals in the manufacturing of 
products that go into our roads, our bridges, et cetera, et 
cetera. They are probably one of the top three companies in the 
country that do that.
    Can you explain how the chemicals in the tariff of 301 that 
we are talking about here, on that list, impact companies like 
Sika in my district?
    Mr. DOOLEY. Congressman Pascrell, I would maybe ask you to 
review the Brookings Institute study, I think it just came out 
yesterday or a couple days ago----
    Mr. PASCRELL. Yes, it did.
    Mr. DOOLEY [continuing]. Where they identified those 
sectors of our economy that would be most impacted or most 
exposed to the increased tariffs. Number one on that list was 
plastics and chemical composites. Many of those would probably 
include the products that Sika is putting into the marketplace. 
So with that implementation of those tariffs, any market 
opportunity they had to export into China would adversely be 
impacted and would be able to create a market opportunity for 
other companies that were operating in other parts of the 
world.
    Mr. PASCRELL. So we are not debating here, are we, Mr. 
Dooley, whether or not China has been a bad actor.
    Mr. DOOLEY. Absolutely.
    Mr. PASCRELL. I do not think anybody, Democrat, Republican, 
Independent, would conclude from what--looking at their 
behavior that they need to, in some way, be impacted. And we 
need to think about that.
    Mr. DOOLEY. Absolutely.
    Chairman BRADY. Thank you.
    Mr. PASCRELL. Thank you.
    Chairman BRADY. All time is expired. Yes, Mr. Lewis, thank 
you. Mr. Reichert, Chairman of the Trade Subcommittee, you are 
recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. I want to thank you 
all for being here today and for your testimony. And I would 
especially like to thank John Wolfe, Chief Executive Officer of 
Northwest Seaport Alliance, for joining us all the way from 
Washington State.
    I share the Administration's goal of addressing unfair 
trade and ensuring American workers and businesses can compete 
on a level playing field. But as we evaluate strategies to 
combat China's cheating, we need to put all American workers, 
all businesses first, and put forward the strongest approach. I 
think our response is strongest if we work with our global 
partners.
    And I thank the Chairman for holding this very important 
hearing so that we can consider the impact of both 232 and 301 
tariffs on the consumer, on the worker, on small business 
owners, as well as on all the jobs that are tied to two-way 
trade. So it is not just about the direct importer, direct 
exporter; it is about the ripple effect across our country and 
our economy. It is about a family that is facing higher prices 
at the store or the aerospace employee putting the finishing 
touches on an airplane, the cherry grower who relies on sales 
to Chinese customers, and the longshoreman working at the port.
    In Washington State, we often refer to ourselves as the 
most trade-dependent State, highlighting the fact that we have 
at least 40 percent of our jobs directly tied to trade. And we 
do this because of examples like Mr. Wolfe has shared with us 
today.
    So my first question is to Mr. Wolfe. Can you describe the 
importance of your operations not just to Washington's economy, 
but to the entire country as a whole?
    Mr. WOLFE. Thank you, Congressman. As you mentioned, we 
consider ourselves not just a gateway for the State of 
Washington, but for many regions throughout the United States. 
Some 60 percent of the cargo moving through the State of 
Washington moves inland to other markets, and the reverse is 
true for exports. It is also important to note that there is a 
direct correlation between imports and exports, and that the 
trade supply chain is somewhat complex, yet intertwined.
    So if we take steps that damage our export opportunities, 
we can be sure that that will impact not just the State of 
Washington and the important jobs--some 40 percent of the jobs 
in the State, but certainly throughout the Nation. So as it has 
been mentioned before, we support the notion of holding our 
trading partners accountable to fair trade.
    Yet, I think we need to use caution in terms of that tool 
that we talk about, tariff, to apply to fair trade. We would 
rather see the Administration work closely with a valued 
trading partner, China, one of our most important trading 
partners, to address some of those issues that we are talking 
about today.
    Mr. REICHERT. And as the Administration receives and 
evaluates comments on the Section 301 tariffs, in your view, 
what is the most important message that you hope the 
Administration hears?
    Mr. WOLFE. I would say, that building upon what I have 
shared about the connection and correlation between imports and 
exports, if we damage our import opportunities as a result of 
trade barriers or tariffs, we damage our export opportunities. 
And there are small businesses that are seeking global markets. 
And if they do not have the equipment, the vessel space, the 
infrastructure to execute on their foreign trade strategy, then 
we limit the job creation and the benefits of free trade or 
fair trade throughout the Nation.
    So I would say that the most important thing is to 
understand that correlation between imports and exports, and 
make sure that we take a laser focus on those issues where we 
feel like there is unfair trade practice.
    Mr. REICHERT. Great, thank you. Mr. Heisdorffer, I am 
hearing from my community, they are concerned about losing 
market share. And I am assuming you are, too. If we do that, 
and China removes tariffs and we are back in the game again, do 
you expect to gain those market shares back?
    Mr. HEISDORFFER. At this point, yes, I think so if this is 
rescinded right now. Is that what you are talking about? Or----
    Mr. REICHERT. Well let's say it goes on for a while, and 
finally China decides to do away with the tariffs, then we have 
a market share we have lost. How hard is that to get back?
    Mr. HEISDORFFER. That is very hard to get back, sir. Those 
market shares will probably go to South America. South America 
has much more land that can go into production. They are 
sitting there just--I will be loving every bit of this--you 
know, where we are in this situation. But right now----
    Chairman BRADY. Mr. Heisdorffer, I apologize. Time has 
expired. I hope we will be able to get back to that answer, 
okay? Mr. Doggett, you are recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman. Mr. Chairman, as you 
know, you and I are not regularly in agreement on issues before 
this Committee. But I think insofar as your opening comments 
emphasize the importance of focusing on the predatory practices 
of China and on supporting a targeted approach where we are not 
going it alone, but working with our allies, that you have it 
about right.
    The main problem I see in the immediate future there, since 
we are governed on everything from immigration to whether the 
Special Counsel's future is preserved by the majority of the 
majority, that a majority of the Republican Caucus has not 
joined your letter to the President, including one-fourth of 
the Members of this Committee. And I would hope that our 
witnesses will focus their attention while they are here in 
Washington on those many Republicans who have not joined that 
targeted approach, or who are, just as is so often the case, 
cowered by whatever tweet the President puts out.
    I would ask our panel members when Secretary Ross was here 
recently. And it is disappointing we do not have any 
Administration official or any real China expert on the panel 
here this morning to discuss what the Administration's policy 
is. But when he was here on other matters, I asked him about 
the third alternative, the targeted approach, that he advances. 
This was one of the three alternatives that he presented to the 
President on steel and aluminum--an approach that would have 
targeted the tariffs on China; on Russia, notably; and on some 
of the countries like Vietnam that are major transshipment 
points.
    And I really couldn't get any explanation as to why he did 
not--why that approach, that alternative was rejected by the 
White House and instead we took the, kind of, shotgun 
blunderbuss approach to cover everyone initially. Have any of 
you or your associations been advised of why the targeted 
approach against Russia and China and the other countries that 
he proposed was not utilized? Mr. Newport.
    Mr. NEWPORT. Yes, I would comment on that, and I believe 
the reason it wasn't taking that approach was because of the 
ease that we have seen of the--if we targeted, say, China, they 
have figured out how to cheat the system and how to beat it.
    So, you know, we have had trade cases and other things in 
which we have gone against China, and they have figured out how 
to go through other countries. So it will just appear elsewhere 
if you only picked a handful of people. And I think if you look 
at--there were three alternatives put out there, the President 
took option one. But with the exemption process that is being 
discussed, you are really falling into option two.
    Mr. DOGGETT. Well, he took an approach that covered 
everyone. He gave a bit of uncertainty to countries that we 
actually have a trade surplus with, if that is to be the 
measure. And it seems to me that in the list in option three, 
they had a number of the transshipment countries, and that the 
focus there would have gotten us a better result.
    In fact, an example of that is what has happened with 
Russian aluminum. For other good reasons, as you probably know, 
very belatedly, the Administration finally singled out the 
aluminum magnate from Russia that provides most Russian 
aluminum, and since singling him out with sanctions, Rusal's 
shares have lost half their value and the London Metal Exchange 
has said it will not stock Rusal metal. And that is a unique 
situation, but it seems to me to show the value of targeted 
sanctions rather than just applying it to everyone. Let me ask 
you in the minute that I have left if any of you can tell me, 
since we do not have an Administration official here, exactly 
what the Trump trade policy is on steel and aluminum? Or China 
generally, or anything--any aspect of it, if you could 
describe----
    Mr. PAUL. Mr. Doggett.
    Mr. DOGGETT [continuing]. What the policy is.
    Mr. PAUL. Yeah, just with respect to steel--and I think it 
is worth reading the Section 232 report, that there is a--and 
Mr. Newport described this in his testimony, that there is a 
gross amount of overcapacity in the system that leaves both--it 
impacts from China, from transshipments from China, and then 
anticompetitive practices that result from oversupply that 
needs to be addressed that is having a material impact on our 
ability to supply for our own national defense.
    In addition to Mr. Newport's example, there is the example 
of armor plate. And there is only a handful of makers of that 
left. And so I think with respect to steel, it is this ability 
to provide some market certainty for domestic steel makers to 
provide for our national defense.
    Mr. DOGGETT. Thank you----
    Chairman BRADY. Thank you. Mr. Roskam, you are recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman. Mr. Kennedy, one of 
your opening sentences resonated with me. I represent suburban 
Chicago, and I have a lot of manufacturers, and very 
sophisticated manufacturers at that, many of them manufacturing 
five times to the right of a decimal. And I think the sentence 
that I--it was in your first paragraph, and I will paraphrase 
it. What is presented as a tariff on foreign steel has become a 
tax on U.S. manufacturing. And that is what I am hearing from 
my constituency.
    So I was out recently at a company in my district, they 
import specialty steel that is not available here domestically. 
They showed me a letter and, you know, here is the letter, it 
is from their supplier, that says, basically, ``Not it.'' This 
25 percent is on you, you make the point that there is an 
exacerbating impact of that, and it is not just the 25 percent.
    What I wanted to explore is something I think you talked a 
little bit about, but maybe to press it a bit more deeply, and 
that is that the impact of the tariffs could have this really 
perverse effect of creating an incentive for more imports of 
finished products that are created outside the United States.
    You mentioned, you know, the Chinese doing an end-around 
and doing, sort of, de minimis changes to steel. Are you seeing 
that with your peers? Can you just give us a little bit more 
color commentary on that?
    Mr. KENNEDY. Sure. Absolutely, thank you, Mr. Roskam. Well, 
we see it every day. We were talking about the energy expansion 
and the building. You know, these LNG terminals on our coast, 
already half the steel comes from China. I mean, we are talking 
about billions of dollars of manufacturing and fabrication, and 
right now, the U.S. fabricators like myself and even some 
companies larger than us, we provide the other half.
    You know, the long-lead items they can get from China 
because it is cheaper. We have a geographic advantage, we have 
a time--a lead time advantage, we are right here. What is 
happening now is look, they can just fabricate all the steel. 
If I have to pay 40 percent more for my steel--and steel makes 
up half the cost of our end product--then China can just 
fabricate all the steel. And they send it through Malaysia, 
they send it through Singapore, they send it through Indonesia. 
And at the end of the day, I do not understand the inability 
for a targeted approach.
    We have to provide traceability on our steel. Because our 
customers want to know that the steel was made to a certain 
quality, a certain strength. Steel has a variety of grades and 
strengths. There is not one carbon steel out there. So I do not 
know why we cannot have a directed, targeted approach.
    We should force our Malaysian exporters, or force the other 
countries who are our trade partners, to show where they got 
the steel. It is easy, they come with MTRs, material 
traceability reports, which show up on every piece of steel. We 
can enforce that if we want to, we can target where the 
punishment goes.
    Right now, you know, we are talking about picking winners 
and losers. And look, if we are picking losers, let's pick the 
people--let's punish the people that need to lose. Right now, 
we are picking winners and losers within the United States. We 
are picking winners in one industry and losers in a lot of 
other industries.
    Mr. ROSKAM. Let me shift gears a little bit and switch to a 
process question now. We have heard that there is going to be, 
you know, the ability to get exclusions and so forth. I will go 
back to the company that I visited. They are now in the process 
of trying to navigate through petitioning for 200 different 
products that apparently they have to--you know, submit this 
and have this big review and so forth.
    Do you have any insight on that? Do you have that range of 
products? Is this not a problem for you, is this easier for 
you? What is your experience?
    Mr. KENNEDY. Well I can only really speak for my business, 
but I would imagine it is similar in that really what it is 
creating is uncertainty. I mean, timing is important.
    Mr. ROSKAM. Right.
    Mr. KENNEDY. You know, right now, we build drilling rigs. 
That is one thing that we compete against Canada for. Once we 
lose market share, I have 200 employees that touch a rig from 
the time it starts, until we buy the steel the time it 
finishes. Well if we lose that portion, and I lose those 
employees, we have spent years building up a manufacturing 
process with training personnel, getting people with the 
experience they need to build our products, to be better at 
building them than our competitor.
    When we build something for the first time, it is always 
worse than when we build it again. We get better and better at 
it. When we lose all of our intellectual property, which is our 
people, when we lose that temporarily, we may never get it 
back.
    Mr. ROSKAM. Yeah. That is good insight, thank you, Mr. 
Kennedy. I yield back.
    Chairman BRADY. Thank you. Mr. Thompson, you are 
recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman, and I want to thank 
all of you for being here today telling us how these ongoing 
trade wars and potential for trade wars are affecting your 
particular sector. Hearing from you, I cannot tell you how 
important it is for us to hear from you, and how important it 
would have been had the President heard from you prior to 
launching his trade war efforts.
    I have voted for trade agreements, and I have voted against 
trade agreements. And I am not opposed to tariffs. I think they 
can be a very legitimate tool for trade when they are used 
strategically. But this Administration is using anything but 
strategy. The trade policies, they are all over the place. 
First, they want to renegotiate NAFTA. Then, they say they are 
going to walk away from NAFTA. First they say trade wars are 
good, then they say there are no trade wars. One thing is for 
sure, this type of Washington talk is bad for producers and it 
is bad for consumers.
    Just look at my State of California, in China's retaliatory 
tariffs. Ninety percent of California's top fruit and nut 
commodities are being hit. The Chinese already had a 48.2 
percent tariff on wine, and as Congressman Dooley notedly 
pointed out, that when they put tariffs on wine, it is not 
against everything that is competing with the United States. 
Now, as a result of the President's trade war, we are facing a 
67.7 percent tariff on wine. This is unsustainable, and it has 
already had major negative effects on orders in my home 
district.
    By not having a cohesive trade agenda with consultation 
from stakeholders and from Congress, this could mean a major 
loss of jobs across many sectors. The California wine industry 
employs almost 800,000 people nationwide. How many of those 
jobs are going to be lost because of this tariff trade war 
nonsense? I would hope that future hearings will focus on smart 
trade policies that will promote strong economic ties and 
building American companies and producers.
    So, Mr. Chairman, I have two statements from the California 
Wine Institute that I would like to ask unanimous consent to 
have placed on the record.
    Chairman BRADY. Without objection.
    [The submissions for the Record of Hon. Mike Thompson 
follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. THOMPSON. And I would like to yield the balance of my 
time to our Ranking Member on Trade, Mr. Pascrell.
    Chairman BRADY. Mr. Pascrell, you are recognized.
    Mr. PASCRELL. Thank you, Mr. Thompson, Mr. Chairman. Mr. 
Paul, you described in your testimony, which I read--I 
apologize, I wasn't here to hear all of it--how global excess 
capacity in steel devastated U.S. companies and workers. The 
problem has gotten worse since 2012, if you look at the 
numbers. Aluminum production has dropped 60 percent just in 
that time, and in 2016, the Global Forum on Steel 
Overcapacity--you are familiar with that--was created to find a 
multilateral solution, and the OECD has been working on this 
issue for years.
    Do you think that the Global Forum has been effective, in 
your view? And do you think that unilateral action actually has 
the chance to incentivize countries to more meaningfully engage 
in the Global Forum?
    Mr. PAUL. Mr. Pascrell, thank you----
    Mr. PASCRELL. We are talking about consequences here.
    Mr. PAUL. Yes. It is an excellent question. And I do think 
the Global Forum has been helpful in putting some focus on the 
issues at stake. I will say it has been an excruciatingly slow 
process, that there are some key partners that are not engaged 
in the Global Forum that have pervasive unfair trade practices 
in steel.
    I will say the greater issue here, Mr. Pascrell, is that 
China first recognized that it had excess capacity about 8 or 9 
years ago in steel, and its leadership has made continued 
promises to reduce that excess capacity. The opposite has, in 
fact, happened, and as China's economy waxes and wanes, the 
rest of the world is caught up in this trade tsunami.
    The American workers suffer the most because we have the 
most open steel market in the world. Our market is uniquely 
penetrated by imports--they account for about 20 percent of our 
consumption. And while other blocs in the EU may put up some 
safeguards, we are left for the industry filing after the fact 
very expensive trade cases to try to make up the difference. 
That is not a sustainable----
    Chairman BRADY. Thank you, Mr. Paul.
    Mr. PAUL [continuing]. Policy.
    Chairman BRADY. Time has expired.
    Mr. PASCRELL. Thank you, Mr. Chairman----
    Chairman BRADY. Mr. Smith, you are recognized.
    Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman. Thank you 
to all of our witnesses here today. And certainly, you bring 
some important perspectives, and Mr. Heisdorffer, I appreciate 
your perspective on agriculture. And obviously, heading up the 
Soybean Association, you bring that perspective, but also as a 
corn grower and a hog producer, I think you have an additional 
perspective. And so there is your formal testimony that we 
certainly appreciate, but also, you know, the impacts that are 
taking place or might take place.
    If you could share a little bit on how tariffs that are 
already in place or those that are proposed, how you see that 
affecting your community, not only your own business, but 
perhaps your neighbors' planting decisions. We know that those 
are very important, especially this time of year. And how, 
perhaps, banks and operating capital might be responding as 
well. Can you touch on those?
    Mr. HEISDORFFER. Yes, Congressman, I can. Right now, farm 
income is down 50 percent, crop prices are down 40 percent, and 
we are expecting--and that is over the last 5 years, since 
2013--and we are expecting another possibly 6 to 7 percent this 
year of lower income. We cannot afford to lose a valuable 
customer like China. It is our number one customer, of course, 
with soybeans. All other countries combined do not come up to 
what China takes from the U.S. soybean producers.
    So yes, if we lose that and we lose our exports to South 
America we are going to end up losing farmers. It is already 
very close to happening out there now. We are going to lose 
some over the next year just because of the downed prices and 
things. I am putting in my 47th crop this spring, and I have 
served the soybean industry for 23 years, either on a State or 
a national level. My son farms with me. I am not so concerned 
about myself at this point, but I am concerned about my son's 
welfare for the future, and for the future young farmers that 
are out there.
    Mr. SMITH OF NEBRASKA. All right, thank you. I yield back.
    Chairman BRADY. Mr. Larson, you are recognized.
    Mr. LARSON. Thank you, Mr. Chairman, and let me commend you 
and the Democratic leader, Mr. Neal, for this panel. It is not 
often that you get to sit in a committee room and hear the 
dynamic differences that exist within the panel itself. And, 
Mr. Chairman, I would suggest that perhaps we need another 
hearing, maybe more extensive, where we get to refine these.
    Because I couldn't help but note the body language of 
individuals when Mr. Dooley was speaking, Mr. Newport's 
reaction when Mr. Paul was speaking, and Mr. Kennedy's 
reaction. And rather than having us inquire of you, it would 
have been great to see that dynamic contrast take place so that 
we can better sharpen our views.
    I say this because I think that what we are discussing here 
this morning is more tactical than in terms of policy, in terms 
of our response. And I think, Mr. Chairman, you were surgical 
in terms of how you discussed this in the beginning, and I 
think that points to a number of the things that individuals 
have said. So first, let me ask the panelists in very rapid 
order, are we experiencing globalization? Yes, Mr. Kennedy? Yes 
or no? Or is this a globalization issue? Mr. Wolfe.
    Mr. WOLFE. Absolutely.
    Mr. LARSON. Mr. Newport. Mr. Heisdorffer. Mr. Dooley.
    Ms. WILSON. Absolutely.
    Mr. LARSON. Mr. Paul. There is no question about the fact 
that what we are dealing with here is an issue of 
globalization. No one less than Richard Trumka has said what we 
need is a massive rewrite of the rules as they relate to global 
policy. Would you agree with that? Mr. Paul.
    Mr. PAUL. I think that is correct. I think that is a very 
aspirational goal----
    Mr. LARSON. It is, but would you agree with it?
    Mr. PAUL [continuing]. Given the shortcomings of the WTO as 
it exists today. But yes----
    Mr. LARSON. Ms. Wilson.
    Ms. WILSON. Our industries actually flourished in the 
United States with some globalization policies. I think there 
are areas, including IPR rights, that we need to take a look 
at. But overall----
    Mr. LARSON. But you would not----
    Ms. WILSON [continuing]. We have supported free trade. We 
have added jobs in the United States because of it.
    Mr. LARSON. Would you say that we need a rewrite as it 
relates to globalization and its impact?
    Ms. WILSON. I would use your word, Congressman, and I would 
say we need a tactical rewrite.
    Mr. LARSON. Mr. Dooley.
    Mr. DOOLEY. I like Ann's comment there. I think a tactical 
rewrite would be----
    Mr. LARSON. A tactical rewrite?
    Mr. HEISDORFFER. Since we have had record crops of soybeans 
the last several years, we need global exports in order to 
maintain.
    Mr. LARSON. Mr. Newport.
    Mr. NEWPORT. Basically, we need fair trade.
    Mr. LARSON. Fair trade. Mr. Wolfe.
    Mr. WOLFE. I can see opportunities where fair trade has 
served us well, and trade policy, so I think we should leverage 
that as we look at a rewrite.
    Mr. LARSON. Mr. Kennedy.
    Mr. KENNEDY. I agree, I think we need free and fair trade, 
and we need it quickly, if we can, to eliminate some 
uncertainty.
    Mr. LARSON. Mr. Pascrell pointed out--and I think a number 
up here on the dais would agree, that tariffs can be an 
important tool, but not if they are used as a weapon. And there 
is more than I think a sense of concern up here from the dais 
about tariffs being used as a weapon. Mr. Newport, I noticed 
your response to Mr. Dooley's comments. I was wondering if you 
wanted to have an opportunity for an exchange on what Mr. 
Dooley was saying. I noticed you nodding your head in 
disapproval.
    Mr. NEWPORT. Oh, no, I think when you look at what has been 
going on we have been facing a trade war in our industry. What 
we want is fair trade. When we are exporting products overseas, 
we are facing tariffs and other duties as an industry. We sell 
steel overseas. There are tariffs in place, there are duties in 
place, a lot of industries face it. But they can come here with 
no tariffs, without duties.
    And, you know, we talked earlier about the exemption 
process, and should it be targeted. Well, actually, on our 
allies, in electrical steel, as I testified, Korea and Japan 
are our two biggest issues of what is being imported in, and 
what was imported in the first quarter of this year from Korea 
equated to what they imported in total from 2012 to 2016.
    Mr. LARSON. Mr. Dooley, do you think we could successfully 
target and utilize tariffs as a tool versus a weapon, or how 
would you respond to Mr. Newport?
    Mr. DOOLEY. My response is, if you listen to some of the 
comments here, you would think that our economy was failing or 
not being globally competitive. But our service sector is 
globally competitive, if not a leader, our energy sector has 
now become a global leader, the chemical manufacturing sector 
is a global leader, our U.S. agriculture sector is a global 
leader.
    And our concern is if you are not tactical, if you take an 
axe approach to, you know, heart surgery, and you have a 
unilateral implementation of a tariff that is targeted at one 
sector, it invites a retaliation. And that retaliation is going 
to go at our most competitive sectors. And that is where, you 
know, we have great concerns.
    Mr. LARSON. Thank you, Mr. Chairman, I----
    Chairman BRADY. Yeah----
    Mr. LARSON [continuing]. I do hope we have another hearing.
    Chairman BRADY. Thank you, Mr. Larson. Ms. Jenkins, you are 
recognized.
    Ms. JENKINS. Thank you, Mr. Chairman, and I want to thank 
all the panelists for joining us this morning. I have voiced my 
concerns many times about these recent tariffs and the harm 
that they could cause Kansas producers, manufacturers, and 
consumers alike. For instance, cattle producers, which Kansas 
ranks third nationally, note that beef exports account for 
around $300 a head, a point reiterated by several Kansas 
cattlemen who were just in my office yesterday.
    President Trump achieved a great victory last year by 
reopening the Chinese market to U.S. beef for the first time in 
more than a decade, but unfortunately, China has placed U.S. 
beef on a proposed tariff retaliation list, which could erase 
the gains our cattlemen and women have made in the Chinese 
markets.
    So in addition to family farmer ranch operations facing 
down retaliation over trade restrictions, extreme and 
exceptional drought is also creeping across most of Kansas, 
diminishing the odds for bumper crops and resulting in 
extraordinary measures to protect our livestock. Every producer 
knows that access to foreign markets and low trade barriers are 
crucial for rural America, even in the best weather conditions, 
but especially so when the weather turns sour.
    In fact, last month, the State of Kansas issued a statewide 
drought emergency, and the USDA recently reported that, 
nationally, just 32 percent of this year's winter wheat crop 
was in good or excellent condition, compared to 51 percent last 
year. In Kansas specifically, it includes rates of 13 percent 
very poor and 31 percent poor. For an additional frame of 
reference, some cattle producers in the State are having to 
feed cattle on those wheat fields because the pasture grass is 
yellow and brittle when it should be green and lush.
    So with that being said, Mr. Heisdorffer, how do you 
foresee the long-term ag economy shaping up if periods of 
drought continue to hamper production and prices for what 
farmers are able to produce are greatly diminished from these 
tariffs and other threats of trade retaliation?
    Mr. HEISDORFFER. Well, to start with, you know, if this 
drought continues, and it is in my area, too. I am in Southern 
Iowa. Northern Iowa is not quite that way, but Southern Iowa 
is. We drained the bucket last year, there is nothing left down 
underneath. And if that continues, yes, like I said, we are 
going to start to lose farmers. There is no doubt about it.
    And livestock, yes, we might be able to get a little bit 
out of crops, but they are going to start selling off 
livestock, which I am sure is going to happen in your State. 
And as that happens, farmers are just going to go out of 
business. There is no other way about it. We put everything 
forward to our families as farmers, and we try to continue that 
generation after generation.
    I am fourth generation, my son is a fifth, and we will keep 
that going, but I am so afraid for these young farmers 
nowadays, and not just that they may fail, but most of them are 
like me, who are in partnership with my son. And though I have 
had a lot of years of farming, they could take me along with 
them.
    Ms. JENKINS. Well, thank you. I guess you have confirmed my 
fear as well. And with that, Mr. Chairman, I yield back.
    Chairman BRADY. Thank you, Ms. Jenkins. Mr. Kind, you are 
recognized.
    Mr. KIND. Thank you, Mr. Chairman. Mr. Chairman, I think 
you said it very well in your opening statement, I think all 
the panelists agreed, too, that with China, we have a problem. 
I think we are all in agreement that they are stealing our 
intellectual property, they are requiring technology transfers, 
they are requiring joint ventures that place our companies in a 
minority position, they are dumping steel below market price in 
the global marketplace, and that is something that definitely 
needs to be fixed.
    But as someone who spent a strong proponent of a robust 
trade agenda in this Congress, I am afraid that America, we 
have a problem. We have an Administration that on day one 
turned their back on the most significant multilateral trade 
agreement in the 21st century, the Trans-Pacific Partnership, 
in the fastest-growing economic region in the globe, the 
Pacific Rim area. They put on ice the trade negotiations with 
the second-largest economic marketplace, Europe, with TPP.
    They threatened to blow up NAFTA, now they are moving down 
the unilateral road of 232 and 301 trade sanctions, and they 
have not embarked on one new bilateral trade agreement in the 
year-and-a-half that they have been in office so far. Our trade 
agenda is seriously off the rails, and it needs to get back on 
track quickly, or we are going to be suffering economically as 
a consequence.
    Mr. Dooley, I do subscribe to your viewpoint, but I think 
the unilateral approach makes it too easy for countries like 
China or anyone else to just retaliate in kind, and 
strategically hurt us where they know it is going to hurt the 
most. And that is something that should bother all of us. But I 
want to pick up on a comment that you mentioned in your opening 
statement, which I think bears a little fleshing out. Right now 
we are in the process, or the Administration put in a process 
exempting countries from the tariffs and requiring individual 
businesses to have to apply for exemptions, and you mentioned 
that we ought to be looking at allowing associations to be able 
to represent the members in the exemption. Why do you think 
that is important?
    Mr. DOOLEY. I think Ms. Wilson also commented on this as 
well. When you have the requirement that an individual company 
has to apply for an exemption--and it is also, kind of, a black 
box process--and if you look at a lot of the companies that do 
not have the internal capacity that have the expertise to even, 
you know, go through that process, it is a significant 
impediment. And it harms businesses such as Mr. Kennedy's, that 
are, you know, just--that is not what they do. They build and 
fabricate and, you know----
    Mr. KIND. I have heard that there could be a number as high 
as 6,500 individual businesses applying for some form of 
exemption moving forward, is that right, Ms. Wilson? Or----
    Ms. WILSON. I am not sure if it is 6,500, but we have 
almost 1,000 now, and if you just look at our membership, many 
of our companies are going to have to file multiple petitions 
for some kind of exclusion, product exclusion. I think the 
other thing that is of concern is the way I understand the 
process may have an initial application, and there may be a 
request for more information. And some of this information is 
going to be considered proprietary. I mean, as you can well 
imagine, one reason why we would like to see a blanket 
exclusion process is because many of our members bring in 
similar types of products. They do not necessarily want to say 
who that is----
    Mr. KIND. Yeah. Well, I hope the Administration will take 
that into consideration as they move forward. Mr. Newport, 
listen, I really appreciate your willingness to stand up and 
defend your industry and the jobs that depend on it, but there 
is also an important ratio that we need to keep in mind, and 
that is 20 to 1. For every one job that is affected by the 
production of steel and aluminum, there are 20 jobs--and I am 
looking at Mr. Kennedy right now--that are affected by the 
consumption of steel and aluminum.
    Can you sit here today and reassure a business like Mr. 
Kennedy's that you can replace the lost steel, that they could 
suffer with these tariffs and still be price competitive in the 
marketplace so that they are not losing contracts as they move 
forward?
    Mr. NEWPORT. Yes, I think if you look over time, you know, 
we have been through it in the steel industry, whether it was 
201 actions, et cetera, that the steel industry has been there 
to support manufacturing. And I think the key on the exemption 
process is making sure it is not another loophole. If we had 
trade cases that people had figured out how to get around, you 
have a 232 action becoming a process with exemptions that 
people are going to look for loopholes to get through. So the 
key is that it is effective, and that is really what the key 
needs to be.
    We have been here, we are also a supporter, and when you 
think about what is coming from the tier ones going into the 
auto industry, besides the steel manufacture, we actually 
supply parts into the auto industry.
    Mr. KIND. Mr. Kennedy, are you confident if the tariffs do 
move forward that you are going to be able to find replacement 
steel at a price competitive----
    Mr. KENNEDY. Right now, our service suppliers have to get 
in line at the mill. I mean, there are hulls that are missing. 
A lot of that is the uncertainty. But there is a lot of fairly, 
freely-traded steel from our allies that we need. And then my 
question on the exemption is how do you exempt a new school or 
a new plant or a wing or a modification or product, a custom 
product, how do you exempt that? They are----
    Mr. KIND. Yeah.
    Mr. NEWPORT. And a comment, the tariffs are not stopping 
the imports.
    Mr. KIND. Okay. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you, Mr. Kind. Mr. Paulsen, you are 
recognized.
    Mr. PAULSEN. Well, thank you, Mr. Chairman. This has been a 
really good panel and a really good discussion. We absolutely 
need to target these unfair trade practices, especially by 
China, that absolutely has engaged in theft of American 
technology and innovation.
    China's actions have undercut our workers, stealing 
intellectual property, enacting hostile policies, forcing our 
American companies, again, to give up their technology. But 
these solutions do need to be targeted narrowly to avoid 
inflicting harm on our consumers as well, and our job creators, 
as we have heard, that rely on fairly-traded imports in order 
to be competitive.
    I have Minnesota medical device companies and supply 
industries that are very worried that the proposed tariffs 
under 301 on pacemakers, defibrillators, x-ray equipment, and 
orthopedics are going to end up making healthcare costs more 
expensive, drive them up. And, Mr. Chairman, I would like you 
to consent to enter into the record an April 6 article in the 
New York Times regarding this. If I could submit that for the 
record.
    [The submission for the Record of Hon. Erik Paulsen 
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. PAULSEN. Mr. Neal, if you want to sub in.
    Mr. NEAL. I am ready.
    Mr. PAULSEN. Okay. Without objection. But there are 
concerns here, as the article points out, that we are impacting 
consumers potentially with knee replacements, hip replacements 
that could go up because of orthopedic tariffs being put in 
place. And the Consumer Technology Association has outlined 
concerns that proposed tariffs on TVs and monitors will raise 
the price of a television 23 percent. And given Ambassador 
Lighthizer's testimony to us and to this Committee to minimize 
the impact to American consumers, this action just seems to 
contradict that testimony. And these are concerns that have 
been raised by the proposed $50 billion of tariffs coming up on 
products. We do not even know what might be on the next 
potential list of $100 billion that we are waiting on the 
Administration to potentially release.
    And look, I think the pro-growth policies that we have seen 
implemented, especially the tax overhaul, now implemented over 
the last year, has put our economy in a really good place, 
adding 600,000 jobs just in the last 3 months, unemployment is 
at its lowest rate since 2000, and the economic growth numbers 
are averaging 3 percent in the last 3 quarters.
    That is double what they were the year previous, and nearly 
every quarter. And I am opposed to broad-based tariffs that are 
going to essentially be taxes that can backfire and then 
reverse our ability for American businesses and jobs to grow 
and actually impose economic harm.
    So, Mr. Kennedy, I want to follow up real quick in the time 
I have. I have heard the same concerns that you have expressed 
today from some of my Minnesota metal fabricating and 
manufacturing companies. They have seen steep price increases 
in steel, for instance, similar to the 40 percent you 
mentioned.
    Now, they have also said that their supply has gone from 
maybe, like, a 6 to 8 week waiting outlook to jumping overnight 
to as high as 22 weeks. Can you talk a little bit about how 
that type of a jump in supply also impacts your pricing? Or 
your jobs----
    Mr. KENNEDY. Sure.
    Mr. PAULSEN [continuing]. Or your manufacturing and your 
ability to plan with certainty for the future?
    Mr. KENNEDY. Sure, thank you, Mr. Paulsen. Yeah, we are 
affected a number of ways. One is obviously pricing. We are at 
a price disadvantage against our foreign competitors, and I 
would imagine those in Minnesota are really, really close to 
their Canadian foreign competitors. But lead times are an 
issue, too. If I cannot meet the expected delivery of my 
customer and my competitor can because they can get their hands 
on the steel, then they win the work.
    You know, we talked about--you just mentioned that they can 
supply the steel, our mills can keep up, and it does not 
prevent imports. Well, uncertainty does. Uncertainty prevents 
imports. Right away, the imports stopped coming. Who is going 
to send that over not knowing whether or not it is going to be 
taxed or whether or not they are going to have to turn the ship 
around or dump it at a loss, and they are not going to do that.
    And I can attest that our mills currently, a lot of those 
mills cannot keep up. And realistically, we should welcome 
competitive steel. We are not scared to compete, and I do not 
think that your Minnesota company fabricators are scared to 
compete. We want to compete, but we do not want our government 
putting up obstacles that prevent us from being able to 
compete. We worked hard to compete on our own and make 
ourselves competitive against our foreign competitors. But we 
cannot be at a price disadvantage to our competitors.
    Mr. PAULSEN. You know, Mr. Chairman, I think what we have 
heard, and I agree, is that our American manufacturers can 
compete and win anywhere. And so we just have to have that 
certainty, a level playing field in order to be able to do 
that. And we can win and sell American goods in every respect.
    Mr. KENNEDY. That is right, and you know what? Our mills 
can compete, too. I mean, Nucor Jewett is 2 hours from our 
facility. They are a U.S. steel producer, and they compete. 
They have hardworking guys. We come from the same stock of 
people over there. And they can compete.
    But not every mill can compete, and not every fabricator 
can compete, and we should not pick winners and losers. We 
should not prop up companies or industries that cannot at the 
expense of those that can. And that is exactly what is 
happening now. There are some mills that are going back to 
work, and that is great. There are some mills that should never 
go back to work.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you. Mr. Pascrell, you are 
recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, the 
title of the hearing is ``The Effects of Tariff Increases on 
the U.S. Economy and Jobs.'' This is about jobs. The Economic 
Policy Institute reports that 3.4 million jobs, American jobs, 
have been lost due to China trade since 2001. And I think it 
has been laid out here that our steel and aluminum production 
in this country has plummeted due to Chinese overcapacity.
    We seem to know what the problem is. The question is what 
is the response? Many China experts and former government 
officials agree that our current policy just is not working. We 
have tried for over a decade. Past attempts at dialogue have 
not worked. A new approach is needed.
    The question now is what is the new approach, and will it 
be effective? The threat of tariffs, however, may be necessary 
to getting China to reform its anticompetitive protectionist 
policies. We have seen the pros and cons of that. But an 
article in the Times the other day kind of sums up everything 
in our dilemma.
    That article was on April 10, it was entitled, ``How Long 
Can We Last Trump's Tariffs at Home in the United States?'' And 
it was about a company based in McKeesport, Pennsylvania. The 
company makes seamless vessels to store gasses at a high 
pressure. Steel cylinders of up to six tons that it sells to 
the likes of the Navy, NASA, and T. Boone Pickens Clean Energy. 
It has received the first bill from the 25 percent tariff that 
President Trump placed on steel from China and a few other 
countries: $178,703 assessed on steel pipe shipment scheduled 
to arrive at the port of Philadelphia today. That is equivalent 
to 2 weeks' payroll.
    Overall, tariffs on steel pipe that the company has ordered 
from China--some are already on the way across the Pacific--
will add more than half a million dollars in raw material costs 
over just 6 months alone. The article goes on to say, `` `How 
long can we last,' mused Michael Larson, the company's Chief 
Executive. `I do not know. We could go down relatively fast. 
The tariff will add 10 percent to the cost of CP Industries' 
''--that is the company--`` `their cylinders, which can sell 
for up to $35,000.' ''
    Now, it would seem to me that we have a real dilemma when 
we try to respond. We have not been able to do it since this 
problem, as you pointed out, Mr. Paul, really struck us about 
12 years ago, and onward. So how do we look at this? And how do 
we finally come to a settlement that is not just keyed in onto 
one industry, but it understands the effect that that industry 
may bring to other industries and the American consumer. That 
is not an easy thing to trace, is it, Mr. Paul?
    Mr. PAUL. If it were easy, it would have been done, Mr. 
Pascrell. I think that is fair to say. This is a process that 
is--we are at the beginning of it. I agree that we need to get 
to a better point. My hope is that Ambassador Lighthizer and 
Secretary Ross are moving in that direction. I will say that 
this has worked both ways.
    When our economy was humming along well, the steel industry 
was in a technical recession from about 2014 to about 2016 to 
2017, and there was one reason for that and one reason only. 
And that was the overcapacity that generates all these other 
unfair trade practices that you see. For steel users, I think 
one of the solutions may, in fact, be downstream relief that 
should be temporary. I think the product exemptions----
    Mr. PASCRELL. Well, some of these tariffs are temporary.
    Mr. PAUL. Pardon me?
    Mr. PASCRELL. Some of these tariffs--for instance, in the 
South Korean trade deal, we made them very temporary.
    Mr. PAUL. Yeah, there is a quota with respect to steel from 
South Korea. It is also important to understand that there are 
hundreds of dumping orders in place now on various products 
including steel, and that is an imperfect process. It is like 
playing whack-a-mole with trade policy. It is very hard to 
accomplish. My hope is that we speed toward this global 
solution that you referred to, Mr. Pascrell----
    Mr. PASCRELL. Mr. Chairman, may I make--thank you--may I 
make a recommendation, if you will? Is it possible that in this 
next hearing, if we put it together as Mr. Larson suggested, 
which I think would be critical, we bring some economists in? 
It was just the report that came out yesterday about the 
consequences of what these tariffs are going to do. And I think 
we can get both sides together and talk about this, because we 
have to make decisions ultimately.
    Chairman BRADY. Thank you----
    Mr. PASCRELL. Article 1, Section 8----
    Chairman BRADY. We will certainly consider that. I would 
love, though, for some economists to be hearing from real-world 
people about these impacts----
    Mr. PASCRELL. Yeah, I think it is a great idea.
    Chairman BRADY [continuing]. And balance out, so we really 
hear both views.
    Mr. PASCRELL. Good.
    Chairman BRADY. Mr. Marchant, you are recognized.
    Mr. MARCHANT. Thank you, Mr. Chairman. I am very privileged 
in my district to have some companies that have projects that 
they are building across the world. And they are projects that 
last 3 to 5 years when they start them. And one of the big 
concerns that they have is that they are mid-project in many of 
these, and they have no way to pass on.
    They did not contemplate, had no way to contemplate that 
these tariffs would hit them mid-project. And they are 
concerned about starting new projects or bidding new projects 
now, and unfortunately, some of them may get shelved or 
postponed because of just the sheer unpredictability of the 
cost. I think some of those industries will affect some of your 
production, Mr. Dooley. I am sure, Ms. Wilson, these are a lot 
of facilities.
    So, as these companies are beginning to deal with this, 
many of you deal with the production of the steel, fabrication 
of the steel. These are people that take the end product of 
your production and your fabrication and then try to piece them 
together into a very sophisticated module--a chemical plant, a 
power plant, you know, something like that.
    What do you see as things the Administration can do in 
their rules that they are making, their product exceptions, et 
cetera, that we can make sure that these projects are not 
disrupted, Ms. Wilson?
    Ms. WILSON. So the vast majority of our members make motor 
vehicle components for new vehicles, whether they are heavy 
trucks or light vehicles. The average----
    Mr. MARCHANT. Toyota's headquarters is in my district.
    Ms. WILSON. I know. And, you know, the average cost of a 
new car is about $35,000. This is a major expenditure for most 
Americans. So what we see here is the cost of steel--and the 
vast majority of steel and aluminum comes from the United 
States. The cost of these specialty steels and aluminum, if it 
goes up, that cost is going to go down to the consumer. And at 
$35,000, are we going to really be able to continue to sell 
cars? That is a serious concern for our members.
    I think what we have to take a look at is this exemption 
process for the countries. We also have to really look at this 
exclusion process for products. Because, you know, a lot of the 
steels that go into something like this are not the steels 
that, you know, Mr. Paul has been talking about that we have 
problems with. They are very specialized, and what we would 
like to see is relief for those kinds of things immediately. 
And will it completely do away with the cost rise? Probably 
not. But it will help ameliorate it a little bit.
    Mr. NEWPORT. Just one comment in regard--we are big in the 
auto industry, it is about 70 percent of our business, and we 
are also a direct supplier of parts. I think you have to put in 
perspective, there is approximately, on an average vehicle, one 
ton of steel used. And let's just use $1,000 a ton on a high 
end for, you know, total metal products. And even if you put a 
20 percent duty on that, you are talking $200 a ton on an 
average $35,000 vehicle.
    So when we are looking at this, we are looking at cost 
impacts on different products that are a fraction of a percent. 
So I think we have to keep in perspective something even 
Secretary Ross pointed out, both in the steel and the 
industry--the aluminum industry--is really what is the overall 
impact----
    Mr. MARCHANT. Yeah, and my projects, the companies that I 
am talking about--Fluor, Exxon--they are building projects 
that, after they are bid, they are 3 to 5 years out. And, Mr. 
Kennedy, you must be the provider for some of those parts, and 
they are needing some certainty to finish projects and bid new 
projects that sometimes just the preparation to bid is 3 years 
out. So that is what I am looking for in this entire process, 
some certainty to proceed and continue, not to disrupt the main 
business.
    Mr. KENNEDY. Yeah, we are in the exact scenario. I mean, we 
have rights that are locked in on projects. We get on a vendor 
supplier list at the beginning of a 3-to-5-year project, and we 
put some level of uncertainty into our pricing as does every 
other fabricator in the world when they price it.
    But when you immediately add a 25 percent tariff or 
effectively a 40 percent price increase, we are locked in on 
those rates, and our customers, even, are locked in on their 
rates. We still have to supply the steel for a year. We still 
have to supply the product, but we get no relief. We are 
bearing the cost. I can promise you we didn't have 40 percent 
profit in our number.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Chairman BRADY. Thank you. Dr. Davis, you are recognized.
    Mr. DAVIS. Thank you very much, Mr. Chairman. I want to 
thank all of our very informative witnesses who have been with 
us this morning.
    Mr. Paul, let me ask you, according to the Guardian April 
7, 2018, issue, the world's richest 1 percent already own one-
half of the world's wealth. And it is on course to control as 
much as two-thirds of the world's wealth by 2030. The 
wealthiest 1 percent is growing on an average of 6 percent 
annually, faster than the 3 percent growth of the remaining 99 
percent of the world's population.
    What type of jobs could be created with trade agreements 
and trade modifications that would encourage these individuals 
to invest and re-invest, and do you see tariff increases as 
bringing or attracting jobs and work opportunities back into 
the United States?
    Mr. PAUL. Mr. Davis, these are good questions, and I 
appreciate them. Let me speak to the types of jobs first. 
First, we obviously have a diverse economy, and one that has 
been in transition for a number of years.
    But manufacturing still plays an outsized role in our 
economy, both in terms of the types of jobs it provides--new 
evidence from the Economic Policy Institute shows that there is 
at least a 13 percent pay premium over the rest of the economy, 
and some studies show it to be larger than that--the types of 
manufacturing jobs tend to provide spin-off opportunities as 
well.
    You know, if AK Steel has a steel mill, there is a 
downstream and upstream and a whole environment that is 
supported by those types of jobs. It is also fair to say, and I 
think you know this from talking to your local economic 
development officials, that getting a manufacturing facility is 
the holy grail.
    Because they know if they get a manufacturing facility, 
they are likely to get mainstream small businesses to come 
along with that, they are going to get more income spent in the 
community. You cannot say that for all its virtues about a 
retail outlet. A retail outlet is not going to bring a factory 
in. But the opposite is certainly true.
    So there is a value to these jobs that cannot be 
understated. The types of jobs that are being established or 
reestablished at the steel mills and aluminum smelters around 
the country are well-paying. Sixty-five thousand, seventy 
thousand, in some cases eighty or ninety thousand dollars.
    One in particular in Granite City, Illinois, in your State, 
that is a community I have visited many times, was beset by 
extraordinary poverty because of these unfair trade practices. 
The fact that there could be a level playing field is restoring 
some hope. There are 500 jobs coming back. These are well-
paying jobs that are simply irreplaceable in that metro area.
    Now, with respect to the effectiveness of the tariffs in 
bringing these jobs back, again, I think on a temporary basis, 
companies respond to market signals. And if you need to build 
your steel facility in the United States, or your aluminum 
smelter, you will add capacity, you will add jobs to meet that 
demand.
    I think at the end of the day, and something that probably 
unites us on the panel, is that none of us want Beijing calling 
the shots in the American economy. And having an authoritarian 
state capitalist regime is something that a private sector 
company should not be expected to compete against in a global 
economy. But that is the situation that we face right now.
    To me, tariffs are an emergency room measure. They are 
triage until we can get a much more sustainable approach, but 
they are absolutely necessary to achieving the objectives that 
we are seeking.
    Mr. DAVIS. Thank you very much, and of course, we know that 
China is the big elephant in the room. And would anyone quickly 
suggest something very concrete that we might be able to do 
with China?
    Mr. NEWPORT. So there is an industry we have been working 
on globally with global producers in trying to address the 
overcapacity. So I think what this has done, the action that 
has occurred has actually resulted in probably the most amount 
of activity that we have seen collectively in the last couple 
of years. There has been some slow progress, as was mentioned 
at the G20 in OECD, but we are seeing action now in discussions 
with how to address it from many countries.
    Mr. DAVIS. Thank you, Mr. Chairman, I yield back----
    Chairman BRADY. Thank you, Doctor. Mr. Renacci, you are 
recognized.
    Mr. RENACCI. Thank you, Mr. Chairman. I share President 
Trump's concern about unfair trade, including the global 
problem of overcapacity in steel and aluminum and the theft of 
American technology innovation. China is distorting the market 
and hurting Ohio workers and businesses through its aggressive 
and unfair policies. At the same time, it is critically 
important that we understand and address any unintended 
consequences so we can collaboratively fine-tune the approach.
    As I always say to my staff, if you do the right thing in 
Washington, there are no hard decisions. That includes favoring 
free trade when everyone is playing by the rules, always 
putting America first when other countries are distorting the 
market, and being ever-vigilant not to create winners and 
losers along the way. Before coming to Congress, I spent 35 
years in the business world.
    I started over 60 businesses I provided as context to 
explain how I view the product exclusion process from the 232 
tariffs. While I understand the Commerce Department's need for 
detail before granting exclusions, it seems especially 
burdensome for small businesses lacking resources.
    So I ask each of you the following yes or no question: are 
small businesses with very limited resources in a burdensome 
situation in navigating the product exclusion process, and 
would allowing them to pull together on exclusions via an 
association or other means, would that seem like it might help 
diminish the burden? So start from the left and move forward.
    Mr. KENNEDY. Sure, but I would like to point out, how do 
you exclude certain products, like building a new school or a 
new hospital, or adding a wing to a facility or custom projects 
or modifications? How do you----
    Mr. RENACCI. Well, that is why I am talking about the 
exclusion process. Is that burdensome, yes or no?
    Mr. KENNEDY. Absolutely.
    Mr. RENACCI. Mr. Wolfe.
    Mr. WOLFE. I believe it is as well.
    Mr. RENACCI. Mr. Newport.
    Mr. NEWPORT. I do not see how you can bring them together 
because they are so unique.
    Mr. RENACCI. Do you have any thoughts? Yes or no?
    Mr. HEISDORFFER. I agree. Yes.
    Mr. DOOLEY. Yes.
    Mr. RENACCI. All right.
    Ms. WILSON. Yes, we think it is very burdensome.
    Mr. PAUL. I do not view it as necessarily burdensome. I 
think it is a necessary step in the process to ensure there are 
no loopholes or unintended consequences.
    Mr. RENACCI. Again, it depends on whether you are the small 
business having to go through it, but I do understand. I am 
glad to see AK Steel represented here today as the last 
producer of grain-oriented electrical steel in the United 
States. As Mr. Newport mentioned, AK Steel was headquartered in 
Ohio. Their footprint includes Coshocton, Mansfield, 
Middletown, Walbridge, and Zanesville. I know Mr. Newport joins 
me in applauding the President's effort to crack down on unfair 
trade practice. We need hearings like this so we can work to 
avoid unintended consequences.
    One such unintended consequence starts with the fact that 
the 25 percent steel tariff under the Section 232 action does 
not cover goods made from electrical steel. Leaving out these 
goods will result in a workaround to the 232 action in that 
manufactures using electrical steel can avoid the tariff by 
simply manufacturing the product outside of the United States 
and then importing the goods back into the country. Said 
differently, the concern is who is the biggest winners of the 
steel tariff could be foreign and domestic companies who 
manufacture outside of the United States before sending their 
goods into the U.S. market.
    Mr. Newport, can you further explain the national security 
importance of the United States having the ability to produce 
electrical steel domestically?
    Mr. NEWPORT. If you think about electricity, you need it to 
run businesses, you need it to power our homes, you need it to 
power the financial markets, et cetera. When you think about 
when a hurricane hits, what that has done to our country 
sometimes when you have had that hit and you have to get the 
power restored; when you think of the attacks that occurred in 
New York when power was lost and, you know, the financial 
markets were down and needing power restored; et cetera, you 
think of how quickly you need to get that power restored.
    And we have taken actions in the industry to adjust our 
operations to make sure we prioritize our work to support that 
industry. And I think about it as if you have to rely on going 
to China, Japan, or Korea after a natural disaster or something 
else occurs, or have that product brought to our country if 
they choose to do so--and by the way, if they are the only ones 
producing it longer-term, what do you think will happen with 
the cost of that product if they choose to ship it to you.
    And I do not think, as a country, we want to put reliance 
on another country for something that is critical to run our 
businesses, to run our companies, and actually to have economic 
growth in our country.
    Mr. RENACCI. Thank you. I want to continue to work with all 
my constituents on how to make sure that we do not have any 
window between what the President wants to get done and what 
Ohio businesses and the economy really need. I am committed to 
helping all Ohioans in working through any issue that they have 
with the 232 or 301 tariffs.
    I appreciate the Chairman, the staff, and my colleagues 
working with American businesses on addressing unintended 
consequences of tariffs. I also encourage my friends in the 
Administration, my colleagues here in Congress, to continue to 
work collaboratively toward the best possible outcome for the 
American people. And I yield back the balance of my time.
    Chairman BRADY. Thank you, Mr. Renacci. Ms. DelBene.
    Ms. DELBENE. Thank you, Mr. Chairman, and thanks to all of 
you for being with us today. And, Mr. Wolfe, as you know, our 
home State of Washington is the most trade-dependent State in 
the country. We are the gateway to some of the fastest-growing 
markets in Asia, and 40 percent of our jobs are tied to trade.
    In an increasingly interconnected world, my constituents 
rely on open markets, whether that is selling berries and 
agricultural products overseas; being able to buy fresh, 
healthy produce in grocery stores year-round; or access to 
affordable technologies, like computers and smart phones that 
enable our students, our researchers, and our entrepreneurs to 
innovate.
    But the impact of trade on our region extends well beyond 
our State. Many agricultural products from across the country, 
including wheat, corn, and soybeans, make their way to China 
and other Asian countries through our ports. And on the other 
side, billions of dollars of imports headed to other parts of 
the country come through Sea-Tac in the ports of Seattle and 
Tacoma.
    Mr. Wolfe, you touched on this in your opening testimony, 
but could you please expand on the economic impact they could 
have on Washington State, and also, on how many jobs in our 
region could be affected by a slow-down in economic activity 
due to tariffs?
    Mr. WOLFE. Thank you. As you mentioned, some 40 percent of 
the jobs in the State of Washington are tied to trade. And we 
have talked about manufacturing jobs, and certainly 
manufacturing jobs are critically important to our economy. 
Yet, those are not the only jobs that are important to our 
economy.
    Trade creates a tremendous amount of valuable jobs not only 
for the State of Washington, but for all of the United States. 
I am talking about jobs like the longshore jobs on the working 
water front, the truck drivers that service our gateway, the 
railroads that service our gateway, the warehouse distribution 
companies, and certainly the exporters that provide those goods 
to foreign markets.
    So if we take a unilateral approach to trade policy where 
we are lobbing back and forth with our trading partner, China, 
we run the risk of damaging those valuable jobs, not just in 
the State of Washington, but throughout the United States.
    I would say the impact just in the State of Washington 
could be tens of thousands of jobs if we enter into a trade war 
with China, because China is our most trade-dependent partner 
in the State of Washington. So it would have a huge impact on 
the economy in the State of Washington, and, I believe, 
throughout the United States.
    Ms. DELBENE. Given supply chain disruptions and just 
uncertainty for businesses, we know that can cause people to 
lose long-term contracts. We also know that you can lose 
business quickly, and it is hard to get that business back.
    Between these tariffs, and the fact that Canada is 
participating in trade agreements in Asia and with the European 
Union, are you worried about trade being diverted to Canada in 
the Port of Vancouver? And how would that hurt the long-term 
competitiveness of the Ports of Seattle and Tacoma and Sea-Tac?
    Mr. WOLFE. Thank you for that question. Certainly, as we 
are situated geographically in close proximity to the Canadian 
gateway, we are seeing more and more trade move through the 
Canadian ports rather than using our gateway. There are a 
number of reasons for that, one of which is the potential risk 
of these tariffs on trade and the uncertainty that it creates 
for business.
    I was visiting with one of our valued export customers just 
recently, a fruit grower in Eastern Washington, and they shared 
with me that although there still is uncertainty about the 
impact of trade, they are looking at those other gateways, 
including the Vancouver BC gateway, as an alternative gateway 
for their exports as a result of the discussion around trade 
disruption in the State of Washington and nationally.
    So it is hard for me to measure the impact today, yet, that 
uncertainty is creating questions for the business community in 
our backyard and the potential of job loss.
    Ms. DELBENE. And do you agree that if you lose that 
business, it will be a lot harder to get it back?
    Mr. WOLFE. Absolutely. We have seen examples of where our 
customers have lost market share globally, and then we resolve 
whatever the issue was. I think even as an example, with the 
disruption on the West Coast between the employers and our 
labor partners a few years ago, there was a shift in the trade 
lanes as a result of that. And some of that market share, you 
never get back. And so there is certainly risk there.
    Ms. DELBENE. Thank you. I yield back, Mr. Chairman.
    Chairman BRADY. Thank you. Mr. Meehan, you are recognized.
    Mr. MEEHAN. Thank you, Mr. Chairman. I want to thank this 
panel for a robust discussion. I think we have all benefitted 
from the idea that there are complex issues here, and I think 
we also all agree that we need to be dealing directly with the 
implications of Chinese dumping and other kinds of activities.
    Mr. Chairman, I hope we also appreciate the 301 
implications, because there is a lot of intellectual property 
and other kinds of issues, notwithstanding there are 
implications to what has been proposed.
    And, Mr. Dooley, in your presentation, you discussed, I 
think, some merging opportunities to the United States, which 
have been realized by virtue of the shale revolution and 
investment in this country, which has really driven job growth, 
which has given us opportunities for international markets in 
chemicals and other kinds of things.
    They are job creators, but one of the concerns I have, can 
you speak to the question of people who have not only made 
investments in those opportunities, but foreign-based 
investment that has come onto our shores to take advantage of 
this, and whether those long-term plans are implicated by this 
kind of inactivity, which causes an interruption that changes 
their projections?
    Mr. DOOLEY. Yeah, thank you for the question. You know, as 
I stated, our industry has had a dramatic increase in our 
global competitiveness. There has been $196 billion in new 
investment, half of which has already been completed or is in 
the process of construction, and the rest of it is in the 
permitting process. This is unprecedented. Sixty-three percent 
of that is foreign direct, so it is chemical companies from 
Europe, from China, from Brazil, from India that are 
recognizing that we have a global competitive advantage, and 
they are making significant investments here in the United 
States.
    They are making these investments not to serve the domestic 
marketplace, but to capitalize on the U.S.' competitive 
advantage to serve the global marketplace. They are making 
those also predicated that we are going to have sound trade 
practices that will not result in implementation of tariffs 
against our exports of chemicals globally.
    And that is what our concern is here, and that is where--
you know, no one disagrees, you know, with the inappropriate 
actions in the market-distorting practices that are used in 
China. But I think what we should be focused on is what are the 
metrics for success? How do we determine when we are winning?
    And that is what, if we are very concerned of the--right 
now, if you look at the Section 232s and the 301 tariffs, and 
we did an evaluation in terms of the metrics in terms of what 
were the economic impacts, you know, holistically, to the 
United States, we are convinced our industry would suffer. And 
I think you would say the soybean industry would suffer. You 
know, Ms. Wilson's constituency would suffer. It is just, you 
know, there are dramatic impacts. Maybe the steel industry and 
aluminum industry would see a marginal improvement.
    But is that the right policy that is going to maximize the 
economic benefits that will benefit workers, that will benefit 
companies, small and large, in the United States? And that is 
where it is not the objective, but it is the tactical, 
strategic approach that you take. And we think that what we are 
looking at right now, if there is not significant modification 
in terms of what is ultimately implemented, is that it will 
have an adverse impact on the broader U.S. economy.
    Mr. MEEHAN. And you talk about the implications. Mr. 
Newport, a question for you if you have a moment to answer it. 
Because I am concerned that when we look at the capacity to be 
able to supply here in the United States, if we are being 
challenged in terms of imports, do we have the capacity to meet 
these demands? And are there changes now with the abrupt, I 
guess, higher level that is being paid all over the investments 
that were made that were predicated on lower prices of steel?
    Are we going to be able to meet that capacity to fulfill 
the requirements that we have currently? And are we going to be 
losing by virtue of people making changes in the kinds of 
aluminum and steel that they are manufacturing to meet, you 
know, this demand so that aluminum goes into high-grade things 
like airplane parts, but I lose the aluminum that is necessary 
for a can manufacturer in my district? How are we going to be 
able to assure that while this is going on, that we can supply 
the steel that is necessary for American-based businesses?
    Mr. NEWPORT. I think two things: one, there is----
    Chairman BRADY. Sorry, Mr. Newport----
    Mr. MEEHAN. Maybe if there is an opportunity to----
    Chairman BRADY. The time has expired. Perhaps you could 
answer in writing, Mr. Meehan----
    Mr. MEEHAN [continuing]. Supplement the record in some 
way----
    Chairman BRADY. Yeah, please. That is a great question. 
Thank you, Mr. Meehan. Ms. Chu, you are recognized.
    Ms. CHU. Mr. Paul, I would like your viewpoint on this 
particular issue. In addition to being on the Ways and Means 
Committee, I am also a Member of the House Small Business 
Committee. Small businesses are extremely important to our 
economy. They create two out of every three new jobs, and in my 
home of Los Angeles County, many of these small firms have 
developed their business models to export overseas, often to 
Asian countries across the Pacific Ocean.
    According to the Census Bureau, the majority of businesses 
engaged in importing and exporting goods are small or mid-sized 
businesses. In fact, 76 percent of exporters in the United 
States and 75 percent of importers have less than 20 employees. 
Also, I understand that with the rate of U.S. goods being 
exported to China increasing by 579 percent between 2001 and 
2017, trade with China has been particularly robust. Among the 
U.S. businesses exporting to China, 53 percent of them have 
fewer than 20 workers.
    Given these statistics, I am concerned about whether 
imposing tariffs on China's exports in steel and aluminum and 
the retaliatory measures taken by China on U.S.-made products 
would have an impact on small businesses back in our districts. 
Can you speak to how small businesses may be impacted by the 
tariffs on steel and aluminum?
    Mr. PAUL. Ms. Chu, it is a good question, thank you so much 
for asking it. I agree that small businesses and the U.S. 
business community in general can benefit from exports, and 
certainly China has been a growing market. I would like to see 
it grow even further. And with respect to both the steel and 
aluminum actions on 232 and the Section 301 action on 
intellectual property rights violations, I think the strategy 
is to ensure that we have a level playing field and that we 
have more market opportunities in China.
    If you recall, Mr. Thompson talked about wine and the 
addition of the tariff on that. It is stunning to me that there 
is a 48 percent tariff on wine right now that China has and 
that we have not pushed back enough. Or with respect to 
soybeans, where there are limitations on value-added processed 
soybeans coming into China, they prefer to get the raw 
commodity.
    There are far too many restrictions that China has in place 
that are limiting our export opportunities, which is why the 
boats going into Seattle and Tacoma are a lot heavier than when 
they are going out. I would like to see much more balance to 
this trade relationship. And part of that is to eliminate the 
market-distorting and anticompetitive practices that China has.
    With respect to small businesses in particular, we are 
looking ahead at a lot of advanced technologies and thinking 
that the United States can have success because we are an 
innovation leader. I am thinking in particular of 
nanotechnology and biotechnology and artificial intelligence 
and robotics. All of these industries have been targeted by the 
Chinese government and its Made in China 2025 program to have 
national champions that will exclude competition from countries 
like the United States.
    I view the tariffs as the beginning of the conversation 
rather than as the exclamation point at the end of it. I think 
we have a lot of work to do. I think there is many sectors of 
the economy that could benefit from a much more balanced 
relationship with China than we have right now.
    Ms. CHU. Well, I am so glad you mentioned the wine, 
because, of course, that is a big issue in my State of 
California. China has increased tariffs on U.S. agricultural 
products such as wine, such as almonds, pistachios, and oranges 
that are grown in my home State of California. And according to 
the Wine Institute, China is one of the fastest-growing wine 
markets in the world and will soon be second only to the United 
States in value.
    The value of the U.S. wine exports to China has increased 
450 percent in the past decade, and it is an important export 
market for U.S. wine producers. And in 2016, 11 percent of 
California wine, which was worth $160 million, was exported to 
China, and in addition, 12 percent of California produced 
almonds, worth $518 million, was exported to China. And 
overall, there were $2 billion worth of agricultural exports 
sent to China. So can you discuss how retaliation by China on 
these products may impact these industries in California's 
economy as a whole?
    Mr. PAUL. Yeah, I do think that the retaliation to the 
extent that it is extralegal should be vigorously challenged by 
our U.S. trade representative at the WTO and through other 
mechanisms, including bilateral consultations. And I think that 
all of those efforts should proceed expeditiously.
    Ms. CHU. Thank you.
    Chairman BRADY. Thank you. Mr. Holding, you are recognized.
    Mr. HOLDING. Thank you, Mr. Chairman. I appreciate you 
holding this hearing. It has been very informative. Like the 
other Members here, I completely agree that the issue of unfair 
trade practices by China must be addressed. North Carolina has 
a very diverse economy. I have heard from folks at home 
regarding how trade actions impact agriculture and 
manufacturing sectors, and if farmers from my district were 
here today with us, I think they would echo the points that 
have been raised by Mr. Heisdorffer.
    So, Mr. Heisdorffer, you mentioned in your remarks that 
there is room to expand our exports into China. And you 
mentioned that we should focus on expanding our trade rather 
than restricting it, and I would agree with you. So my question 
to you is can you elaborate on what specifically we can do in 
order to expand our exports to China, and what barriers that 
you see right now that prevent us from expanding our exports to 
China?
    Mr. HEISDORFFER. Yes, sir. Well, the United States Soybean 
Export Council works constantly through all countries, besides 
China. China was one of the first places they were in. It has 
been 20 or so years ago that ASA started in China to develop 
that trade, and now the Soybean Export Council does that in 
other countries, smaller countries.
    We are going to have to continue to expand just to maintain 
what we have. Because, like I said, we have South America, who 
is more than anxious to take a penny of our trade if they can, 
and Mexico is our number two customer in soybeans, and our 
number one customer of soybean meal.
    I cannot specifically tell you how we can just go in and--
you know, we have more soybeans to sell. Let us try to sell 
them to China. If we keep working with them, we have expanded 
that market over a number of years, it keeps growing. If we can 
continue to do that, it would put us in good shape. So----
    Mr. HOLDING. We will be on a good trajectory. So maybe as a 
followup, you know, what are the successful tools that American 
farmers are using today, as far as increasing their 
availability for exports and so forth? And can we strengthen 
any of those tools?
    Mr. HEISDORFFER. That is correct. Where I said Brazil has 
more land, U.S. farmers have to use technology and new genetics 
in order to make up for larger production. And we have done 
that, and we are increasing the yields significantly every 
year, as long as weather permits. And so we will continue to 
use those technologies to expand our production.
    Mr. HOLDING. So we excel in technology, another reason why 
Chinese unfair trade practices and thievery of our intellectual 
property needs to be countered. Existing programs are out there 
to help farmers, are there any programs that you are aware of 
that are not working really as they are intended to work?
    Mr. HEISDORFFER. I do not know what programs we have--yes, 
we have the ARC and PLC programs in the farm program. Those are 
only if you have a loss.
    Mr. HOLDING. Right.
    Mr. HEISDORFFER. And just like crop insurance, you have to 
have a loss. And no one wants to have a loss.
    Mr. HOLDING. Right.
    Mr. HEISDORFFER. So really, they are not any kind of a 
subsidy. You know, China says we are getting subsidies. Well, 
there is no subsidy, as you know, when it comes to the U.S. 
farming----
    Mr. HOLDING. Right. Well, thank you, and Mr. Chairman, I 
think we have agreement that China is a strategic trader that 
will play by the rules when it only behooves them, and ignore 
them when these rules do not work in their favor. So I look 
forward to continuing our work here in the Committee on this 
issue. And I yield back.
    Chairman BRADY. Thank you, Mr. Holding. Mr. Schweikert, you 
are recognized.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman. Look, I am going 
to try not to go over the questions, because sometimes that is 
one of our bad habits is asking the same thing over and over. 
So let's actually take a slightly different approach. We know 
right now that a lot of our bilateral organizations that 
actually should have helped us head off massive excess capacity 
in China and other places are not working. And so this is going 
to be a novelty for me. I am going to actually start with Mr. 
Paul.
    If I came to you right now and said, ``As the United States 
and our trading partners, China being one of them, we need to 
change our bilateral organizations so they are no longer 
debating societies, where we sit there and talk and talk and 
talk and talk and talk and talk, and then we talk about 
talking. How do we actually move so things can move quickly, 
and that when there is actually a finding, that it is not just 
the marginal to that one sliver, but actually can move across 
the trading platform of the world?''
    Mr. PAUL. That is a good question, Mr. Schweikert. I will 
first say that we are constrained somewhat by our obligations 
to the World Trade Organization. I am going to set those aside 
for a moment----
    Mr. SCHWEIKERT. No. And I am living--this is on what being 
a utopian----
    Mr. PAUL. Certainly.
    Mr. SCHWEIKERT [continuing]. Instead of these flare-ups 
where we have to, in many ways, threaten trade to actually 
force what bilateral organizations should have already fixed.
    Mr. PAUL. Absolutely. So you would need the collaboration 
of the major steel-producing companies of the United States, 
first of all. And you have most of that through the G20--not 
all, but most. And what you would want to do is add the 
countries to that. You would want to establish objective 
criteria, and to ensure that countries are committing to 
aligning their supply and demand as much as possible, and that 
there are no government interventions in their industries.
    For instance, 5 of the 10 largest steel companies in the 
world are owned or partially owned by the Chinese government. 
That is simply not a level playing field. You would have to 
provide some mechanism to----
    Mr. SCHWEIKERT. Okay----
    Mr. PAUL [continuing]. Alter that, and then there would 
have to be enforceable, agreed-upon--you would have to enforce 
those divisions----
    Mr. SCHWEIKERT. Okay, so the checklist, I have had a 
fixation on timelines----
    Mr. PAUL. Yeah.
    Mr. SCHWEIKERT [continuing]. And responses instead of on 
delays. And forgive me, it is just the hazard of the 5-minute 
rule. Mr. Newport, I was under the impression, because of the 
low prices of our natural gas futures, a lot of other energy 
that we actually, if things were--what is the term, ceteris 
paribus, you know, level--we should be a low-cost producer in 
the world. Your opinion?
    Mr. NEWPORT. Yeah, I believe we are very competitive. The 
thing we do not have that others have, like China, is 
government subsidies to support the business. So that is really 
what is key is having a level playing field.
    Mr. SCHWEIKERT. Let's just do baseline energy costs 
compared to our other competitors, particularly Europe and 
other places where their hydrocarbons are imported in. What is 
the differential? What is our energy production cost? When you 
produce a ton of steel, you know, the dollars it costs, how 
much of that ton of steel was energy?
    Mr. NEWPORT. It is a smaller percentage when you look at 
it. Raw materials and energy are probably about 60 percent of 
our cost. So the key component is your scrap and your iron ore 
that you buy.
    Mr. SCHWEIKERT. Okay.
    Mr. NEWPORT. And alloys and a lot of things from the 
chemical industry that we use for processing steel, et cetera. 
So energy is a piece of it, especially in the electrical and 
furnace business.
    Mr. SCHWEIKERT. All right, and I am running out of time, 
and I wanted to get to this. How do you respond to Mr. Kennedy 
and--forgive me--even some of my family that is in the 
fabricating world that appreciate and have love and caring for 
the mill, but they make things, and there is a lot more of them 
making things, and the cascade effect of the price surges, 
particularly over the last, you know, 6 weeks, has not been 
particularly helpful to their contracts? What do I tell them?
    Mr. NEWPORT. Well, I would comment on a couple of things. 
Just one, I think the market will settle down some. There has 
been overreaction, there has been a lot of uncertainty, I 
agree, there is a lot of uncertainty, which creates a lot of 
issues in all of our businesses and that we have to address. 
Also, in regard to supply material, imports have not stopped. 
We have had successful trade cases, we have had these 232 
reports flooding in----
    Mr. SCHWEIKERT. Yeah. But it is just my fear that--and this 
is a horrible--I mean, you want to save, because we need the 
capacity, but there are multiples and multiples out there on 
the fabricating side, and they are also our brothers and 
sisters, and they should not be cast aside either. I yield 
back.
    Chairman BRADY. Thank you, the gentleman's time has 
expired. Mrs. Walorski, you are recognized.
    Mrs. WALORSKI. Thank you, Mr. Chairman. Thanks to all of 
you witnesses for taking the time to be here. It has been a 
fascinating discussion, I am thankful that you are here. We are 
here to examine the effects of tariffs on jobs and the economy, 
so I want to share some observations from my district. I want 
to provide some context before I do.
    My district is in Northern Indiana, which has the second-
highest concentration of manufacturing jobs in the country. 
They manufacture RVs, boats, trailers, and other heavy 
equipment. Plenty of suppliers are also in the area. The 
unemployment rate now in Cook County is around 2 percent, but 
there are thousands of jobs open on any given day, so really, 
it is more like zero.
    These are good-paying jobs, too. The average RV worker's 
salary was $68,000 in 2016, so this is what is at stake. With 
that in mind, I just want to relay some of the information that 
I have received from business owners in my district. If they 
were sitting here today, this is what they would tell you.
    One manufacturer said, ``We have seen a 50 percent increase 
in the price of steel, mostly since the tariffs were announced. 
Additionally, there is a shortage of steel. We are furloughing 
the production line in one facility today and will probably 
have to furlough some of the guys in our main facility later in 
the week due to lack of availability of material. We have 
raised our prices to customers because our product is a low-
margin item. The combination of the increase and the lack of 
availability is affecting sales.''
    Another manufacturer that produces bearings said, ``We 
cannot switch to a U.S. source, it would take 1 to 2 years for 
us to get approval from our customers if there was a U.S. 
source. We will continue to import steel and we will pay the 
duties. So far, we have incurred about $15,000 in tariff costs 
with the potential of another $240,000 based upon the orders we 
have already booked with our Japanese steel supplier.
    We are moving forward with our exclusion requests. So far, 
the cost has been close to 100 hours to complete these 
exemption forms, along with some legal costs for review and 
advice. We are beginning to talk to our customers regarding 
possible price increases this summer.''
    A trailer manufacturer said, ``We have rolling shortages of 
steel and we are on allocation from our supplier in Utah. 
Prices have already gone up 25 to 30 percent respectively on 
aluminum and steel because of speculation. Now we are seeing a 
trend past 30 to 35 percent each, and of course, I am livid. 
The manufacturer also cancelled a factory expansion that he was 
planning with his tax cuts.''
    A steel fabricator said, ``We observed steel prices 
starting to move up in early 2017 on just the talk of potential 
steel tariffs, and a sharp escalation in steel prices in the 
last 3 months as a tariff started to become reality. This has 
resulted in a 15 to 29 percent increase in the cost of our 
steel. To put this in perspective, our increase in steel cost 
is larger than the entire cost of providing health insurance to 
our work force.''
    A component manufacturer said, ``We are the sole 
manufacturer left in the United States that manufactures this 
type of product. Our competitors import all or most of their 
finished product from either Mexico, China, or Vietnam, et 
cetera, therefore, avoiding any impact on this tariff. The 
bottom line in this is if you raise our steel and aluminum 
prices, our prices will have to increase in order to cover the 
cost. Our foreign competitors will not be affected. We 
currently purchase all of our steel and aluminum from domestic 
sources.''
    A canning company said, ``We are in the process of trying 
to build a 147,000 square foot warehouse. The company building 
the warehouse gets their steel from Canada, a country exempted 
from the steel tariff. However, we are unable to get a firm 
quote even out of Canada, because prices are beginning to rise 
there as well with so much demand shifted to Canada. It is not 
on hold, we have to build it. So we are at the mercy of a 
volatile market.''
    And the final story I would share with you is a steel 
processer said, ``When purchasing raw materials, we give 
preference to domestic steel mills wherever possible. We enjoy 
long, outstanding relationships with many domestic mills. We 
want them to thrive.
    The actual dynamics of the entire metalworking market have 
evolved in the last 40 years. In some cases, we find the 
domestic mills cannot meet the quality standards required by 
our customers, or they cannot meet the quality standards at a 
competitive cost. In those cases, we will buy foreign material. 
Why put a tariff on these items?''
    And, Mr. Chairman, with that, I yield back.
    Chairman BRADY. Thank you. Mr. LaHood, you are recognized.
    Mr. LAHOOD. Thank you, Mr. Chairman. I want to thank the 
witnesses for being here today and for your important 
testimony. I represent a heavy ag district in Central Illinois. 
Ours is the eighth-largest in terms of corn and soybean 
production in the country.
    Also, I am blessed to have Caterpillar have their 
operational headquarters there. And whether it is Caterpillar 
or John Deere, or our farmers, obviously, they are affected by 
the Administration's current trade policy. And I have described 
the Administration's trade policy as in some ways unorthodox, 
unconventional. We have had Ambassador Lighthizer here, and 
Secretary Ross.
    And, I guess, Mr. Heisdorffer, when I look at our ag 
community and I look at what is going on with NAFTA in our 
current negotiations, which, obviously, we are having our 
eighth round this week, and the concerns there in looking at 
the potential tariffs on steel and aluminum and the retaliation 
there, what we hear from the Administration is that give them 
some time in terms of negotiating.
    But I look at the commodities markets, and I look at the 
prices, and the prices continue to go down. But I also look at 
what our farmers have to do to, you know, think out 6 months, 
10 months, a year in advance, and so much of what our farmers 
do is looking at the future and what they are going to do. And 
the uncertainty that we have right now is what I hear every day 
from my farmers, many of which supported the President when he 
ran.
    You look at how well he did in Iowa and my part of the 
country, and we just had Secretary Ross here a couple weeks 
ago, and, you know, he was trying to reassure us and give them 
some time. I guess, I would ask you, what gives you comfort or 
reassurance with the direction we are heading as you talk to 
farmers in your area, and other soybean producers?
    Mr. HEISDORFFER. More exports is, of course, our biggest 
push. We all have to make decisions, as you said, a year in 
advance, more or less. We are going to put in a corn crop, we 
have to start putting nitrogen on the year before. I am a 
livestock person, so we have that swine manure that we have to 
take care of in the fall, and we inject that into the ground, 
according to our manure management plan, and that is our 
nitrogen for our corn crop the following year.
    So those acres are committed. And so soybeans work the same 
way. Whatever acres do not go to corn usually gets rotated. 
Understanding that your State is the number one soybean 
producer here--in the last few years, anyway--we are proud that 
we can produce a protein that will help feed the world. And 
soybeans are that protein. And we will continue to do that as 
long as we can, but any kind of interruption in our exports 
really hurts us.
    Mr. LAHOOD. Thank you. Congressman Dooley, I appreciate 
your comments as it related broadly to trade. I want to maybe 
ask your comments when I look at the justification of what this 
Administration is looking at in terms of these tariffs on 
aluminum and steel and national security, and using that as the 
reliance and looking at the standard with the WTO and how these 
cases have been dealt with, it seems to me--particularly when 
you hear from our Defense Department on what they say about 
national security as it relates to steel and aluminum--and you 
couple that with the fact that we have not really partnered 
with our European partners or the Canadians or our other allies 
in terms of a trade strategy that would go after the Chinese a 
little bit more. Can you comment on that?
    Mr. DOOLEY. Thank you, and I think that is--you know, when 
we look at the implementation of the 232s, it was on national 
security grounds. You know, there needed to be, from our 
perspective, a little consideration given to who are our 
strongest allies.
    Is our national security really jeopardized because Canada 
is a source of steel to the United States? I would suggest not. 
Nor would I suggest that Mexico or Brazil or our allies in the 
EU were going to jeopardize their security and the U.S. 
national security by failing to import critical steel to the 
United States.
    That group of allies, though, should be more aligned and 
prepared to engage with this Administration in a more 
aggressive, collaborative effort to put pressure on China to 
address some of their inappropriate practices that are leading 
to the excess capacity.
    Mr. LAHOOD. Thank you.
    Chairman BRADY. Thank you, Mr. LaHood. Before I recognize 
Mr. Kelly, I want to thank the witnesses for being here. I 
apologize, I have to scoot down to the White House. You know, 
April 17 is the last time Americans will have to file their 
taxes under this old, broken tax code that burdened American 
manufacturing and farmers with the highest tax rates in the 
world.
    I want to thank you for being here. I am just going to--you 
have been a remarkable panel, and very insightful. Mr. Kelly, 
thank you for providing witness for us as well, and you are 
recognized.
    Mr. KELLY. Thank you, Mr. Chairman. And thank you all for 
being here. I think we need to start talking about trade. There 
are so many different ways to look at it, but one of the things 
that I have been marveled at is that for decades now, we have 
complained about our loss of market share, somehow thinking 
that there is an honor system out there that people will just 
stop doing bad things to us because we are nice to them. I have 
to tell you, being in the automobile business and watching the 
loss of market share has been incredible. You do not get it 
back once it is gone. You do not get it back.
    Mr. Newport, I cannot tell you how much I appreciate you 
being here today. You know, last week, during our work week, we 
actually went down to AK to watch them make the electrical 
steel. We watched them make that grain-oriented electrical 
steel. We also were up in Sharon--and Wheatland, too--when we 
were in Farrell looking at the crankshaft business up there at 
Sharon Crankshafts.
    So with all that in mind, I was looking at some things 
here, and it says, ``The U.S. power system is comprised of 
3,300 utilities, 3,300 utilities that work together to deliver 
electric power through 200,000 miles of high-voltage 
transmission lines, 55,000 substations, and 5.5 million miles 
of distribution lines that bring electricity to millions of 
American homes and businesses.'' And any of the system's 
principal elements--power generation, transmission, or 
distribution--could be targeted, and we know that.
    And the question is when you go to AK--and I watched the 
hardworking men and women of AK and what they are doing, and I 
have been there my whole life, so I know what they do, and I 
would really suggest that Members of Congress, instead of 
talking at it, go look and see what these people do. Actually 
see what it is we are talking about. Do not let somebody give 
you a bunch of talking points and say, ``This is what it is.''
    You are the last producer of electrical steel in the United 
States. I am constantly told about how fragile our power grid 
is, and how it is at the very--we could lose that, and if we 
were to lose that, what would the effect be on our national 
security? And I understand the concern about, well, what is 
going on now, and how this talk is being harmful to futures, 
and how it is disrupting.
    I would just suggest that this idea, again, that people 
telling you, ``Oh, no, no, Kelly, you know, free trade as long 
as it is fair trade.''
    I say, ``You know what, and so what do you do when you find 
that it is not fair trade?''
    And they say, ``Well, you go to the WTO.''
    I say, ``That is fine. And how many years does it take to 
get a ruling on it?''
    ``Well, you know, sometimes three, sometimes four.''
    I said, ``Okay, that ship has sailed. Okay, you win the 
case, you lose the market.''
    I wish we would stop talking about unfair trade practices 
and change them to illegal trade practices. If we sit back--and 
we finally have a President that just didn't talk about it when 
he was campaigning or she was campaigning, but when the rubber 
meets the road, when you actually get in the office, well, it 
has only been 14 months, and I know we have passed no judgment 
on the previous couple decades that we just talked about it and 
did nothing.
    Mr. Newport, could you talk about the effect, if we were to 
lose AK, if we were to lose the only producer of electrical 
steel in the United States, what kind of jeopardy that puts our 
power grid in?
    Mr. NEWPORT. Yeah, when you think about it, if you would 
have something that would occur, whether it be a national 
disaster, you have a terrorist attack, or something else, or 
you just have something failing the system--which there have 
been blackouts that have occurred over the last decade or two 
in our country, and think about what that has done to 
businesses, what that has done to the financial markets, et 
cetera--how critical an impact, or how big of an impact that 
would have to our industry.
    I can tell you, you know, the other competitor that 
produced the product went out of the business in 2016. Our 
business levels have not gone up, they actually have gone down. 
So our utilization is actually lower than it was a year ago, 
despite the other competitor that made it going out of the 
business.
    But I can tell you also what will happen is if something 
would occur that they continue to flood the market and take 
over the market, if we weren't making it, when they are the 
only supplier, a foreign producer coming in, I can tell you 
what I believe would happen is the price of that is not coming 
down.
    You think about that, what that could do to our energy 
costs, and what that can do to our businesses when we become 
solely reliant on something overseas, and I agree with you. It 
is getting fair trade. We have already, you know, taking on the 
trade wars, we have already faced it. It has been going on for 
decades.
    We have seen it, as I gave examples, on electrical steel. 
And because people were unfairly and illegally trading steel 
does not give them the right to buy that steel. What we want is 
fair trade. If we cannot compete, that is fine. I have no 
problem with that. And we addressed that.
    Mr. KELLY. Yeah, good. I wish I had time--we really do need 
to talk to all of you for a much longer time than this. You 
flew in from all over the United States and you get 5 minutes 
to talk about your concerns.
    So we want to keep doing that, but I really do believe that 
at some point, you are going to not just talk the talk, you 
better walk the walk. And for us to sit back and allow the rest 
of the world to pick our pockets, and say, ``I wish they would 
not do it,'' somewhere along the line, we are going to get 
caught up with this.
    I have to tell you, being in the automobile business, there 
is very few people out of work that can buy a car or a truck. 
And I am watching this, and us losing. Our base, our 
manufacturing base, puts us in one hell of a bad position in a 
global economy right now, in a situation where everything is 
just so fragile.
    So I want to thank you all for being here, you guys are 
tremendous for coming in. Ladies, thank you all for being here, 
we really appreciate it.
    Ms. JENKINS [presiding]. Mr. Reed, you are recognized.
    Mr. REED. Well thank you, Madam Chairwoman, and it is great 
to be way over here. I feel like I am in Kansas. It is good to 
see you. Anyway, I just want to thank the panel for being here, 
and I want to echo some of the things that Mr. Kelly, my good 
friend from Pennsylvania, indicated. And as this Administration 
goes down this clearly new trade policy and Putting America 
First agenda, I join in looking forward, not backward.
    And one of the things that I know my colleagues have 
already touched upon a little bit is I do not think most 
Americans, when I go back to my district in Western New York--
it is a rural area, my home town is Corning, New York, it is up 
near Buffalo, Rochester, the Pennsylvania border--they have no 
idea, as has been confirmed here today, that we do not have a 
trade agreement with China. China is operating under the WTO 
standards. Nobody knows what that is, that is a DC term, to a 
large degree, to the people that are working hard day in and 
day out in Western New York.
    And so one of the things that I wanted to stress today and 
question the panel on, as we put these new tools in this trade 
policy, and as we go after that even, level playing field that 
we are looking to achieve--and I hear pretty much consistent 
agreement from the panel, that is, kind of, the outcome 
everyone is looking for here--as we go into that future 
negotiation possibly with China--and I was glad to see the 
president of China indicate a willingness in his public 
comments to engage in a conversation, I think that is critical 
to being successful here--what would you offer us, from your 
perspectives?
    When we sit down at some point in time in the future--
because I do believe we will sit down with these 
representatives from China and other trading partners--to 
address that even and level playing field, what are the 
priorities? How do we take on the overcapacity issue of steel 
coming out of China?
    What are you looking for, what would you say to us as we 
build that next trade agreement? What would you say are the key 
provisions that have to be in that agreement to make it 
enforceable and ensure that American workers have that 
opportunity to compete on that even and level playing field? 
Anybody like to go first in regard to that? Go right ahead.
    Mr. PAUL. Sure, Mr. Reed, I would be happy to. And I 
appreciate your leadership on manufacturing----
    Mr. REED. I appreciate that.
    Mr. PAUL [continuing]. I know you have done a lot of policy 
work on that. You can start with the Section 301 report. There 
are a number of commitments that China has repeatedly made to 
protect intellectual property, to stop cyber-hacking, to 
eliminate forced technology transfers, and to eliminate other 
anticompetitive practices that they have failed to implement. 
And there have to be, again, consequences for that, whether it 
is a loss of market access or tariffs or some other mechanism, 
there needs to be consequences for that lack of market norms.
    The second thing, and this is the more troubling and 
difficult thing, is that China wants to be treated like a 
market economy, yet, it is fundamentally an authoritarian state 
capitalist regime that has resisted both bilateral and 
multilateral efforts to conform to world trade rules.
    There is not an easy question for--or, there is not an easy 
answer for that, particularly with President Xi, kind of, 
doubling down on the desire to build national champions, and as 
I mentioned, Made in China 2025, which is targeting the next 
generation of our industries. It is steel today, it is robots 
tomorrow. We have a lot at stake here with respect to American 
innovation and American jobs.
    But fundamentally, what hasn't worked is simply kicking the 
can down the road. We have been willing in the past--and I do 
not want to touch on it like you suggested--but we have been 
willing in the past to simply accept China's word and move on 
to get to the next negotiation. That has been a failed 
strategy. It has not worked. I am----
    Mr. REED. Sanctions, so I am hearing----
    Mr. PAUL [continuing]. I am glad, in a way, that the 
President has laid the cards on the table because----
    Mr. REED. I appreciate that.
    Mr. PAUL [continuing]. This is a long overdue conversation.
    Mr. REED. And that is exactly where I am not going to go. 
And one of the things that I have not heard a lot of 
conversation on today, because we are talking about steel and 
aluminum: currency manipulation, to me, is one of the biggest 
things that is sticking out there unaddressed and is the 
elephant in the room.
    So does anybody want to touch on that in my short time 
left? I would appreciate it. But are there any other comments? 
When we negotiate this with China, what are we looking for?
    Ms. WILSON. I do not necessarily disagree with Mr. Paul. I 
think we have long been a champion on IP rights with our 
manufactured products. But I think what we are hearing from our 
suppliers is because we have cast a wide net, we are bringing 
in product and we are having consequences that are going to 
affect U.S. workers.
    Mr. REED. And I appreciate that short-term consequence----
    Ms. WILSON. That is the reason that has brought me here. 
There is no----
    Mr. REED. I am looking at the long-term----
    Ms. WILSON [continuing]. Yeah, I understand.
    Mr. REED [continuing]. The long-term effects. Anyone else--
--
    Ms. WILSON. The short-term would hurt us.
    Mr. REED [continuing]. Want to offer anything, especially 
on currency? Yes, sir.
    Mr. WOLFE. Yes, I would just encourage us to look at 
leveraging the export opportunities and some of our small- and 
mid-sized business and the growth markets in China.
    Mr. REED. Perfect, thank you. Well at that, my time has 
expired. Thank you, Madam Chair. And thank you to the 
witnesses.
    Ms. JENKINS. Mr. Smith.
    Mr. SMITH OF MISSOURI. Thank you, Madam Chairwoman. Thank 
you all for being here. I definitely appreciate the 
conversation. I represent Southeast Missouri. We have been 
devastated by the illegal dumping practices of the Chinese when 
it comes to aluminum. In March of 2016, I saw 900 jobs vanish 
because we could not smelt aluminum the way we had for decades, 
because of the illegal subsidizing of the Chinese government of 
aluminum.
    Let me give you some interesting numbers that need to be 
reiterated, because some people may not understand it, based on 
the conversations I have heard today. In 2000, the Chinese 
produced roughly 10 percent of the world's aluminum. This was 
in the recent report that was put out by Secretary Ross at the 
Department of Commerce.
    As of 2015, they produced over 55 percent of the world's 
aluminum. In 15 years, they went from 10 percent to 55 percent, 
roughly. In that same timeframe, in 2000, we had just under 20 
aluminum smelters in the United States. Up until just recently, 
we had two fully operational aluminum smelters.
    High-purity aluminum is very important for our national 
defense efforts. We all know that. That is what came out in the 
report. But we only had one plant doing it. Now we are going to 
have two. The day after the President issued his aluminum 
tariffs, I stood in New Madrid, Missouri, with the announcement 
of 450 new jobs that were opening up.
    My district is an agriculture-based district. The largest 
community is 38,000 people. We grow more soybeans in Southeast 
Missouri in seven counties than the entire State of Missouri. 
But we also have an aluminum smelter.
    Granite City, Illinois, is 50 miles from my congressional 
district. We have been hit hard by the illegal Chinese 
practices. When we talk about a trade war, and people talk 
about a trade war, Mr. Paul, do you know how many tariffs the 
Chinese impose on products that come into their country? How 
many different tariffs? Could you guess?
    Mr. PAUL. The Chinese have significant tariffs on virtually 
every American product coming into its country.
    Mr. SMITH OF MISSOURI. They have over 19,000 tariffs on 
goods coming into China. We need to remember that as U.S. 
citizens, that the Chinese are not looking out for the American 
citizen. The Chinese are not looking out for the American 
worker. The Chinese are not looking out for the American 
farmer. That is why they have all kinds of tariffs on added-
value soybean products. And that is why they decided to go 
after the soybean farmers in Southeast Missouri with a 25 
percent tariff.
    I hope that the president of the Chinese government will 
decide to work and negotiate with President Trump. That is what 
he is asking for, that is what we are needing. We are needing 
fair agreements, fair deals, to look out for the Americans. 
They are pulling out billions, hundreds of billions of dollars 
of our wealth by unfair trade practices, by over 19,000 trade 
tariffs. Whether it is steel, aluminum, soybeans, corn, 
biodiesel, pork, or beef. All of it. And we need to do 
everything we can in supporting the President to make sure we 
get the best agreement possible so that we are treated fairly 
and appropriately.
    And so I thank you for the conversations, but I think we 
need to understand that the true problem that we have to look 
at are these countries that are not treating us fairly. We just 
want to be treated fairly. We want to be good neighbors, 
whether it is Canada or Mexico or China or South Korea. We want 
to be good trading partners and good neighbors, but we want to 
be treated fairly and appropriately.
    We want to make sure the soybean farmers in Southeast 
Missouri are getting the best, best value for the products that 
we grow. We want to make sure that the aluminum industry and 
steel industry are thriving and surviving.
    But we have to do that by making sure we are not taken 
advantage of. And we have been taken advantage of for way too 
long. And it has been on the backs of American farmers, 
American workers, and American manufacturers.
    And let me just point out, the Wall Street Journal, on 
April 6, talked about aluminum decreasing since March 1 by 4 
percent. They got a 10 percent tariff, but the price of 
aluminum has decreased by 4 percent. That is the opposite of 
what everyone said prior to the President proposing that. We 
just need to make sure things are fair and free, but when 
19,000 tariffs are imposed by one country, that is not fair. 
Let's look at the Chinese. Thank you, Madam Chairwoman.
    Ms. JENKINS. I, too, would like to thank our panelists for 
appearing before us today. Please be advised that Members have 
2 weeks to submit written questions to be answered later in 
writing. Those questions and your answers will be made part of 
the formal hearing record. With that, the Committee stands 
adjourned.
    [Whereupon, at 1:16 p.m., the Committee was adjourned.]
    [Submissions for the Record follow:]
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