[Senate Hearing 115-843]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 115-843
 
                       THE IMPACT OF ZERO TARIFFS
                          ON U.S. AUTOWORKERS

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

   EXAMINING THE IMPACT OF ZERO TARIFFS ON UNITED STATES AUTOWORKERS

                               __________

                           SEPTEMBER 5, 2018

                               __________

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             U.S. GOVERNMENT PUBLISHING OFFICE 
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman
                  
MICHAEL B. ENZI, Wyoming          PATTY MURRAY, Washington
RICHARD BURR, North Carolina      BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia           ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky               MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine           TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana     CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana               ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah              TIM KAINE, Virginia
PAT ROBERTS, Kansas               MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska            TINA SMITH, Minnesota
TIM SCOTT, South Carolina         DOUG JONES, Alabama

                                     
                                     
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
             
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                      WEDNESDAY, SEPTEMBER 5, 2018

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening statement.........................     1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State 
  of Washington, Opening statement...............................     3

                               Witnesses

Moore, Stephen, Distinguished Visiting Fellow, Project for 
  Economic Growth, Institute for Economic Freedom and 
  Opportunity, The Heritage Foundation, Washington, DC...........     6
    Prepared statement...........................................     7
Riley, Bryan, Director, Free Trade Initiative, National Taxpayers 
  Union, Washington, DC..........................................    17
    Prepared statement...........................................    18
    Summary statement............................................    26
Lee, Thea, President, Economic Policy Institute, Washington, DC..    26
    Prepared statement...........................................    28
Bozzella, John, President and CEO, Association of Global 
  Automakers, Washington, DC.....................................    31
    Prepared statement...........................................    32
    Summary statement............................................    38


                       THE IMPACT OF ZERO TARIFFS

                          ON U.S. AUTOWORKERS

                              ----------                              


                      Wednesday, September 5, 2018

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Lamar 
Alexander, Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding], Isakson, Scott, 
Young, Murray, Casey, Bennet, Warren, Kaine, Hassan, Smith, and 
Jones.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. The Committee on Health, Education, Labor, 
and Pensions will please come to order.
    Senator Murray and I will have an opening statement. Then 
we'll hear from our witnesses, and then we look forward to 
questions and conversations between Senators and witnesses.
    There's a lot going on in the Senate today, so people will 
be coming in and out. But this is an interesting topic, and we 
look forward to it.
    President Trump has set as a goal zero tariffs. He said at 
the G-7 meeting no tariffs, no barriers. That's the way it 
should be. In a meeting a few weeks later with the president of 
the European Commission, they said, ``We agreed to work 
together toward zero tariffs, zero non-tariff barriers, zero 
subsidies.''
    Today is an opportunity to make the case why zero tariffs 
are good for the U.S. autoworker, and I'll be using the impact 
of an essentially zero tariff agreement, the North American 
Free Trade Agreement, on the Tennessee autoworker to make my 
part of that case.
    Let me begin with the story of the Rogue. Rogue is a Nissan 
vehicle. It's very popular in the United States. It's a small 
SUV. A few years ago, Nissan internally had a competition to 
see where to build it, whether in South Korea or Japan or the 
United States, and the Nissan plant in Smyrna, Tennessee, which 
employs 8,400 people, won that competition. As a result, all of 
the Rogues sold in the United States today are built in 
Tennessee.
    A major reason why the plant in Tennessee was able to win 
that competition with South Korea and Japan was because of the 
North American Free Trade Agreement and its zero tariff, 
essentially zero tariff, polices. Nissan is able to move parts 
and even cars back and forth across the North American borders 
in order to make a car competitively, one that is low enough 
cost and high enough quality to compete in the marketplace.
    It's not always been true that U.S. automakers have been 
able to build a car competitively. If one reads David 
Halberstam's book in 1979, The Reckoning, he talks about how 
the Midwestern auto plants, which was most of our auto plants 
then, were growing not competitive with European and Japanese 
cars and were losing the market. What has happened since then 
is pretty remarkable, and it's especially remarkable in our 
state.
    Let me use a story as an example. Forty years ago, I walked 
across Tennessee in a campaign for Governor, spending the night 
with people along the way. One family I stayed with was the 
Knight family outside Murfreesboro, Tennessee, south of 
Nashville. Lillian Knight told me she was sad because she had 
twin sons, high school students, and she said, ``They're very 
smart, but they'll never get a job around here, and I'll never 
see my grandchildren.''
    Two years ago, one of those twins, Randy, stepped down as 
the CEO of Smyrna's Nissan plant, which employs 8,400 people.
    Since that time, we've added the General Motors plant and 
the Volkswagen plant and 1,000 suppliers. Auto suppliers are 
now in 88 of our 95 counties and are one-third of our 
manufacturing workers. One out of 15 vehicles made in the 
United States is now made in Tennessee, and none were 40 years 
ago.
    It's important to us what happens in the auto industry, and 
much of all the good that I just described has happened since 
1994, when NAFTA and its gradual move toward zero tariffs in 
North America went into effect. Tennessee auto jobs have nearly 
doubled since 1994. National auto jobs have doubled since 2010. 
It's true that many auto jobs were lost in the Midwest, about 
3.6 million, since 1994. But on the other hand, about 3.6 
million jobs were gained in the Southeastern United States. So 
the United States is producing about the same number of cars 
today that it did when NAFTA was signed.
    Half the cars, nearly, according to the Global Automakers 
Alliance, are built by so-called foreign-owned cars, who make 
in the United States what they sell in the United States, like 
the Rogue. And the practical effect is that in our state, it 
means family incomes have gone up, as jobs which paid less are 
being replaced by auto jobs which pay more.
    Here's what President Trump said at the G-7 summit in June: 
``No tariffs, no barriers. That's the way it ought to be.'' And 
then later, in July, with the European Commission president, 
they said, ``We agreed today, first of all, to work together 
toward zero tariffs, zero non-tariff barriers, and zero 
subsidies on non-auto industrial goods.''
    One of our witnesses, Stephen Moore, wrote in a piece for 
the Washington Times in July, quote, ``Zero tariffs would be 
the ultimate victory for totally free and fair trade. It would 
advantage the United States most because we already impose the 
lowest trade barriers.'' Zero tariffs, in my view, are the 
right goal. Piling tariffs on top of tariffs, in my view, is 
the wrong goal. You don't have to be a math professor to figure 
that out.
    Nissan says that 70 percent of the weight of the vehicles 
it makes in Tennessee and Mississippi are steel. The cost of 
steel is up since January by 40 percent, according to Steel 
Benchmark. That means a several thousand dollar increase in the 
cost of a Rogue made in Smyrna.
    Or you can look at President Bush's experience with steel 
tariffs. He found out pretty quickly that while there are about 
139,000 people--that's today's number--producing steel in the 
United States, there's 17 million Americans working in 
industries that use steel. He abandoned steel tariffs, because 
after about a year, they had destroyed more jobs in the steel-
using industry than existed then in the steel-producing 
industry.
    We see the same thing in Tennessee. Electrolux, an 
appliance manufacturer, has canceled a $250 million expansion 
because of the new high cost of steel, even though they buy all 
their steel in the U.S. You import steel, put a tax on it, and 
everybody else raises their prices, too.
    Same with Bush brothers, who can beans, about a third of 
all the beans in the United States. They estimate their 
revenues will go down 8 percent because of the higher cost of 
steel.
    Same with Bridgestone. They buy steel cord for tires. None 
of that is made in the United States, so they have to pay for 
it--the higher price for imported steel. There are 38,000 
waivers at the Department of Commerce from people who would 
like not to pay the higher tax on steel that's imported.
    The zero tariff goal also keeps us from talking about what 
I consider to be the wrong goal when we talk about trade, and 
that is to focus on the trade deficit, which really is 
irrelevant to this discussion. For example, look at the North 
American Free Trade Agreement. One of the sticking points still 
is dairy between Canada and the United States. The problem is 
not a trade deficit. The United States has a trade surplus with 
Canada on dairy, a pretty big one. The problem is Canada does 
not do for us what we do for them. Reciprocity, or lack of it, 
is the problem.
    Also, the trade deficit is not a good focus because Mexico, 
for example, spends about a quarter of its entire wealth buying 
stuff from the United States. The United States spends one-
fifth of 1 percent of what our GDP is buying stuff from Mexico. 
So the focus--and a zero tariff places this focus properly--
should be on reciprocity. Is the other country doing for us 
what we do for them?
    We hope to learn today from distinguished witnesses what 
the impact of a zero tariff policy will be on U.S. autoworkers. 
What can we learn about the goal the President has talked 
about, and what will the impact be?
    Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Well, thank you very much, Chairman 
Alexander.
    Thank you to all of our witnesses for being here today, and 
I especially want to thank Ms. Thea Lee, who has a long history 
of fighting on behalf of workers for better trade policies. I 
appreciate your advocacy.
    We don't often talk about trade and tariffs in this 
Committee. It's usually a conversation that takes place over in 
the Finance Committee. But there is no question that President 
Trump's escalating trade war is already hurting a lot of 
workers in our country, and things will only worsen on working 
families if he continues to pursue these reckless trade 
policies. That is something that everyone, not just the Finance 
Committee Members, should be worried about.
    The Chairman focused on the impact of President Trump's 
proposed tariffs on the auto industry--very important, but the 
damage done by the President's ill-conceived ideas could go 
much further than just the auto industry, and that has the 
potential of hurting workers in every industry across all 50 of 
our states. As a voice for my home State of Washington, I hope 
we can broaden the conversation, because perhaps no state has 
more to lose in Trump's trade wars than Washington State.
    About 40 percent of all jobs in Washington State are tied 
to trade. So whether we're talking about wheat farmers in 
eastern Washington or longshoremen who load goods onto ships at 
one of our ports on the west side, a lot of workers in my home 
state are at risk.
    Last month, I had the opportunity to meet with members of 
the Agricultural Committee as well as the men and women who 
work at our ports, and I have to tell you they are already 
feeling the pain of Trump's reckless trade policies. One 
example was our fruit tree growers, people who produce those 
delicious cherries you all love and our famous Washington State 
apples. They have estimated their losses are already in the 
tens of millions of dollars for this year alone due to 
retaliatory tariffs.
    Others are feeling the pain because of the uncertainty of 
this administration's ham-handed approach. They are wrapping up 
this year's harvest and should be planting for next, and while 
the Trump administration is telling them to be patient, they 
cannot hold out forever. And as they made very clear to me, a 
one-time taxpayer funded aid package like the one the 
administration announced this summer is not a long-term 
solution, even if it somehow trickled down to every affected 
worker, which right now it does not.
    What's so important to remember is that our growers and our 
longshoremen are just the first to feel the effects of 
President Trump's misguided trade war. We know that their 
losses will trickle out to workers at businesses I've heard 
from, to farm suppliers, to local car dealerships, to regional 
businesses and restaurants, to them and their families and 
their communities and many more, and that list will go on. The 
domino effect is very real. It is urgent for my home state and 
for every state. President Trump is playing a very dangerous 
game right now, and it's the American workers who are being 
forced to pay the price.
    How do we craft a trade policy that achieves fair trade and 
lifts up U.S. workers? The answer is not to simply eliminate 
all trade barriers, including tariffs, but it also is not 
President Trump's scatter-shot tariffs. There is a toolbox at 
our disposal to help level the playing field. One example: 
tariffs can be used carefully and have been by several 
administrations to combat unfair trade practices or level the 
playing field or improve conditions for workers. But they have 
to be used in a strategic, coherent manner that, frankly, has 
been missing from the current administration to date.
    There are other tools that can be used to achieve fair 
trade, including building stronger labor standards into our 
trade agreements to make sure our trade partners are respecting 
their workers' rights and to make sure American workers are 
competing on a level playing field. And labor standards must 
not be an afterthought. Meaningful enforcement of basic labor 
rights abroad should be at the center of our trade policies.
    America's workers are dedicated, they are increasingly 
productive, and they are creative. But it is unfair to ask them 
to compete against countries who are dumping their products 
into U.S. markets with workers making sub-minimum poverty wages 
or workers who face deadly violence or intimidation when they 
organize for better conditions.
    Fair trade should be about respecting workers while growing 
jobs here at home and opening up markets for our goods 
overseas, not a race to the bottom. President Trump is not 
pursuing a rational trade policy that puts our workers first, 
and I'm very deeply concerned that if he continues to engage in 
this scatter-shot, tit-for-tat trade war while demonizing our 
closest allies and long-time trading partners instead of 
working with them to root out bad actors and address systemic 
issues, it will be the millions of workers in communities 
across this country who are forced to bear the brunt of 
President Trump's trade war.
    Mr. Chairman, I stand ready to work with you as well as 
anyone from either side of the aisle who is willing to work on 
solutions that restore certainty to our communities and pursue 
trade policies that work for our families, our workers, and the 
states we represent. Our workers can't wait much longer, Mr. 
Chairman.
    Thank you.
    The Chairman. Thank you very much, Senator Murray.
    We'll now hear from our witnesses and then go to questions 
from Senators. I will introduce our witnesses.
    The first is Stephen Moore, Distinguished Visiting Fellow 
with the Project for Economic Growth and the Heritage 
Foundation's Institute for Economic Freedom and Opportunity, 
currently a senior economic analyst for CNN, former member of 
the Wall Street Journal editorial board.
    Next, Bryan Riley, Director of National Taxpayer Union Free 
Trade Initiative. He has led grass roots efforts in support of 
initiatives like the North American Free Trade Agreement and 
has researched the domestic impact of trade.
    Next, Thea Lee. Ms. Lee is President of Economic Policy 
Institute, has previously worked with the AFL-CIO. She has 
served on the State Department's Advisory Committee on 
International Economic Policy, the Export-Import Bank Advisory 
Committee, and the Board of Directors of the National Bureau of 
Economic Research.
    Our final witness today is John Bozzella, President and 
Chief Operating Officer of the Association of Global 
Automakers. He has previously served as a Senior Operating 
Executive for Cerberus Operations, an advisory company, and 
Senior Vice President of External Affairs and Public Policy for 
the Chrysler Group.
    Welcome again to all our witnesses.
    Mr. Moore, why don't we begin with you.

  STATEMENT OF STEPHEN MOORE, DISTINGUISHED VISITING FELLOW, 
PROJECT FOR ECONOMIC GROWTH, INSTITUTE FOR ECONOMIC FREEDOM AND 
      OPPORTUNITY, THE HERITAGE FOUNDATION, WASHINGTON, DC

    Mr. Moore. Thank you, Mr. Chairman. It is a privilege to 
testify before this Committee. I am an economic researcher at 
the Heritage Foundation, but my remarks today are my own views 
as an economist, not necessarily those of Heritage.
    I would start by saying that, Mr. Chairman, you stole my 
thunder. I mean, I agree with virtually everything you just 
said. You get an A in economics today, because you got the----
    The Chairman. I never did before, so thank you.
    Mr. Moore. You had it exactly right. And, by the way, I 
agree with many of the points that Senator Murray made as well.
    Let me start by saying that I also served as a senior 
economic advisor to the Trump campaign and so had many 
occasions to speak to Donald Trump about trade policy, and he 
used to always say that--every once in a while, I would say, 
``Well, you know''--then, we would call him Donald--``those are 
protectionist trade policies,'' and he would say, ``No, I am 
not for protectionism. I'm for''--as you said--``I want 
reciprocity. I want a level playing field. I want more trade, 
but I want to make sure that it's fair.''
    I was always somewhat skeptical of that approach. But I 
would say today I'm less skeptical than I was 6 months ago or 9 
months ago. I think that, so far, it appears that Trump is on a 
right course. I love what you just said, Mr. Chairman, about 
the zero tariff policy. This is something that I--and I think 
some of the others at this table--have been urging as a 
strategy. And you're right. Donald Trump has talked a lot about 
this. His chief economic advisor, Larry Kudlow, talks a lot 
about that as well.
    I think that the Mexico agreement is a pretty good start. I 
think we're going to get an agreement in the next few weeks 
with Canada. The handshake deal that he has with Europe I think 
is a very promising thing, and, as you know, at the end of that 
deal, it says the goal here is to get down to zero tariffs so 
that we have zero tariffs across the Atlantic. That would be a 
very positive thing.
    Then, you concentrate your efforts on China. China is 
clearly the bad actor on the international scene. They are the 
country that is abusing our trade laws and our intellectual 
property. So I think it's going in the right direction.
    Senator Murray is right that this is a dangerous game. 
We're in the fourth inning of the game. So far, it looks like 
it's going pretty well, but you never know how this is going to 
end.
    A second point I'd make is one that you made as well, Mr. 
Chairman, which is the U.S. auto industry is healthy in the 
United States. It really is, and it's healthy--even it's 
recovering big time in states like Michigan, those Midwestern 
states. I'm from Illinois, so I'm a Midwesterner. But it's very 
strong in the southern states, states like yours, in Tennessee, 
Alabama, Texas, and I've been--I travel a lot on my job. I go 
to a lot of these factories, and I've seen the economic 
vibrancy that's going on as a result of the movement of the 
auto industry into the southern states. So that's a very 
positive thing.
    My kind of view when it comes to auto is if it ain't broke, 
don't fix it. This is a positive trend, and I have some charts 
in my testimony that show that it's been a healthy recovery for 
the auto industry.
    The next point I would make is that one of the reasons I'm 
opposed to protectionist measures, whether it's steel or 
whether it's aluminum or, in this case, whether it's autos, is 
that I think we should learn the lessons from the 1970's. We 
tried that approach in the 1970's of protecting our industries 
with tariffs, and it led to a loss of jobs. It hurt the 
American consumer big time. In fact, almost all studies show 
that the negative wealth effects to consumers outweighed any 
benefits to the protected workers.
    But, more importantly, is that what we discovered from 
these protectionist policies is that when you gave American 
industry a kind of cloak of protection of 20 percent, 30 
percent, 40 percent trade barriers, they became fat and flabby 
and inefficient. They didn't have to compete, and that's the 
worst thing. I'm a big believer--as you said, Senator Murray, 
we've got the best workers in the world. If you give American 
industry and American workers a level playing field, we can out 
compete the Japanese, the Chinese, the Canadians, the Germans, 
and so on. And the worst thing to do is to give them a cloak of 
protection, which I think in the long run has a negative 
effect.
    I think we're going to win on these trade policies. As I 
was saying, Senator Murray, when you were out, I think you're 
exactly right that this is a bit of a dangerous strategy that 
Trump is proposing, but I think at the end of the day, I'm an 
optimistic, and I think this will work out if we move toward 
the policy of zero tariffs with the kind of labor protections, 
Senator Murray, that you're talking about.
    Thank you.
    [The prepared statement of Mr. Moore follows:]
                  prepared statement of stephen moore
                  
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    The Chairman. Thank you, Mr. Moore.
    Mr. Riley.

  STATEMENT OF BRYAN RILEY, DIRECTOR, FREE TRADE INITIATIVE, 
            NATIONAL TAXPAYERS UNION, WASHINGTON, DC

    Mr. Riley. Thank you, Chairman Alexander, Ranking Member 
Murray, and distinguished Senators, for the opportunity to be 
here today.
    I'm Bryan Riley. I'm with the National Taxpayers Union. 
Founded in 1969, NTU is the Nation's largest taxpayer 
organization, and we have a long history of opposing import 
taxes that drive up prices for American consumers and weaken 
our economy.
    You know, I think most Americans remember in our 
Declaration of Independence the line about no taxation without 
representation, and maybe not as many remember the line right 
before that which accuses the king of England of cutting off 
our trade with all the countries in the world.
    Today, you could call any economist at the Economics 
Department at Vanderbilt or Washington State or almost any 
university in the country, and they would tell you the same 
thing. I think they would tell you the same kinds of things 
which we heard in the opening statements and in Steve Moore's 
comments and in my comments, that these proposed tariffs and 
existing tariffs on steel and aluminum and automobiles are a 
terrible idea, and they're self-destructive.
    You know, earlier this year, NTU released a letter from 
over 1,200 economists, including 15 Nobel laureates, who 
agreed: ``We are convinced that increased protective duties 
would be a mistake. They would raise the cost of living and 
injure the great majority of our citizens. Such action would 
inevitably provoke other countries to pay us back in kind by 
levying retaliatories against our goods.''
    NTU strongly supports the kind of zero tariff, zero subsidy 
agreements that Senator Alexander and Steve Moore have alluded 
to earlier, and we continue to encourage the administration to 
move in this direction. However, we are concerned that for the 
first time since the end of World War II, we're in a cycle of 
increasing tariffs and trade barriers, not just in the United 
States, but from our trading partners. A 25 percent tariff on 
imported auto parts, for example, clearly would be harmful to 
America's autoworkers. It would be additional damage on top of 
the steel and aluminum tariffs that are harming America's 
workers.
    Another point I wanted to be sure and share was this is not 
a policy that most Americans, I think, endorsed. When the 
Commerce Department held public hearings on tariffs on 
automobiles earlier this summer, nobody endorsed the idea. 
There was one--the speaker from the United Auto Workers didn't 
wholeheartedly endorse it, but didn't wholeheartedly oppose the 
idea. But none of the other people speaking endorsed the idea 
of new tariffs on automobiles.
    NTU went through nearly 2,300 comments that were submitted 
online about possible tariffs on automobiles and parts. Only 
about 1 percent of the comments were in support of new 
restrictions on imports, and these findings are in line with 
the public opinion polls, which show that more Americans than 
ever are supportive of international trade.
    I'm concerned that the U.S. is getting left behind as other 
countries are cutting zero tariff deals. If you're a car maker 
in Canada or Mexico, you can export to Europe without paying a 
tariff. If you're based in the U.S., you have to pay a 10 
percent tariff. That's not because of any unfair barrier. It's 
because Canada and Mexico have negotiated deals. I see no 
reason why the United States should not be able to do the same 
thing.
    In conclusion, I just want to reiterate that we support the 
goal that the President has stated of moving toward a zero 
tariff policy. We strongly believe that imposing new regressive 
taxes on Americans is the wrong approach for U.S. trade policy.
    I look forward to hearing any questions that you all may 
have later this morning.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Riley follows:]
                   prepared statement of bryan riley
                   
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                   [summary statement of bryan riley]
          Trade has been an important part of our country's 
        history from the very start, beginning with the Declaration of 
        Independence, which was in part a response to barriers that cut 
        off our trade with all parts of the world, and the U.S. 
        Constitution, which created the largest and most successful 
        free trade area in history.

          NTU supports President Trump's stated goal of zero 
        tariffs, zero non-tariff barriers, and zero subsidies in 
        international trade. However, we are concerned that for the 
        first time since the end of World War II, U.S. and foreign 
        trade barriers are increasing precipitously.

          Tariffs harm the economy and weaken U.S. security.

          Forcing American manufacturers to pay more for steel 
        and aluminum has costly implications for downstream industries 
        like car manufacturing. One study found that when the Bush 
        administration imposed steel tariffs in 2002, 200,000 Americans 
        lost their jobs as a result. That was more than total steel 
        industry employment at the time. A 25 percent tariff on 
        imported auto parts would further reduce U.S. automaking 
        employment by imposing a significant new cost on assembling 
        cars in the United States.

          The U.S. automobile manufacturing industry has never 
        been stronger.

          New auto tariffs would be a big, regressive tax 
        increase on American workers.

          Eliminating tariffs on steel, aluminum, and parts 
        would benefit U.S. autoworkers.

          The United States risks being left behind as other 
        countries negotiate zero-tariff agreements.

          NAFTA and other agreements should not impose new 
        costs on the auto industry, and should not undermine the 
        ability of the United States to modify its laws to attract 
        global investment.

          Negotiating more zero-tariff trade agreements, 
        cutting import taxes on inputs used by U.S. manufacturers, and 
        resisting the impulse to impose new levies on imported cars and 
        other goods are the right policies for America.
                                 ______
                                 
    The Chairman. Thank you, Mr. Riley.
    Ms. Lee, welcome.

 STATEMENT OF THEA LEE, PRESIDENT, ECONOMIC POLICY INSTITUTE, 
                         WASHINGTON, DC

    Ms. Lee. Thank you, Mr. Chairman. Thank you, Ranking Member 
Murray, Members of the Committee, for the opportunity to be 
here today for this important hearing.
    I am Thea Lee, President of the Economic Policy Institute. 
EPI is a nonprofit, nonpartisan think tank, and for just over 
three decades, we have analyzed the effects of economic policy 
on the lives of America's working families.
    I wanted to start by stepping back for just a moment to put 
in perspective what has actually happened so far in the so-
called trade war the last several months. While there have been 
a number of separate announcements of tariffs on various goods, 
all told so far, the total implemented tariffs only affect 
about one-tenth of 1 percent of the U.S. economy. There may be 
additional tariffs implemented in the coming months and years, 
but even those amount to about eight-tenths of a percent of GDP 
at most, even assuming that tariffs are applied to all motor 
vehicles and parts, imports, after the auto 232 investigation.
    Of course, there is a lot of uncertainty about how other 
countries may react in retaliation, but even then, it is 
important to remember that countries often threaten retaliation 
without actually following through. These tariffs that we've 
been discussing so far will not by themselves cripple a $19 
trillion economy. But, of course, it is important to assess 
whether they are working as planned and are as effective as 
possible.
    It's important to note that tariffs used strategically can 
be an important and useful tool. In the case of our trade 
relationship with China, specifically, tariffs can provide 
essential leverage to address egregious unfair trade practices, 
including currency manipulation, illegal subsidies, 
intellectual property theft, the non-economic motives and 
actions of state-owned enterprises and other problematic 
actions.
    However, the Trump administration's tariffs have been 
erratically implemented, inconsistently messaged, and sometimes 
apparently motivated by politics or whim. Rather than seeking 
to coordinate, as Ranking Member Murray said, a comprehensive 
and coherent strategy in conjunction with our allies and 
complementary to our domestic policies, this administration 
appears to have no overarching strategy or goal in sight.
    Tariffs are designed to change behavior and to disrupt by 
their nature. They disrupt both domestic producers, consumers, 
and our trading partners. In an ideal world, they are applied 
as a short-term strategy to motivate desired behavioral 
changes, for example, to motivate opening foreign markets or 
ending illegal subsidies or enforcing workers' rights 
obligations. Or they can provide short-term relief to an 
industry experiencing destabilizing imports. During that 
period, prices do rise. They are meant to rise temporarily. 
Sometimes, when it's working as planned, that allows domestic 
producers to regain their competitive edge and motivates 
trading partners to cease their objectionable actions, 
ultimately leading to a more efficient outcome and potentially 
lower prices and more jobs.
    But if we are not clear--if the government is not clear 
about our ultimate goals, then our trading partners and 
businesses have insufficient information to adjust, and if we 
alienate and insult our trading partners, then we cannot 
present a united front to address problematic behaviors. And if 
our domestic tax and spending policies are contributing to an 
over-valued dollar and creating incentives to outsource, then 
we are working at cross-purposes.
    In fact, the current tariff regime is problematic on a 
number of fronts and does not appear so far to be having the 
desired effects. The U.S. trade deficit with China is up 8.5 
percent through June. The overall U.S. trade deficit is up 7.3 
percent, which itself is increasing twice as fast as the 
overall economy. So our trade problems with China are getting 
worse, not better.
    The current administration's trade strategy is likely to 
deliver the maximum uncertainty and pain from higher import 
prices but little of the gain in increased exports, jobs, 
domestic production, and profits that we would get from a more 
strategic and coordinated implementation or by realigning, 
reducing the value of the U.S. dollar by about 25 percent to 30 
percent. Addressing currency misalignment, in our view, is the 
single most important step that the U.S. Government should take 
to rebalance trade and support good jobs.
    In conclusion, we absolutely do need to change and reform 
our current trade policy, but not in a haphazard and reckless 
way. We need to work together--and I'm glad to see this 
bipartisan hearing today--to develop and implement a strategic 
trade policy that aligns with our values and goals and that 
works as a complement to our domestic policy to create good, 
skilled, high-wage jobs in manufacturing and agriculture and in 
the service sector.
    The key elements of reform include the following: address 
currency misalignment, stop seeking additional NAFTA styled 
trade agreements that have not delivered, make access to the 
U.S. market contingent on respect and enforcement of 
internationally recognized core labor rights, and, finally, 
develop a real economic plan to help workers in America by 
focusing on skills, workforce development, job quality, 
infrastructure, clean energy, and expanding a strong social 
safety net.
    Thank you for your attention. I look forward to your 
questions.
    [The prepared statement of Ms. Lee follows:]
                   prepared statement of thea mei lee
    Thank you, Chairman Alexander, Ranking Member Murray, and Members 
of the Committee, for the invitation to participate in this important 
hearing. I'm the president of the Economic Policy Institute (EPI). EPI 
is a non-profit, non-partisan think tank based in Washington, DC, and 
for just over three decades, we have analyzed the effects of economic 
policy on the lives of America's working families.
    The policies we've put in place to shape and regulate trade and 
globalization have major impacts on the wages, jobs, and communities of 
American workers and on the vitality of American industries and the 
economy. EPI has examined U.S. trade policy from the perspective of 
working families since the early 1990's when NAFTA was first proposed--
raising concerns about currency, outsourcing, and workers' rights. EPI 
research assesses the potential economic benefits for the Nation, 
states, and congressional districts from negotiating better trade 
agreements and curbing currency manipulation and other unfair trade 
practices.
                        What's actually happened
    As we begin this discussion, it is important to step back for a 
moment and separate fact from fiction on what has actually happened in 
the so-called ``trade war'' of the last several months. While there 
have been a number of separate announcements of tariffs on various 
goods applicable to different countries, all told so far, total 
implemented tariffs only affect 0.1 percent of the U.S. economy. 
Additional tariffs may be implemented in the coming months, but even 
those amount to 0.8 percent of GDP at most, even assuming that tariffs 
are applied to all motor vehicle and parts imports after the auto 232 
investigation. Of course, there is uncertainty about how other 
countries may react in retaliation, but even then it is important to 
remember that countries often threaten retaliation without actually 
following through.
    The steel and aluminum tariffs announced by President Trump in 
March affect only a narrow sliver of the U.S. economy and are quite 
modest in size. Nevertheless, defenders of the globalization status quo 
have responded hyperbolically. For instance, many critics of the 
tariffs have referenced a 2018 study by Francois and Baughman of The 
Trade Partnership claiming that five jobs will be lost for every new 
job created in U.S. iron, steel, and nonferrous metals. EPI has already 
produced a comprehensive report explaining why this study should be 
considered an outlier and showing that the actual economic impact of 
the tariffs will be quite minor.
                           Tariffs as a tool
    It is also important to note that tariffs, used strategically, can 
be an important and useful tool. In the case of our trade relationship 
with China specifically, tariffs can provide essential leverage to 
address egregious unfair trade practices, including currency 
manipulation, illegal subsidies, intellectual property theft, the non-
economic motives and actions of state-owned enterprises, and other 
actions.
    However, the Trump administration's tariffs have been erratically 
implemented, inconsistently messaged, and sometimes apparently 
motivated by politics or whim. Rather than seeking to coordinate a 
comprehensive and coherent strategy in conjunction with our allies and 
complementary to our domestic policies, this administration appears to 
have no overarching strategy or goal in sight. In fact, my colleague 
Rob Scott has referred to the administration's approach as ``tactics in 
search of a strategy.''
    Tariffs are designed to change behavior--both of domestic producers 
and consumers and of our trading partners. In an ideal world, they are 
applied as a short-term strategy to motivate behavioral changes (for 
example, opening foreign markets or ending illegal subsidies or 
enforcing workers' rights obligations). Or they can provide short-term 
relief to an industry experiencing destabilizing imports. During that 
period, prices do rise--temporarily. Sometimes that allows domestic 
producers to regain their competitive edge, ultimately leading to a 
more efficient outcome and potentially lower prices and more jobs.
    But if we are not clear about our ultimate goals, then our trading 
partners and businesses have insufficient information to adjust. And if 
we alienate and insult our trading partners, then we can't present a 
united front to address problematic behaviors. And if our domestic tax 
and spending policies are contributing to an overvalued dollar and 
creating incentives to outsource, then we are working at cross 
purposes.
    In fact, the current tariff regime is problematic on a number of 
fronts and does not appear so far to be having the desired effects. The 
U.S. trade deficit with China is up 8.5 percent through June (year to 
date, over the same period last year), significantly faster than the 
overall U.S. goods trade deficit, which increased 7.3 percent, twice as 
fast as the overall economy is growing. Our trade problems with China 
are getting worse, not better. And the International Monetary Fund 
recently projected that the overall U.S. current account deficit will 
rise from $466 billion in 2017 to $798 billion in 2020, an increase of 
more than 70 percent within the next 3 years. \1\
---------------------------------------------------------------------------
    \1\  The U.S. trade deficit is expected to rise in the future as a 
result of recent increases in the value of the dollar, higher rates of 
growth in the United States relative to our trading partners, and 
recent increases in the U.S. budget deficits as a result of recent tax 
cuts and spending increases included in the most recent Federal budget, 
which are expected to surpass one trillion dollars by 2020.
---------------------------------------------------------------------------
    With sloppily applied tariffs as the centerpiece of the Trump 
administration's trade strategy, we can expect to get all of the pain 
from higher import prices, but little of the gain (in increased 
exports, jobs, domestic production and profits) that we would get from 
a more strategic and coordinated implementation or by realigning 
(reducing the value of) the U.S. dollar by 25-30 percent. The Trump 
administration's tariff policies are also a missed opportunity to work 
with our international allies to assemble a coordinated plan. However, 
this is not particularly surprising given that the President appears to 
approach trade policy as a way to antagonize foreign governments and 
grandstand, rather than a critical way to help workers in the U.S. 
regain some ground.
    Over the past two decades, growing trade deficits with China and 
other countries have eliminated millions of good manufacturing jobs in 
the United States. These deficits are the single most important cause 
of the loss of 5 million manufacturing jobs since 1997 (Houseman 2018), 
roughly 30 percent of industry employment, and the disappearance of 
nearly 90,000 U.S. manufacturing plants.
    One reason we are so concerned about the loss of jobs caused by 
flawed trade policies is that the jobs that are directly displaced are 
often manufacturing jobs, which provide excellent wages and benefits, 
especially compared to the service sector, where employment has been 
growing. These manufacturing jobs have often been unionized, and have 
generally provided higher wages, on-the-job training, and benefits like 
health care and retirement security. And EPI research has shown that 
the wage-suppressing effects of our poor approach to globalization and 
trade has hit all workers without college degrees across the country--
of all races and ethnicities--not just those in manufacturing who have 
lost jobs directly to import competition. While trade-displaced workers 
face the largest individual losses, in the aggregate the costs of these 
job losses are much smaller than the wider effects of downward pressure 
on wages.
    Manufacturing also supports millions of good jobs in high-wage 
industries such as law, accounting, and engineering and technical 
services. And it was also responsible for two-thirds of private sector 
R&D in 2015, according to the National Science Foundation.
    Yet, instead of striving to create more good jobs with similar 
qualities in infrastructure or the clean energy sector, or improving 
the wages, labor standards, and quality of all jobs, the Trump 
administration and Republicans in Congress have repeatedly attempted to 
repeal or undermine the Affordable Care Act, to actively roll back or 
stall basic labor standards (including killing a record-breaking number 
of workplace safety and other labor regulations through unprecedented 
use of the Congressional Review Act), and have failed to take action on 
expanding meaningful retirement security for all. This Congress also 
recently pushed through the Tax Cuts and Jobs Act, which is likely to 
increase incentives to offshore production and profits of American 
firms, by providing a major tax advantage for foreign profits over 
domestic profits.
                What we should be doing on trade policy
    In conclusion, it is crucial that we work together to develop and 
implement a strategic trade policy that aligns with our values and 
goals, and that works as a complement to our domestic policy to create 
good, skilled jobs in manufacturing, in agriculture, and in the service 
sector. To do that, we need to recognize that our current and past 
trade policies have failed on a number of fronts.

    The key elements of reform include the following:

    Address currency misalignment. We need to abandon the strong dollar 
dogma and target a currency that allows for a manageable and stable 
trade deficit. We absolutely can manage the value of the U.S. dollar, 
and we need to set it at a level that essentially balances trade. This 
will give U.S. manufacturing the breathing room it needs to get back a 
few million jobs. (See this EPI report on the pervasive negative impact 
currency misalignment has had on American jobs and wages.)

    Stop seeking additional NAFTA-style trade agreements. There's no 
reason to devote policy resources to chasing a ``better trade deal''--
certainly not by negotiating agreements that incentivize outsourcing 
and boost the profits of the U.S. pharmaceutical and software companies 
while actively subverting the bargaining power of American workers. 
Policymakers who want to work across international borders could 
instead focus on eliminating tax havens or harmonizing climate policies 
to ensure that countries do not free ride on others' efforts to 
mitigate greenhouse gas emissions (see the recommendations in this 2017 
report from EPI on how to reorient national policy toward measures that 
will benefit the U.S. and other countries ).

    Make access to the U.S. market contingent on respect and 
enforcement of internationally recognized core labor rights. These core 
labor standards include the right of freedom of association and the 
right to bargain collectively, as well as freedom from discrimination, 
forced labor, and child labor. Enforcing these core labor rights is 
win-win for workers in all countries. While the U.S. has included some 
labor rights provisions in our trade agreements for many years, they 
have not been effectively and consistently enforced.
    We need a new approach and commitment. Prime Minister Trudeau of 
Canada has requested that U.S. ``right-to-work'' laws meant to thwart 
collective bargaining be ended as a condition for NAFTA renegotiation. 
This is the kind of ambitious, big-picture thinking about how to 
leverage trade policy to boost labor's bargaining position that we 
could really use in the United States, and it's been lacking from the 
Trump administration and recent Democratic administrations alike.

    Finally but just as significantly, we need to develop a real 
economic plan to help workers in America--by focusing on skills and 
workforce development, job quality, infrastructure, the clean energy 
transition, and expanding a strong social safety net. The U.S. 
Government has its own responsibility to develop and implement a 
coherent long-term economic strategy with respect to both manufacturing 
and services, both trade-related and domestic. We have failed to invest 
adequately in infrastructure and skills for decades, and business has 
not filled the void. We have a tax system that rewards capital over 
labor and outsourcing over domestic production. It remains riddled with 
unproductive loopholes, and--especially after last year's changes--it 
fails to raise adequate revenue to fund needed investments. We must use 
domestic tax, infrastructure, and workforce development policies to 
ensure that American workers and businesses have the tools and skills 
they need to compete successfully.
    While textbook trade models show that cutting tariffs is win-win, 
they also show that the amounts of income redistributed by trade, from 
workers at the bottom to those at the top, vastly exceed the gains from 
trade. As Josh Bivens and Dean Baker have explained, the textbook trade 
models simply imply that the winners from trade gain more than the 
losers lose, even if the losers far outnumber the winners. A win for 
everyone from cutting tariffs only occurs if the winners compensate the 
losers. And that is what we have never done in the United States. It is 
incumbent upon us to develop trade, manufacturing and labor policies 
that will create good jobs with rising incomes for all working 
Americans, especially the 70 percent of the labor force that has 
experienced wage stagnation during the past four decades of 
globalization.

    Thank you for your attention, and I look forward to your questions.
                                 ______
                                 
    The Chairman. Thank you, Ms. Lee.
    Mr. Bozzella, welcome.

 STATEMENT OF JOHN BOZZELLA, PRESIDENT AND CEO, ASSOCIATION OF 
               GLOBAL AUTOMAKERS, WASHINGTON, DC

    Mr. Bozzella. Thank you very much, Mr. Chairman, Ranking 
Member Murray, Members of the Committee. Thank you very much 
for holding this hearing today. My name is John Bozzella. I am 
the President and CEO of Global Automakers and spokesperson for 
Here for America.
    Mr. Chairman, I wholeheartedly agree with your assessment 
of the benefits that NAFTA has brought to the U.S. and states 
like Tennessee. There's just no question about that. And I 
agree also that we should be working toward zero tariffs. That 
is the right goal. Our concern is that we appear to be going in 
a different direction. I'm grateful for the chance to speak 
this morning on behalf of the industry, which is united in its 
concern over the impact of tariffs on our workers, our 
customers, and, frankly, our future.
    The industry is already facing additional costs for steel 
and aluminum and export restrictions due to foreign 
retaliation. The uncertainty associated with the still ongoing 
NAFTA negotiations and especially the Commerce Department's 
investigation of whether trade in autos and auto parts 
threatens national security foreshadow a future of complex and 
intrusive rules, higher costs, lower demand, and fewer export 
opportunities.
    Mr. Chairman, today, 14 companies build cars and trucks in 
the United States, with a 15th soon to begin production in 
2021. These companies support a value chain of U.S. businesses 
across the country. The value chain includes R and D, the 
manufacture of motor vehicles and high-value components like 
engines and transmissions, the sale and distribution of cars 
and trucks, financing, and after sale service.
    Directly and indirectly, the United States auto industry 
currently employs 10 million Americans. All of these employees 
work at jobs and live in communities that will be directly 
affected by tariffs on the goods they use and produce. With all 
due respect to those with a contrary view, these people are not 
leverage or tactical instruments in a game of international 
chess. They should be front and center in any discussion of 
tariffs, along with our customers, who, of course, will also 
share the brunt of these higher costs.
    Many of you heard directly from these hardworking Americans 
in July when more than 100 autoworkers from U.S. facilities of 
international automakers came to Washington from across the 
country, many for the first time in their lives, to express 
their concern over the effect that high automotive tariffs 
would have on their jobs, their families, and their 
communities. They drove to Capitol Hill in cars they built 
themselves to deliver the message that tariffs are taxes, and 
these taxes cost jobs.
    Mr. Chairman, as you and other Members of the Committee 
heard from these workers, the U.S. auto industry is, in fact, 
quite healthy. The vehicles available to American consumers 
today are unquestionably safer, cleaner, and better built than 
ever before. Amid all the change, the U.S. auto industry is 
producing as many vehicles as it has on average during the past 
25 or 30 years and selling and exporting American made cars and 
trucks at near record levels.
    Tariffs like those already implemented and those on the 
horizon raise the cost of producing vehicles in the United 
States. Higher prices for vehicles made in the United States 
and imported from abroad inevitably depress sales. With fewer 
sales, we need fewer workers to build our cars, fewer workers 
to build parts for those cars, and fewer people to sell and 
service those cars.
    A better way to strengthen and enhance the American auto 
industry is, first, by holding our trading partners accountable 
and working toward zero tariffs worldwide for cars and trucks; 
and, second, by focusing our policy efforts on the development 
of a workforce equipped with the skills necessary for the auto 
manufacturing jobs that we have today and that we will have 
tomorrow. We don't need tariffs to create U.S. auto 
manufacturing jobs. We need more workforce training to fill the 
many openings we have right now.
    When America does trade the right way, eliminating trade 
barriers and expanding access to more markets, we create jobs, 
promote innovation, and build the foundation for sustainable 
prosperity. When America does trade the wrong way, with 
unnecessary and self-defeating restrictions, we raise costs and 
prices, depress demand, limit consumer choice, discourage new 
investment, and threaten jobs and opportunity.
    Mr. Chairman and Members of the Committee, thank you again 
for the opportunity to speak to you today and for your work to 
promote American jobs, investment, and growth.
    [The prepared statement of Mr. Bozzella follows:]
                  prepared statement of john bozzella
    Chairman Alexander and Ranking Member Murray, thank you for the 
opportunity this morning to testify before the Senate Committee on 
Health, Education, Labor and Pensions. My name is John Bozzella. I am 
the President and CEO of Global Automakers \3\ and the spokesperson for 
Here For America \4\.
---------------------------------------------------------------------------
    \3\  The Association of Global Automakers represents the U.S. 
operations of international motor vehicle manufacturers, original 
equipment suppliers, and other automotive-related trade associations. 
For more information, visit www.globalautomakers.org.
    \4\  Here For America is an initiative of the Association of Global 
Automakers to increase public awareness about the importance of 
international automakers to American job creation, economic growth, 
technological innovation and strong communities. Visit 
www.hereforamerica.com.
---------------------------------------------------------------------------
    The U.S. auto industry today comprises fourteen companies that 
build cars and trucks in the United States. A fifteenth is scheduled to 
begin production in 2021. These companies support a value chain of U.S. 
businesses all across the country conducting research and development, 
manufacture of vehicle components such as engines and transmissions, 
vehicle assembly, sales, service, logistics and aftermarket products 
and services, employing 7 million Americans. Add in indirect 
employment, and their ranks grow substantially.
    Thirteen of those fifteen automotive manufacturers may be 
incorporated outside the U.S., but they have put down deep roots in the 
United States. Several have been building vehicles here for more than 
30 years.
    All of these 7 million employees work at jobs and live in 
communities that will be directly and quickly affected by tariffs on 
the goods they use and produce. These people are not tactical 
instruments in a game of international chess. Any discussion of tariffs 
should put them front and center in the discussion, and that is among 
the many reasons we appreciate your convening this hearing today.
    Back in July, Here For America hosted the first ever ``Drive-In''. 
More than 100 autoworkers from U.S. facilities of international 
automakers came to Washington DC from all across the country--many for 
the first time in their lives--to express their concern over the effect 
that proposed punitively high automotive tariffs would have on their 
jobs, their families, and their communities. They drove to Capitol Hill 
in cars they built themselves to participate in a press conference at 
the U.S. Capitol, followed by meetings with Members of Congress from 
both parties, during which they delivered the message that tariffs are 
taxes, and that tariffs mean fewer jobs.
    Many Senators on this Committee devoted time to hear from these 
workers directly. Chairman Alexander met with associates from Nissan 
and Toyota who were here from Tennessee. Senator Jones cohosted the 
press conference with a bipartisan group of House Members, in which 
they highlighted the economic opportunities that Hyundai, Honda, 
Daimler, and Toyota have created in Alabama and across the country. 
Senator Jones then took time to meet personally with auto workers who 
came to Washington from across his home state to further discuss 
concerns over potential tariffs. Senator Young energized a packed house 
at our welcome dinner, which included Hoosiers who work for Honda, 
Subaru, and Toyota. Senator Isakson's staff met with associates from 
Kia and Honda who came up from Georgia, and Senator Paul's staff met 
with associates from Toyota in Kentucky.

    Here's what these people had to say.

    John Hall, a maintenance worker at the Hyundai Motor Manufacturing 
plant in Montgomery, Alabama, said ``new tariffs on automotive imports 
would have a devastating effect. I am one of thousands of American 
workers whose livelihoods would be put at risk by a substantial tariff 
on automotive goods. It would not be possible to change our supply 
chain overnight, and a 25 percent tariff on parts would raise 
production costs at our Alabama factory by about 10 percent annually.''
    Jennifer Adair, Team Leader in Quality at Toyota Indiana shared 
these thoughts: ``My message is simple, I'm an American auto worker and 
these tariffs will hurt Toyota. Every day, I go to work at Toyota Motor 
Manufacturing in Indiana and ensure the vehicles we build are ready for 
our consumers. We produce vehicles that are built here, sold here and 
exported all over the world.''
    Stuart Countess, Chief Administrative Officer, Kia Motors 
Manufacturing Georgia said: ``While we recognize free trade makes the 
United States competitive, broad restrictions such as tariffs on auto 
and auto part imports will raise costs for our customers and their 
families. We don't want to risk losing all of the gains our community 
and our team members have achieved, that is why we echo the plea, Don't 
Tax My Ride.''
    These workers are proud to work at companies providing high-value, 
high-tech jobs that continue to contribute significantly to the 
communities you represent and know very well.
    The city of Chattanooga, Tennessee, became home to the Volkswagen's 
newest facility in 2011. Today, VW Chattanooga employs around 3,500 
people who have built over 800,000 vehicles, paying out well over $250 
million in annual payroll to its manufacturing employees. \5\ These 
operations are responsible for supporting an additional 21,000 jobs 
through suppliers, port facilities, and transportation services, 
accounting for $1.5 billion in incomes for these residents of Tennessee 
and Georgia. \6\ Tennessee Governor Haslam said in July,
---------------------------------------------------------------------------
    \5\  https://media.vw.com/en-us/releases/1055.
    \6\  http://cber.haslam.utk.edu/pubs/bfox309.pdf.

        ``I want to thank all 3,500 employees at the plant. Your brand 
        has become our brand, and while you are making world-class 
        vehicles in Chattanooga, you might not know it, but you are 
        actually helping build Tennessee, as well. We're grateful for 
---------------------------------------------------------------------------
        that and the impact that you've made.''

    VW is not the only one making a difference in Tennessee. Nissan 
manufacturing facilities around Nashville employ over 12,000 people 
directly and pay over $800 million in payroll annually. International 
auto manufacturers account for over 16,000 jobs and 5 percent of 
Tennessee's Gross State Product. That's a $17 billion contribution to 
Tennessee's economy.
    The city of West Point, Georgia, has benefited greatly from the 
manufacturing facility built by Kia in 2009. Prior to 2006, the 
residents of West Point believed that they would become casualties of 
the textile flight of the 1990's. That changed when Kia announced it 
was building a facility in the city. People were so overjoyed that they 
put ``Thank You Jesus for Bringing KIA'' signs in their front yards. 
\7\ Since then, Kia has invested $1.6 billion in Georgia to date, 
employs over 2,700 people directly, and supports another 14,000 
indirect jobs through its suppliers, some only a mile or two down the 
road from Kia's facility. \8\ Along with these direct factory and 
indirect supplier jobs, Kia supports thousands more jobs in the local 
community through retail and restaurant sales. The mayor of West Point, 
Steve Tramell, said to NPR in July of this year, ```We've been through 
that down time. . . We don't ever want to go through that again.''' \9\
---------------------------------------------------------------------------
    \7\  https://www.complaintsboard.com/messup/thank-you-jesus-for-
bringing-kia-to-our-town.html.
    \8\  https://www.kmmgusa.com/about-kmmg/our-company/.
    \9\  https://www.npr.org/2018/07/27/631839199/trumps-proposed-auto-
tariffs-threaten-kia-plant-in-georgia.
---------------------------------------------------------------------------
    In Lincoln, Alabama, Honda completed a massive production and 
management facility in 2001 that now employs over 4,500 workers and 
produces three popular vehicles, the Odyssey, the Pilot, and the 
Ridgeline, as well as V6 engines that power them. Since the start of 
Honda's production operations in Lincoln, Alabama, the entire area 
around the Honda facility saw growth in both employment and income. 
Talladega and Calhoun Counties, the two closest counties to Lincoln, 
gained over 3,000 jobs from Honda and Tier-1 suppliers, accounting for 
an additional $380 million of payroll in just these two counties. The 
total impact of Honda's facility in Alabama was 43,000 new jobs, $1.7 
billion in payroll, and $170 million in state and local tax revenue 
going to fund schools and infrastructure projects. \10\
---------------------------------------------------------------------------
    \10\  https://www.edpa.org/wp-content/uploads/The-2014-Economic-
Impacts-of-Honda-Manufacturing-of-Alabama-LLC-and-its-Tier-1-
Suppliers.pdf
---------------------------------------------------------------------------
    BMW in Greer, South Carolina, began production in 1994, and the 
Counties of Greenville and Spartanburg saw an immediate 2 percent drop 
in unemployment. Manufacturing is now the largest economic sector in 
both counties. \11\ BMW has invested over $9.3 billion in the Upstate 
region of South Carolina and currently directly employs 10,000 people. 
BMW South Carolina is now the company's largest production facility in 
the world. This investment and commitment to South Carolina has allowed 
the city of Greer and surrounding counties to have a reliable pool of 
employment and tax revenue. Greer's population has grown by 22,000 
since the year 2000, and the city plans to support a population of 
100,000 by 2030 through community development projects that include a 
complete revitalization of Greer's downtown region, replacing a 100-
year-old sewer system, building a new 100-room hotel, and repaving the 
roads and sidewalks. \12\ These projects would not be possible without 
the investment in South Carolina that BMW has facilitated.
---------------------------------------------------------------------------
    \11\  https://fred.stlouisfed.org/series/SCGREE5URN.
    \12\  https://upstatebusinessjournal.com/downtown-greer-
experiencing-dramatic-evolution/.
---------------------------------------------------------------------------
    These are just a few of the hundreds of success stories that stem 
from the investment international automakers have made in the United 
States. And they are not done yet. Volvo Cars has just this week 
started production of its S60 model in an all new U.S. factory in South 
Carolina. Volvo Cars plans to expand to include production of the XC90 
in the same facility for a total investment of $1.1 billion. Honda is 
going to invest another $55 million in Alabama, bringing its total 
investment in Alabama to more than $2.6 billion, and Mazda and Toyota 
have announced a joint venture that is set to open in Huntsville in 
2021. Additionally, Toyota will invest another $10 billion over the 
next 5 years in its U.S. operations. \13\, \14\
---------------------------------------------------------------------------
    \13\ 13 https://www.al.com/news/anniston-gadsden/index.ssf/2018/07/
honda_announces_548_million_ex.html.
    \14\ 14 https://www.reuters.com/article/us-usa-autoshow-toyota/
toyota-to-invest-10-billion-in-u-s-over-five-years-idUSKBN14T1NN.
---------------------------------------------------------------------------
    Overall, international automakers have invested nearly $82 billion 
in the United States, which, combined with the investment of U.S.-
headquartered companies, supports a vibrant, highly competitive and 
innovative U.S. industry. This has occurred during a period of expanded 
trade that has yielded a thriving industry that produced almost 11 
million vehicles last year, nearly twice the level during the Great 
Recession. Sales remained high at 17.2 million in 2017, while exports 
in 2017 exceeded 1.9 million vehicles.
    Exports of U.S.-built cars and trucks worldwide have more than 
doubled since 1993, when NAFTA became effective, increasing from 
978,155 vehicles to 1.981 million vehicles. The value of these same 
exports has nearly quadrupled, rising from $14.3 billion in 1993 to 
more than $57 billion in 2017.
    These conditions have also driven an unprecedented era of 
innovation in the industry generally, and in the United States 
specifically. International automakers alone employ hundreds of highly 
skilled engineers and designers at 65 R&D facilities in 16 states. 
Additionally, the U.S. automotive industry includes not only original 
equipment manufacturers, but a broad ecosystem of suppliers that 
develop and produce highly advanced systems components. Their spending 
supports the development and deployment of critical automotive 
technologies, including artificial intelligence, radar and lidar camera 
systems, along with many others.
    All of this has happened while the industry operated under the 
current system of trade rules, many of which were put in place under 
Presidents Clinton, Bush, and Obama, with bipartisan support in the 
Congress.
    Today, however, the U.S. industry faces tremendous uncertainly as 
it assesses the risk of extremely high import tariffs.
    Steep tariffs recently placed on steel and aluminum, imposed 
pursuant to an investigation into whether imports of these metals are a 
threat to U.S. national security under section 232 of the Trade 
Expansion Act of 1962, are already rippling through the automotive 
supply chain. The costs of these goods, including steel and aluminum 
produced in the U.S. increased across the board. \15\, \16\ The price 
of steel has gone up almost 50 percent since tariffs were announced--
that's announced, not imposed--and the 50-percent price increase is 
more than twice the amount of the tariffs that were imposed.
---------------------------------------------------------------------------
    \15\  https://www.wsj.com/articles/steel-aluminum-prices-rise-on-u-
s-tariffs-1527792759.
    \16\  https://agmetalminer.com/2018/06/12/raw-steels-mmi-domestic-
steel-price-momentum-continues-to-grow/.
---------------------------------------------------------------------------
    Rising input costs directly impact the cost of production for U.S. 
automakers. Toyota, which sources 90 percent of the steel for its U.S.-
based facilities from American mills, stated,

        ``The (U.S.) administration's decision to impose substantial 
        steel and aluminum tariffs will adversely impact automakers, 
        the automotive supplier community and consumers.'' \17\
---------------------------------------------------------------------------
    \17\  https://www.reuters.com/article/usa-trade-toyota/toyota-says-
u-s-tariffs-on-steel-aluminum-will-substantially-raise-production-
costs-idUST9N1N004M.

    Ironically, the steel tariffs have created an opening for foreign 
producers. Bloomberg reported on July 5 that ``So successful have 
tariffs been in pushing up American steel that foreign metal is 
becoming more appealing.''
    The U.S. Department of Commerce is conducting a similar 
investigation into whether imports of autos and auto parts are a threat 
to our Nation's security. This broad authority to impose these tariffs 
in the name of national security was granted to the President of the 
United States by Congress. Unlike other authorities to impose tariffs 
to respond to unfair trading practices or to provide temporary 
protection to a struggling industry facing import competition, this 
``232'' authority is so broad, and the impacts of tariffs imposed under 
it are so widespread and of such indeterminate length, that Congress 
must ask whether this authority is being used for the purposes 
intended.
    There is simply no support for the proposition that imports of 
cars, trucks, SUVs and auto parts threaten the national security of the 
United States. No automaker or auto parts supplier has requested 
protection under our trade laws. Auto sales, production and exports are 
in fact at or near all-time highs.
    The Department of Commerce so far has been unable to outline any 
theory explaining how the commercial production of cars and trucks is 
connected to U.S. national security. Simply running a sectoral trade 
imbalance, which the Secretary suggested as a rationale during a recent 
appearance before Congress, seems insufficient because it does not 
distinguish the U.S. automobile industry from other industries where 
this is also the case.
    In response to the Department's call for public comments on the 232 
tariffs, only three substantive statements, out of more than 2,300 
comments of all types, were filed supporting tariffs or other 
restrictions on auto or auto parts imports, and that support was often 
tepid at best. In addition to the absence of public support, 
associations representing the entire U.S. auto industry oppose the idea 
of tariffs and urge that this investigation be reconsidered. This unity 
is as remarkable as it is unprecedented.

    Tariffs are Taxes. No ifs, ands or buts.

    U.S. tariffs placed on imports are taxes paid by Americans. If 
punitive tariffs of 20-25 percent are imposed on auto-and auto-parts 
imports, as the U.S. Department of Commerce is now considering, new 
vehicle prices will increase. The Peterson Institute for International 
Economics estimates that vehicle prices will increase by $2,100, to up 
to $7,000 per vehicle. \18\ Every vehicle sold in America would see 
price increases because a global supply chain supports high-value auto 
manufacturing in the U.S. This will reduce demand for new cars, 
creating excess manufacturing capacity across the country. The Peterson 
Institute estimates U.S. auto and parts production would fall by 4 
percent. Used car prices would also rise as new cars become less 
affordable. And, the cost of servicing and maintaining vehicles would 
increase as imported parts are taxed. Adding additional injury, U.S. 
trading partners would retaliate with tariffs on our exports. As a 
result, 624,000 Americans could lose their jobs. \19\
---------------------------------------------------------------------------
    \18\  https://piie.com/system/files/documents/pb18-16.pdf.
    \19\  https://piie.com/blogs/trade-investment-policy-watch/trumps-
proposed-auto-tariffs-would-throw-us-automakers-and.
---------------------------------------------------------------------------
    The gains that the auto industry has achieved recently are 
jeopardized by the prospect of tariffs. Hakan Samuelsson, the CEO of 
Volvo Cars, stated recently at the facility opening in Charleston, 
South Carolina,

    ``If you have trade barriers and restrictions, we cannot create as 
many jobs as we are planning to. . . We want to export and if suddenly 
China and Europe have very high barriers, it would be impossible. . . 
then you have to build the cars there. And then all cars will be more 
expensive, you have to invest more tooling and have every model in 
every country. That's against all the logic of modern economies that 
trade with each other.''

    The Center for Automotive Research (CAR) calculated that the 
overall effects of these price increases could reduce sales by 2 
million units and cost more than 700,000 jobs if tariffs were applied 
to all trading partners.
    Retaliation by our trading partners is inevitable. China recently 
hit the U.S. with retaliatory tariffs on autos and other products in 
direct response to our tariff actions. \20\ Last year, the U.S. 
exported over 267,000 new vehicles to China, totaling over $9 billion 
in value. \21\ Retaliation hurts all American automakers.
---------------------------------------------------------------------------
    \20\  https://www.wsj.com/articles/u-s-car-makers-left-in-the-dust-
as-chinas-tariff-cuts-boost-europe-japan-1533901068.
    \21\  https://www.trade.gov/td/otm/assets/auto/
New_Passenger_Exports.pdf.
---------------------------------------------------------------------------
    For instance, BMW in South Carolina builds over 400,000 vehicles 
every year, all of them from their X-series line of SUV's. They make 
almost all SUV's in Spartanburg County, South Carolina and are 
America's largest auto exporter. \22\ Of the almost 280,000 vehicles 
they export, around 85,000 go to China, which greatly lessens our trade 
deficit with the country. Mercedes-Benz manufactures vehicles in 
Alabama and South Carolina and exports around 50,000 U.S.-made vehicles 
to China. \23\ Seven of the top ten vehicle models exported to China 
from the U.S. are manufactured by BMW and Mercedes-Benz, the two 
companies holding the top three spots. \24\
---------------------------------------------------------------------------
    \22\  https://www.nytimes.com/2018/07/19/business/economy/tariffs-
south-carolina-bmw.html.
    \23\  https://www.cnbc.com/2018/04/05/chinas-trade-threat-could-
hurt-german-carmakers-more-than-us-auto-giants.html.
    \24\  https://www.usatoday.com/story/money/cars/2018/04/10/chinese-
auto-tariffs-xi-jinping/503470002/.
---------------------------------------------------------------------------
    These companies need unimpeded access to Chinese markets to 
continue to sell American-made vehicles in the world's largest car 
market. The harder we make it to access that marketplace, through 
tariffs and retaliation, the greater the potential for production to 
move outside of the United States.

    Trade and Investment Environment is Highly Uncertain, Adding to 
Industry Challenges

    There is an enormous amount of uncertainty facing manufacturers who 
build cars and trucks in the United States: steel and aluminum tariffs, 
the future of NAFTA, the prospect of Section 232 tariffs on autos and 
auto parts, and so forth.
    Uncertainty dampens investment, which crimps innovation and 
curtails jobs. The Congressional Budget Office (CBO) stated in its 
August 2018 economic report,

        `` . . . heightened uncertainty about trade policy could 
        discourage businesses from making capital investments that they 
        might otherwise have made, because changes to trade policy 
        affect price competitiveness in foreign markets as well as the 
        costs associated with global supply chains. Recent volatility 
        in equity markets might indicate that such uncertainty is 
        already taking a toll on the value of U.S. businesses.'' \25\
---------------------------------------------------------------------------
    \25\  https://www.cbo.gov/system/files?file=2018-08/54318-
EconomicOutlook-Aug2018-update.pdf pg 15.

    Auto companies are already taking notice of this uncertainty. The 
auto industry requires long lead times to plan, develop and manufacture 
vehicles. Decisions made in the face of this uncertainly cannot be 
easily undone. A stable investment climate includes clear, fair, free 
and open trading rules. As the nature of the industry forces it to plan 
production, investment, and employment years in advance, trade turmoil 
is causing some to reconsider the status of their U.S. investment, just 
as the CBO is predicting. \26\
---------------------------------------------------------------------------
    \26\  https://www.bizjournals.com/columbus/news/2018/07/13/honda-
ironic-if-tariffs-punish-foreign-automakers.html.
---------------------------------------------------------------------------
    The auto industry is now in the midst of a transformation as it 
pursues electrification and automation, and as consumers consider new 
ways of accessing personal mobility, such as ride sharing and 
subscription services.
    The United States is today the world leader in the electrification 
of vehicles and in the development of automated transportation. 
Automakers and suppliers worldwide develop, test, and sell the latest 
technologies in our market because it is so open and friendly to 
innovation. Our research and academic institutions are the standard of 
the world for their expertise in sensors, robotics, artificial 
intelligence, and more.

    Trade restrictions put that leadership at risk.

    Free trade in goods, resources, intellectual content, materials, 
and production is the key to successfully addressing those challenges. 
Electrification of the vehicle fleet will require metals and minerals. 
Automation will require sensors and chips and AI capabilities. 
Countries that arbitrarily and indiscriminately restrict trade in any 
of these areas will soon be eclipsed. Future research and development 
activities--and the expertise and production capacities that are 
developed--will happen elsewhere.

    Advanced Manufacturing in the US and American Workers

    International automaker facilities already have a problem to solve 
without imposing harmful tariffs. It's a comparatively good problem to 
have: too many jobs. Deloitte estimates that there will be 2 million 
unfilled manufacturing positions by 2025 due to retirements and 
education gaps. \27\ Many facilities face issues with finding a 
qualified workforce.
---------------------------------------------------------------------------
    \27\  https://www2.deloitte.com/us/en/pages/manufacturing/articles/
boiling-point-the-skills-gap-in-us-manufacturing.html.
---------------------------------------------------------------------------
    However, automakers are already getting ahead of some of these 
workforce issues by investing in their local communities and workforce. 
Much of this investment takes the form of educational programs, 
partnering with local high schools and colleges to train the next 
generation of manufacturers.
    VW's Mechatronics Akademie, in tandem with the local government, is 
training future employees for its factory in Chattanooga, and recently 
saw its first 24 graduates of the program. This is just one of four 
educational programs VW is involved with, including a five-week 
pipeline program offered free to qualified candidates, and a $1 million 
donation to the State of Tennessee for manufacturing educational 
materials.
    Honda of Ohio, which has five facilities in the state, operates a 
workforce development initiative named EPIC. This program focuses on 
introducing manufacturing technology to people earlier in life and 
includes Summer STEM camps, a work-study program with Columbus State 
Community College, and supporting the Marysville Early College STEM 
High School, among other initiatives. This is in addition to 
scholarships for students pursuing an associate degree in manufacturing 
or mechanical engineering technology from local college institutions. 
\28\
---------------------------------------------------------------------------
    \28\  https://ohio.honda.com/article/building-the-manufacturing-
workforce-of-the-future.
---------------------------------------------------------------------------
    In Georgia, Kia has been able to partner with the state's Quick 
Start Program to train people for the facility in West Point. Together 
they collaborated to design and develop the building, a 70,000 square 
foot state-of-the-art training facility where all of Kia's 2,700 
manufacturing employees received training, with some receiving more 
specialized training in robotics, welding, and electronics labs. \29\ 
Thanks to this program, Kia was able to achieve 70 percent production 
efficiency at launch, well above industry standards. As Kia has 
continued to mature and grow, the company has renewed contracts to 
continue the beneficial partnership with Quick Start. \30\
---------------------------------------------------------------------------
    \29\  https://www.industryweek.com/quick-start.
    \30\  http://www.georgia.org/wp-content/uploads/2014/08/
KIA_Case_Study_Final.pdf.
---------------------------------------------------------------------------
    Hyundai Motor Manufacturing Alabama (HMMA) in Montgomery partners 
with Trenholm State Community College to run a 6-month maintenance 
apprenticeship program for HMMA team members that includes both 
classroom and hands-on training. The Hyundai manufacturing plant also 
offers internship programs for undergraduate students who attend 
designated universities in a variety of disciplines, including 
accounting, human resources, legal, production control and engineering.
    Many of these programs allow people to graduate from a vocational 
or associates program for little to no cost. People with associates/
vocational degrees tended to earn $10,000 more annually than people 
with high school degrees. This is quite the investment to make in one's 
self, unless that person happens to work at Subaru in Lafayette, 
Indiana. Subaru has one of the most direct forms of workforce education 
we see, a branch campus of Purdue Polytechnic Institute, located 
directly on the facility grounds. Subaru pays for its associates to 
earn degrees at Purdue or the local community college, Ivy Tech. 
Considering the high-tech nature of the auto making industry, these 
programs spend a great deal of time equipping people with the skills 
they need to be productive employees. These programs that are run and 
funded by these automakers are not just training a workforce, they are 
setting people up for lucrative and fulfilling careers in the 
manufacturing industry.

    Conclusion

    When America does trade the right way, eliminating trade barriers 
and expanding access to more markets, we create jobs, promote 
innovation, and build the foundation for sustainable prosperity. When 
America does trade the wrong way, with unnecessary and unwanted 
restrictions and intervention, we raise costs and prices, depress 
demand, limit consumer choice, discourage new investment, and thereby 
threaten jobs and opportunity. Our own experience should teach us the 
course we should take.
                                 ______
                                 
                  [summary statement of john bozzella]
          The U.S. Auto Industry today comprises fourteen 
        companies that build cars and trucks in the United States, with 
        a fifteenth scheduled to begin production in 2021. This 
        investment supports a value chain of U.S. businesses across the 
        country providing components, sales, service, logistics and 
        support employing 7 million Americans. Many of these workers 
        could be harmed by potential tariffs on auto and auto parts 
        imports.

          U.S. tariffs placed on imports are taxes paid by 
        Americans. If punitive tariffs of 20-25 percent are imposed on 
        auto-and auto-parts imports, as the U.S. Department of Commerce 
        is now considering, new vehicle prices will increase by as much 
        as $7,000. \1\ Every vehicle sold in America would see price 
        increases because a global supply chain supports high-value 
        auto manufacturing in the U.S. This will reduce demand for new 
        cars, creating excess manufacturing capacity across the 
        country. Used car prices would also rise as new cars become 
        less affordable. The cost of servicing and maintaining vehicles 
        would increase as imported parts are taxed. U.S. trading 
        partners would retaliate with tariffs on our exports. As a 
        result, 624,000 Americans could lose their jobs. \2\
---------------------------------------------------------------------------
    \1\  https://piie.com/system/files/documents/pb18-16.pdf.
    \2\  https://piie.com/blogs/trade-investment-policy-watch/trumps-
proposed-auto-tariffs-would-throw-us-automakers-and.

          Current trade policy has fostered a healthy and 
        competitive auto industry in the United States and created 
---------------------------------------------------------------------------
        robust markets for U.S.-built vehicles all around the world.

          This success at home and abroad has led to an 
        unprecedented era of innovation in the auto industry. 
        International automakers have invested significantly in R&D, 
        employing hundreds of highly skilled engineers at 65 facilities 
        in 16 states.

          Innovation has reshaped the workforce as well. 
        Today's auto production jobs are high-tech, highly paid, 
        career-building opportunities for which there is a shortage of 
        talent. Therefore, auto manufacturers have invested heavily in 
        workforce development initiatives such as apprenticeship 
        programs, and partnerships with local high schools, colleges, 
        and universities to train the next generation of manufacturers.

          When America does trade the right way, it creates 
        more investment and more opportunities for American workers. 
        The success of international automakers over the last several 
        decades should inform policymakers as they reexamine trade 
        policy and consider restrictive measures such as tariffs.
                                 ______
                                 
    The Chairman. Well, thank you, Mr. Bozzella, and to each of 
you, we'll now begin a 5-minute round of questions, and I will 
start.
    Mr. Bozzella, I mentioned in my opening statement that 
according to Benchmark Steel, the tariffs have caused an 
increase in the price of steel in the United States by about 40 
percent since January 1. Nissan tells me that 70 percent of the 
weight of the vehicles it makes in Tennessee and Mississippi 
are steel. Now, you don't have to be a math professor to figure 
out what that would do to price.
    Are we beginning yet to see the effect on the price of 
automobiles sold in the United States of the steel tariffs?
    Mr. Bozzella. Yes, we are. You're exactly right, Mr. 
Chairman. And, in fact, most of the steel that the U.S. auto 
industry uses in the United States is produced here in the 
United States, and it's the price of U.S. produced steel that 
is going up. So, for example, not only Nissan, but there's a 
company in Indiana that gets 90 percent of its steel from an 
Indiana mill. The price of that steel has gone up 30 percent.
    The Chairman. The reason the price is up is because the 
price of imported steel went up and so----
    Mr. Bozzella. That's right.
    The Chairman.----The domestic manufacturer meets the price.
    Mr. Bozzella. That's correct.
    The Chairman. Our steel imports from China this past year, 
according to my figures, is about 2 percent. Is this beginning 
to have an effect on these increased prices? If I go to buy a 
Rogue or some car, is the price higher today? Or if it's not, 
when will it be higher?
    Mr. Bozzella. Well, there's no question production costs 
are already higher from the steel and aluminum tariffs as well 
as from foreign retaliation, for example, between the United 
States and China. When it actually has an impact on prices is 
really going to be dependent on the competitiveness of a 
particular vehicle segment and how an individual company 
decides to act. A company could, frankly, just take less profit 
or take a loss on the vehicle, or they could pass on the price. 
I think we will see a price increase.
    The Chairman. Well, that would be a pretty big loss, 
wouldn't it? I mean, if steel prices are up 40 percent, and the 
weight of steel in a vehicle 70 percent, that's several 
thousand dollars of vehicle.
    Mr. Bozzella. Yes, I think that's right, and if you look at 
the analysis that has been done with regard to the auto tariffs 
and auto parts tariffs, a 25 percent tariff on a vehicle or on 
a part would result in a price increase of between $2,000 and 
$7,000 of vehicle. There is no question that these price 
increases would be significant.
    The Chairman. Mr. Moore, let's talk about a zero tariff 
goal. The way I look at the North American Free Trade 
Agreement, it's essentially a zero tariff agreement with some 
important exceptions. Isn't that right? I mean, between 1994 
and 2008, we got rid of most of the tariffs between Mexico, 
Canada, and the United States.
    Mr. Moore. That's right, Mr. Chairman, and, in fact, I'm 
old enough to have been here when that happened. I think it was 
1994, '93-'94. It was a genuine bipartisan achievement. We had 
bipartisan laws that passed back then. It was a Democratic 
president, Bill Clinton, who signed that into law. Most of the 
Republicans----
    The Chairman. Well, let me--without interrupting----
    Mr. Moore. Yes, sir.
    The Chairman. I want to stay within my time. So it took a 
while to get to a zero tariff. I mean, it was 1994. I think it 
was nearly 2008 before most of the tariffs were removed. So 
let's talk about how we do that with other countries, for 
example, with the European Union.
    Now, I know that agriculture and non-tariff barriers are 
also big issues that we have to deal with. But would it be 
possible to head toward zero tariffs by having a step toward 
equal tariffs on cars between the European Union and the United 
States? For example, today, I believe the EU has a 10 percent 
tariff on cars imported from the U.S., but we only have a 2.5 
percent tariff on cars imported from the European Union. On the 
other hand, we have a 25 percent tariff on light trucks.
    What if we each took a step toward lower tariffs in an 
equal way? Would that be a reasonable way to start toward a 
zero tariff policy on automobiles between our country and the 
European Union?
    Mr. Moore. Yes, it absolutely would, Senator, and you're 
exactly right that most countries--you said this in your 
opening statement, that most countries actually do impose 
higher tariffs than we do, and this is something that Donald 
Trump complains about, and he's right. We have a lot of these 
trade agreements with countries, and yet when you look at the 
actual facts, they do impose higher tariffs. And let's not 
forget the non-tariff trade barriers, which a lot of countries 
like Japan and China--that can be a bigger problem as such.
    One of the pitches that we used to make to President Trump 
and still do is, look, if we can lower those tariffs on 
everything, relatively, the United States benefits from that. 
The United States worker benefits. The United States companies, 
whether they're in Tennessee or Washington state--because, we 
have to lower our tariffs more than these other countries do. 
Now, there are some cases, as you said, with respect to light 
trucks, where we may have to reduce our tariffs more than these 
other countries. But on balance, it's a good deal for the 
United States.
    The Chairman. Thank you, Mr. Moore.
    Senator Murray.
    Senator Murray. Thank you all very much for your testimony.
    Ms. Lee, let me start with you. You said it, and we all 
said it--President Trump has taken a reckless and haphazard 
approach to trade policy. It's really led to a lot of confusion 
and frustrated some of our key allies and has really not 
changed the behavior of our trading partners for the better. 
Even some of our staunch worker advocates that support doing 
more to achieve fair trade for U.S. workers, like the United 
Steel Workers and the AFL-CIO, have expressed concerns about 
the President's actions.
    The AFL-CIO Executive Council recently said, and I quote, 
``We have serious concerns regarding the administration's 
seemingly haphazard approach to the implementation and design 
of the enforcement efforts and the backlash it has generated. 
Tariffs are most likely to be effective when they are 
appropriately targeted to specific trade practices, part of a 
well-developed strategic plan, and employed in coordination 
with allies, such as Canada, rather than aimed at them,'' end 
quote.
    Can you talk to us about how President Trump's approach has 
been ineffective and even harmful and explain what a more 
targeted, strategic, and worker-focused trade policy would 
actually look like?
    Ms. Lee. Thank you, Senator Murray. I think the Trump 
policies, because they've been so irregular and erratically 
announced and unexpected and sometimes driven by a news 
announcement or a tweet or something--I think they've created 
the maximum uncertainty, and that isn't ideal, because if you 
want people to change their behavior, you want businesses and 
governments to change their behavior, you want them to know 
what they need to do and when they need to expect it. I think 
that that's something we can focus on.
    These policies need to be better targeted, identify the 
problem actors, the problem sectors, and the problem behaviors. 
That has not clearly been done, and they've been applied too 
broadly. If we've identified the unfair trade relationship with 
China and the very imbalanced trade relationship with China as 
one of our key economic problems--and I would agree that is our 
key economic problem--it would make much more sense to bring 
some of our allies in a coordinated way to take concerted 
action so that we could be more effective.
    If Europe and Canada, for example, were working with the 
United States to address unfair practices or global excess 
capacity in steel in China, which is clearly a problem, then I 
think we'd be much more likely to be effective. The other thing 
is that these tariffs should be short-term with clear goals, 
and that is, I think, the other way that you can achieve the 
maximum with the minimum amount of pain as opposed to the 
opposite way.
    I would say in terms of issues that there are two issues 
that I think are most important. I said currency misalignment 
earlier. You can do a lot of work to reduce tariffs, but if you 
haven't taken any action to address currency misalignment, all 
your good work in reducing tariffs and disciplining subsidies 
can be undermined by currency movements. I think that's some of 
the experience that the United States has had over the last 25 
years with Mexico, with China, where we go to a lot of trouble 
to negotiate these deals, but we don't address currency, and 
the tariff reductions become ineffective.
    The other piece is workers' rights, which you mentioned, 
Senator Murray, and I think that that's part of a longer-term 
picture of the kind of global economy we want to live in, where 
workers can exercise their basic rights, and American workers 
are not put at a competitive disadvantage by having to compete 
with workers who lack basic human rights at the workplace.
    Senator Murray. Thank you. You know, the U.S. economy is 
becoming increasingly global. With the expansion of trade and 
the selling of more of our goods overseas, we are seeing new 
opportunities. We're also seeing new challenges. And I know 
Members of Congress have differing views on what a fair trade 
agenda should look like, but I think we can all agree that 
trade should not negatively impact working families here in our 
country.
    Talk to us a little bit about the essential components that 
Congress should ensure are included in an international system 
so that we don't inadvertently create an economic situation 
that leads to depressed wages or working conditions or 
bargaining power for our workers.
    Ms. Lee. Thank you, Senator. I think that's an excellent 
question, and it's part of how the U.S. sees its role in the 
global economy. It's a mistake, I think, for the U.S. to try to 
be--to win a low-road contest of getting the cheapest labor, 
the lowest taxes, and the most lax regulation. That's not even 
a good strategy for a developing country, but certainly not a 
wealthy industrialized country from the United States.
    Our success will come from investing in our workers, our 
infrastructure, and in making sure that we're using technology 
to benefit workers and communities, not just profit. So we need 
to have both adjustment programs in place, re-training, 
skilling, but we also need to invest in our own infrastructure 
and our own skills, and we have failed to do that over the last 
couple of decades.
    Senator Murray. Thank you.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    Senator Isakson.
    Senator Isakson. Thank you, Mr. Chairman. I've tried to 
listen closely.
    Mr. Moore, I've enjoyed meeting with you many times. Would 
you tell me what you think the policy of the United States is 
today regarding trade?
    Mr. Moore. Well, we've been kind of the leader in the free 
trade movement that Bryan Riley was just talking about for 30 
years, and this has been something that almost all economists 
agree on, that a great period of prosperity all around the 
world that began in the early 1980's through around 2007, a 25-
year period, moved literally a billion people out of abject 
poverty. So it's probably one of the great anti-poverty 
programs of all time--is free trade.
    Trump has challenged the kind of orthodoxy that we've lived 
by here in the United States for the last 25 years, in some 
ways, I think, in a productive way, and in some ways in a 
nonproductive way. Trump believes that all these other 
countries are not playing by the rules, and in some ways, he's 
right about that, as I was telling the Chairman. As you look at 
the data, there's a very good analysis of this--by the way, I 
would recommend to all of you--in the President's Council of 
Economic Advisers Report on Trade that shows a lot of these 
countries just aren't playing by the rules, and the question is 
how do you get them to play by the rules.
    I'll just summarize this by saying in the last 25 years, 
we've used the carrot of free trade agreements to try to reduce 
tariffs, and that, on balance, I would say has been a positive 
thing. Trump is using this kind of club of threatened tariffs 
to try to get countries to behave and play by the rules, and we 
will see. I mean, the jury is still out as to whether that will 
work.
    I was saying in my statement that I think, so far, we're 
making some progress here. I think we've made some progress in 
Mexico. I think we've made some progress with the Europeans. 
And the big fight to come--I mean, this is the big fight of our 
time--will be whether or not Donald Trump can get China to 
start playing by the rules. They cheat, they steal. They steal 
$300 billion a year of our technology, our intellectual 
property.
    Senator, you're from Washington State, where you have an 
incredible technology industry. A lot of that stuff that is 
being produced by our great minds and talents is being stolen 
by the Chinese. So we need to get China to behave, and he's 
going to use these threatened tariffs to try to make that a 
reality.
    Senator Isakson. Not to cut you off, but to try and make it 
a shorter answer----
    Mr. Moore. Sorry.
    Senator Isakson. I want you to respond to this kind of 
census I'm going to do. We've gone from having a clear and 
understandable trade policy to not having a clear and 
understandable trade policy. Is that fair to say? The U.S. 
trade policy used to be predictable and now is not?
    Mr. Moore. I think we are in a--I think that's absolutely 
right. I think we're in a period where people are still trying 
to figure out what the trade policy is in this administration, 
and I think Trump has to be clearer about what the goals are. 
But I know this, that he believes that workers in some of these 
states, like Michigan and Ohio and Pennsylvania and Iowa, those 
Midwestern states--I'm a Midwesterner--have been hurt by some 
of these trade policies.
    Now, I don't always agree with them, but you talk to 
workers in those states--I guarantee you, I was on the campaign 
trail--a lot of those workers in those states believe their 
factories are not there because of China or because of Mexico 
or other countries, and we'd better figure out, and this is 
sort of your job, as the policymakers, to figure out how we 
have a trade policy where all Americans benefit.
    Senator Isakson. Well, let me say this. I have been openly 
in opposition to the trade policy since the President announced 
it. I got concerned when they dropped TPP. That really knocked 
me for a loop. I was a big supporter of TPP. And then when you 
start talking about NAFTA, I'm from a 21 percent agricultural 
state, Georgia, and that's a big-time problem for us. The 
agricultural states are the ones that are really getting killed 
in competitive trade or tariff between countries.
    It concerns me that we don't have a known commodity in 
terms of what is our trade policy. Two, we have an environment 
that is, at best, uncertain. And, three, it is beginning to 
show its evidence in the marketplace.
    I am going to be quick, Mr. Chairman, but I want to make 
this point. I was with a friend of mine on Labor Day two days 
ago, and the family was going to buy a boat for next year. They 
bought a new lake house, and they were talking about the boat 
they were going to buy, and they found it last weekend and came 
back this weekend to the lake to make the deal.
    They went to the dealership, and the boat was $500 more 
than it was the week before. It's not a big boat, but $500 is 
$500. And the guy told me--he said, ``I asked the boat dealer 
why the price had gone up, and he said, `Well, actually, the 
boat is on sale versus what it was two weeks ago. The problem 
is our cost has gone up so much that we're having to raise the 
price that much more because of the tariff situation in 
Washington.' '' This is the aluminum and steel component on 
boats and yachts and things like that.
    But my point is we are beginning to see the effects of a 
trade policy that is, at best, not clear and unsettling and 
uncertain, vis-a-vis, what American has been. I think that's a 
mistake for us, and I think the quicker we get to a place where 
a panel like the five of you, before anybody, can say, ``Well, 
U.S. trade policy today is X and it ought to be Y,'' then we'd 
be in a lot better shape than everybody speculating on what it 
really is or what it really should be.
    I just wanted to make that point, and I think it's 
beginning to have an effect, Mr. Chairman.
    The Chairman. Thank you, Senator Isakson.
    Senator Bennet.
    Senator Bennet. Thank you. Thank you to all of you for 
being here, and thank you, Mr. Chairman, for holding this 
hearing.
    Ms. Lee, you had mentioned in an answer to Senator Murray 
something that I think is the real problem, which is China. I 
wondered whether you could talk a little bit about--if we were 
serious about dealing with this--how we would deal with it and 
how we would use our allies strategically--you referenced that 
as well--if we were trying to counteract the problem that we 
really face.
    Ms. Lee. Thank you so much, Senator Bennet. I do think if 
you look at the China trade relationship, it's a $375 billion 
deficit, and I do believe that the snapshot of a trade 
relationship between two countries gives you a lot of 
information. It's not the only thing you need to look at, but, 
in this case, it shows you that there's a tremendous imbalance 
there.
    Particularly, if you look at the composition of our trade 
imbalance with China, you see that $100 billion of that is in 
advanced technology products. Those are areas where the United 
States, as a wealthy industrialized country, should have a 
comparative advantage, and we have a comparative advantage with 
other countries, but not with China because of a combination of 
the kinds of unfair trade practices that the Chinese government 
has engaged in. So I think we need to be very targeted.
    But I would say, as I said before, I think currency 
misalignment is one of the key issues with respect to China, 
and workers' rights. When I was at the AFL-CIO, we brought two 
Section 301 cases against China on currency manipulation and 
violation of workers' rights, and we alleged that in both of 
those cases, those unfair trade practices were costing American 
workers and businesses hundreds of millions of dollars in terms 
of lost profits and good jobs.
    I think those two issues are crucially important in terms 
of that imbalanced trade relationship, and that's where I'd 
like to see the energy of the U.S. Government go.
    Senator Bennet. What could our allies do to help with that?
    Ms. Lee. Well, I think in both of those areas, places like 
Europe and Canada have also been subject to some of the same 
unfair trade practices and some of the pressures around 
currency misalignment and workers' rights, and they ought to be 
our allies on that. So if we were to go in with a coordinated 
strategy and to put in place similar protections, we would have 
a stronger case, both if it came to the--we were challenged at 
the World Trade Organization, but also the impact on China. 
China would not be able to play us off against each other or 
to, give business to Europe or Canada to punish the U.S. for 
raising those issues. We would have a united front, and I think 
that would be much more effective than the approach that's 
being currently taken.
    Senator Bennet. You mentioned the World Trade Organization. 
You know, one of the--Mr. Moore had said earlier that free 
trade had been one of the great anti-poverty programs because 
people in other countries had been lifted out of poverty. 
That's no doubt true.
    Part of the challenge that we face in the United States is 
that wages for the bottom 90 percent of Americans have been 
flat for 50 years in America, and a lot of that has to do with 
letting China into the WTO, and then what? Not enforcing the 
rules of the WTO, not having the right rules? Can you talk a 
little bit about that, what our rational expectation should be? 
Because those flat wages are really decimating the hopes and 
dreams of really the vast majority of Americans at this point.
    Ms. Lee. Thank you, Senator. That is exactly right, and the 
stagnation of wages for the vast majority of American workers 
over the last several decades should be, I think, the key 
policy concern of all lawmakers in the United States, both 
Republican and Democratic.
    Globalization, the wrong kind of globalization, and the 
kind of trade policy we've had with China, in particular, has 
been an important factor, not the only factor, but an important 
factor in undermining the bargaining power of American workers, 
because when American workers go to organize a union or to ask 
for a raise or to ask for health benefits or a bathroom break 
or safety goggles, often they're told, ``We don't need to give 
you that because we can go to China,'' and workers there do not 
have basic rights to demand those kinds of protections. They 
don't have basic democracy, either, in China. So that 
imbalance, I think, is at the core of what's wrong.
    Also, the perceived unfairness of U.S. trade policy. 
American workers know that they are productive and that they 
can compete on equal terms with workers in the rest of the 
world. But they can't compete with workers who get thrown in 
jail for trying to organize a union or for asking for a raise.
    Senator Bennet. Thank you, Ms. Lee.
    I would say, Mr. Chairman, with my last 15 seconds, from 
Colorado's perspective, just from my state's perspective, the 
last thing we would do would be to punish our closest trading 
partners, Canada and Mexico. Certainly, from the perspective of 
the agricultural community in Colorado, it makes absolutely no 
sense when the problem is China.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Bennet.
    Senator Scott.
    Senator Scott. Thank you, Mr. Chairman, and thank you to 
the panel for being here with us this morning.
    When I think about the hearing this morning, about the 
impact of zero tariffs on U.S. autoworkers, I think of my home 
state of South Carolina. Perhaps unbeknownst to many, South 
Carolina is the No. 1 state in the export sales of both tires 
and completed vehicles, passenger vehicles. Sixty-six thousand 
people work in the automotive industry in South Carolina. 
Twenty thousand two hundred and twenty new jobs have been 
created in just the last six or seven years.
    The question as it relates to tariffs and its impact on 
U.S. autoworkers is a question that is very important to South 
Carolina. I think the answer, really, is pretty clear as well, 
which is whether you're the Continental Tire employee in Sumter 
or the Engine Systems employee in Fountain Inn, the answer is 
not much.
    It actually may be beneficial for those autoworkers in 
South Carolina, because of the fact that so many of the best-
selling vehicles sold in America--maybe they're Japanese 
vehicles, Toyota or Nissan, or maybe they're European vehicles, 
but their production happens in the country.
    The question, I think, is simple--doesn't have a negative 
impact, perhaps it has a positive impact.
    The question I have, really, is the impact of using tariffs 
as a negotiating tool--what is the long-term impact on 
businesses? Having been a small business owner, when you tell 
me that there are headwinds in one direction, I typically head 
in the other direction. My concern is that, as my BMW folks in 
the upstate and the new Volvo plant in the Low Country, when we 
talk about tariffs, are we changing business systems today, 
whether or not those tariffs actually come to fruition?
    Anyone on the panel.
    Mr. Bozzella. If I may, Senator, I would say absolutely 
yes, and I think Ms. Lee made a very, very good point that, at 
the very least, we've created--and I think all of the panelists 
have--we've created a degree of uncertainty that is clearly 
affecting business decisions. There's no doubt about that.
    I think if you take the examples of BMW in Spartanburg, 
Tennessee----
    Senator Scott. South Carolina.
    Mr. Bozzella. Excuse me, Spartanburg, South Carolina. I 
apologize. I got the city right, and I'm looking right at 
Senator Scott. My apologies.
    Senator Scott. People get us confused all the time.
    [Laughter.]
    Mr. Bozzella. In Spartanburg, BMW is a major exporter.
    Senator Scott. Yes.
    Mr. Bozzella. They export over 80,000 vehicles to China. 
China is the second largest source of U.S. built vehicles in 
the world. We export a whole assembly plant of annual 
production to China. Those vehicles now have a 40 percent 
tariff on them. So, yes, there are critically important issues 
that need to be resolved between the U.S. and China. The 
trading relationship isn't right and needs to be rebalanced. 
But the impact of this retaliation is very real. There's no 
question about that. That will affect business decisions. It is 
increasing the cost of production. In Spartanburg, South 
Carolina, that's a problem.
    Ms. Lee. If I may?
    Senator Scott. If you could just have a short answer, 
because, unfortunately, I have a minute and 20 seconds.
    Ms. Lee. Short answer. I would say both business and labor 
would agree that it can be useful to use tariffs strategically 
if you achieve your goal, if you change the behavior, if you 
end the unfair trade practices. So that can be useful. But if 
you're doing it with no clear goal in sight--and I think that 
the current tariffs are a little bit ill defined--then it's 
more problematic.
    Senator Scott. Thank you, ma'am.
    To that, I think, Mr. Moore, perhaps you are the person to 
answer the question. I think the President's objective has been 
to change behavior through the threat of tariffs. It is 
certainly an unorthodox approach. It seems to have worked, 
especially with economies like South Korea. The chorus 
agreement, I think, is a better agreement.
    Mexico--I think we are in a better position going into 
NAFTA than we would have been without the unorthodox approach. 
Do you want to comment on the unorthodox approach? And then 
we'll have about 10 seconds left to make a point.
    Mr. Moore. Look, unorthodox is probably a good word to 
describe this trade strategy. I used this metaphor before. I'll 
use it again. We're in the fourth inning of this baseball game. 
I think in the end, Trump is going to prevail. I think he's 
going to get real concessions from especially nations like 
China. But as the Senator said, this is a high-risk strategy, 
but we can't live with the current--especially when it comes to 
China, I think almost all Americans agree we can't live with 
the status quo any longer.
    One other quick point. Your point is so good about--what is 
an American car today? I mean, right?
    Senator Scott. Excellent question.
    Mr. Moore. You know, you have BMWs that are more American, 
made with American labor, and Fords that are not made with 
American labor. So even this whole idea of what an American 
automobile is today--we're not living in the 1970's or 1980's 
any longer.
    Senator Scott. Let me just, if I may, Mr. Chairman, end 
with this thought on the future of the American autoworker and 
the importance of what companies are doing to train and provide 
opportunities for folks who too often have been carved out of 
the workforce. BMW and their Scholars Program has provided an 
apprenticeship approach that has had a positive impact on folks 
who have been carved out of the workforce from an opportunity 
standpoint for far too long, and one of the goals we should 
have is to see more companies invest in workers and, frankly, 
future workers in a fashion that we're seeing at home in South 
Carolina.
    Thank you for the extra time.
    The Chairman. Thank you, Senator Scott, and I'll give 
Senator Warren a little extra time to make up for it.
    Senator Warren.
    Senator Warren. Thank you very much. Thank you, Mr. 
Chairman, and thank you all for being here.
    You know, for decades now, American trade agreements have 
hurt American workers. These trade deals have been written 
behind closed doors with corporate lobbyists whispering in the 
ears of our negotiators, and what has that meant for workers? 
It's meant flat wages and hundreds of thousands of jobs that 
are sent overseas. Meanwhile, we have undermined important 
environmental protections, we've let drug costs soar through 
the roof, and we've hung small businesses out to dry. So we 
need a new approach to trade, an approach that puts American 
workers and American interests first.
    Let me start with you, Ms. Lee. You're an international 
trade economist who's been following the changes in our economy 
for a while now. Do you think that tariffs can play a role in 
making sure that our trade policy supports American interests?
    Ms. Lee. I think tariffs can absolutely play a role. That's 
why we have an international trading system. That's why we lay 
out the rules to address unfair trade practices, global excess 
capacity, violations of workers' rights. So we need to be able 
to use tools in our toolbox, and tariffs are a key one.
    Senator Warren. Thank you. Tariffs are an important tool 
that we should be willing to use to make sure that American 
workers and American businesses can compete fairly with their 
counterparts in other countries. But tariffs alone won't solve 
the problem. They have to be part of a bigger strategy, a 
strategy for protecting American workers.
    Ms. Lee, what do you think a real pro-worker agenda would 
look like? What should the government be doing to raise wages 
and give people some economic security?
    Ms. Lee. I think that's an excellent question, Senator 
Warren. We need to rebuild the bargaining power of American 
workers. That's what I would say is the key economic problem in 
the U.S. economy today. You could do that by strengthening 
unions, by raising the minimum wage, but also by making sure 
that our trade policy is geared toward good jobs at home and 
not toward the profits of multinational corporations, which I 
would say if you look at the content of the trade agreements 
we've put in place over the last couple of decades, they have 
been more focused on corporate mobility and flexibility and 
power and profits than on good jobs in our communities and 
making sure that workers have that fair playing field.
    But, also, all the kinds of social safety net things that 
have been undermined and underfunded recently--family medical 
leave, retirement security, job safety--those are the kinds of 
things that American workers need. They need fair scheduling. 
They need decent wages. They need leverage and bargaining power 
at the workplace. I think that is actually what makes a healthy 
and vibrant U.S. economy that can compete in the global economy 
on fair terms.
    Senator Warren. Okay. So you've identified strengthening 
unions, raise the minimum wage, family medical leave, 
protection for retirement, schedules that work. Have President 
Trump and the Republican Congress taken any of these steps?
    Ms. Lee. They have not.
    Senator Warren. All right. Let's talk about what they've 
done instead. They delayed and weakened protections against 
workers' exposure to carcinogenic materials like silica and 
beryllium. Is that part of a pro-worker agenda?
    Ms. Lee. It is not.
    Senator Warren. They've opened the door for taxpayer 
dollars to flow to Federal contractors that have stolen wages 
or injured or killed their workers. Does that help working 
families?
    Ms. Lee. That does not help working families.
    Senator Warren. They've rolled back collective bargaining 
rights by putting corporate attorneys who've spent their 
careers trying to stop workers from organizing in important 
agencies like the NLRB. Does that help create good jobs?
    Ms. Lee. That is the opposite of what's needed to create 
good jobs.
    Senator Warren. Thank you. You know, we absolutely need to 
fix our trade policy so that it puts the interests of American 
workers first, not the interests of giant multinational 
companies. But that is not enough. We should be standing up for 
American workers and their families in every area, their wages, 
their right to organize, workplace safety, retirement security, 
access to affordable healthcare. That's what workers in 
Massachusetts and around the country desire, and it's what all 
of us here in Washington should be focused on.
    Ms. Lee. Thank you, Senator.
    Senator Warren. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    Senator Young.
    Senator Young. Thank you, Mr. Chairman. I'm grateful we're 
holding this hearing.
    As I think about the auto industry, I think about, of 
course, those autoworkers I represent, the communities that our 
auto industry helps keep vibrant, places like Princeton, 
Indiana; Greensburg, Indiana; Lafayette, Indiana, where Toyota 
and Honda and Subaru have made major investments over the 
years, and so many Hoosier families benefit from that economic 
impact, which in the State of Indiana is nearly $7 billion. On 
the employment side, we have approximately 123,000 Hoosiers who 
are supported by the international auto industry, and that's 
the equivalent to over $7.3 billion of total employee 
compensation. So this matters to the State of Indiana, and I 
know so many other states in our Nation, more broadly.
    With that said, I'm really concerned about the 
administration's strategy, to the extent we understand it, as 
it pertains to trade. I've been vocalizing this for months and 
months and months. We've heard from, I think, every United 
States Senator here today that they're concerned about the 
uncertainty. Every panelist here does not know what our trade 
policy is.
    I think there's one means by which we could insist on 
clarity, not just from this administration, but future 
administrations as well. That is by requiring each 
administration to develop a comprehensive, whole-of-government 
economic security strategy.
    We have a national security strategy that deals with highly 
classified information, highly consequential issues, and they 
work across different departments of government. The National 
Security Advisor elicits information from the State Department, 
Department of Defense, Treasury, and beyond, and they put 
together an unclassified document with a classified annex.
    We ought to be doing the same sort of thing, to my mind, 
with respect to our economic strategy. It could deal with such 
things as Ms. Lee has pointed out, like currency manipulation, 
although I think that's the most difficult of all of them, 
candidly, to deal with. It can deal with things like tariffs, 
intellectual property theft, joint forced technology transfer, 
state-owned enterprises and the dumping of their manufactured 
goods into places like Indiana, where you're effectively 
imposing 100 percent tax rate on those workers who lose their 
jobs on account of dumped commodities and products.
    Why don't we have a written national economic security 
strategy? Would anyone like to speak to this issue?
    Mr. Moore. Well, let me just quickly address that. Look, 
we've got--I think we have a national economic strategy under 
this President. We have the strongest economy in 25 years. The 
growth rate in economy was 4 percent in the first quarter of--
--
    Senator Young. Let me interject respectfully. So you're 
rattling off a number of successes, but with respect to this 
issue, an economic security strategy, and we deal with 
predatory economic practices, you said earlier, Mr. Moore, we 
need to get more clarity from the administration. We can get 
more clarity through a written document that allows Members of 
Congress to critique that document, to embrace portions of it, 
just as we do with the national security strategy, and it will 
serve a signaling purpose to our allies, partners, and 
adversaries alike.
    What say you, sir?
    Mr. Moore. Well, my point was maybe it started--even 
Senators on both sides of the aisle--it's about time we maybe 
start giving Donald Trump the benefit of the doubt here. I 
mean, the improvement in the economy over the last 20 months 
has--and I'm a big advocate of what----
    Senator Young. We should trust him on trade policy without 
clarity on the plan.
    Mr. Moore. On trade policy, look, I've made my--you quoted 
me correctly. I do think that there are problems with this 
strategy. I think it lacks a coherence. We'll see--I mean, six 
months from now, let's see where we're at. I'm an optimist. I 
do think we're going to see some greatly improved trade deals 
over the next six months. I may be wrong, but I think if that 
happens, the economic benefits to workers and American 
companies will be profound.
    Senator Young. I am most hopeful, and I'm cheering for this 
president. I actually credit this president for elevating these 
predatory practices to the highest level in China and, to a 
lesser extent, India, Brazil. These countries are the biggest, 
I think, violators of international trading norms and laws, and 
my sense is it's not my job to develop a strategy, per se, but 
I think if we did what some of the other panelists indicated, 
which is partner with the largest other economies of the world 
and apply our collected leverage, vis-a-vis, the worst actors, 
we could have even greater success.
    I acknowledge that we are seeing some signs of brittleness 
within the Chinese economy and others, and I, too, share your 
hope, Mr. Moore.
    Thank you all for being here.
    The Chairman. Thank you, Senator Young.
    Senator Casey.
    Senator Casey. Thank you, Mr. Chairman, and I want to thank 
the panel for being here and for your testimony.
    I'm going to direct my questions to Ms. Lee for one 
purpose, and that's to focus for a couple of minutes on China. 
I was particularly impressed by the statement that you gave. I 
wasn't here when you presented it, but the written statement 
I've taken a look at.
    When I consider--and I don't think this is just true for 
Pennsylvania, but I think it's true for the Nation. When China 
cheats, we lose lots of jobs in Pennsylvania, and when you 
consider who's the serial violator out there, it's China in 
every instance, it seems. I think the U.S. needs both a 
sustained and coordinated strategy to address these threats, 
but we've got to work with our allies to execute it.
    I guess the real focus of not just my questions, but your 
statement was the impact of China's trade practices and the 
kind of unfair practices both our companies have faced and have 
been fighting against, and our workers. I think the worker part 
doesn't get nearly enough attention. It did in your statement, 
but maybe not in the course of our discussions.
    Whether it's currency manipulation or illegal subsidies or 
intellectual property theft or actions by state-owned 
enterprises, all of them in one way or another and sometimes 
substantially--they all harm American workers.
    There's a recent study focusing on the impact of China on 
American workers by MIT economist David Autor and his co-
authors. They found that almost 40 percent of the decline in 
U.S. manufacturing just between the years 2000 and 2007, just 
that seven-year time period, was due to a surge in imports from 
China. So 40 percent attributable just in seven years only to 
China.
    I guess the first question is can you discuss the impact of 
China as it relates to both jobs and wages on U.S. workers?
    Ms. Lee. Thank you, Senator Casey, for the question. 
Because of the sheer size of China and because of the 
systematic unfair trade practices, China has an outsized impact 
on the United States, and you can measure the impact on both 
jobs, wages, and on businesses. I think that's something that 
we also don't give enough attention to, which is that American 
businesses that are trying to produce in the United States on 
American soil are put at a ridiculous disadvantage when trying 
to compete with China because of the illegal subsidies and the 
theft of property and the workers' violations, the 
environmental violations, and so on.
    I think--we've looked at several million jobs that are 
impacted by unfair trade with China, and so this absolutely 
should be a top economic priority for the President and for the 
Congress. But in order to be effective, as I said before, I 
think it needs to be done in coordination with our allies, and 
it needs to be done in a very systematic way and identify the 
right problems.
    I think the right problems are currency manipulation and 
workers' rights violations. Those are both things that have a 
systematic impact on--every single item that we import from 
China is underpriced because of currency misalignment and 
because of the fact that workers lack basic human rights in 
China. They don't have the Democratic right to go and change 
governments if they want to. They can't go to their manager and 
organize a union, an independent Democratic union, at their 
workplace if they want to, and that puts--every American 
business is at a disadvantage.
    A lot of American business--when I was at the AFL-CIO, 
people used to come and say they were afraid to complain 
because they didn't want to bring the Chinese government down 
on them. But even businesses said they were facing such unfair 
trade conditions that they could not survive, but they didn't 
have the tools to act, and that's why it needs to be done 
overall in a very concerted way by the U.S. Government.
    Senator Casey. In the remaining time I have--I know we have 
less than a minute. But it's my belief--and I think there's a 
lot of data to validate my belief--that the decline of unions 
is one of the reasons why we've had a wage decline or at least 
stagnation over time.
    Can you walk through just in a few--in the remaining time 
we have some of the causes of wage stagnation as you see it in 
your research?
    Ms. Lee. Yes. The decline of unions is a key factor where 
workers don't have the countervailing power to go in to bargain 
effectively. The decline in the minimum wage also has lowered 
the floor so that people don't have that backstop that they 
used to have. And then a series--and the fact that we have not 
had full employment in the U.S. economy consistently over the 
last couple of decades means that workers don't have the 
bargaining power, the ability to go in on a regular basis, and 
then employers have come up with a bunch of different measures 
to undermine workers' bargaining power like forced arbitration, 
non-compete agreements, and other things that workers are 
pressured into signing as a condition of employment.
    Senator Casey. I'm out of time, but thank you very much.
    Ms. Lee. Thank you, Senator.
    Senator Casey. Thanks to the panel.
    The Chairman. Thank you, Senator Casey.
    Senator Jones.
    Senator Jones. Thank you, Mr. Chairman, and thank you for 
this hearing, and I also want to thank you, Mr. Chairman, for 
the work that we've been doing together on automobile tariffs. 
It is important to your State of Tennessee. It's important to 
my State of Alabama, where 57,000 people are now involved in 
some way with the automobile industry.
    I have been--like so many expressed here--have been very 
concerned about the President's trade policy broadly. I, too, 
think it is totally incoherent and is hurting my businesses. It 
is hurting farmers.
    With all due respect, Mr. Moore, I don't think you give the 
benefit of the doubt to an incoherent policy for a while, to 
just let it ride, that you need to work--and we have an 
obligation to work to change that incoherent policy or at least 
to try to do what we can, to do that as opposed to just 
following the Disney song, wishing upon a star. I think we need 
to be continuing to speak out, as Senator Young has and others 
have done.
    My concern--because Alabama has grown so much economically 
because of the automobile industry, I've got a specific concern 
about that. I've got a concern about farmers who are being 
affected, and with regard to that, especially, it hits the 
farmers most obvious, because the farmers are going to lose 
markets with this trade policy. If we wait 6 months and hope 
for the best, we may get a good trade policy, but we may have 
also lost markets, and it hurt us in the long run.
    Mr. Bozzella, I'd like to ask you--it's not quite as 
obvious to me about the markets for automobiles. We ship a lot 
of automobiles to China. We ship--Alabama, I think, is the 
third largest exporter of automobiles. But with supply chains 
and suppliers, do these tariffs also have the ability to affect 
markets for those automobiles that are produced in America 
overseas?
    Mr. Bozzella. There's no question about it, Senator. As you 
noted, there's a huge number of vehicles that are built in 
Alabama that are exported to countries all around the world. 
What we're seeing as a result of these trade policies is we're 
seeing retaliation from our trading partners, and what that 
means is that it's more difficult for us to export cars that 
are built in Alabama, and the price of building those cars in 
Alabama, because of the tariffs on steel and aluminum, has gone 
up. It's a double whammy that hurts Alabama autoworkers.
    Senator Jones. All right.
    Mr. Riley, you've talked a little bit about how the tariffs 
here are a regressive tax. I don't think there's any question 
about that. Clearly, unlike what the President said early, that 
these other countries are going to pay for these tariffs, that 
is just a complete misunderstanding about tariffs, in general. 
It's a regressive tax on American consumers, on American 
businesses.
    I was not here during the tax bill, when it was passed last 
December. I didn't take office until January. But it seems to 
me that these tax--that tariffs and the increase in the cost of 
these goods is not only going to undercut the benefits that 
American businesses have seen from those tax cuts. Also, these 
tax cuts that American consumers have seen, what we've given to 
them, we're about to take away with these tariffs. Is that a 
fair statement, or am I completely off base?
    Mr. Riley. It's a fair statement. If you look at all the 
tariffs or taxes that the administration has put in place or 
has proposed, you're looking at about $130 billion a year, up 
from about $33 billion. So that's a big tax increase. It would 
take away a lot of the benefits that we have seen from the tax 
reform, tax cutting legislation.
    In my introductory remarks, I referred to the Declaration 
of Independence. I now refer to the Constitution, which is it's 
not the executive branch, but Congress that has the power to 
tax, and I'd sure like to see Congress take a more active role 
in overseeing and, actually, more active oversight before these 
taxes could go into effect in the future.
    Senator Jones. Last question, and this is just for anyone 
on the panel. Senator Portman and Senator Ernst and I have a 
bill introduced that would take away the decision of what is a 
national security interest--which I find it just a little bit 
bizarre that the BMWs and Mercedes that I see around Alabama 
and different places are a national security concern. But be 
that as it may, this bill would take that out of the Commerce 
Department and put that over with national defense, where it 
appears to be the more obvious reason to determine whether it's 
national security.
    Does anyone have any thoughts about that and if we can 
reform this process a little bit with that?
    Mr. Riley. Well, real quickly, if it's a defense issue, 
Section 232, it seems to me the Defense Department ought to be 
the key agency involved, and I think that Congress ought to 
have a chance to weigh in before these taxes go into effect in 
the future.
    Mr. Bozzella. I would agree. I would agree with that. I 
think it's important that Congress look at--you have the 
authority over tariffs and taxes. You should make sure, I 
think, that the administration is conducting itself in the way 
in which you intended it, and I think that's part of what the 
bill does, and I think it's important.
    Senator Jones. Right. Well, thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Jones.
    Senator Kaine.
    Senator Kaine. Thank you, Mr. Chairman, and thanks to the 
witnesses.
    I apologize for walking in late, but I was at a Foreign 
Relations hearing about the future of NATO, and a lot of what 
we were talking about in that future of NATO is how it is 
perceived by NATO allies when we use trade against them, when 
we use national security waivers against Canada, against 
Europe, when we call the EU a foe--by we, I mean the President. 
So it's interesting to come to this hearing. It's connected.
    I know you've talked about many of these issues with the 
other Senators. I want to talk to you about two things that 
concern me, and the two are uncertainty and then the place of 
Canada in the discussion about NAFTA right now.
    Uncertainty--in Virginia, one of the best assets we have 
that has enabled our economy to be strong is the Port of 
Virginia, which is, by some measures, the second or third most 
active port on the East Coast of the United States. The CEO of 
the port talks about the tariffs as, quote, ``significantly 
putting our infrastructure advancements at risk.'' This is an 
article from three or four days ago. And he can't quantify 
that, because it's an uncertainty, but it's an uncertainty that 
makes them very, very nervous.
    When I was Governor, I encouraged Volkswagen to relocate 
their North American headquarters from Michigan to Virginia, 
which they did, and they have a global business, including the 
manufacture and sale of a lot of vehicles in China. They are 
very, very worried. I was speaking to VW execs within the last 
week. They're extremely worried about the tariffs and the 
uncertainty it creates, and especially uncertainty around 
disruption of global supply chains that they now require.
    Then, finally, the only vehicles that are manufactured in 
Virginia are Volvo trucks. There's a Volvo truck plant in 
Dublin, Virginia, Pulaski County, far southwestern Virginia, 
the economically most challenged part of our state, and they 
are also dealing with the effect of tariffs on the aluminum and 
steel that they use, and they are very, very worried about 
this. And when I say they, it's interesting. I can talk to both 
management or I can talk to UAW workforce, and they express the 
same concerns. At the port, I can talk to management or I can 
talk to the 19 unions that do work as part of the port council. 
They are concerned, similarly with VW.
    As a mayor and Governor, I love certainty. I feel like if 
we can give people certainty, they can figure out in the 
private sector, or our public planners, how to adjust around 
it. Even if they don't like the certainty that we're giving 
them, they can adjust around it. But it's really hard to adjust 
around an asterisk or a question mark.
    I would like to ask you first about kind of the uncertainty 
effect of all this. What's the end game? What's the off-ramp? 
Where are we going? We've not really had the administration 
come here and brief us on where they think we're going to get 
with this. If you could share either--do you share my concern, 
or am I too worried about something I shouldn't be worried 
about?
    Mr. Bozzella. Yes. Uncertainty is hugely problematic. 
Senator Alexander said earlier in the hearing that a lot of 
what happens in decisions that management is making about where 
to introduce a new product is really essentially a competition 
within the company between different regions of the world. We 
want to win that competition for American workers. Uncertainty 
is a killer in that competition.
    Ms. Lee. I would just agree with that. Uncertainty is 
counterproductive for everybody, for all the players, because 
you can't get businesses to change their behavior in ways that 
you want them to and you can't get governments to change their 
behavior if we don't have clarity about the goals, the 
duration, the magnitude, and the targets of these tariffs, and 
that's what's missing in this current strategy.
    Senator Kaine. Mr. Riley or Mr. Moore.
    Mr. Riley. Well, I agree with my prior two panelists. You 
mentioned the port, and if we're losing a trade, as some people 
think, it seems to me we ought to just close down all the ports 
and pave over them. Of course, nobody would think that's a good 
idea. The countries around the world that are going to prosper 
are the ones that are going to have an environment of certainty 
and are the ones that are going to work to attract 
international trade and international investment, and that 
includes getting to a zero tariff regime for all the inputs and 
parts, not just for car workers, but others across the United 
States.
    The idea that, well, in the long run, this is going to work 
out, and we can just do our patriotic duty and suffer in the 
meantime--it's important to point out there's a lot of people 
around the country who are hurting right now because of the 
tariffs and the threat of new tariffs and the uncertainty.
    Senator Kaine. Mr. Moore.
    Mr. Moore. I don't have any difference of opinion with my 
colleagues here. I would simply say that there is chaos right 
now in our trade policy, but I'm hopeful here that we're 
experiencing short-term pain for long-term gain if we can get 
to the kind of trade agreements that better benefit American 
companies and American workers.
    I think there's universal agreement among the four of us 
that the steel tariffs just don't make a lot of sense. I mean, 
we're not really--we're not even adding to the jobs of 
manufacturing workers, because for every steel worker we're 
protecting--and, look, I care--we all care about our steel 
workers. But for every manufacturing job that we protect, we're 
likely to lose two or three or four workers.
    It's so apropos to your industry, the auto industry. If you 
want to save auto jobs, you don't want to impose steel tariffs. 
I mean, that was the point that you were making, Mr. Chairman.
    Ms. Lee. But I just want to, for the record, say that I 
don't agree with that, necessarily, that the steel tariffs are 
addressing a problem of global excess capacity that is an issue 
and has been an issue and causes inefficiency and distortions 
in the global steel trade. But whether they've been applied 
correctly is a different question.
    Senator Kaine. Mr. Chairman, I'm over my time. I could ask 
my Canada question for the record, but seeing that I'm the last 
witness, I could also ask it right now.
    The Chairman. Go ahead.
    Senator Kaine. I appreciate your sufferance.
    I am very nervous about the NAFTA renegotiation leaving out 
Canada. Now, I support the President--at 20-plus years into 
NAFTA, why wouldn't we get into it and see if we could make it 
better? I mean, we would be foolish not to. So that I 
completely agree with.
    But I do know that even strong opponents of NAFTA 20-plus 
years ago are now saying that the supply chains are so 
integrated that to try to extract or sort of partially extract 
Canada in this case would be very devastating. Do you agree 
that Canada is one of our top two trading partners. We cannot 
leave--if we're going to do an update of NAFTA, it would be 
very foolish to not have them in.
    Mr. Bozzella. Yes, I agree. NAFTA has been a winner for the 
U.S. auto industry. NAFTA should and needs to be modernized. 
There is no NAFTA without Canada. Even the framework agreement 
between the U.S. and Mexico is completely unworkable for the 
auto industry if Canada is not a party to the deal. So we do 
need Canada in NAFTA.
    Ms. Lee. I would totally agree with that. Canada is 
obviously a valued trading partner with shared values, with 
high standards, good jobs, shared values, and, as you say, 
integrated supply chains. It makes no sense to go forward 
without Canada at the table.
    Mr. Riley. I agree.
    The Chairman. Well, thanks to all of you.
    Mr. Riley, you didn't get to answer as many questions. I'm 
going to ask you one before I wrap up.
    Mr. Riley. Thank you.
    The Chairman. Would you restate what your National Taxpayer 
Union calculates the amount of new taxes are on the American 
people as a result of the tariffs on steel and aluminum?
    Mr. Riley. Thank you. It's about $133 billion, Mr. 
Chairman, and we'll provide that for the record. We have a 
formal report on that coming out just in the next few days. I 
should note that is the tax that Americans are paying due to 
U.S. tariffs. It doesn't include all the taxes that foreign 
governments have imposed on U.S. exporters, and it's important 
to consider those economic costs as well. So we'll be happy to 
provide the Committee with that exact number going forward, but 
it's a big cost.
    The Chairman. I thank the four of you for coming. It's been 
a very useful hearing, and I think you can tell that from the 
Senators' participation.
    The hearing record will remain open for 10 business days. 
Members may submit additional questions to our witnesses within 
that time.
    Thank you for being here. The Committee will stand 
adjourned.
    [Whereupon, at 11:36 a.m., the hearing was adjourned.]

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