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




 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2019

                              ----------                              


                        THURSDAY, JULY 26, 2018

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    The subcommittee met at 9:45 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Jerry Moran (Chairman) presiding.
    Present: Senators Moran, Collins, Murkowski, Alexander, 
Boozman, Capito, Lankford, Kennedy, Shaheen, Reed, Manchin, 
Coons, Schatz, and Van Hollen.

            OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

STATEMENT OF HON. ROBERT E. LIGHTHIZER, AMBASSADOR

                OPENING STATEMENT OF SENATOR JERRY MORAN

    Senator Moran. Good morning, everyone. The subcommittee on 
Commerce, Justice, Science, and Related Agencies will come to 
order. We are here for, in my view, a very important 
opportunity for subcommittee Members to explore significant 
issues that our country is facing that our constituents care a 
lot about.
    I welcome you all here this morning. Our witness today is 
Ambassador Robert Lighthizer, the United States Trade 
Representative.
    Welcome, Ambassador Lighthizer. Thank you for the moments 
we had just a few minutes ago to have a conversation. And I 
thank you for coming here to testify before the subcommittee 
today.
    The Office of the U.S. Trade Representative is responsible 
for developing and coordinating U.S. international trade, 
commodity, and direct investment policy, and overseeing trade 
negotiations with other countries.
    Just this week, representatives from Mexico and the 
European Union are in Washington, DC, for various trade 
discussions and negotiations. Your timing is appropriate. USTR 
performs its mission with the important goal of securing market 
access throughout the world to create new opportunities and 
higher standards of living for U.S. families, farmers, 
manufacturers, workers, consumers, and businesses.
    Over 400,000 Kansas jobs are supported by global trade, 
many of which are in the agriculture and manufacturing 
industries. In order for USTR to succeed, Congress must make 
certain that the necessary resources are available to carry out 
USTR's important mission.
    The administration has requested $63 million for USTR in 
its fiscal year 2019 budget request. As we consider USTR's 
funding needs, we must also be mindful of the administration's 
trade policies and strategy.
    Ambassador Lighthizer, under your leadership, we have 
witnessed a significant increase in U.S. trade activity and 
what I consider to be a major change in both policy and 
strategy.
    For example, you issued a letter on May 18 of 2017, shortly 
after your confirmation, addressed to congressional leaders 
about USTR's intentions to renegotiate NAFTA. In that letter, 
you stated NAFTA was, quote, ``outdated and do[es] not reflect 
modern standards,'' unquote, and notably, that USTR was, quote, 
``committed to concluding these negotiations with timely and 
substantive results.''
    More than a year later, this process is still underway. 
This subcommittee looks forward to learning more about USTR's 
progress on these efforts and ongoing negotiations.
    Ambassador Lighthizer, I do not think it would be a 
surprise to you that many were concerned--that many are 
concerned about your efforts to renegotiate NAFTA, especially 
considering the administration's seemingly nonchalant attitude 
toward potential termination of that agreement. Understandably, 
many are even more concerned about the administration's 
direction today, because in addition to NAFTA, USTR is at the 
heart of a trade dispute with China following findings by 
USTR's Section 301 investigation.
    I applaud the administration's effort to crack down on 
China's unfair trade practices. I hope you can elaborate on the 
administration's strategy regarding how it's negotiating--how 
negotiations are going with China.
    The tactics we now see, where the United States imposes 
tariffs, China responds, the United States threatens more 
tariffs, China responds, and so forth, appears to have gotten 
China's attention, but more tariffs cannot be the ultimate 
answer. Any further escalation of this dispute that results in 
more tariffs will only cause undue harm to U.S. farmers, to 
farm families, to manufacturers, workers, consumers, and 
businesses, the very people and industries that USTR is 
designed to help. The effects of the current tariffs are real, 
and farmers, ranchers, and the manufacturing sector in the 
United States and in my home State of Kansas are feeling the 
pressure.
    A farmer in Cloud County, Kansas, Stacey Forshee, and her 
husband, David, are fifth-generation family farmers where they 
grow soybeans, corn, wheat, and also raise cattle. The Forshee 
family, as well as many of their neighbors, will begin fall 
harvest in the coming months. Decreased commodity prices, which 
have coincided with the ongoing tit-for-tat tariff battles, 
coupled with already reduced farm income, which has fallen by 
50 percent since 2013, is driving Kansas farmers like the 
Forshees to the edge.
    All told, it has been an estimated $361 million of Kansas 
exports are being threatened by various tariffs. Bottom line: 
trade and exports are how we earn a living in Kansas, and 
farmers, ranchers, and our Nation's manufacturers cannot afford 
a prolonged trade war.
    Ambassador Lighthizer, thank you for joining us this 
morning. And I look forward to your testimony.
    I would now like to recognize the Ranking Member of this 
subcommittee, Senator Shaheen, for her opening remarks.

                  STATEMENT OF SENATOR JEANNE SHAHEEN

    Senator Shaheen. Well, thank you, Mr. Chairman.
    And thank you, Ambassador Lighthizer, for being here this 
morning. I appreciated the opportunity to speak with you 
earlier this week.
    The Senate Commerce, Justice, Science, and Related Agencies 
appropriations bill for fiscal year 2019 provides $57.6 million 
for the United States Trade Representative as well as an 
additional $15 million for the Trade Enforcement Trust Fund. So 
in total, the bill provides nearly $73 million for USTR, level 
with the fiscal year 2018 omnibus Congress passed in March and 
$10 million more than requested in the President's fiscal year 
2019 budget proposal.
    Now, as you know, USTR can play a very instrumental role in 
creating a level playing field for American businesses and 
workers, and at the same time expanding markets for U.S. 
companies and removing foreign trade barriers. Unfortunately, 
like Senator Moran, I am concerned that these tools are being 
used in a way that is hurting American businesses, antagonizing 
our allies, and letting other countries set the rules of the 
road for global trade.
    Now, as we discussed, I appreciate the need to get tough 
with countries that cheat or abuse the rules, but we can't 
afford to do that, I believe, in a unilateral way that causes 
an unnecessary trade war with our allies and puts American 
companies at a disadvantage.
    Chairman Moran outlined the impacts that the trade war with 
China has had on farmers in Kansas, and we're seeing some 
similar negative effects in New Hampshire. I've heard from a 
number of small businesses in my home State who have had deals 
canceled and market access shrink.
    Last week, I visited a small business in New Hampshire 
called Moonlight Meadery. They had a deal effectively killed by 
the retaliatory tariffs on American wine. This is a deal that 
would have doubled their output--and for a small business, that 
meant a lot--but what's happened, they've had to lay off 
employees, and they've also been hit by the increased cost of 
aluminum because of the tariffs on steel and aluminum.
    Another New Hampshire small business, Little Bay Lobster 
Company, that sold 50,000 pounds of lobster to China each 
week--that's a lot of lobster--can no longer find a buyer. 
After USTR imposed the Section 301 tariffs, China retaliated 
with a 25-percent tariff that drove up the price of U.S. 
lobster. So meanwhile, Canadian lobster companies can sell 
their products to China at a much lower price, and Little Bay 
is worried that they are going to lose their market 
permanently.
    And it's not just the agriculture sector. I'm hearing from 
high-tech, value-added manufacturing companies about the 
negative effects of the administration's trade policies. These 
are well-paying jobs in growing sectors in New Hampshire, like 
the aerospace and defense industry, industries in which we have 
a competitive edge in the global market that are now being 
disadvantaged by retaliatory tariffs and higher costs of raw 
materials.
    So, for example, Intelligent Manufacturing Solutions 
Corporation is a contract manufacturer in New Hampshire of 
circuit boards. This company was close to winning a $5 million 
contract to build circuit boards here in the United States, but 
as a result of the tariffs imposed by the administration, the 
contract will likely go to a Chinese competitor, creating 
Chinese jobs.
    Unfortunately, I worry that if we continue in this 
direction, this will be just the tip of the iceberg, and that 
if left unchecked, the trade war will have dire ramifications 
for the American economy. So, Ambassador, we clearly have a lot 
to discuss, and I look forward to your testimony and to having 
you here today.
    Thank you.
    Senator Moran. Senator Shaheen, thank you very much.
    Ambassador Lighthizer, again welcome to our subcommittee. I 
know that there will be a lot of questions, and I expect a 
robust conversation, but we will begin with your comments and 
testimony this morning.
    Mr. Ambassador, you need to turn on your microphone, 
please.

             SUMMARY STATEMENT OF HON. ROBERT E. LIGHTHIZER

    Ambassador Lighthizer. Chairman Moran, Ranking Member 
Shaheen, and Members of the subcommittee, it's been 14 months 
since I was confirmed as the United States Trade 
Representative. It has been a very busy year for our agency. 
I'd like to take you through a few of the highlights.
    We have been renegotiating the North American Free Trade 
Agreement at an unprecedented speed. This would be the first 
comprehensive renegotiation of a U.S. trade agreement. As part 
of this process, we have consulted extensively with Congress, 
as required by TPA. Hopefully, we are in the finishing stages 
of achieving an agreement in principle that will benefit 
America's workers, farmers, ranchers, and businesses.
    We are also finalizing revisions to the U.S.-Korea Free 
Trade Agreement. We have arrived at an agreement with the 
Koreans to strengthen the domestic truck manufacturing here in 
the United States, allow more U.S. vehicles to enter the Korean 
market without burdensome regulations, and fix a whole host of 
implementation issues related to agriculture, pharmaceutical 
products, and many other products.
    We are actively engaging in efforts to commence new trade 
agreements, including the newly announced EU initiative from 
yesterday. After the confirmation of my deputies, in mid-March 
of this year, I instructed Ambassadors Mahoney and Gerrish to 
consult with Congress and to work with their foreign 
counterparts to find future partners for future agreements. We 
are speaking with a number of countries in Southeast Asia and 
Sub-Saharan Africa, and I'll be happy to talk about that 
further if you're interested.
    We have taken action on two 201 investigations, one for 
solar power products and the other on washing machines. These 
are the first 201 investigations since 2001. Both cases involve 
tremendous amount of work, reviewing facts. Each resulted in an 
affirmative ITC recommendation with the President largely 
accepting the recommendations of the International Trade 
Commission. And we have seen success in domestic manufacturing 
as a result of those actions.
    At the direction of the President, USTR has been leading 
the Section 201 efforts to combat unfair Chinese intellectual 
property practices. In March of this year, we published our 
report and identified several major problems, including forced 
technology transfer, non-economic licensing practices, state-
funded strategic acquisitions of U.S. technology, and 
cybertheft. In response to the Chinese actions, the President 
directed the implementation of several measures, including a 
WTO case, which we brought targeted tariffs, strengthened 
export controls, and rigorously addressing direct investment in 
critical technologies.
    We are also pursuing and defending numerous actions at the 
World Trade Organization. We are actively litigating 10 
offensive disputes, defending 21 disputes, and participating as 
a third party in another 20 cases.
    In addition to these major initiatives, USTR runs a host of 
other programs and deals with many trade issues on a day-to-day 
basis. We operate the Generalized System of Preferences 
program, the African Growth and Opportunity Act program, we 
monitor our many trade agreements we have in place, we prepare 
and publish numerous reports on trade, we lead the interagency 
process for developing trade policy, and we work on a daily 
basis with our foreign counterparts to reduce barriers to 
trade, U.S. trade, around the world.
    Finally, I would like to touch on the budget of USTR. In 
fiscal year 2017, we were appropriated $62 million with an 
option of deriving funds from a trust fund that was set up in 
2015. Our appropriation for fiscal year 2018 was $57.6 million 
plus $15 million from the Trade Enforcement Trust Fund. We're 
certainly grateful for the added appropriation, and we are 
focused on making the best use possible of it.
    For fiscal year 2019, the President's budget requested $63 
million to support the staffing increases and focus on priority 
areas.
    I thank the Members of the subcommittee for their time 
today, and I look forward to answering your questions and 
discussing the President's trade agenda.
    [The statement follows:]
            Prepared Statement of Hon. Robert E. Lighthizer
    Chairman Moran, Ranking Member Shaheen and Members of the 
subcommittee, thank you for inviting me to participate in this hearing.
    It has been just over 14 months since I was confirmed as the United 
States Trade Representative. It has been a very busy year for our 
agency. I would like to highlight a few of the matters that have kept 
us occupied.

  --We have been renegotiating the North American Free Trade Agreement 
        at an unprecedented speed. This would be the first 
        comprehensive renegotiation of a U.S. trade agreement. As part 
        of that process, we have consulted extensively with Congress as 
        required by the TPA legislation. Hopefully, we are in the 
        finishing stages of achieving an agreement in principle that 
        will benefit American workers, farmers, ranchers, and 
        businesses.
  --We are finalizing revisions to the U.S.-Korea Free Trade Agreement 
        (KORUS). We arrived at an agreement with the Koreans to 
        strengthen domestic truck manufacturing here in the United 
        States, allow more U.S. vehicles to enter the Korean market 
        without burdensome regulation, and fix a host of implementation 
        issues related to customs for agricultural and other goods, 
        pharmaceutical products, and other issues.
  --We are actively engaged in efforts to commence new trade agreement 
        negotiations. After the confirmation of my Deputy United States 
        Trade Representatives in late March of this year, I instructed 
        Ambassadors Mahoney and Gerrish to consult with Congress and 
        work with their foreign counterparts to find future partners 
        for new agreements. We are speaking with countries in Southeast 
        Asia and Sub-Saharan Africa as we move forward and start the 
        process of negotiating FTAs.
  --We have taken action on two Section 201 investigations, one on 
        solar products and the other on washing machines. These are the 
        first Section 201 investigations since 2001. Both cases 
        involved tremendous work to review the cases petitioned and 
        resulted in ITC recommendations for relief, which the President 
        largely accepted. And we have seen success as domestic 
        manufacturing in both of these important industries has 
        increased as a result.
  --At the direction of the President, USTR has been leading the 
        Section 301 efforts to combat unfair Chinese intellectual 
        property practices. In March of this year we published our 
        report and identified several major problems, including forced 
        technology transfer, non-economic licensing practices, state-
        funded strategic acquisition of U.S. technology, and 
        cybertheft. In response to the Chinese actions, President Trump 
        directed the implementation of several measures, including a 
        WTO dispute, targeted tariffs, strengthened export controls, 
        and rigorously addressing state-directed investment in critical 
        technologies.
  --We are also pursuing and defending numerous trade actions at the 
        World Trade Organization. We are actively litigating 10 
        offensive disputes, defending 21 other disputes, and 
        participating as a third party in approximately 20 more 
        disputes.
  --In addition to these major initiatives, USTR runs a host of other 
        programs and deals with many trade issues day in and day out. 
        We operate the Generalized System of Preferences program and 
        the African Growth and Opportunity Act program, we monitor the 
        many trade agreements we have in place, we prepare and publish 
        numerous reports on trade, we lead the interagency process for 
        developing trade policy, and we work on a daily basis with our 
        foreign counterparts to reduce barriers to U.S. trade around 
        the world. We have a full plate.

    Finally, I would like to touch on the budget of USTR. In fiscal 
year 2017 we were appropriated $62 million with an option of deriving 
funds from the trade enforcement trust fund, a trust fund created under 
the 2015 Trade Facilitation and Trade Enforcement Act.Our appropriation 
for fiscal year 2018 was $57.6M plus $15 million from the Trade 
Enforcement Trust Fund. We are certainly grateful for the added 
appropriation and are focused on making the best use of it in the few 
remaining months of fiscal year 2018. For the fiscal year 2019 
President's budget, USTR requested $63 million to support staffing 
increases and focus on priority areas. For fiscal year 2019 
appropriations, we have seen the Senate and House marks, which again 
include funding from the Trust Fund. Given the breadth of our 
activities and the President's ambitions, we will plan to use base and 
Trust Fund resources to increase our capacity to address the 
administration's many trade priorities.
    I thank the Members of the subcommittee for their time today and 
look forward to answering your questions.

    Senator Moran. Ambassador, thank you.
    We will now begin a series of questions by Members of the 
subcommittee. I'll start with particularly a focus on Japan and 
Asia.
    Your written testimony submitted to the Committee on 
Finance in March of this year, you stated that USTR was going 
to, quote, ``aggressively pursue other potential free trade 
agreements''. That's something that I fully support. Japan is 
one of the United States' largest markets for beef, wheat, and 
other products. Japan is currently negotiating and enacting new 
trade agreements with the EU, with Canada, and other nations.
    How is--how is USTR ensuring a level playing field with 
other nation competitors, specifically with regard to Japan, 
when we are--when they are completing free trade agreements 
with other nations to the exclusion of the United States? And 
perhaps you can speak more broadly as to the ongoing efforts to 
establish new free trade agreements.
    Ambassador Lighthizer. Thank you, Mr. Chairman. Well, first 
of all, on the issue of new FTAs, I did say it as you said, and 
I said it from the very beginning, it's the President's policy, 
when he decided he did not want to stay in the TPP, that he 
would negotiate FTAs with other countries in that region as 
well as in other areas. That process was delayed somewhat by 
the fact that our deputies were not confirmed until about 3 
months ago.
    Since then, we have one deputy who's worrying about talking 
to the Congress and talking to potential trading partners in 
East Asia and in other--in Sub-Saharan Africa. And we have 
divided it up. We spent a fair amount of time with respect to 
both. It's not appropriate for me, given TPA, I think, to 
announce what we're going to do because we're still in that 
process and we have to consult with the Congress, and then we 
have to make an announcement, and then we have to wait 90 days 
under TPA before we can negotiate.
    But I would say we are close to beginning negotiations in 
each area. There are a number of countries, if you deal first 
with East Asia, who are interested. Some have different 
advantages over the others, one, that we particular liked is 
the Philippines. I think it would be a good first agreement. 
It's in a good location, and we have--there are a lot of 
advantages to it. In the case of Sub-Saharan Africa, we've 
talked to a number of countries, and a number have expressed 
interest. We're trying to make a decision what's the best one 
to start with.
    In both areas, our view is that we want to have a model 
agreement. We want to pick someone where there are clear 
advantages to U.S. manufacturing and agriculture sales. And 
then our hope is that most of what is in that model is 
something we can use with other people.
    So it's something we're very actively doing, as I--you 
know, as I tried to state in my opening statement. We're very 
busy, and we're not a huge agency. Having said that, this is a 
very high priority.
    In terms of Japan, our relationship with Japan is a very 
good relationship. The President met with the Prime Minister a 
couple of months ago at Mar-a-Lago. They've had several 
meetings. In that meeting, he was quite clear about the nature 
of some of our trade problems.
    We have had a chronic trade deficit with Japan, and we have 
had, in that case, what we consider to be unfair barriers to 
U.S. exports in a number of areas. One that would come to mind 
in your case, of course, would be beef, because that's a 
principal one that when you think about when you think of both 
the TPP, but also primarily Japan. We set up a structure where 
Minister Motegi and I are involved in negotiations on that. 
We're going to have a meeting probably in the next--certainly 
in the next 30 days. It's being set up right now. We have a 
fairly aggressive agenda.
    Right now, it is the Japanese position that they don't want 
to enter a new FTA agreement with the United States, but 
they're willing to work through a variety of issues, and that's 
something that we would expect to do. Our sense is that they 
ought to--we ought to be negotiating a FTA with Japan.
    Senator Moran. Mr. Ambassador, let me get another question 
in before my time is more fully expired. I applauded the 
administration for successfully concluding negotiations with 
China in 2017 to allow U.S. beef exports resumption into China 
after they were blocked in 2003. However, the 25-percent 
retaliatory tariff on U.S. beef, which stems from USTR's 301 
investigation, threatens to halt those exports and certainly 
any expansion.
    So on one hand, we had the opportunity to high five and 
brag about beef going to China. That seems, that opportunity 
seems, to have disappeared, and most concerning is what the 
growth potential that exists in China, what it does to our 
opportunities for increasing U.S. beef sales.
    Ambassador Lighthizer. So if I can, let me speak for a 
second about beef with China because I think it is a good 
example of what we're facing with China. So the President's 
strategy, as was the strategy of prior administrations, was to 
initially engage in a dialogue with China. We clearly have a 
chronic problem with China. We have a trade deficit with China 
which is unsustainable, $375 billion, most of which, or a lot 
of which I would say, is not the result of real economics, but 
really is a result of state capitalism.
    So 10 years ago, as a result of negotiations, because of 
their unfair practices, China agreed to let U.S. beef in, in 
certain circumstances 10 years ago. Over the course of the next 
10 years, they didn't let any beef in because they made the 
promise and did not keep the promise. The President, during the 
100-day period when we decided--the President decided, ``I will 
try dialogue first,'' had that dialogue, and as a result of 
that, they agreed to let the beef in.
    Let's be clear, though. The amount of beef, U.S. beef, that 
was eligible, eligible, to come in was less than 3 percent of 
U.S. production. So it wasn't like it was going to be a 
panacea, although a lot of people thought that it was. The 
result is that after the last time I saw numbers, which were 8 
or 9 months in, there was something like $60 million worth of 
beef sold in all of China.
    So I guess to me, the China beef situation is more an 
example of what we're facing with China than it is actually a 
solution. We really thought we would, A, be able to sell beef 
with hormones and the normal U.S. production of beef into 
China. For a long period of time, we don't think they have a 
WTO right to keep us out.
    So while we made some headway in there, you're right, they 
did take it away. That raises the question, and it's going to 
be the question, not with beef, but with all the Members and 
all the retaliation, and this may not be the appropriate time 
to raise it, I'll do it on somebody else's time if you like, 
but we have to at some point discuss why we're doing any of 
this because there clearly is pain associated with what we're 
doing, and the President is very sympathetic to not only cattle 
ranchers, but to everyone else who's--and it's a lot of ag, but 
a lot of other people who are--who are being, we believe, 
unfairly treated as a result of our attempt to really level the 
playing field.
    Senator Moran. Ambassador, I'm quite certain this issue 
will come up among my colleagues.
    The Senator from New Hampshire.
    Senator Shaheen. Thank you, Mr. Chairman. And that was a 
good segue into my question.
    As I mentioned in my opening comments, I had the 
opportunity last week to visit one of those small businesses 
that, as you point out, is being hurt by the policies of the 
administration. And it's a company called Moonlight Meadery. 
They make a beverage classified as a wine from honey. And I 
talked to the owner about the fact that we were going to be 
having this hearing and you would be coming before the 
subcommittee, and I asked him what he would like me to ask you 
about the administration's policy. And as you can see, I've 
posted it. He said, ``I'd like to ask them what the plan is. 
And I'd like to ask them, Why are they asking small businesses 
to bear the brunt of this policy? It doesn't seem fair.''
    So how do you respond to my small business owner?
    Ambassador Lighthizer. Well, first of all, we talk to the 
same small businesses and--and farmers and ranchers a lot, and 
the President is very sympathetic, and I personally am very 
sympathetic. It certainly is not our plan to have small 
business or agriculture or anyone else in America feel the 
brunt of a change in trade policy which is designed to make the 
U.S. stronger and richer and help our exports and help all 
American businesses and farmers and ranchers. So that's our 
objective.
    Senator Shaheen. So I'm sorry to interrupt, but do you have 
a timeframe for when you think this objective is going to be 
achieved?
    Ambassador Lighthizer. Well, let's--yes, let's talk about 
that. First of all, you have to start with the proposition that 
you think there's a problem, you think in the--an increasing 
deficit is a problem. That's the first thing. We believe there 
is, and something different has to be done.
    Secondly, then it seems to me you have to kind of divide it 
up. If you look at NAFTA, I believe we're very close, and 
someone else will ask about that, and I can take their time to 
talk about NAFTA if you'd like. That's part of it.
    Senator Shaheen. Please do take their time.
    Ambassador Lighthizer. KORUS is also part of it. And then 
there are a whole lot of other actions that we're taking. But 
on the specific question of China, the reality is it's going to 
take time, I believe. Now----
    Senator Shaheen. And can you talk about what's--what is our 
trade deficit? Because as I've looked at the numbers, if you 
add in services, it isn't a deficit, it's actually a surplus.
    Ambassador Lighthizer. With respect to--I'm sorry.
    Senator Shaheen. To the total----
    Ambassador Lighthizer. No, no. So the numbers are 
approximately $800 billion goods deficits. We have about a $250 
billion services surplus. So we have a substantial deficit any 
way you cut it. Now, there are some countries where the 
argument that you're making comes up, and somebody might have 
raised it in that context. There are some countries where there 
is this data point, and we make that point. But overall, it's 
clearly a very--a very negative trade situation.
    But if you don't accept that, then everything we're doing 
is not--you know, doesn't make sense. But we think it's clear 
that we have, in the case of China, they're acting 
inappropriately, they're taking advantage of an open U.S. 
economy, they're using state capitalism, and they're taking 
U.S. jobs and U.S. wealth. And we think it's clear, and, 
therefore, something has to be done to defend American workers, 
including this company.
    Senator Shaheen. So you have--the administration has 
proposed $12 billion in aid to farmers who are being hurt by 
this policy. Are you also talking about aid for small 
businesses like those in New Hampshire who are being hurt by 
this policy? And how have you distinguished between the two?
    Ambassador Lighthizer. Well, I think that there are a lot 
of people across the economy that are being negatively 
affected, we believe unfairly by predatory practices, 
particularly by China, but also by other people, we don't think 
they were--anyone was authorized to take that kind of action. I 
would take a step back, and I think that a lot of these very 
same companies and agriculture producers are also negatively 
affected by all the predatory practice that have led to the 
$800 billion goods trade deficit.
    So I don't want anyone to think that we had sort of a level 
playing field, and we had decided to do something to move back. 
These are the same people who are suffering, as a result, in 
our opinion, of bad trade deals and bad trade policy over a 
long period time. There's a lot--I don't know this person's 
business, of course, but I know a lot about agriculture and a 
lot of other businesses. There are an awful lot of people that 
are facing unfair trade, and their own businesses are suffering 
from it, but it's kind of been like the status quo, so they 
haven't really focused on it.
    Senator Shaheen. So----
    Ambassador Lighthizer. It is--it is the view of the 
administration that agriculture has been particularly targeted 
by retaliation as a result of the kinds of actions we're doing 
to try to level the playing field, and, therefore, the 
President and the Secretary of Agriculture put in place this 
program.
    Senator Shaheen. So you're not contemplating that kind of 
assistance for other small businesses that are being hurt by 
this trade war.
    Ambassador Lighthizer. Not at this time, no.
    Senator Shaheen. Thank you.
    I'm out of time, Mr. Chairman.
    Senator Moran. Senator Alexander.
    Senator Alexander. Mr. Ambassador, welcome. Mr. Ambassador, 
until yesterday, the tariff taxes that the administration had 
placed began to look like, ``I've got a problem, so I'll shoot 
myself in one foot, and I've got a problem, so I'll now shoot 
myself in the other foot.''
    I mean, the morning--for those who think it's not hurting, 
the Wall Street Journal this morning says Chairman Ford said 
that rising commodity prices, primarily steel, shaved about 
$300 million from their second quarter results. Most of it they 
blamed on the metals tariffs. Both companies buy almost all 
their steel from U.S. producers, whose prices have increased in 
reaction to the tariff. Steel accounts for 53 percent of the 
material in typical automobile, and aluminum, 11 percent.
    In Tennessee, that's pretty bad news because we've got 929 
auto parts suppliers. They almost all use steel and aluminum. 
Three big car companies. That's 136,000 workers. That's a third 
of our manufacturing force. That's not good for us, and it's 
not good for a lot of other people in Tennessee.
    And Electrolux, in Springfield, canceled a $250 million 
expansion because of steel prices going up even though they buy 
all their steel in the U.S.
    Our big tire companies have to buy cord for the tires from 
overseas because it's not made in the United States, so they 
pay an extra price.
    Bush Brothers cans a third of the beans in the United 
States. Its revenues are going down 8 percent it thinks because 
of steel--tin--the steel-plated cans they have to buy.
    And we have a company in Dickson, Tennessee, that chose 
between China and the U.S., moved to Tennessee, then suddenly 
on their gas grills, steel prices are up 40 cents because of 
us, retaliatory tariffs raise it even more. So they're making a 
loss on every gas grill they export to Europe and Canada. They 
wish they had moved to China instead of the United States.
    Now, that's the bad news.
    Now, the good news is that what the President said at the 
G-7, what he said about a week ago, and what he said yesterday, 
is that we're headed toward a zero-tariff/zero-subsidy policy. 
That's what it should be, he said. I agree with that. And I'd 
like to ask you a couple of things about how we get there. 
Obviously, we're familiar with such a thing. I mean, the North 
American Free Trade Agreement is essentially a zero-tariff 
agreement with a few exceptions. It took us several years to 
get to that point until 2008, but we got there. Japan and 
Europe are negotiating the same kind of deal.
    So as we take a step toward a zero-tariff agreement, which 
we would welcome in Tennessee, and I imagine in this country, 
would a reasonable step one be, say, to make the tariffs the 
same between the United States and Europe on cars and trucks, 
which would be to lower it to 10 percent, the tariff on trucks, 
light trucks, and 2.5 percent tariff on cars?
    And as we begin to do this, my second question, and I'll 
let you take the rest of the time, how quickly then will we get 
rid of the steel and aluminum tariffs? Because if we're moving 
toward a zero-tariff policy, obviously, we don't want to raise 
the price of steel 40 percent in the United States, which we 
have this year, according to the steel indices, because you 
can't make a truck in Tennessee with steel up 40 percent and 
sell it competitively in the United States or export it to 
Europe.
    So how--how--would that first step seem reasonable to you, 
the one I described? And, number two, how quickly can we get 
rid of the steel and aluminum tariffs so we can be competitive 
in a zero-tariff environment?
    Ambassador Lighthizer. Thank you, Senator, for that 
question.
    First of all, the basic philosophy that we have is that we 
want free trade without barriers; that's what the President 
wants. We don't see it. We see ourselves as being treated 
unfairly. So then the next question is, What do you do about 
that? One idea is to talk and see if over a period of time you 
can make change. Our sense is that that's been tried and tried 
and tried and tried, and the deficit goes up and up and up and 
up. So the President's idea is we have to do something more 
dramatic, we have to try to change----
    Senator Alexander. Well, in the short time we've got, what 
about the idea of the same tariff for cars and trucks in the 
United States and light trucks in the European Union?
    Ambassador Lighthizer. Well, I would say, first of all, the 
idea of zero tariffs/zero subsidies, but also we need zero 
standards, right? We can't have standard barriers, we can't 
have nontariff barriers to trade, because we could have the 
same tariff and not be able to sell anything to somebody 
because they have a trade barrier.
    In my opinion, you can't cherry-pick specific--you have to 
be careful cherry-picking specific products like cars or trucks 
because some country has an advantage than others and some 
doesn't. In the past when we've had this negotiation----
    Senator Alexander. Well, but you picked steel and aluminum. 
You cherry-picked them and you drove up the price of steel 40 
percent since January.
    Ambassador Lighthizer. Well, I will talk about the steel 
and aluminum if you like, but just philosophically on what 
you're saying, I think you have to include, if you--when you go 
to zero-zero, a balanced package, it has to have agriculture as 
part of it, you have to do not just trucks and cars, which I 
believe would greatly favor the European Union in the case that 
you bring as opposed to the United States, but there are a lot 
of other manufacturing products that would greatly benefit the 
United States, and agriculture for sure. Agriculture is one of 
the areas where we make world-class products and a lot of other 
products that are made, and I could go through it, because I've 
seen letters and the like from Members.
    So I think the idea, I agree with you, is completely right. 
The idea is to pick the number of things, we have a balanced 
package, and move from where we are to an environment where you 
don't have tariffs, where you don't have subsidies--because 
that's an important part, you can't compete with someone who's 
subsidized, and we don't subsidize for the most part--and then 
the third thing is you have to worry about nontariff barriers 
to trade, which is a little more complicated, but you can't be 
in a position where you now have zero tariffs, they can ship, 
but you can't ship there. And I can give you examples of all 
these.
    The final thing I would add is I think you have to do 
something on services to make a balanced package because that's 
another area where the United States has a huge advantage. The 
idea of doing just trucks and cars by themselves strikes me as 
being something that would favor Europe and lead to an increase 
in the trade deficit and hurt the U.S. automobile 
manufacturers.
    On the issue of the 232, our objective is, the President's 
objective is, as we do these deals, that we--and we have done 
this in the case of Korea and some other countries, that we set 
up a mechanism whereby they don't pay those tariffs as long as 
we're not in a position where they take all the benefit that's 
supposed to go to U.S. steel and aluminum producers. So in the 
case of Korea and others, we've set up a situation where they 
can ship duty-free in the United States up to a historic level, 
so they don't get the benefit of it.
    But on the 232 generally, the first question you have is 
you have to conclude that there is a problem. Steel and 
aluminum are essential to national security, and that they were 
in jeopardy, and that prices were unfairly low. If you don't 
take that step, then the action doesn't make any sense. The 
President believes, I believe, that that was a necessary step.
    And then, therefore, after that, the objective is to try to 
manage it in a way so there's the least amount of collateral 
damage while accomplish what we believe to be a good--but the 
next--in the next round, I'll be happy to talk more about this 
with you because I think it's a--the basic--and you and I have 
talked about these things. The basic idea, I think, is exactly 
what the President wants to do. He wants to get to a position 
where the U.S. is competing with countries specifically on a 
bilateral basis and ultimately everyone on a no-barrier, be it 
tariffs or anything else, kind of basis, and then let the 
United States let pure economics make the decision. And if 
that's the case, he's convinced, and I'm convinced, and I know 
you personally are very convinced, we're going to win. We're 
going to do just great in an environment like that.
    Senator Alexander. Thank you.
    Senator Moran. Senator Manchin.
    Senator Manchin. Thank you, Mr. Ambassador. I appreciate 
you being here. A lot of questions will be asked. I come from 
the State of West Virginia, that got just absolutely destroyed 
with NAFTA, so we might look at it a little bit differently, 
and people might be surprised at my take on all this. I don't 
disagree with the President taking a tough stand and very 
unorthodox how he's going about it. I want to see the end 
result. And I want to make sure there is fairness to a trade 
deal. I know we talk about ``free.'' I want ``free'' to be 
fair.
    With all that being said, do you believe that these deals 
that we make around the country, or around the world, if you 
will, should be more bilateral than multilateral? Some 
countries are taking advantage by tacking onto a country who we 
might be able--we might be trying to help?
    And the other part of that question would be, Do you 
believe there should be a sunset review on these? Because NAFTA 
has been, what, 20-some years? And with that, I would think 
that, you know, after about 5 years, you should have it 
reviewed. Did it meet the intent of what we did the deal for? 
There's a reason for these trade deals. And we don't want to do 
any harm to anybody in the United States, and while we're 
helping other countries, we want to make sure we're helping 
ourself, too.
    And that would be my first question. I'll go on to my 
second one after that. So if you can answer on that one there.
    Ambassador Lighthizer. Thank you, Senator. First of all, I 
would say that the President believes, and I believe, and both 
of us have for long periods of time independently, that the 
United States is far better off in bilateral deals. We have the 
biggest market. We have more leverage. If we were in a position 
where we were a small economy or a small country, we would be 
far better off then getting together with other people----
    Senator Manchin. Well, everyone was telling us what a 
mistake we made by not staying in TPP. I was never for TPP 
because of that reason.
    Ambassador Lighthizer. I think we give up a lot of our 
leverage and--and this is another thing the President focuses 
on--they're much harder to enforce.
    Senator Manchin. Gotcha.
    Ambassador Lighthizer. So you're in a position with five 
countries, you're in an agreement with five countries, you have 
a problem with one of them, what do you do? You don't get out 
of the agreement--right?--because then you--it just messes 
every--if you have an agreement with one country, and you're 
the United States of America, you can enforce your rights under 
that agreement. So to me, it's pretty clear.
    On the issue of sunset, I believe that--that we ought----
    Senator Manchin. I'm not saying sunsetting, stopping and 
have to go through the procedure again, I said the sunset 
review. We review if we've met the intent, the findings, of why 
we did the deal.
    Ambassador Lighthizer. Yes. I think we clearly should have 
a sunset review, absolutely. I think the basic idea of a free 
trade agreement is this: we're not talking about MFN trade, 
we're not talking about a level playing field. What we're 
saying to a country is, ``We'll give you better access than 
we're giving the rest of the world, and you give us 
approximately an equal amount of better access.''
    It's not--it's not MFN. MFN is at the WTO. What we're 
saying in an FTA notionally is, ``We're going to give you an 
advantage in our market. You give us an approximately equal 
advantage in our market.'' It's reasonable to say that after a 
period of time and after economies change and evolve to say, 
Did we give them approximately equal to what we got? If we 
didn't, it wasn't a good deal in my judgment. Now, it will be 
good for some people for sure--right?--because these things are 
able, but overall for the country, I think because of the 
nature of an FTA, you should sit down and review whether or not 
it was the deal you wanted.
    Senator Manchin. I know some of my colleagues in different 
States are getting hurt in different ways, and they're going to 
express that today, as you already heard. I don't think no one 
intends for that to be, but can we have a correctness to this 
unfairness? And what type of a time period do you think it 
would take? The President is taking a very unorthodox approach 
to it. He hits them hard, looks and sees, and makes some 
adjustments. I'm okay, I'm looking for the results, but I don't 
want to do any harm to American manufacturing, producers, 
growers, whoever it may be in those categories.
    The thing about China that I knew about, that they're 
telling me that we basically only imported about 2 percent of 
China's steel. China produces 50 percent of the world's steel, 
and they were basically using every gimmick they could to get 
to our markets through other venues, if you would, camouflaging 
that. Was that part of the problem we had with China? And with 
a $350 to $500 billion trade deficit, it even exasperated it.
    Ambassador Lighthizer. So the answer to that, Senator, in 
my judgment is yes. And let's talk for a second about steel 
with China because it's not just a steel problem with China, 
it's an example of the Chinese industrial policies.
    Senator Manchin. Correct.
    Ambassador Lighthizer. So they basically, for noneconomic 
reasons, created a beyond enormous steel industry, not for 
economic reasons. They basically did it through state 
capitalism. To give you an idea, a relative idea, we make in 
the United States something just south of 100 million tons of 
steel. They make 1.1 billion tons. I mean, they--and they have 
created all this in the last few years----
    Senator Manchin. What do they consume?
    Ambassador Lighthizer. Pardon me?
    Senator Manchin. What does China consume of what they 
produce?
    Ambassador Lighthizer. I'm going to guess that their 
consumption--they probably have $300 billion worth of excess 
capacity. I mean, a million tons, 400 million tons, I mean----
    Senator Manchin. So they're intentionally overproducing.
    Ambassador Lighthizer [continuing]. It's enormous. 
Basically what they did is they created it largely to get rid 
of imports, and then they kind of--as these things do, it got 
out of control. And then they ended up so big that they swamped 
the entire market of the entire world. And then everywhere you 
look, if you--everywhere you look, in every country you look, 
Chinese excess capacity has hurt the steel industry. It's 
across the board, everywhere in the world. In fact, there's a 
group, the Steel Forum, and that's all they do is meet and talk 
and complain about this.
    But I say it's more an example of the problem because you 
have the same thing with aluminum, you have the same thing with 
solar, you have the same thing with any number of high-tech--
yes, high-tech products. In our view, you can't be in the 
position where we are the residual of Chinese state capitalism. 
We have to stand up for ourselves and make sure that market 
forces determine who survives and who doesn't survive. And the 
steel industry is a classic example of that. The world steel 
problem is entirely a Chinese problem.
    Senator Manchin. Do you see a timetable--I know my time is 
up--a timetable on basically the correction of this unfairness 
of trade? Because we don't want a trade war. We definitely 
think we need a correction, and the correction--there's some 
pain going on with this correction. Can you give us an idea of 
time?
    Ambassador Lighthizer. So to me, you have to kind of take 
it problem by problem. Renegotiating NAFTA, I think we're close 
to a point where we're going to have that finished. We had 
problems, on a much smaller scale, with Korea, and we have 
resolved that issue. I have a whole list of smaller ones 
involving ag that no one is going to give me the time to read, 
but to notionally know that it's there.
    Senator, you already heard the list, so I won't--I'll just 
let you tell your colleagues.
    Senator Manchin. As a matter of fact----
    Ambassador Lighthizer. But there's a lot going on, but I 
would--that's all by way of saying China is going to be a 
longer term problem. That isn't to say we're going to be in a 
trade war with China, in my judgment, but we have to change the 
dynamic. The direction we're going in right now, these are 
numbers, $375 billion in goods deficits, and I repeat, not as a 
result of economic forces, those are numbers that are not 
sustainable, never even heard of in the history of the world. 
These are such cataclysmic numbers that something has to be 
changed.
    And what the President focused on, because it's the most 
important part, and here is our study that I alluded to, which 
is the basis for all these tariffs. And this is a study that we 
did, we started in August, we did it for--for--I apologize for 
running over, but I think a lot of people have this--this 
question. This is a study, it was an 8-month study. It was an 
excellent study. I commend it to your staff to read. Many of 
you probably have. I had it published, because this is the 
basis, this is the reason we're putting tariffs in this area. 
And I even, because I had worked on the Hill, in the back of 
it, I put in nine charts so that Members could go through the 
charts and not have to read the thing, so they understand the 
basis.
    This is--we are taking this action because technology is 
the future of the American economy. This is our ultimate 
competitive advantage, is technology. And if we don't stand up 
for it, we don't change the direction, we're not going to--our 
kids aren't going to have the kind of economy we want. And this 
is a study which I really commend because it is the basis, and 
it's really a well-done study, and a lot of people who do not 
agree with us at all on trade have read the study and said, 
``You're right.''
    Senator Manchin. Thank you.
    Senator Moran. Ambassador, thank you. I'll take your 
assurance that my colleagues were delighted to hear what you 
had to say and, therefore, will have no additional questions. 
So the time will not have lapsed.
    Senator Collins, we'll see if this has any truth.
    Senator Collins. Thank you, Mr. Chairman.
    Welcome, Ambassador. Let me start by thanking you for 
sending officials to Maine last month to meet with our 
lobstermen dealers and processors. Since that visit, 
regrettably, the situation for the lobster industry has 
worsened. China is admittedly a very bad actor when it comes to 
trade, but we have to be sure that the actions we take don't 
end up hurting our own domestic producers.
    China, since that meeting, has slapped a retaliatory tariff 
on Maine's lobster that is our State's largest export. It 
generates about $1.5 billion in economic activity in my State. 
And experts--exports of Maine lobsters to China had nearly 
tripled during the past 3 years. Compounding the problem facing 
the industry is the new trade agreement between Canada and the 
European Union, known as CETA. It has eliminated and phased out 
tariffs on frozen, live, and processed Canadian lobsters that 
goes into the European Union.
    And so the result is that American lobster exporters are at 
a serious disadvantage because they're now facing tariffs of 
between 8 and 30 percent to sell into the European Union, which 
used to be a very profitable market accounting for 
approximately 15 to 20 percent of annual American lobster 
exports.
    So when you combine what's happening with Canada with the 
retaliation by the Chinese, my lobster industry is saying to 
me, ``How are we going to survive while the administration 
works out its long-term plan?'' And that's my question to you.
    Ambassador Lighthizer. Well, thank you, Senator. I'm, of 
course, as you know, very familiar with the problem and the 
issue, and Ambassador Mahoney, who is behind me, was my deputy 
who went to Maine. And you are, of course, completely right, 
that lobstermen from Maine are both targets of the Chinese, but 
also have this unfortunate circumstance that the relationship 
between the CETA, the FTA between Europe and Canada, has also 
taken away one of their markets. And I think the good news is 
that this is something we can now focus on in our talks with 
Europe. It's very much something that's on our mind and 
something that hopefully we can rectify in the context of those 
talks, the European part of it.
    The China part of it is more--you know, is the same problem 
that we have on all of the things that they target. And by the 
way, I want to make it clear, too, that there is no WTO--there 
is no international trade law justification for them taking 
these actions. They did it completely as rogue nations, and we 
brought a WTO action against them for that.
    In the case of China and this specific retaliation, we are 
always willing to talk about China. We think managing that is 
going to be not just for the lobster industry, but for others, 
managing that relationship is going to be something that's 
going to require a lot of effort and really an attempt to try 
to minimize the effects as we move forward on all the 
industries that are targeted by them. But I do think there is 
hope on the European side in the not-too-distant future that we 
can rectify that problem because that's even before the other 
thing started. It was something that, because of you and some 
of your colleagues, was very much on our radar screen.
    Senator Collins. Thank you. The second question I'm going 
to have to ask you to respond for the record since my time will 
be up by the time I finish the question, and that has to do 
with the 232 national security tariffs on steel and the impact 
on American--small American manufacturers.
    And I'd like to give you a specific example from the State 
of Maine. It's a 183-year-old family-owned business called 
Hussey Seating in North Berwick, Maine. And it manufactures 
bleachers and auditorium seating for distribution across the 
globe. So here's what has happened. Prices for domestically 
sourced steel have risen significantly to match the tariff 
price of imported steel, and so overall steel costs for Hussey 
Seating have increased approximately 45 percent over the same 
period last year. And the problem is that this small 
manufacturer has locked in contracts well before beginning a 
project that did not anticipate a 45-percent increase in the 
cost of steel. There are other companies in my State, Stonewall 
Kitchens, in York, Maine, which distributes specialty foods, 
our maple syrup industry, our blueberry processors are worried 
about the retaliation from Canada in response to the 
President's Section 232 decision.
    So my question for the record to you is, Aren't we risking 
doing tremendous damage to our own domestic industries by using 
the national security justification against some of our closest 
allies? And I know my time has expired, but if I could have an 
answer for the record, I'd really appreciate that.
    Ambassador Lighthizer. Thank you.
    Senator Collins. Thank you.
    Senator Moran. Thank you, Senator Collins.
    Senator Reed.
    Senator Reed. Mr. Ambassador, thank you. I think I'm going 
to follow up on Senator Collins' question, which is, Is Canada 
a national security threat to the United States to justify 
Section 232?
    Ambassador Lighthizer. So----
    Senator Reed. That's a yes or no.
    Ambassador Lighthizer. Well, that was just the beginning of 
the answer. The way--you have to start with the proposition 
that you think you need to help the steel industry, for 
example. If you're going to do it, you have to put it--you have 
to do it globally. You can't help the industry by just putting 
on tariffs against one country because if you--first, we have 
tariffs on China because that's where the problem is. The 
product then comes in through other sources.
    So if you're making--if your decision is we're going to 
have the United States pay higher prices for steel to save an 
industry, you've made that decision, and hopefully you come to 
the point where the--where you're--where you're--the price 
increase is worth the pain, and people have different ideas of 
where that point is, but this is logically how you would do it. 
You can't be in a position where all the benefits of that, for 
example, come into the--go to the Canadian steel manufacturers. 
You have to be in a position where the benefit, if we're paying 
the price, the benefit goes to the United States steel 
producers.
    So you have to do something to stop the--Senator Long used 
to have a great comment, which was if you have one hole in the 
net, all the fish will swim through it if you give them enough 
time. You have to be in a position where you don't have a hole 
in the net. That's not to suggest that we think Army tanks are 
going to come in from Canada. The point is that if you've made 
a decision that it's in the national interest to save the steel 
industry, then you have to put in place a program that actually 
works, and that requires not having holes in the net. 
Otherwise----
    Senator Reed. Okay, now we're down to the yes or no. Is 
Canada a national security threat to the United States 
justifying Section 232 action against Canada? Yes or no.
    Ambassador Lighthizer. In the case of steel, yes, 
absolutely, because of the nature of the program, for sure.
    Senator Reed. Because of the nature of the program.
    Ambassador Lighthizer. That's--that--otherwise, you don't 
have a program. You don't have a program if you let some----
    Senator Reed. No, no, I'm not talking a program. You have 
identified a country----
    Ambassador Lighthizer. I'm sorry?
    Senator Reed. You have identified a country. The basis for 
the action against Canada is a threat to the national security 
of the United States. You have walked around that question for 
the last several minutes and saying the whole program has to go 
in effect.
    Let me put it another way. Okay? This is a country that has 
sent forces to Afghanistan. Those forces have--some of them 
unfortunately have given their lives in a joint effort with the 
United States. This is a country that since the 1950s has been 
maintaining our early warning for attack, then the Soviet 
Union, now Russia. This is a country who uses our equipment. 
This is a country who has been with us every step of the way. 
And I guess, again, Are they a national security threat to the 
United States, justifying legally--you're a lawyer--the 
imposition of this 232?
    Ambassador Lighthizer. And my answer is if you are of the 
opinion that the 232 is justified because of the need to 
preserve the U.S.--if that is your decision, then you have to 
put in place a provision, a program, that actually works, and 
that means every country has to have--you can't let--you can't 
let all the steel come in through any other country. Otherwise, 
the program doesn't make any sense. That's the context. Nobody 
is declaring war on Canada or saying they're an unfriendly 
neighbor, they're obviously not. They're a great ally and 
certainly one of America's closest friends and closest trading 
partners. But if you decide that you need to protect an 
industry, you can't be in a position where the protection is of 
no value because everything comes in through----
    Senator Reed. But your decision is based----
    Ambassador Lighthizer [continuing]. Canada.
    Senator Reed. Mr. Ambassador, you decided that you want to 
do something for the industry, or not do something for the 
industry, and then you've climbed onto Section 232 because it's 
the only available legal status at the present, but that 
premise is the national security of the United States. And I 
don't know what kind of data or information you have that would 
show that Canadian imports of steel or any other products would 
impair the functioning of our steel industry. I don't think 
you've got a good legal basis for what you're doing.
    Ambassador Lighthizer. Well, I mean, that's--I mean, that's 
the fundamental question. The fundamental question is, Do you 
think--it's not really about--in my judgment, with all due--
it's really about Canada or Mexico or Europe, it's about, Do 
you think having a steel industry is a national security issue? 
And if you conclude that it is, then you have to put in place a 
position. If you conclude that it isn't, then you don't do 
anything.
    Senator Reed. No, that's not true.
    Ambassador Lighthizer. That's the fundamental issue.
    Senator Reed. You're--Mr. Ambassador----
    Ambassador Lighthizer. But that's the----
    Senator Reed. Mr. Ambassador, okay. So let's--what else can 
we invoke Section 232 for?
    Ambassador Lighthizer. I'm sorry?
    Senator Reed. Can we--can we use Section 232 to protect 
Hollywood, the entertainment industry?
    Ambassador Lighthizer. To do? I'm sorry.
    Senator Reed. Can we use Section 232 to protect Hollywood, 
the entertainment industry, because we want to maintain an 
entertainment industry in the United States----
    Ambassador Lighthizer. The entertainment----
    Senator Reed. So China is a--China is a threat to us, 
France is a threat to us, those new wave films are just cutting 
the heck out of us. You're using--you're using national 
security as kind of a generalized premise, and I don't think 
valid premise, to go after countries, individual countries, 
that are, frankly, ironically, are contributing more to our 
national security than--than--they're contributing a lot, let 
me stop there. But my time has expired.
    Senator Moran. Thank you, Senator Reed.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman, and thank you 
for convening this very, very appropriate and timely hearing.
    Ambassador, thank you for being here with us. I want to 
talk about the seafood tariffs, 25 percent on the American 
seafood imports. It has clearly rattled my State. Our seafood 
industry is our--the number one industry, private industry, in 
terms of the jobs and the economic opportunity that it brings. 
Last year, with our salmon exports, about 40 percent of our 
salmon went to China. Over the last 5 years, it's been about a 
third of our salmon has been exported to China, and it's not 
just the salmon. With cod, 54 percent of our cod last year went 
to China.
    So this is very, very significant to us. We're still trying 
to figure out exactly what this means, not only to our 
fishermen, but to the processors, to the logistics industry, 
all aspects of the seafood supply chain. And then the 10-
percent retaliatory tariffs that were announced just last month 
puts even more pressure on our seafood processors because many 
of our fish and shellfish that are harvested in the State are 
then processed in China before reimporting back to the United 
States for domestic distribution. So in many ways, we're 
looking at this, and it is, in effect, imposing a 10-percent 
tax on our own seafood, which is just a tough one to reconcile.
    We had actually been doing pretty well with China, making 
some, I think, significant steps towards reducing the tariff 
imbalance that we had seen. It had been 22 percent. The 
direction that things were taking it and where we were headed 
to was a drop to about 6 percent, and then everything stalls 
out just again a month or so ago. So we have been doing 
everything that we can to further that trade relationship with 
China and to really help balance things out, and it seems that 
the plan that we were on has now been set back and set back in 
really a debilitating way.
    Keep in mind this follows on the heels of Russia's 
retaliation to U.S. sanctions back in 2014, when there was an 
embargo on American seafood imports. So we felt the impact of 
that. It's been about a $40 million loss to the State. The 
previous administration didn't take any steps to address that. 
So we've got that that we're dealing with. Now we are looking 
at these additional foreign markets that are at risk.
    When I listened to Senator Collins and her description of 
the lobster industry and the impact that she's got going on 
with Canada, it is very akin to what we are seeing, perhaps 
just different countries involved here.
    So I've got the same question that Senator Shaheen has 
because my fishermen, my processors, those in the logistics 
industry, everyone who is part of this chain are saying, ``What 
is the plan? Because we don't see--we thought we had a pretty 
good plan, we were working towards it, and now everything has 
been pulled back.'' So how can you give that assurance to this 
seafood industry that, again, it's not just critical to Alaska, 
but to so many of our coastal States?
    Ambassador Lighthizer. Well, thank you, Senator. First of 
all, you're right, it's way--it's way beyond just Alaska. We've 
heard from a number of States that have the problem, and all 
the retaliation in seafood has been from China because they 
believe it's an effective political tool, and that's very 
unfair to the people that are in that industry, much in the 
same way that agriculture has been targeted by others, but also 
primarily by Chinese----
    Senator Murkowski. And if I may interrupt you and just ask 
the question then, Because they have been impacted, as you say, 
similar to farmers, is it my understanding that any of this $12 
billion in aid that is directed to agricultural commodities, I 
look at that and I don't see that there would be any allowance 
for our fishermen. We call them ``farmers of the sea,'' but 
apparently that doesn't seem to fit with your definition. And 
don't get me wrong, Alaskans are not necessarily looking for or 
supporting this what they consider to be this bailout, but they 
are interested in knowing, does--would this encompass them as 
well because of the impacts that they have seen?
    Ambassador Lighthizer. Well, I'm not an expert on the USDA 
program. It would--it's my understanding that it doesn't, but 
I'm not at all an expert on it. I just--I don't--that's 
something that the Department of Agriculture does, and I'm 
not--I mean, I just generally know about----
    Senator Murkowski. This is a very, very, very significant 
industry in the country.
    Ambassador Lighthizer. I--I----
    Senator Murkowski. So we need to know whether or not we're 
going to--we know that we've been impacted, so if there is 
going to be some relief, one would assume that somebody has 
looked critically at these definitions to determine, ``Okay, 
who's eligible for this $12 billion?''
    Ambassador Lighthizer. It's--it's my--in the first place, I 
once--I repeat I'm not an expert. It's my understanding that 
they're using existing programs that have already been set up 
by the Congress so that they're using existing authority under 
existing law and existing funds, and I don't know how quite--
I'm not an agriculture expert and that in U.S. agricultural 
programs. Others----
    Senator Murkowski. But some of those existing funds in the 
agriculture--in the--for instance, in the purchase and 
distribution program, have been used in the past to actually 
help Alaskan markets purchase surplus that is then donated. So 
we gain benefit from that. So if you're taking from this 
program to allow for benefits that would go exclusively to the 
traditional agriculture sectors, then you're putting us at 
further disadvantage. So I'm just trying to get some clarity 
here. I don't mean to be rude in interrupting, but I--these are 
critical----
    Ambassador Lighthizer. No, I understand, and I--I 
understand completely why you're--why it's such an important 
problem, and it's a serious, serious problem to your State and 
to a number of other States.
    And with respect to the specifics of what products are 
covered, I'm happy to look into that and get back to you and 
give you an answer. And that's a legitimate question, and 
I'll--I'll go to the----
    Senator Murkowski. But is there a plan for seafood?
    Ambassador Lighthizer. I will--I will do that. The other 
thing I guess that I would say is that it is--it's no comfort 
to the people that are in that position, but we can't--the 
Chinese--what the Chinese are doing, if you agree with us that 
it's intolerable, or if you even take it to another step and 
say it involves some other national--some national security 
issue, it's--we have to figure out some way so that specific 
people are not targeted and are hit, but we can't be in a 
position where China has the on/off switch on whether we do 
things that are in our national interest by being able to 
unfairly attack various constituents. That's the nub of the 
problem.
    But on the specific question about the program and seafood 
specifically, I'll go to the Department, we'll go to the 
Department of Agriculture and get back to you with an answer. I 
mean, I'm not--I--I agree, you're raising significant and 
important questions.
    Senator Murkowski. My time has expired. Thank you.
    Senator Moran. Senator Schatz.
    Thank you, Senator Murkowski.
    Senator Schatz.
    Senator Schatz. Thank you, Mr. Chairman.
    And, Ambassador, thank you for being here.
    I want to follow up on Senator Reed's question around the 
national security justification under 232 for steel tariffs and 
follow up because you are considering automobile tariffs, and I 
quote, because imports are weakening our internal economy.
    So it does seem to me that you're looking at using 232 
because it's sufficiently broad and gives you discretion to 
assert not that we need to secure our own supply and our own 
capacity, for instance, for industrial shipbuilding if we have 
to do a war buildup, but, rather, the basic argument is 
anything that hurts our economy, hurts our national security, 
and, therefore, can hang on 232.
    First of all, am I getting that right?
    Ambassador Lighthizer. Well, I don't think it's fair to say 
that anything that hurts our economy is national security. 
Personally, I --
    Senator Schatz. Okay, so it's a question of scale, but it's 
not --
    Ambassador Lighthizer. I----
    Senator Schatz. Hold on. It's a question of scale, but not 
a question of category because when people think that 232 is 
being invoked for the purpose of steel, there's a kind of nexus 
that you may infer that doesn't exist. I thought initially that 
what you were saying is we need to be able to build our own 
stuff in case we need to build up for a war. You didn't make 
that assertion. You said anything that hurts our economy 
sufficiently is a national security issue, which is why you are 
now moving to automobiles.
    So it seems to me that anything that is large enough, even 
if there is no real direct nexus to national security issues, 
and even if we are undermining our national security by 
offending some of our greatest allies, that you are now in a 
position where you're arguing we're going to use 232 with near 
impunity.
    Ambassador Lighthizer. Well, I guess, in the first place, 
I'm not arguing at all, and I'm certainly not arguing that we 
use 232 on everything in the economy. So if I gave you that 
impression, I want to change that impression right now. That's 
not my position at all.
    With respect to the action the President took on steel, 
it's, in my judgment, it's clearly----
    Senator Schatz. Well, we went over steel. Why don't we--why 
don't we cover automobiles, and you can tell me why automobile 
tariffs should be justified under the national security 
process. And I will also just layer one more question, which 
is, Did this actually go through the NSC? I mean, did this go 
through a proper national security process? Because the 
reporting about it--and I'd love for you to correct the 
reporting if necessary--is that this originated from the White 
House and USTR, and then they sort of papered over it to comply 
with the statute, but there are not a lot of national security 
professionals that think this is--was legitimately done.
    Ambassador Lighthizer. Well, in the first place, just so 
all the members understand, 232 has nothing to do with USTR, 
right? So it didn't begin with USTR because we--this is a 
Department of Commerce program. It has nothing to do with the 
United States Trade Representative's Office, so it's not my--I 
didn't do the study. I was involved in policy discussions about 
what the solutions should be, as were the National Security 
Advisor, all the appropriate national security department, 
under that statute. Once again, it's not my statute, I'm not 
responsible for it. Under that statute, it's--it is a 
decision--the study is done by the Department of Commerce in 
consultation with the Department of Defense. So the Defense 
Secretary is very much involved----
    Senator Schatz. No, I know all the statutes. I know.
    Ambassador Lighthizer. It's----
    Senator Schatz. I don't have a lot of time. I want to get 
one more question in.
    Ambassador Lighthizer. I'm sorry.
    Senator Schatz. I guess the question that I have, and it's 
following up on Senator Murkowski's and Senator Shaheen's 
question, is that it seems to me that we're playing chicken 
with China, and the fundamental disadvantages that we have are 
numerous, but among them are that they take a 50- or 100-year 
view, and we, because we're a democracy, take a every-2-years 
view. And we are trying to stare these folks down. Now, we've 
freed up $12 billion, which we're going to borrow from China--
right?--to soften the blow of our own policies because we just 
drove our own prices down by 20 percent, and somehow we've 
decided that that increases our own leverage.
    But if I'm China, I'm looking at the United States and I'm 
saying you've got bipartisan upset, you've got farmers and 
ranchers and fisheries and manufacturers and just about 
everybody across the country in a panic about this, and I would 
wait us out because why would you stare down a non-democracy? 
They can incur more pain over more time than we can because we 
all have an obligation to our own small businesses and large 
businesses, who are not just on the edge of having a bad year, 
but on the edge of shutting down or losing contracts forever. 
So even if you come back and it's, you know, 18 months from now 
and the price of soybeans are now 14 bucks up from 8, we've 
lost our contracts.
    So how do we have leverage in a situation where they have 
unending patience and we have almost none?
    Ambassador Lighthizer. Well, I mean, that's a long 
question, and I am prepared to give you a long answer.
    Senator Schatz. That's fair.
    Ambassador Lighthizer. First of all, you say the Chinese 
are clever because they have a 50-year view. We should be 
clever and have a 2- or 3-year view. That doesn't make any 
sense to me. I believe that----
    Senator Schatz. No, I'm saying we're a democracy, and so we 
take a shorter term view because we are responsible to our 
voters periodically.
    Ambassador Lighthizer. So does that mean that democracies 
always lose to authoritarian governments? Does that mean the 
state capital----
    Senator Schatz. No, it just----
    Ambassador Lighthizer. Does that mean----
    Senator Schatz. Sir, it just means you don't pick stupid 
fights.
    Ambassador Lighthizer. If--look, if your conclusion is that 
China taking over all of our technology and the future of our 
children is a stupid fight, then you are right, we should 
capitulate. My view is that's how we got where we are.
    Senator Schatz. So----
    Ambassador Lighthizer. I don't think it's a stupid fight. I 
don't know a single person that's read this report that thinks 
it's a stupid fight to say China should not be able to come in 
and steal the future of American industries.
    Senator Schatz. I'm not----
    Ambassador Lighthizer. To me, that doesn't make any sense.
    Senator Schatz. I'm not suggesting that we have any 
disagreement about our end goal, but that's like telling me--
you're like a golf pro saying, ``Make sure you hit it in the 
middle of the fairway.'' Everybody wants to hit it in the 
middle of the fairway. Everybody wants better trade deals. We 
are doing it badly right now. That's what's happening.
    Ambassador Lighthizer. Well, tell me what we should do, 
Senator.
    Senator Schatz. I've run out of time. Thank you.
    Senator Moran. Senator--Senator Boozman. Excuse me.
    Senator Boozman. Thank you, Mr. Chairman.
    And thank you, Ambassador, for being here. First of all, I 
want to congratulate you and the President and the team that 
worked on the European situation, and hopefully, now that we 
have a framework, we can in a timely fashion, actually get that 
nailed down, which is so, so very important.
    I'd like to talk to you a little bit about some specific 
things that are going on that really are dislocating short term 
and long term. Just this week, a constituent contacted me 
regarding the hardwood lumber manufacturing industry. Virtually 
all of the quality U.S. hardwood lumber, which is primarily 
manufactured in the South and Appalachia, is exported to the 
Chinese market. Since U.S. tariffs have gone into effect, their 
purchases of our U.S. hardwood lumber have not decreased, but 
essentially have ceased. Prices are in freefall. Markets have 
collapsed. Mills will be closing unless the issue is resolved 
fairly soon.
    It's being said that short-term pain, long-term gain. We 
understand that, and I don't disagree with what you were saying 
just now. We have to get these problems done. But in these 
rural Arkansas towns, and these rural towns throughout the 
South, it's not a matter of the mills just shutting down, these 
are very rural areas, the community shuts down.
    So I guess what I would like to know if you're aware of 
that particular issue. And the way that we can allay that is to 
open other markets to take the place of the Chinese market. And 
I guess I would like to know what we're doing in regard to that 
until we get this sorted out.
    Ambassador Lighthizer. Well, yes, thank you, Senator. First 
of all, thank you for being there and supporting the President 
when we made our announcement yesterday.
    Senator Boozman. Thank you.
    Ambassador Lighthizer. And I do think it's a significant 
decision, I mean a significant initiative, and hopefully one 
that will come to fruition in as brief a period of time as is--
as is reasonable.
    The solution to a lot of these problems, not just the ones 
because of China, but other trade problems, is to find new 
markets, is to open up new markets. And the President is 
committed to doing that. He's committed to doing it on a 
bilateral basis.
    The effort, as I say, has been delayed somewhat because it 
took--I won't get into process, but it took a long time to get 
people confirmed. In my own case, it took a number of months, 
and in the case of my deputies, it took even longer, but 
ultimately they're in place. And this is a very high priority 
for us to open up markets in East Asia, but in other areas, 
too. The European initiative is an approach. We have, as I say, 
negotiations going on with Japan, and opening up markets in 
these specific areas is something that we have as an objective 
and something that we should do.
    I should say this just generally to Members or to Members' 
staffs, that to the extent there are business people that come 
in and have specific problems, I know you bring them to us, but 
everyone should bring them to us, part of what we do is try to 
solve these issues as they come up, but the other part is we 
put in these specific company situations into the metrics that 
we use to negotiate with other people because there are 
situations where when we're trying to decide--I'm saying, ``Who 
should we negotiate with in East Asia,'' for example, 
``initially?'' and you look at a situation where there are real 
sales by real U.S. companies that can benefit from it.
    So, I mean, kind of a classic like example of the problem, 
it's not one that affects your situation, but a classic example 
of the problem is you look and you say the Philippines imports 
cars from Japan because they have an agreement that they can 
come in duty-free. Our cars can't come in duty-free. Therefore, 
we can do an agreement with the Philippines where we can now 
ship our cars there and it will--won't cost the Philippines 
anything at the margin because we'll get the benefit and take 
market share away from----
    Senator Boozman. Can you talk to us very quickly? There are 
lots of situations where there simply aren't other products 
being made in the country.
    J.B. Hunt was up here testifying yesterday about the 
containers. There are no domestic manufacturers here of that 
product.
    We have another company that makes drill bits. They're the 
only company in the United States that make the drill bits. 
They're stuck with a 25-percent tariff on the stuff that they 
use to make the drill bit. It comes from the UK. Their 
competitors, though, are able to bring that in with a drill bit 
being made in the UK, and so they're at a tremendous 
disadvantage.
    What happens with these companies where there is no other 
supply in the United States? How do we get around that?
    Ambassador Lighthizer. Well, I would say--now we're talking 
about the steel program specifically----
    Senator Boozman. Well, again, this is just another 
component that's gotten caught up in this.
    Ambassador Lighthizer. So if there are--if there are--if 
it's a product coming in involving steel or aluminum, then 
there's the exclusion process. In the case --
    Senator Boozman. But is the exclusion process done in a 
timely fashion?
    Ambassador Lighthizer. Well, it's done--that exclusion 
process--and I'm sorry for being long about this, but I want to 
be clear--that exclusion process on steel and aluminum is done 
at the Department of Commerce, and I'm not involved in it, but 
I----
    Senator Boozman. But it needs to be done in a timely 
fashion.
    Ambassador Lighthizer. With respect to the Chinese tariffs, 
so we have--the President announced 50--this is slightly 
complicated, and I apologize--he announced $50 billion in 
tariffs that we would take because of the theft of intellectual 
property, a calculation that was made by economists, not by us. 
It wasn't a number pulled out of the hat, it was a calculation 
that this is one part of what the Chinese did that was 
calculable, was $50 billion. So he announced a series of 
measures. And you say here is--and one of them is to put in 
place $50 billion worth of tariffs.
    So we said here--we have an algorithm that came up with 
here are the things that are least likely that affect Chinese 
policy, least likely to affect U.S. manufacturers and U.S. 
consumers and have the maximum effect on China. That's the 
algorithm that was created.
    And then we have a hearing. And people who are in this 
situation come forward and they say, ``Hey, this has this 
peculiar circumstance on us,'' as you would suggest. And as a 
result of that hearing--we had 3 days of hearings--it's now in 
the USTR, not the other thing--we had 3 days. As a result of 
that, we took $16 billion out of the 50 and said, ``No, we 
don't want to do this,'' because people came in and made the 
kind of argument that you're making, and they said, ``This is 
not going to ultimately net effect help us, it's going to hurt 
us.''
    So we said, okay, fine, we'll take the 50, we'll reduce it 
by 16, and we put the 34 in place, and that's what we did. And 
then we said, now, to make up that, we're going to go to the 
rest of the Chinese imports and find another 16 using the same 
algorithm. So that's working its way through process and people 
making their comments on that.
    With respect to the 34 that's in place, people can come in 
and make an exclusion process that we have at USTR who have 
peculiar circumstances. So that's one answer to your question. 
The other answer is there are people who will come in and say, 
``I'm having this effect, and this downstream product is in the 
same circumstance, they should have a tariff on them, too.'' 
And there's a small, but an element of that where people will 
come in. And then when we're looking at this, we try to do 
that.
    Now, all of this is complicated and only justified if you 
think the objective is justified, right? If you think--if it's 
not worth the battle, then none of this makes any sense. If you 
think it's significant, then we have to go through this to make 
it as painless and as fair as we can make it, and that's 
basically the process that we have.
    Senator Boozman. Thank you.
    And thank you, Mr. Chairman.
    Ambassador Lighthizer. But thank you for giving me the 
opportunity to explain that because I wanted to sort of lay 
that out a little bit.
    Senator Moran. We've been very lenient in our time, and 
it's important to hear what you have to say, and it is very 
complicated subject matter.
    Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman.
    Thank you, Mr. Ambassador. And I agree with your analysis 
about China's long-term plan to essentially steal a lot of U.S. 
advanced technology. And, as you said, they do this over a long 
period of time. Some of the most egregious examples of Chinese 
companies that have stolen U.S. technology are Huawei, which is 
a giant telecommunications company, and ZTE, another giant 
Chinese telecommunications company.
    Here's what TechCrunch said about ZTE just a couple months 
ago, quote, ``To get a sense of just how egregious ZTE's 
behavior truly is, we need only to consult PACER, the national 
index of Federal court cases. A search of PACER reveals that in 
the U.S. alone, ZTE has been sued for patent infringement an 
astonishing 126 times just in the last 5 years.'' And they go 
on to give other examples of how ZTE, in collaboration with the 
Government of China, has engaged in wholesale theft of U.S. 
technology, which is why there was bipartisan support here in 
April when Secretary Ross and the Department of Commerce 
imposed a denial order on ZTE.
    And I was astonished when we let them off the hook. And I 
want to know why we let them off the hook. And here's what--
here's what President Trump tweeted out. He said, quote, ``Too 
many jobs in China lost. Commerce Department has been 
instructed to get it done.'' And then he ordered the Department 
of Commerce to reverse the denial order on ZTE, one example of 
where we actually hit them where it hurts as opposed to them 
hitting us where it hurts, like on agriculture and fisheries.
    So the Congress, on a bipartisan basis, in the NDAA bill, 
the Defense Authorization bill, we passed legislation to 
reimpose the original order. The administration lobbied 
furiously against it. ZTE hired a lobbying firm here in 
Washington that spent $1.3 million in a few months and ended up 
getting their way. ZTE thought it was money well spent, and 
damn right it was well spent for them because as a result of 
the administration's actions, they took that provision out of 
the NDAA bill, which is coming to the floor of the Senate now.
    Now, you were asking Senator Schatz what he would do 
differently. And I want to know why we let ZTE off the hook 
when they have an astonishing record of engaging in exactly the 
kind of wrongdoing that you talked about while every national 
intelligence defense person who's been up here has said they 
pose an espionage threat, and why, after they were caught 
violating our sanctions against North Korea and Iran, 
flagrantly and repeatedly, we finally did the right thing, and 
then for God knows what reason, the President changes his mind. 
It's exactly the kind of situation you're talking about, where 
we had an opportunity to really send a strong message. Why did 
we reverse that decision?
    Ambassador Lighthizer. Well, first of all, Senator, I agree 
with you that ZTE is a bad actor, they were determined to be so 
by the Obama administration, and they took action against them, 
and they were determined to be so by the Trump administration. 
Now, you can make an argument as to where the line is, what you 
end up--what you do. They were punished. In your view and the 
view of a lot of other people is that it wasn't a sufficient 
punishment. It was the largest fine in history. It was 
requiring them to change their management, and it was putting 
in place probably the first time ever a monitoring system 
inside the company, but----
    Senator Van Hollen. Mr. Ambassador, I'm aware of what they 
did. It was a large fine. Look, this is a company that just 
spent $1.3 million in a couple months to lobby. I mean, this is 
a slap on the wrist given where we had them. We had them--we 
had them caught red-handed not only in sanctions, but it was an 
opportunity to address the issue that you have been talking 
about very passionately, and I appreciate it. They have been 
Exhibit A of flagrant violators. If we're serious about this, 
how can we let them off the hook? Did you support the decision 
to let them off the hook?
    Ambassador Lighthizer. I guess what I'm arguing is that 
they're not let off the hook.
    Senator Van Hollen. Okay, what did we get for it? What did 
we get? What did we get in terms of your efforts? I don't think 
we should be trading away national security, but what I want to 
know is when we let them off the hook, because the Department 
of Commerce had imposed the denial order, they had imposed it, 
it was going to be in effect for 8 years. Now it's not. Now 
they get to go back to doing business. Yes, there will be some 
more oversight, but I want to know what we got for it. What did 
we get for it, Mr. Ambassador?
    Ambassador Lighthizer. I guess I don't--I don't know what 
you mean by what we got for it.
    Senator Van Hollen. These are negotiations. I mean, we're 
talking about they are retaliating against us on a whole range 
of issues with regard to the steel tariffs. This is something 
that President Xi personally was upset about, the denial order 
on ZTE, the export denial order, and I want to know why we 
backed up and if we--since we backed up, what we got for it in 
this negotiation.
    Ambassador Lighthizer. Well, I guess I would say that the 
question is, What's the nature of the remedy? And it's an 
enforcement action. It's not part of--if your--if your question 
is, Did--Was there a tradeoff in the context of what I do? The 
answer is no, there was no tradeoff in anything that I do.
    Senator Van Hollen. You know, here's what I'm worried 
about. Here's what I'm worried about. Were you surprised when 
China retaliated, imposed retaliatory tariffs on agriculture 
and fisheries and all these things? Did that surprise you?
    Ambassador Lighthizer. No.
    Senator Van Hollen. Okay. I mean, you did file something at 
the WTO or you said they were violating the WTO rules, right?
    Ambassador Lighthizer. And I believe they are, right.
    Senator Van Hollen. And you weren't surprised that they did 
that, right?
    Ambassador Lighthizer. I'm sorry?
    Senator Van Hollen. You're not--you were not surprised that 
they violated WTO.
    Ambassador Lighthizer. I don't think they lived up to their 
WTO obligations in almost--I don't want to say in almost, but 
in many, many respects have not lived up to their obligations.
    Senator Van Hollen. Right. So here you're talking about 
these negotiations like we have them in little boxes, you're 
doing this, the Secretary of Commerce is doing this. I don't 
know why we would ever let them off the hook on ZTE when it was 
the one thing where we really had them squeezed. And what 
you're telling me is that was in somebody else's box and we got 
nothing out of it.
    Here's what--here's another thing President Trump tweeted 
out. He said when you're in a position like the United States 
where you're losing on trade, trade wars are good and easy to 
win. He tweeted that out just a few months ago. After hearing 
the testimony about the retaliatory tariffs that have been 
imposed by China and your inability to say when this is going 
to end, and I agree with you, it's really hard, do you disagree 
that this is going to be, quote, easy to win?
    Ambassador Lighthizer. I think, Senator, what--what the 
President's point----
    Senator Van Hollen. I just--is it easy to win? And what is 
winning?
    Ambassador Lighthizer. Well, I mean, to me, winning is 
opening up their market----
    Senator Van Hollen. That's right.
    Ambassador Lighthizer [continuing]. Have them stop stealing 
our technology----
    Senator Van Hollen. Right.
    Ambassador Lighthizer [continuing]. And to change their--I 
don't want to say change corporate capitalism because I don't--
I mean, state capitalism, I don't think you're ever going to do 
that, but change its negative effects on us. I think that's 
what we have to do. And we have to manage that over a period of 
time.
    And I think what the President was saying is when you--when 
things have been going so badly for so long, and, you know, 
this is not--we have to remind ourselves, this is not a 
situation that we created, right? This has been going on, I can 
bring the charts and show them to you, and I would have if you 
wanted to, but you can sort of see we have had a pattern of how 
we reacted to China in this case----
    Senator Van Hollen. Mr.--I'm really not contesting that. 
I'm not disputing the fact that for a long period of time we've 
been put at a disadvantage. What I'm arguing is that it's, 
number one, not easy to win, and I think you've said that, 
we've got to figure out a strategy, but I can tell you, it's 
damn sure not easy to win when you let them off the hook on a 
company like ZTE, that has been one of the most flagrant 
violators in terms of stealing U.S. technology, is an espionage 
threat, and violate our sanctions laws repeatedly and 
flagrantly. So if we're going to really be in this, let's be in 
this and not play Ping-Pong on issues when the costs are so 
potentially high in the United States.
    Thank you, Mr. Chairman.
    Senator Moran. Senator Van Hollen, thank you very much.
    Senator Capito.
    Senator Capito. Thank you, Mr. Chairman.
    And thank you, Ambassador, for being here, and thank you 
for the service to our country and the work you're doing. I 
also come from the State of West Virginia. Senator Manchin I 
think said it correctly, that trade agreements have not been 
traditionally very helpful to our small State, and that's why I 
join you in advocating for fair trade and protecting American 
jobs.
    I want to talk a little bit about the auto tariffs and 
frame it. We have a Toyota company, a Toyota plant, in our 
State, 1,600 employees, and I'm sure a lot of--we have 
peripheral businesses that are associated with that. But if you 
track what happens in that, in that supply chain, the raw 
aluminum comes from Canada. It goes to a Toyota plant in 
Tennessee that makes the engine block. The engine blocks then 
come to West Virginia, where we make the 6-cylinder very well. 
We make the 6-cylinder engines in addition to the 
transmissions. Then half of those engines go from West Virginia 
back to Canada, where they are dropped into the Lexus RX and 
then brought into this country for sale.
    So we have a lot of cross-border--crisscrossing the 
borders. We have a supply chain that is wholly wrapped up with 
us and our allies and the friendly nation of Canada. And I'm 
going to go back to what I think has been the essence of a lot 
of questions that we've had, is, What's the endgame here and 
when will we get it? If people are looking at making additional 
investments, which we, through our tax reform bill, that was a 
large part of our tax reform bill, was to bring about more 
investment in this country, and we're seeing that happening, we 
don't--we're finding a chilling effect because people aren't 
seeing an endgame.
    So my question is--you've addressed it slightly in saying 
there is an endgame, particularly as it comes to Canada and 
Mexico. I'm not looking for a date certain, but I'm looking for 
some more certitude in your statements to help lay these issues 
to rest.
    Ambassador Lighthizer. So thank you, Senator. I would say I 
think that the--the--we have a whole variety--we have a whole 
variety of problems, and I think the one you're addressing is 
the NAFTA issue generally.
    Senator Capito. Right.
    Ambassador Lighthizer. And it is our hope--I'm meeting this 
afternoon with the Mexican side on the NAFTA deal and a 
discussion including the representatives of the new--of the 
newly elected government----
    Senator Capito. Government, yes.
    Ambassador Lighthizer [continuing]. In Mexico. My hope is 
that we will, before very long, have a conclusion with respect 
to Mexico and that, as a result of that, Canada will come in 
and begin to compromise. I don't believe that they've 
compromised in the same way that the United States has or that 
Mexico has.
    So if--in terms of timing with respect to NAFTA, I would 
say the following: if you assume that you're going to have 
President Pena Nieto sign an agreement, a new agreement, with 
the United States, which is to say the current President of 
Mexico, there has to be 90 days' notice before that can be 
signed under TPA. So he's going to leave office on December 1. 
If you go back 90 days, that takes you to around the end of 
August.
    Senator Capito. Mm-hmm.
    Ambassador Lighthizer. So if we're going to have him sign 
it----
    Senator Capito. It has to be then.
    Ambassador Lighthizer [continuing]. With the consent, of 
course, of the newly elected President----
    Senator Capito. Right.
    Ambassador Lighthizer [continuing]. And the President of 
the United States sign it, and hopefully the Canadians, you're 
probably looking at having to have some kind of a conclusion 
during the course of August, and my sense is that that's not an 
unreasonable timeframe if everybody wants to get it done. 
That's what our hope is, Senator.
    Senator Capito. All right. Thank you. That's much more 
definitive.
    On the statements yesterday, the President talked about the 
EU markets opening up to American energy, something I'm very 
interested in with the LNG markets. I'm curious to know on that 
aspect in terms of the EU obviously wanting to diversify their 
energy mix, we know they've been reliant on Russia for a lot of 
their natural gas. I guess, is that a geopolitical decision by 
the EU to something that we can provide a good bargaining chip 
for us? Is that how that whole thing is coming about?
    Ambassador Lighthizer. Well, I tend to stay in my own lane 
and guessing that their geopolitical objectives is something 
that I'm probably not very good at. Having said that, there is 
always discussion about their reliance on energy coming from 
the east, and they're spending a lot of money to create 
infrastructure to deal with LNG presume--I mean, once again, 
I'm not--that's not my area to guess, but it certainly is 
logical to think that they want to do that.
    Senator Capito. Right. Right.
    Ambassador Lighthizer. And there was a lot of discussion 
about their infrastructure and the kind of thing that they--
they have committed to spend that money to be able to bring in 
and then get it through their distribution system. So it seems 
to be something that they have as an objective, but I don't 
want to comment on their relationship, obviously, with the----
    Senator Capito. Right. My time is up. Thank you.
    Senator Moran. Thank you.
    Senator Coons.
    Senator Coons. Thank you, Chairman Moran, Ranking Member 
Shaheen.
    And, Ambassador Lighthizer, thank you for coming here 
before the subcommittee to discuss the priorities and 
activities of USTR. I'm going to briefly mention two things of 
real interest and concern to me, and then move to a home State 
concern and tariffs and our overall trade policy.
    First, just on intellectual property and the Section 301 
actions. I spent 8 years as in-house counsel for a global 
manufacturer. We had all sorts of problems with IP theft from 
China. I think President Trump is absolutely right to 
prioritize being aggressive in pushing back against China's 
maligned trade activities that have gone on for far too long, 
and I appreciate their being made a priority.
    I do, however, have real concerns about the consequences of 
tariffs being misapplied in a way that doesn't marshal our 
allies in a directed effort to confront China's activities, but 
has, I think, negative secondary consequences.
    Second, as a result of Brexit, we have an opportunity to 
negotiate with the UK. Senator Portman and I have created a 
U.S.-UK trade caucus. We met with Liam Fox, the British 
Secretary of State for International Trade, with whom I believe 
you've also met, to talk about bilateral trade relations. I 
just want to ask up front, Do you support a post-Brexit U.S.-UK 
free trade deal? And do you plan to notify and engage Congress 
formally of your intention to begin negotiations, as TPA 
requires?
    Ambassador Lighthizer. The answer is yes and yes.
    Senator Coons. Great.
    Ambassador Lighthizer. I would just say at the appropriate 
time. I mean, they have their own system, they have their own--
--
    Senator Coons. Right. March of next year.
    Ambassador Lighthizer. Yes. The answer is yes and yes.
    Senator Coons. I think there are preliminary conversations 
we can have, but this is a potential opportunity to show what a 
modern FTA looks like between countries that are having a 
clear-eyed talk about IP, about data, about capital flows, 
about a lot of different things. So I look forward to working 
with you on that.
    Ambassador Lighthizer. And I look forward to working with 
you and the caucus. It is appropriate.
    Senator Coons. In my home State of Delaware, we are all 
about chicken. Our agricultural sector is very heavily focused 
on poultry, and soybeans and corn are the main feedstock for 
chickens. So soybean farmers in Delaware, who are already 
facing a disaster declaration because of both flooding and 
previously drought, have contacted me because soybean prices 
are at the lowest they've been in nearly a decade. And I just 
want to tell you a short story about how these Section 232-
based tariffs on steel, national security justified, are 
harming our relations and maybe harming our export 
opportunities.
    Senator Isakson, of Georgia, is a dear friend of mine. His 
State exports more chicken than any State. Sussex County, 
Delaware, exports more chicken than any county. And we started, 
under AGOA, many years ago trying to break down barriers to the 
export of our chickens into the South African market, not the 
world's largest market, but we're shipping now a significant 
quantity of U.S. poultry into that market after years of 
effort.
    We had a very difficult meeting recently with their trade 
minister. They do export a very small amount of steel into the 
United States market. They applied for a waiver. They don't see 
themselves as a national security threat to the United States, 
much like other countries. I've also recently met with their 
foreign ministers, Canada, Sweden, who are wondering why these 
long-time trusted allies are facing steel sanctions.
    In the specific case of South Africa, they are going to be 
justified in imposing countervailing duties that may well close 
the door to this newly opened market for our poultry. And I 
started by saying I agree with you that we should be fighting 
China's aggressive mercantilist actions. I disagree with the 
strategy. In fact, I've heard colleagues, Republican and 
Democrat, say, ``Where's the strategy in imposing tariffs in 
ways that may shut the door to critical export markets?''
    Let me ask about the tariff strategy. As Senator Schatz I 
think memorably suggested, a central planned economy like China 
may have more staying power than a democracy where all of us 
face constituencies in our home States that are increasingly 
upset about the impact of tariffs. I'm struck that the 
administration is proposing to dip into $12 billion borrowed 
from China through an FDR era program to try and provide 
support to farmers. And I know my soybean farmers might be 
interested in that. They'd rather have long-term contracts than 
short-term payments. But is there a plan to figure out how--I 
think I heard the seafood sector championed by Senators from 
Maine and Alaska. I've got manufacturers, small and medium 
manufacturers, that make things out of steel, filing cabinets 
and manufactured steel products. Will there also be payments 
available for those businesses harmed by the tariffs in all 
sorts of sectors? And how do you make those decisions, Mr. 
Ambassador?
    Ambassador Lighthizer. Thank you, Senator. First of all, I 
would say that the USTR has--spends a lot of time worrying 
about poultry and working on poultry, as you know.
    Senator Coons. Thank you. Yes.
    Ambassador Lighthizer. I would also say that among the 
actions of China that are unfair to the United States is 
actions that they take to limit our exports of poultry, as well 
as corn, wheat, and a whole variety of other issues that we can 
talk about, because we tend to focus on the technology because 
that's where the tariffs are coming from, but the reality is 
they're--while they're a good agriculture market, they should 
be much better because they take a number of steps, and we have 
a number of WTO cases against them for unfair trade--unfair 
actions.
    Senator Coons. But the point I was making, Mr. Ambassador--
--
    Ambassador Lighthizer. Yes.
    Senator Coons [continuing]. Was, yes, I agree with you, 
China we have all sorts of problems with, but you're now 
making--taking the unprecedented step of providing cash 
payments to support those farmers harmed by countervailing 
duties. Are you going to provide those to other sectors? And 
how will you decide that, since I have folks in my State 
suffering from steel costs rising from other tariff issues? And 
how long will we sustain these tariffs? Will we sustain them 
for months? for years?
    What prospect do we have of China caving on our core trade 
issues with them before it collapses our vital alliances with 
countries like Canada or Sweden, whose foreign ministers have 
recently expressed directly to me their sense of grievance or 
hurt at having been the subject of a national security-based 
tariff?
    Ambassador Lighthizer. So I apologize for giving long 
answers, but they seem to be questions that require long 
answers, so I'm sorry about that.
    In terms of, how long will it take with respect to, for 
example, Canada in steel and aluminum? Just to take that issue 
in a silo by itself. If we end up with a successful NAFTA 
negotiation with Canada, then as part of that, we expect there 
to be an agreement on steel and aluminum with respect to 
Canada. We don't have a similar process going on with respect 
to Sweden. But we do have a process, which we began yesterday, 
with respect to the European Union. And the view would be that 
if we are successful in coming to a conclusion on that, that we 
would also solve the steel and aluminum problem with respect to 
the European Union. So that's kind of--to answer those 
questions, that's more or less where we are on that part of the 
issue.
    On the question of, How long will it take to resolve the 
issue with China? my guess is, candidly, it's going to take 
longer because I think they do take a longer view, which, by 
the way, I think is the right view, and to the extent we can, 
we ought to be taking. I realize we have a political system 
that makes it difficult, but, nonetheless, the reality is an 
awful lot of our senior politicians do take a long view, right? 
I mean, it's not fair to say that every politician is dictated 
to by what is the next election. A lot of them take risks and 
do the right thing.
    So I don't know the answer to the question on China. I just 
know that I believe we have a strategy. I think it's one that's 
worked. I don't think the President created the problem with 
China. I think it was created over a period of time by 
basically by benign neglect, and I think it's a situation where 
you have to make a change, or the consequences are grave for 
the country. That's where I come from and----
    Senator Coons. Let me conclude, if I might, because I have 
one more colleague waiting to question. Mr. Ambassador, let me 
just summarize, if I can, your answer, and the areas in which 
we agree and disagree. I absolutely agree, we should be taking 
aggressive action against China to defend America's inventions 
and innovations in IP and to make sure that we've got fair 
market access, particularly for the chickens of Delaware and 
many other States. But by slapping tariffs all over the world 
on other countries that are not directly engaged in this, we 
reduce the number of our allies who are working with us against 
China's malign actions, and we grow the number of trade 
disputes and problems we have.
    The example of South Africa possibly closing off soon our 
poultry export access to their market, something that's not 
even on your menu, strikes me as one of a dozen unintended 
consequences of a misguided policy that instead of marshaling 
our allies to focus on challenging China, has, instead, stirred 
up a hornet's nest of problems in other parts of the world with 
trusted allies.
    And my concern, sir, is that I agree with you, China is 
taking the long view, and so should we. If our strategy is to 
pay more and more and more directly from the Federal Government 
to farmers and maybe fishermen and maybe manufacturers, we are 
gradually moving from a market economy to one where we are 
borrowing tens of billions of dollars from China to pay those 
sectors in the United States that suffer as we try and see who 
will blink first. I'm concerned that's not a sustainable 
strategy.
    Thank you.
    Senator Moran. Senator Coons, thank you.
    Senator Lankford.
    Senator Lankford. Ambassador Lighthizer, thank you. Thanks 
for your service and what you're trying to be able to take on. 
You inherited a mess on trade worldwide, and there are a lot of 
issues that are happening, but they all need to be cleaned up. 
So the grand challenge is, How do we actually get this done?
    So what I'd like to be able to hear from you is, What has 
been done to date? What are some of the wins that you've 
already had on trade issues? And then, What are the priorities? 
And specifically for us, and for me in particular, What are we 
trying to get to? Because it looks like we're trying to 
increase tariffs everywhere. Is the goal to increase tariffs or 
is the goal to get tariffs down everywhere? So the wins and the 
goal.
    Ambassador Lighthizer. Thank you, Senator. First of all, 
we--I think the biggest single thing is we're--and I've said 
this, that we're close to having a deal with Mexico, and 
hopefully that will lead to a deal with Canada. We have 
negotiated a successful renegotiation, of course.
    And then one of the things that I alluded to before that we 
don't give credit to is a whole variety of things that we have 
done. And I'll just mention briefly we have opened up Guatemala 
to poultry. We have gone in there and negotiated and changed 
it. Rice in Nicaragua. We have changed the--gotten the EU to 
change the way they treat U.S. citrus in a beneficial way. The 
distilled--dried distilled grain is something that's important 
to a lot of people, and we have opened up the market in several 
places, and even China got rid of their countervailing duties. 
Rice exports to Colombia, we've opened up that market. Corn 
also to Colombia. Pork, Argentina lifted their ban that they'd 
had in place for years and years and years, and now they're 
accepting U.S. pork. The distilled dried grains exports once 
again in Vietnam, they'd had a--they closed our market in 2016.
    And I could go on. There's a whole bunch of these things. 
Lamb in Japan, they had a ban on lamb in Japan. I mean, these 
are things that no one reads about or knows about, but they're 
things we do every day to help agriculture and to help--and 
many of them, by the way, are coming to us at the request of 
Members of the Congress because of their constituents, and 
we're spending a lot of time on them and have a number of 
successes.
    In terms of--I guess your second question was, What's the 
endgame?
    Senator Lankford. The second question is really the goal. 
More tariffs or less tariffs? And really are we on offense, 
trying to find more markets, or are we just trying to fix 
broken markets already----
    Ambassador Lighthizer. What--I mean, what the President 
wants to do, the President's fundamental belief is that if we 
have an environment in which we're competing based on 
economics, not based on artificial barriers to trade, not based 
on tariffs, not based on subsidies, which is an important part 
of this, because the United States is relatively not a 
subsidizer, that the United States will do very well. And 
economics will determine these things, who ends up succeeding 
and who doesn't in our own economy, and that's the way that it 
should be. The question is when you don't have that 
circumstance, what do you do? What's your reaction?
    Till now, I believe the problem has been basically the 
solution has been one of nibbling around the edges. I think 
that's what's happened. I've followed this for a long, long 
time, and I could talk about it for years and years and years, 
not that anyone was selling us down the road or anything, they 
were just dealing with problems in a--at the edges. And I think 
this President's view is we've now gotten to the point where we 
have the trade deficit. It's so extreme at $800 billion that we 
just can't nibble around the edges, we have to change, and 
particularly with respect to China, where it's $375 billion. I 
mean, that's bigger than the GDP of most countries, it's 
enormous.
    So what his objective is--and I think he stated it 
yesterday and he has stated it on a number of other occasions--
he wants to be in an environment and will do it however we have 
to do to do it, where we don't have--where U.S. producers, 
companies and farmers and ranchers, are not treated unfairly, 
that they can compete based on economics. That's what his 
objective is, Senator.
    Senator Lankford. Right.
    Ambassador Lighthizer. And this is his way of trying to do 
it, right? I mean, and----
    Senator Lankford. Well, I would tell you, for the ag folks 
that are in my State, they're looking for more markets and more 
places to get into. They already have markets that they're in 
now, and now there's the tariffs and the issues they're facing 
as a result of response. They want those to be fixed, but 
they're still looking for the new places, more places they can 
take their product.
    And as you and I have talked about before, the steel 
tariffs are helping steel companies in the United States, but 
they're not helping actual construction in the United States, 
whether you're building products or whether you are building 
small offices or stores or whatever it may be because the cost 
is going up, and now the cost of construction, once it's done, 
exceeds the value that you can actually sell into that area.
    So all of those things do have a real effect, as you know. 
And you and I have talked about issues like softwood lumber 
coming from Canada and some of the issues there, or paper 
products coming in from Canada, and so many other issues that 
are out there.
    The target goal is how to get some of these resolved long 
term so that we can go start fighting for the new places and 
the new countries to be able to do business and be on offense 
again.
    Ambassador Lighthizer. Yes, I completely agree with you, 
and I guess what's more important, the President certainly 
agrees with you on the fundamental direction, and I think he 
agrees with most Members about how to get there, but it's sort 
of--it's not an easy thing. But directionally, we completely 
agree with you, Senator.
    Senator Moran. Senator Lankford, thank you.
    The very patient Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman.
    Mr. Ambassador, I'm not here to criticize you, I'm just 
trying to understand you. Here's what I think is going on, just 
based on my observations. You're a smart guy and President 
Trump is a smart guy. And you both understand that the only way 
to win a trade war is not to fight. But you're trying to 
negotiate us some better trade deals, and that causes anxiety 
because it impacts markets and it impacts investment decisions. 
And it causes anxiety because it's risky. I mean, we could 
lose. That's why they call it risk taking; otherwise, they'd 
call it sure thing taking. I mean, is that basically what your 
strategy is?
    Ambassador Lighthizer. Well, I think that--I mean, I----
    Senator Kennedy. Briefly.
    Ambassador Lighthizer. Yes. I think you're--I think you're 
right. It's--it creates anxiety and--and----
    Senator Kennedy. Okay. How long--how long--and I know you 
can't give me month and day. Is it going to take years?
    Ambassador Lighthizer. In my opinion, the--there are--as 
you've heard me say patiently, there are----
    Senator Kennedy. Yes, but is it going to take years?
    Ambassador Lighthizer. I think some issues will be dealt 
with short--in short periods of time, and I think directionally 
we're going to have a problem with China that's going to go on 
for years. That's not to say that what we're doing now will be 
in place, all that, but it's--it's----
    Senator Kennedy. Okay. I know you can't predict the future. 
So you think it will take years with China.
    Ambassador Lighthizer. I believe that to be true.
    Senator Kennedy. Okay. Year or years?
    Ambassador Lighthizer. Well, I mean, I'm--once again, I 
can't predict the future, but the way I analyze it, Senator, 
they are--they have a system, and their system is challenging 
our system, in my opinion.
    Senator Kennedy. Well, I'm not--I'm not going to defend 
China. I mean, we let them into the WTO on December 11, 2001. 
They started cheating December 12. And all the cultured 
cosmopolitan, you know, consumers of bacon-wrapped shrimp, you 
know, who live in the condos with the high ceilings, said, 
``Oh, this is great. China is going to embrace democracy.'' It 
didn't work out quite like the experts said. So I'm not going 
to defend China.
    Let's suppose Senator Moran was elected President of the 
United States, and hypothetically, his first policy was, ``I am 
going to----,'' ``I'm really upset about the current account.''
    Ambassador Lighthizer. About what, sir?
    Senator Kennedy. About the current account.
    Ambassador Lighthizer. Right, right.
    Senator Kennedy. ``Our experts----,'' ``our exports are way 
below our imports, so I am going to declare a moral equivalent 
of war on imports. We're going to flip that balance.'' Is that 
going to make us richer?
    Ambassador Lighthizer. No, I don't believe that's the--I 
don't believe that's the--the way to get the trade deficit down 
is to demand fairness and market outcomes and increase--I would 
say increase exports, but I think imports will, in a fair 
market, also come down there because there are--there are 
circumstances where U.S. companies will become strong, and 
they'll be more----
    Senator Kennedy. Well, let me ask you this. I'm sorry, I'm 
not trying to be rude or cut you off, but I'm trying to get 
to--some--to the meat of the nut here.
    If I buy something from Japan, I give them dollars, right? 
What happens to those dollars?
    Ambassador Lighthizer. Well, there are a lot of things that 
can happen to the dollars. I mean, they can keep the dollars. 
They can buy things----
    Senator Kennedy. And what would--would they just--would 
they just put it under their mattress or would they buy 
Treasuries?
    Ambassador Lighthizer. Well, and sometimes they--in some 
cases, they put it under the mattress and sometimes they just 
literally build up their reserves, so that happens. They spend 
it a lot of times on petroleum, which they get from someplace 
else, and a lot of other imports. So they spend it on other 
things in order to build up their own economic strength. In 
some cases, they come in and buy productive assets of the 
United States----
    Senator Kennedy. Okay. Sorry for interrupting again. I'm--
what I'm getting at, as you probably know, is the relationship 
between the current account and the financial account. It's got 
to balance, right?
    Ambassador Lighthizer. The answer is, yes, of course.
    Senator Kennedy. Okay. So if we're running a negative in 
our current account, our financial account has got to be 
positive, right?
    Ambassador Lighthizer. Well, so----
    Senator Kennedy. Which means that those dollars are coming 
back to the United States, and they're being invested, right?
    Ambassador Lighthizer. In the first place, at some point, 
the dollars circulate back to the United States, and that then 
raises another issue. So the fundamental--there's a great 
article if somebody ever--if you're ever--if you're ever 
interested in this issue enough. If you Google ``Warren Buffet 
Squanderville,'' it will come up, and it's a short article that 
he wrote, I don't know, 10 years----
    Senator Kennedy. But let's get back to the relationship 
between the current account and the financial account.
    Ambassador Lighthizer. Okay.
    Senator Kennedy. Okay? If you've got more imports than 
exports, you're running a negative current account.
    Ambassador Lighthizer. Right.
    Senator Kennedy. But that means you've got to be, at least 
the way you economists describe it, you've got to be running a 
positive in your financial account; otherwise, your balance of 
trade, it doesn't balance out, right? Isn't that money coming 
back here and being invested? I mean, if Toyota, we buy a bunch 
of stuff--strike the Toyota part--we buy a bunch of stuff from 
Japan----
    Ambassador Lighthizer. Right.
    Senator Kennedy [continuing]. More than we sell, those 
dollars are going to come back--right?--sometimes through 
foreign direct investment from Japan.
    Ambassador Lighthizer. Sometimes it's buying our debt----
    Senator Kennedy. Yes, the thing they do, huh?
    Ambassador Lighthizer [continuing]. And sometimes it's 
buying--and sometimes it's buying our assets, and sometimes 
it's creating new jobs, but it could be all of the above, 
right.
    Senator Kennedy. Do you believe, generally speaking, that--
that exports are better than imports and that account--current 
account surpluses are always better than current account 
deficits?
    Ambassador Lighthizer. Yes, I do believe that. And I think 
if you look at the countries that have had the most--the best 
economic growth over years and years and years--and I want to 
say I'm not an economist, I'm a lawyer--but if you look at the 
countries who have run it, Germany has run a current account 
surplus 7.7 percent of GDP, and they've run a huge one for 
decades and decades and decades.
    Senator Kennedy. Well, how come--how come then President 
Moran's moral equivalent of war on imports wouldn't make us 
richer?
    Ambassador Lighthizer. Because I think--I think you get 
more efficiency out of having more exports, but I do think you 
will have----
    Senator Kennedy. I'm sorry to interrupt you, but I'm--I'm 
trying to get an answer. How come, if exports are better than 
imports, President Moran's policy of a moral equivalent of war 
on imports, we're going to stop buying stuff from countries to 
give them dollars to buy weapons to try to kill us, we're going 
to make it here in America, how come that's not going to--the 
Moran policy, hypothetically, Jer, won't make us richer?
    Ambassador Lighthizer. Right. I think, as a general matter, 
we are better off making it in America, and I think that the 
most--the most efficient allocation of resources around the 
world is to have trade in a situation where there are no----
    Senator Kennedy. But I want to go back. I'm sorry, I don't 
mean to interrupt you, but I--but you're good at these--you're 
a good witness, you can stretch it out. If I can make--if I 
can----
    Ambassador Lighthizer. What do you want me to admit, 
Senator? I'll just admit it, and then we can go home.
    [Laughter.]
    Senator Kennedy. I'm just trying to understand. I'm not 
trying to get you to admit anything. I'm trying to understand.
    Ambassador Lighthizer. Whatever it is, I agree.
    [Laughter.]
    Senator Kennedy. What--what if--what if we can buy it half 
as--twice as inexpensively from England than we can stop and 
make it? Shouldn't we buy it?
    Ambassador Lighthizer. Well, yes, I've heard of Ricardo, 
yes, I have. Yes.
    Senator Kennedy. That's yes.
    Ambassador Lighthizer. Yes, yes. The problem where it 
breaks down is where you have multiple countries and you have 
trade barriers. So it's not--if you're saying, Do we want 
ultimately market efficiency? Of course, we do. And do we want 
to make mostly the things that we do best here and buy the 
stuff that someone else--of course, it makes everybody richer, 
it makes everybody in the world richer. But what do you do in a 
circumstance where you have a country with a $12 billion--a $12 
trillion GDP that doesn't agree with that? What do we do with 
them? How do we stop them from subsidizing? How do we stop 
them--now, your view would be, but in 100 years their model is 
not sustainable, or 200 years, or whatever the number is. My 
view is I'm not going to be around in 200 years, and you----
    Senator Kennedy. Well, I don't--I don't think you know what 
my view is----
    Ambassador Lighthizer [continuing]. Anticipate what is 
sustainable.
    Senator Kennedy [continuing]. With all due respect.
    Let me ask you this, Why don't we just go to Europe and 
say, ``Let's just cut all tariffs''?
    Ambassador Lighthizer. But--but we have said that.
    Senator Kennedy. Yes. But, I mean, why don't we make that 
our objective with all the countries with which we're 
negotiating?
    Ambassador Lighthizer. So let's--let's--of course, that is 
our objective, but it can't just be tariffs--all right?--
because there are other nontariff barriers. So you can't be----
    Senator Kennedy. And quotas.
    Ambassador Lighthizer. You have to get rid of----
    Senator Kennedy. Any--all tariff barriers come down.
    Ambassador Lighthizer. All tariff barriers and all 
subsidies--right?--because you can't----
    Senator Kennedy. Yes.
    Ambassador Lighthizer [continuing]. And all--of course, and 
that's the President's objective. That's what Senator Alexander 
and I--we're talking about. That's--see, he just came in. He 
came back for the next round. That is precisely what our 
objective should be. And in that environment, if you can get to 
it, and I personally don't think you're going to get to it very 
soon, but directionally we ought to be working in that. That's 
the direction we ought to be working in. In that environment, 
everybody gets rid of it. That's the theory, and my guess is 
it's reality.
    Senator Kennedy. All right. Here's my last question. What 
if Congress passed a law that said you can do business, this is 
America, we believe in freedom, you can do business with China 
all day long, but it's illegal, just like it's illegal to give 
a Chinese official a bribe to do business with him, it's 
illegal to let him have your technology?
    Ambassador Lighthizer. So in the first place, in terms of 
our--if you're referring now to our study, in our study, there 
is theft of technology, which U.S. companies are not 
participants in--right?--they just--it's stolen----
    Senator Kennedy. Yes, but sometimes we give it to them.
    Ambassador Lighthizer. Yes, and--and it's--it is both 
cybertheft, but it's also setting up business in China and 
having them going in and steal technology. So that's one 
problem.
    Senator Kennedy. Yes. But--but----
    Ambassador Lighthizer. Another problem----
    Senator Kennedy [continuing]. What I'm getting to is we go 
to them and we say we want to--we want--I'm about done----
    Senator Moran. You said that earlier.
    Senator Kennedy. When we go to them and we say--our 
business people say, ``Look, we want to do business here,'' and 
they say, ``Give us your technology,'' and they say, ``Swell.''
    Ambassador Lighthizer. So that's the forced technology 
element that's in here that you're referring to. And one of the 
ways we're addressing that is through export controls and to 
try to stop that. So there's--it's tricky, it's hard, as you 
know, but there are ways to do it. For example, you want to 
stop licensing of tech----
    Senator Kennedy. I'm sorry. I have gone on way too far. 
Thank you, Mr. Chairman.
    Senator Moran. Ambassador, thank you.
    Thank you, Senator Kennedy.
    We're going to try to do a--I'm going to do a second round 
of what I hope is rapid questions. I've been what I think is 
generous both to you and to my colleagues to make certain that 
this important topic is explored. And then we need to conclude. 
I expect there will be a vote called shortly.
    Ambassador, what tools, other than tariffs, does the United 
States have to combat China's theft of our technology, their 
cyber attacks against our infrastructure, and their pursuit of 
our business secrets? Other than tariffs, what else--what's the 
tool?
    Ambassador Lighthizer. We have--and it's part of the 
President's program--we have export controls both in terms of 
product, but also in terms of technology. We have limitations 
on investment because state capitalism is buying these kinds of 
assets. And the Congress is in FIRRMA, in the process of 
passing FIRRMA, which the President I think will--and which the 
President supports, and which will help us fight this battle.
    In addition, you have obviously criminal--you know, there 
are criminal statutes and the like that don't involve us, but 
in my opinion, in the technology area, it's exports controls, 
it is tariffs, it is investment restrictions, and then it's 
going to the WTO, which we--and by the way, all of those things 
we have done in here except for the criminal part of it.
    Senator Moran. What--in addition to tariffs, what nontariff 
trade barriers would you expect China to use and pursue in 
regard to the United States?
    Ambassador Lighthizer. That--that--I'm sorry, that just 
can't be a short answer because they're doing a whole lot of 
things. We get from the Embassy every day a whole variety of 
things. So what do they do? They slow up inspections, they 
require people to do things--companies bringing in products to 
do things that are--you know, that are designed to do nothing 
but slow things up or to reject products on technical or even 
incorrect reasons.
    Senator Moran. Maybe the summary of what I think your 
answer is, there's a whole set of other tools----
    Ambassador Lighthizer. There are a lot of things.
    Senator Moran [continuing]. China is utilizing in addition 
to tariffs, so----
    Ambassador Lighthizer. And they're doing those things.
    Senator Moran. We could expect more to come beyond tariffs 
I would guess you would tell me.
    Ambassador Lighthizer. Yes, but I would say with respect to 
many, probably almost all, of those things, in various 
contexts, they were already doing them to the extent to which 
it was beneficial to them.
    Senator Moran. Okay. The conversations at the White House 
that announced yesterday in regard to the EU, those are 
encouraging. It seems to me that it is a framework by which we 
agree we're going to at least in the battle--that's not the 
right word--in the trade war at the moment, we're going to have 
to take a pause and see if we can't negotiate an end to that. 
That's a good thing in my view. But I've read that the possible 
trade agreements with the EU, that the EU wants to exclude U.S. 
agriculture from any agreement. Your reaction to that?
    Ambassador Lighthizer. Well, I mean, my reaction was in the 
discussions--in the first place, agriculture is a difficult 
issue everywhere in the world, and it is equally difficult in 
the European Union, given the fact that they have 28 countries 
and they have all the problems. Our view is that we are 
negotiating about agriculture, period. That's part of the 
process.
    Senator Moran. Would we negotiate an agreement with EU that 
leaves agriculture out of the discussions--not out of the 
discussions, out of the result?
    Ambassador Lighthizer. I certainly would not recommend 
that.
    Senator Moran. You talked about the $12 billion aid package 
that was announced for farmers by the administration earlier 
this week. Tell me what--what role USTR, you, played in those, 
in those discussions, the announcement. Was there coordination 
that occurred? USTR involved in that decision?
    Ambassador Lighthizer. I was aware of it, and--but it's not 
a program that--that I have expertise in or was--you know, any 
kind of a knowledgeable participant.
    Senator Moran. I'm coming to a conclusion.
    I want to ask you to reiterate something I think you said 
earlier to the response to a question I think of Senator Capito 
about the status of NAFTA renegotiations. Would you tell me 
again, tell the committee again, what you expect this timeline 
to be and what you said about August?
    Ambassador Lighthizer. Well, so, in the first place, I 
don't know whether we're going to get an agreement. It depends 
on everybody being reasonable. But in terms of the timeframe, 
if you assume that it's going to be signed by the current 
President of Mexico, President Pena Nieto, and you--and he's 
out on December 1st, then you move back 90 days because we can 
sign until we have agreement in principle 90 days before. 
That's TPA. Then you'd have to more or less have agreement in 
principle, which is the way these things work, sometime in 
August.
    Senator Moran. And I think, finally, is it possible that 
you and USTR would address Section 232 tariffs, again the 
Department of Commerce's jurisdiction, but are those part of 
NAFTA negotiations?
    Ambassador Lighthizer. Yes. Well, I mean, technically they 
are not part of NAFTA, but they--the expectation is that there 
would be a resolution of those in the context of NAFTA, yes.
    Senator Moran. The Section 232 tariffs are negotiable items 
that occur in the overall discussion of a NAFTA agreement.
    Ambassador Lighthizer. That's correct.
    Senator Moran. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman.
    Ambassador Lighthizer, I was pleased when we spoke by phone 
to hear you talk about the willingness of USTR to take 
enforcement, trade enforcement, action, and you said, ``Bring 
me any cases that you know of, and we'll explore those, and 
we'll try and take action.'' Well, one question that I have is, 
Have you brought any cases to address labor violations by our 
trading partners? Because, as I understand, there have been a 
number of labor violations to our agreements, some of our 
agreements.
    Ambassador Lighthizer. WTO agreements? Or you mean NAFTA 
negotiated? In the context of----
    Senator Shaheen. I'm talking about any trade agreements 
that we have that would involve labor standards. Has USTR 
brought any cases to address any violations of those labor 
standards?
    Ambassador Lighthizer. So in the FTAs, I don't believe 
during our--there haven't been that many brought, that we have 
brought any, but we are very just--we are very heavily 
negotiating on labor standards and labor commitments in the 
NAFTA, and we're working very closely with the unions to--the 
unions and other interested parties, in fairness, to set up a 
system where labor rights will be substantially improved in 
our----
    Senator Shaheen. I appreciate that----
    Ambassador Lighthizer. So it's a high priority for us, but 
I don't know that we brought any.
    Senator Shaheen. It's actually my understanding that you 
have not brought any enforcement actions to address labor 
violations, and I would hope that you might be able to explore 
whether that's, in fact, true, and share that with the 
committee----
    Ambassador Lighthizer. I believe it's, in fact, true. I 
don't recall anybody--if there are labor violation cases to be 
brought, we're certainly willing to bring them. And people 
bring them to us, right? I mean, these----
    Senator Shaheen. Right.
    Ambassador Lighthizer [continuing]. This is not something 
that we--that we would necessarily, but in the context of 
NAFTA, there's an effort to try to set up a system that's a 
little more pro--a little more--a little easier to monitor.
    Senator Shaheen. Good. Well, I appreciate that. I think 
that's very important because as we look at how our American 
workers are impacted by some of those agreements, as you've 
heard from the panel, that continues to be an issue.
    Ambassador Lighthizer. I completely agree with you.
    Senator Shaheen. I was pleased, as I'm sure all of us were, 
to see the President's press conference yesterday and the 
effort to cool tensions with Europe. I'm not sure I understand 
why we started tensions with Europe in the first place. I think 
if we were engaged in negotiations around TTIP, that would have 
significantly reduced tariffs. As I understand, the Europeans, 
under those negotiations, were offering to reduce 87 percent of 
all tariffs to zero. But I would like to know if you can share 
with us whether there were any concrete decisions made 
yesterday as part of that, those discussions, and that 
announcement. Or what specifically happens next?
    Ambassador Lighthizer. So we're just one day into this 
agreement. What the President and President Juncker agreed to 
was that we set up a variety of groups, but basically one group 
to deal with the process of getting to zero on tariffs and zero 
on subsidies, and another group to deal with this rather 
complicated issue of getting standards to the point where 
hopefully there's some equivalency and we remove standards as a 
trade barrier. And I met independently with the Commissioner 
who's responsible for trade. And, I mean, when you say this is 
a 1-day--this 1-day-old news. So--well, but we are in the 
process on a short timeframe to set up a structure. We have in 
the USTR already allocated resources and are expecting to be 
moving forward. And as you suggest, there is some basis on 
which to have these discussions because we have a history of 
TTIP, and we can talk at another time about what happened with 
TTIP, or at least what my perception is on what happened with 
TTIP.
    Senator Shaheen. But I guess the question that I'm asking 
is there wasn't anything--as I understood the announcement and 
the analysis that I heard, there wasn't anything specific that 
was agreed to yesterday except an agreement to talk further and 
to set up these kinds of working groups.
    Ambassador Lighthizer. Well, I would say--I would say that 
in terms of the trade part, there was that, but there was also 
agreement on the energy part, which is one of the paragraphs in 
the agreement, the LNG part, what they're going to do on that. 
There was a separate one on increases in soybean purchases, but 
there weren't like contracts signed or that.
    Senator Shaheen. And, in fact, the EU has to rely on the 
countries within the EU to agree to things like increases in 
soybean purchases. Is that--am I correct in that?
    Ambassador Lighthizer. I think that--well, yes, the answer 
is yes, and presumably private companies, right.
    Senator Shaheen. So the EU really couldn't agree to that in 
those discussions.
    Ambassador Lighthizer. I'm sorry, to the what?
    Senator Shaheen. The EU couldn't agree to increase soybean 
purchases in those discussions because they don't have the 
ability----
    Ambassador Lighthizer. Well, they couldn't--they couldn't 
sign contracts, but the reality is that Mr. Juncker came with a 
mandate from the member states, right? He didn't--that's how 
they operate. So I presume there's a--you know, you know, 
there's a basis for what he--for what they agreed to.
    Senator Shaheen. And let me--my time is up, but I just 
wanted to make a point that I think has come out from several 
people who have asked questions. You said that several times 
with respect to things like ZTE and some of the other issues 
that were brought up that were not directly under the USTR that 
you stay in your own lane and you don't deal with those issues, 
but it seems to me that one challenge that we've got right now 
is that we haven't recognized that what's good for national 
security is often good for the economy, what's good for the 
economy is often good for national security, and that we 
haven't looked at the tools of diplomacy and of international 
activity in the context of a coordinated strategy, and I guess 
that's a concern I have about these tariffs, that I appreciate 
the arguments that you're raising, but it doesn't seem to me 
that it's part of a coherent coordinated strategy that's 
looking at the role of the United States and the world, and it 
seems to me that that presents real challenges for us going 
forward.
    Thank you, Mr. Chairman.
    Ambassador Lighthizer. Well, I guess, in response to that, 
I would suggest that what we've tried to do is the opposite of 
that. We have tried to coordinate it, and the President's 
``National Security Strategy,'' which was published in maybe 
February, goes through this and talks about economic security 
as part of national security. It's a really good document, and 
I would recommend it to anyone. And it is--really, it's, I 
believe, the first time anyone has ever tried to integrate 
national security with--and say economic security is an 
essential part of--if you don't have a strong economy, you 
don't have a--you're not prepared for national security. That's 
kind of the essence of what it is, of that document. And so I 
think it--I think we're, you know, in agreement with you.
    Senator Shaheen. Maybe I'm faulting the implementation 
rather than the strategy then.
    Senator Moran. Mr. Ambassador, to follow up on Senator 
Shaheen's comments, let me put in your mind, and you don't need 
to respond, I'm happy to stay after if you want to tell me what 
you think, but there is a belief that Europe is naturally going 
to be buying more soybeans. As a result of our loss of markets 
in China, those are being replaced by Argentina and Brazil, and 
as those soybeans in Argentina and Brazil are moved to China, 
where Europe has currently been buying from Argentina and 
Brazil, we will become a natural market. We want to make 
certain that we--that wherever the market is, it's at a price 
and in volume that offsets or grows the current opportunity we 
have to export soybeans around the globe, particularly to 
China.
    Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman, for the 
opportunity to comment.
    Mr. Ambassador, you've been there a long time, so thank you 
for coming today.
    I want to talk about aluminum, which is a part of the 
national security justification for that tariff. What's the 
goal of putting a tariff tax on aluminum? Is it to create an 
environment in which the United States produces more aluminum?
    Ambassador Lighthizer. I think the objective is to have a 
viable aluminum industry in the United States, and I think 
there was a--there was a----
    Senator Alexander. Well, now, let me just--there are 
different parts to aluminum. I mean, I know a little about this 
because I grew up near Alcoa, Tennessee, and my father worked 
for an aluminum smelting plant, and you make aluminum by 
running a lot of electricity through bauxite, and then you make 
an ingot, and from that ingot, you make pots and pans and--
well, then roll it out. Then they make pots and pans and 
aluminum foil and all that kind of thing. I assume we're not 
putting a tariff on in order to create more aluminum foil 
plants or more pot and pan plants; I assume the national 
security just worry would be that we're not producing enough of 
the basic aluminum ingot, and that if we don't produce any of 
it, that's a national security problem. Would that be right?
    Ambassador Lighthizer. Well, in my view--and once again, 
I--this wasn't a report that I wrote--right?--it was written--
--
    Senator Alexander. But you say this is all coordinated. 
You're the Trade Representative.
    Ambassador Lighthizer. Now, what I said is I'm involved in 
the process.
    Senator Alexander. Yes, I know.
    Ambassador Lighthizer. I don't know if you were here when I 
said that. I'm involved in--but I----
    Senator Alexander. You just said it was coordinated. I 
heard that part. But what's the goal of it? Do you want to 
produce more aluminum ingots? Is that the idea?
    Ambassador Lighthizer. I think our view is that there's--
there is certain kinds of aluminum that you need in national 
defense, and that if you don't have it, if you don't have some 
kind of an aluminum industry----
    Senator Alexander. Okay, I don't want to run over my time. 
Well, but all you need to produce that aluminum is an aluminum 
ingot. You could then have an American plant that can produce 
whatever you want. Right?
    Ambassador Lighthizer. I'm sorry, I guess I'm not 
following.
    Senator Alexander. Well, all I'm saying is we have a pretty 
robust aluminum industry in the United States. We can make 
about anything: aluminum foil, special aluminum, pots and pans. 
But it would seem to me the worry is that we don't--do you know 
how many aluminum smelters we have in the United States today?
    Ambassador Lighthizer. We have very few.
    Senator Alexander. We have seven. Do you know how many 
people work at those aluminum smelters?
    Ambassador Lighthizer. I don't know the answer----
    Senator Alexander. 4,000. So we have 7.2 million people 
working in the automotive industry whose jobs are affected. We 
just read the morning paper. 11 percent of every car is 
aluminum, and Ford and GM are saying they're going to not make 
as much money because of the tariff on aluminum, and it looks 
like we're doing that to protect 4,000 jobs in the aluminum 
smelting business, and we're not going to get those back 
because the reason we don't have aluminum smelting is because 
of the cost of electricity.
    Now, Alcoa produces half of the aluminum produced in the 
United States, 46 percent. They have three smelters, and they 
have one that's curtailed, which means it could open up if it 
wanted to. A 10-percent tariff is not enough to offset the 
increased price of electricity. So what are we going to do, go 
to 20 and 30 and 40 so that we have enough aluminum ingots made 
in the United States, and at the same time, continue to add to 
the price increases for automotive?
    Ambassador Lighthizer. So the answer is there is no plan to 
go to 20, 30, and 40 percent, Senator.
    Senator Alexander. Then what's the justification for any 
tariff on aluminum if it's not enough to create an incentive 
for aluminum companies to create more aluminum?
    Ambassador Lighthizer. I don't know about Alcoa's situation 
specifically, but the calculation was made at the Department of 
Commerce that a 10-percent tariff on aluminum at the margin 
would make a difference so that you would end up with a 
sustainable aluminum industry in the United States. That was 
the calculation.
    Senator Alexander. Well, I'd like for us to talk to them 
because that doesn't make any sense at all because we've only 
got seven smelters, we've got one curtailed smelter. Everybody 
knows smelters have fled all over the world because of the 
price of electricity. So unless we're deliberately going to 
increase the price of basic aluminum ingots in the United 
States by 20, 30, 40 percent, we're not going to be able to 
make ingots.
    Now, we could get ingots. We get 40 percent of our aluminum 
from Canada, which leads me to my next question. Did I 
understand you a minute ago that if you're able to resolve the 
NAFTA agreement, that that could be coordinated with the 
aluminum tariff, and, as a result, there might not be an 
aluminum tariff on Canadian aluminum ingots coming into the 
United States?
    Ambassador Lighthizer. Yes, Senator. Resolving the NAFTA 
issue, we would expect or hope that we would resolve this deal 
and aluminum issues with both Mexico and Canada.
    Senator Alexander. Well, that might not resolve the 
aluminum price issue in the United States because, as we know, 
whenever you raise the price of any imported steel or aluminum, 
it raises the price of everything else, but at least it would 
deal with the supply.
    What I'd like to ask you to look at is whether it makes any 
sense to put any tariff on aluminum when the reason we don't 
have aluminum ingots in the United States is because of the 
price of electricity, and it's that much--and Canada has a lot 
of water, so they can make electricity a lot easier, and so can 
other countries, other countries in the world.
    The last question I would have, Mr. President, if I may, I 
would assume that what we're going through right now is a 
substantial review of NAFTA. Then why do we need a sunset 
clause? I mean, you're reviewing NAFTA today, and it seems to 
me--there are a substantial number of Republicans, including 
me, who are not likely to vote for any new NAFTA agreement that 
includes a sunset clause because we don't think it's worth 
anything.
    So I'm over my time, but I would hope you would take that 
back to the negotiations and know that--I hope that presents a 
real obstacle to having a sunset clause in any final NAFTA 
agreement.
    Senator Moran. Senator Kennedy, just a suggestion. You will 
gain credibility if you leave the Moran Presidency out of your 
questioning, and it would also make me feel more comfortable.
    [Laughter.]
    Senator Kennedy. I'm done. Unless--I'll yield whatever time 
I have to Senator Alexander.
    Senator Moran. You're not recognized for that purpose.
    [Laughter.]
    Senator Moran. Ambassador Lighthizer.
    Senator Kennedy. Thank you.
    Senator Moran. Thank you, Senator Kennedy.
    Senator Shaheen. I just have one more.
    Senator Moran. Yes, Senator Shaheen.
    Senator Shaheen. I just have one more question, Ambassador. 
And as we had the whole conversation about increasing exports, 
and that's one of the things that we would like to do in order 
to address the trade imbalance, one of the things that I hear 
consistently from New Hampshire companies who are--have 
markets, international markets, who are very anxious to 
continue to do trade deals, is how much they are affected by 
the inability of the EXIM Bank at this point to do big trade 
deals because of not having the appointees they need in order 
to get a quorum.
    Can you tell me if the administration is working to address 
that and what you're doing? And do you have any ideas for when 
that might be up and running again to do those bigger trade 
deals?
    Ambassador Lighthizer. Well, I would say, first of all, I 
completely agree with your constituents who say the EXIM Bank 
is important and that we're losing deals as a result of it. The 
acting president is my other deputy, who's not here. The 
President appointed him so that we would have someone who was 
actually an acting president. And in my view, the failure to 
have an effective EXIM Bank that's entirely with the United 
States Senate, I don't think it has anything to do with the 
administration at all. I think it's the fact that the Senate 
won't confirm the people, and if they did, we'd have an--I 
hope.
    Senator Shaheen. Right. I'm--I certainly fault the Senate 
as well. I guess my--I thought my question was, What is the 
administration doing to try and address that? Are you talking 
to the Senators who are holding that up? And we can name them 
here. I won't do that, but the people who are preventing that 
are not on my side of the aisle, they're on the President's 
side of the aisle. So is there an effort by the administration 
to try and persuade them of the error of their ways?
    Ambassador Lighthizer. Well, I don't want to characterize 
it as the error of their ways, but there certainly is a view, 
and I personally have spoken with Senators, and I know that 
other people are doing their own thing because they agree that 
we have to move forward.
    I--on the other hand, I believe that there are--I agree 
to--with the people who are on the other side of us on this 
issue that there are improvements that we need to make. We need 
to be reforming all that sort of thing----
    Senator Shaheen. Absolutely, but----
    Ambassador Lighthizer [continuing]. But, to me, we have 
to----
    Senator Shaheen [continuing]. We should get it operating.
    Ambassador Lighthizer. I am a complete believer in what 
you're doing, and if you're saying, is it something that I care 
about? am I active on? the answer is yes.
    Senator Shaheen. Thank you.
    Thank you, Mr. Chairman.
    Senator Moran. Thank you very much, Senator Shaheen. Thank 
you for your cooperation.
    And we are again pleased, Ambassador, that you were with 
us. Thank you for taking the time to do so. This hearing in 
part was intended to discuss with you your resource needs, and 
you mentioned them, at least in passing, in your opening 
statement, but we'd be happy to hear further from you in that 
regard.
    And you are very articulate and very intelligent, and I 
thank you for the attention that you provided to responding to 
my colleagues' and my questions.

                     ADDITIONAL COMMITTEE QUESTIONS

    If there are no further questions, and there are none this 
morning, Senators may submit additional questions for the 
subcommittee official hearing record. And we would request USTR 
to respond to those within 30 days.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
            Questions Submitted to Hon. Robert E. Lighthizer
            Questions Submitted by Senator Susan M. Collins
                        232 steel investigations
    Question 1a. The 232 national security tariffs on steel are having 
an impact on small American manufacturers. A specific example from the 
State of Maine is a 183 year old family-owned business called Hussey 
Seating in North Berwick, Maine. It manufactures bleachers and 
auditorium seating for distribution across the globe. Prices for 
domestically-sourced steel have risen significantly to match the tariff 
price of imported steel. So overall steel costs for Hussey Seating have 
increased approximately 45 percent over the same period last year. The 
problem is that this small manufacturer has locked in contracts well 
before beginning a project that did not anticipate a 45 percent 
increase in the cost of steel. There are other companies in my State--
such as Stonewall Kitchen in York, Maine, which produces specialty 
foods--that are being affected by Canadian retaliation. Our maple syrup 
producers and blueberry processors are also worried about the 
retaliation from Canada in response to the president's section 232 
decision.
    Are we risking doing tremendous damage to our own domestic 
industries by using the national security justification against some of 
our closest allies?
    Answer. No. The President's determination to impose tariffs on 
imports of steel and aluminum is based on a finding by the Secretary of 
Commerce, arrived at through an investigation conducted pursuant to 
Section 232 of the Trade Expansion Act of 1962, that the quantity and 
circumstances of these imports threaten to impair our national 
security. The ensuing action responded to this problem. The President 
invited allies and partners of the United States to discuss with us 
possible alternative means to address this threat. The United States 
has subsequently arrived at such satisfactory alternative means with 
several countries. Where countries choose instead to respond to the 
President's legitimate and fully justified action with retaliatory 
tariffs, we will take all necessary and appropriate action to protect 
U.S. interests.
                    semiconductors/trade with china
    Question 2a. Semiconductors are Maine's fourth largest export at 
$227 million, and U.S. semiconductor manufacturers are a major employer 
in my State. Moreover, semiconductors are the Nation's 4th largest 
export, and the U.S. has a substantial trade surplus in semiconductors 
with China.
    It is my understanding that Chinese domestic semiconductor 
companies export almost no semiconductors to the U.S. market. The 
majority of semiconductor imports from China are U.S. designed or 
manufactured chips, which are exported to China in semi-finished form 
for final assembly, testing, and packaging, and then imported back to 
the U.S. I agree with the administration that action needs to be taken 
to address China's violations of intellectual property, but it is not 
clear how tariffs on semiconductors can advance this goal if Chinese 
companies are not actually affected.
    Given these circumstances, how will proposed tariffs on 
semiconductors address China's discriminatory practices, and how are 
they intended to benefit the U.S. semiconductor industry?
    Answer. USTR found in the Section 301 investigation that acts, 
policies, and practices of the Government of China related to 
technology transfer, intellectual property (IP), and innovation are 
unreasonable or discriminatory and that these unfair acts, policies, 
and practices cause tens of billions of dollars in damage to the U.S. 
economy. U.S. stakeholders that rely on technology, IP, and innovation 
for their competitive edge suffer substantial damage from these acts, 
policies, and practices. The actions taken by the United States as a 
result of the Section 301 investigation are intended to obtain the 
elimination of China's unfair and harmful acts, policies, and practices 
thereby promoting the interests of all affected U.S. stakeholders, as 
well as the strength of the U.S. economy as a whole.
    Semiconductors are one of the top U.S. exports, and they are 
critical to advancing innovation in virtually all sectors of the U.S. 
economy--from automobiles to cell phones to medical devices. 
Semiconductors are a specific target of China's unfair and harmful 
industrial policies. In fact, China has openly stated its intention of 
achieving global dominance in advanced technology, as set forth in 
industrial plans such as the ``Made in China 2025" plan. To this end, 
the Chinese Government has launched an ambitious initiative to develop 
an indigenous, self-contained semiconductor industry-an initiative 
calling for government-directed funding in the tens of billions of 
dollars, with some estimates of over $150 billion. If China's policies 
go unanswered, the U.S. industry will lose its scientific, 
technological, and competitive advantage as a result of Chinese 
industrial policy.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein
            intellectual property tariffs on chinese imports
    Question 1a. I've heard from many California companies that are 
experiencing major problems with the steel and aluminum tariff 
exclusion process, and I am concerned that there will be similar issues 
with the exclusion process for intellectual property tariffs.
    The Federal Register notice on exclusion procedures published on 
July 11, 2018 notes that each exclusion request should address 
``whether the imposition of additional duties on the particular product 
would cause severe economic harm to the request or other U.S. 
interests.''
    What is your agency's plan to process all of the requests from 
American companies?
    Answer. The Office of the U.S. Trade Representative has established 
a transparent process to receive, analyze, and make determinations on 
the product exclusion requests submitted by businesses and other 
interested persons. The process is as follows:

  --Exclusion requests, responses, and replies will be received and 
        posted on Regulations.gov.
  --Interested persons will have 90 days to file a request (Period ends 
        on October 9, 2018).
  --Following posting of the filed requests on Regulations.gov, 
        interested persons will have 14 days to file responses 
        supporting or opposing the request. After the 14 day response 
        period, the requester has 7 days to reply to any responses 
        received in support of or opposition to the request.
  --Decisions will be posted on USTR.gov on a rolling basis after the 
        close of the request's 21-day public comment period and 
        following analysis and review of the request and comments on 
        the request.
  --All approved product exclusions will be retroactive from the 
        additional tariff effective date of July 6, 2018, and will 
        remain in effect for 1 year.

    USTR has assembled an internal team to review requests and will 
also draw on the assistance of interagency industry and trade experts. 
In addition, we met with congressional staff to apply lessons learned 
from the Section 232 process.
    Question 1b. How long will companies have to wait for a decision on 
their exclusion request so that they can resume their normal business 
activities?
    Answer. USTR's Section 301 team is reviewing product exclusion 
requests on a rolling basis. As stated in the Federal Register Notice, 
USTR periodically will announce decisions on pending requests.
    Question 1c. On what specific criteria will each exclusion request 
be judged, and how much weight will be given to each specific criteria?
    Answer. The Federal Register Notice published on July 11, 2018 (83 
F.R. 32181) outlines the information and factors USTR will consider in 
making its product exclusion determination:

  --Specific product description criteria.
  --Whether the particular product or a comparable product are 
        available only from China.
  --Whether the imposition of additional duties on the particular 
        product would cause severe economic harm to the requestor or 
        other U.S. interests.
  --Whether the particular product is strategically important or 
        related to ``Made in China 2025'' or other Chinese industrial 
        programs.

    USTR may also consider any other information or data relevant to an 
evaluation of the request.
    USTR will evaluate each request on a case-by-case basis, taking 
into account the objective of the Section 301 investigation. However, 
we have consulted with congressional staff and stakeholders to apply 
lessons learned from the Section 232 process.
    Question 1d. How has the effort to implement the President's 
intellectual property tariffs affected your agency's other 
responsibilities?
    Answer. The exclusion process has not affected USTR's other 
responsibilities.
    Question 1e. What specific steps is USTR taking to avoid problems 
that surfaced from the Commerce Department's steel and aluminum tariff 
exclusion process?
    Answer. USTR is not in a position to comment on the exclusion 
process in the Section 232 investigations.
    Question 1f. What resources are you devoting to the exclusion 
process, in terms of personnel and funds?
    Answer. USTR is using career staff and contract staff, along with 
input from other agencies upon USTR's request, to review and process 
the exclusion requests. USTR will continue to adjust the resources 
allocated to the exclusion process, taking account of the number of 
requests. USTR is drawing on existing funding for those activities.
    Question 1g. How many personnel from other agencies will be 
detailed to the 301 exclusion process and from which agencies?
    Answer. Please see response to Question 1f. Personnel from other 
agencies are not ``detailed'' to USTR, but instead provide analysis 
upon request.
    Question 1h. Have White House personnel been involved in the 
exclusion process?
    Answer. Please see response to Question 1f. USTR is a component of 
the Executive Office of the President.
    Question 1i. What is USTR's plan for expanding the exclusion 
process should the President decide to enact additional tariffs on $200 
billion in Chinese imports?
    Answer. Please see response to Question 1f. If and when the Trade 
Representative takes a supplemental action in the investigation, the 
decision will be made at that time. As necessary, USTR would allocate 
funds and personnel to ensure expeditious processing.
    Question 1j. What is USTR's plan for expanding the exclusion 
process should the President decide to enact additional tariffs on $200 
billion in Chinese imports?
    Answer. Please see response to Question 1i.
                  intellectual property theft by china
    Question 2a. China's systemic intellectual property violations are 
well-documented, including in your office's Section 301 report. This is 
a problem that is hurting California industries from Silicon Valley to 
aerospace, and it must be addressed.
    However, I am concerned that this administration seems more focused 
on escalating tariffs that are hurting American farmers, workers, and 
consumers rather than taking measures to address China's IP theft.
    What concrete measures are you taking to address China's 
intellectual property violations aside from tariffs?
    Answer. Consistent with the President's trade policy agenda, USTR 
will use all available tools to ensure that American workers, farmers, 
ranchers, manufacturers, innovators, service providers, consumers, and 
investors receive fair treatment in trade and win the full benefit of 
the economic opportunities the United States has negotiated. The Trump 
administration continues to urge China to stop its unfair acts, 
policies, and practices, open its market, and engage in true market 
competition. We have been very clear about the specific changes China 
should undertake. Regrettably, instead of changing its harmful 
behavior, China has illegally retaliated against U.S. workers, farmers, 
ranchers, and businesses. The United States is taking action at the 
World Trade Organization (WTO) to address China's unfair technology 
practices that run counter to WTO rules. The administration is also 
working to strengthen export control laws and to fully implement the 
CFIUS reforms of FIRRMA.
    Question 2b. What is the status and timetable of negotiations with 
China to address intellectual property violations?
    Answer. USTR, together with other agencies, has continued to work 
with China to identify issues and discuss solutions.
                  effects of the president's trade war
    Question 3a. I've heard from many California companies that 
President Trump's tariffs are increasing their production costs, which 
means their exports are less competitive around the world. They are now 
thinking about relocating American jobs overseas in response to the 
President's tariffs.
    This seems entirely counterproductive to me. I fear that the longer 
this trade war goes on, the more pronounced and long-lasting these 
effects will be. Once we lose these markets, it will be very difficult 
to re-open them to American exporters.
    Do you have any economic analyses showing that any short-term pain 
for American companies and workers will actually be outweighed by long-
term benefits?
    Answer. The investigation conducted by USTR under Section 301 of 
the Trade Act of 1974 found that Chinese Government acts, policies, and 
practices related to technology transfer, intellectual property, and 
innovation are unreasonable or discriminatory and burden or restrict 
U.S. commerce and that these unfair acts, policies, and practices cause 
tens of billions of dollars in yearly average damage to the U.S. 
economy. California inventors and businesses, as some of the world's 
most innovative and IP-reliant companies, suffer substantial damage 
from these practices. The actions taken by the United States as a 
result of the investigation are intended to obtain the elimination of 
China's unfair and harmful acts, policies, and practices, thereby 
promoting the interests of all U.S. stakeholders that rely on 
innovation for their competitiveness.
    At the same time, we continue to use all available tools--including 
negotiation of agreements, enforcing existing agreements, enforcing GSP 
criteria related to market access, dispute settlement, and others--to 
preserve existing markets and open markets more fully to U.S. goods and 
services.
    To minimize the impact of tariffs on American companies and 
workers, the administration has set up an exclusion process.
    Question 3b. What is the administration doing to protect the market 
share of American exporters in countries that the President has imposed 
tariffs upon?
    Answer. Please see response to Question 3a.
              direct payments to farmers to offset tariffs
    Question 4a. Last month, the administration announced $12 billion 
worth of agricultural assistance for farmers hurt by the President's 
trade actions.
    This seems like a very expensive self-inflicted cost to American 
taxpayers, given that it wouldn't be necessary if not for the 
President's tariffs.
    Short-term government handouts won't keep farmers in business if 
their long-term markets are eliminated in retaliation for the 
President's tariffs.
    What is the administration doing to open up new markets for 
American farmers?
    Answer. I recognize the importance of expanding export market 
opportunities for America's farmers and ranchers and allow them to 
compete on an even playing field. In the NAFTA negotiations, for 
example, we are committed to negotiating an agreement that expands 
access into Canada for U.S. dairy, poultry and egg products and to 
resolve other barriers to U.S. agricultural products, including wine. 
Beyond NAFTA, we are currently assessing likely trading partners with 
which we would like to pursue new agreements. USTR is also pursuing a 
strong enforcement agenda to ensure that American businesses, farmers 
and ranchers have an even playing field. For example, we have initiated 
WTO dispute settlement proceedings against British Columbia, Canada's 
discriminatory practices. USTR will continue to work closely with the 
U.S. Department of Agriculture to resolve these and other impediments 
to U.S. exports of food and agricultural products.
    Question 4b. Do you expect that additional government handouts will 
be necessary for American industries hurt by the President's tariffs?
    Answer. The Secretary of Agriculture announced his intent to 
provide up to $12 billion of agricultural assistance in light of the 
unique circumstances faced by America's farmers and ranchers. USTR does 
not have authorities to provide any such assistance to U.S. businesses.
                       geographic origin labeling
    Question 5a. Legal protections for geographic origins--like Napa 
wine--are critical for American agriculture. The main way we enforce 
these labels--and ensure that Napa wine can only be produced in Napa, 
California--is through trade agreements and cooperation with our 
trading partners.
    First, the President pulled out of that Trans-Pacific Partnership. 
Now the President is threatening to go it alone on NAFTA. And recently, 
the President has threatened to withdraw from the World Trade 
Organization.
    If America withdraws from all of these international agreements, 
how will you ensure that American agricultural producers--particularly 
winemakers--are protected?
    Answer. The administration is committed to negotiating trade deals 
designed to benefit all Americans, including winemakers. For example, 
the existing NAFTA has certain carve outs that permit Canada to 
discriminate against U.S. wine. With Trade Promotion Authority 
extended, the administration will use this authority to obtain better 
trading terms for American workers, businesses, farmers and ranchers. 
The World Trade Organization is an important institution for American 
agriculture and we are advancing a proactive agenda in the WTO to 
promote a trade agenda that reduces trade distorting agricultural 
domestic support and science based decisionmaking for sanitary and 
phytosanitary measures. Specific to wine, we have also initiated WTO 
dispute settlement proceedings against Canada's discriminatory wine 
measures in British Columbia.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
    Question 1a. Ambassador Lighthizer, American farmers believe that 
we should be working hard to open new markets for our farm commodities, 
not making it more difficult to sell products abroad. But the latter is 
exactly what this administration's trade policies have caused. Vermont 
dairy farmers are in the middle of an economic crisis as market 
conditions, trade barriers, and now escalating Chinese tariffs are 
creating a perfect storm of damaging factors, which only gets worse 
with every tweet storm out of the White House. Watching what was a 2 
percent tariff on dairy products in China get hiked up to 27 percent is 
very distressing for Vermont as two of the top products we sell to 
China are whey and cheese. Dairy is our leading agriculture sector in 
Vermont in terms of the jobs, economic opportunity, and land 
conservation it brings to the State.
    How do you plan to ensure our trade policy allows dairy farmers to 
thrive and maintain last year's export levels of nearly 15 percent of 
our U.S. milk production?
    Answer. I recognize the importance of making sure that U.S. dairy 
exports can expand and compete on an even playing field with 
competitors. In the NAFTA negotiations, for example, we are committed 
to negotiating an agreement that expands access into Canada for U.S. 
dairy products. Beyond NAFTA, we are currently assessing likely trading 
partners with which we would like to pursue new agreements. U.S. dairy 
products continue to face unfair trade barriers in a number of foreign 
markets. USTR will continue to work closely with the U.S. Department of 
Agriculture to resolve such impediments to U.S. dairy products in order 
to expand export opportunities for the U.S. dairy industry.
    Question 1b. Given that this $12 billion bailout to offset the 
impact of tariffs you have provoked on farmers is not sustainable, what 
assurances can this administration give to our farmers that you have a 
long term strategy or vision for supporting their export markets?
    Answer. Please see response to Question 1a. Our efforts to expand 
markets for U.S. farmers go beyond dairy and extend to all agricultural 
products. And over the last 18 months, the administration has secured 
market openings in Argentina, Morocco, and other countries.
    Question 2a. American dairy farmers and cheese makers have urged 
this administration to reconsider its imposition of new tariffs on 
Mexico in light the fact that Mexico has engaged in constructive NAFTA 
negotiations and the overwhelming harm that Mexico's retaliatory 
tariffs will have on dairy's trade with what is by far our largest and 
most reliable market for dairy exports. The U.S. production of cheese 
and other dairy products supports nearly 3 million American jobs, and I 
am very concerned that these steep Mexican duties will allow the 
European Union, which recently signed a bilateral free trade agreement 
with Mexico, to steal our dairy farmers hard-earned market share out 
from under us if these tariffs continue.
    Do you share my concerns that by allowing Mexico's cheese tariffs 
to remain in place, you will greatly assist the European Union in a 
market where the U.S. has long been the leading supplier?
    Answer. We recognize the dangers of the EU's approach to the 
protection of geographical indications in the EU and third-country 
markets for U.S. producers and traders, particularly those with prior 
trademark rights or who rely on the use of common food names. This 
effort pre-dates any retaliatory tariffs and is a serious problem. Our 
agencies are continuing to work intensively through bilateral and 
multilateral channels to advance U.S. market access related to GI trade 
initiatives of the EU, its Member States, other countries, and 
international organizations.
    We also understand that Class 7 is harming U.S. dairy exports. My 
office is working to address this problem in the NAFTA renegotiation. 
Our objectives also include opening Canada's market further to the full 
range of U.S. dairy products. We continue to press Canada on these high 
priorities for the United States.
    Question 2b. Why has this administration pursued trade policies 
that result in our dairy farmers suffering from long term loss of 
access to our top foreign market?
    Answer. We are engaged in numerous efforts to gain improved access 
for U.S. dairy products in a number of important export markets, 
including Canada. We will continue to place a high priority on 
maintaining existing markets and opening new ones for U.S. dairy 
producers as we move forward with our trade agenda.
    Question 3a. Ambassador Lighthizer, when I speak to Vermont 
business owners, they tell me that the uncertainty surrounding what 
tariffs will be levied, how much they will be, when they will go into 
effect, and how they will apply is as damaging to them as the tariffs 
themselves. For instance your statement on proposing tariffs on $200 
billion in Chinese imports this July was billed as the culmination of 
almost a year of warnings from the administration, and yet with so many 
conflicting statements by the President and others in that time about 
whether progress had been made, manufacturers tell me financing has 
been restricted, and they have been waiting to make decisions about new 
machinery or expansion.
    Who speaks for the United States when it comes to trade?
    Answer. As USTR, my statutorily mandated responsibility is to be 
the President's principal trade advisor and lead trade negotiator for 
the United States. I intend to fulfill that role. However, as USTR has 
always done, and where required by statute, I will continue to work 
closely with all members of the President's cabinet, Congress, and the 
Trade Advisory Committees in order to develop a balanced trade policy 
that furthers the priorities of the President and the American people.
    Question 3b. What guidance can the Office of the United States 
Trade Representative give Congress so that we can help provide our 
constituents the certainty they need to continue making the best 
decisions for the future of their companies?
    Answer. USTR publishes all information related to the Section 301 
investigation of the acts, policies, and practices of the Government of 
China related to technology transfer, intellectual property, and 
innovation in the Federal Register. The Federal Register notices, 
hearing transcripts, and information related to the product exclusion 
process are posted here: https://ustr.gov/issue-areas/enforcement/
section-301-
investigations.
    Question 4a. I recently visited Leader Evaporators, a company in 
Rutland, Vermont, founded in 1988, which manufactures evaporators 
mostly of stainless steel, which is their most significant material 
cost. Their competitors are all based in Canada, so any increase in the 
cost of steel in the United States, but not in Canada, will be a 
serious problem for their company. Even before tariffs, the strong U.S. 
dollar had given an advantage to their Canadian competitors who export 
to the United States and make their own attempts to export to Canada 
that much harder. The Trump administration's retaliatory tariffs have 
created enormous uncertainty and are causing real pain for Vermont 
businesses. The administration's claims that the pain will be short-
term provide no comfort when real long- term detrimental impacts have 
owners putting growth plans on hold, losing money and market shares, 
and losing contracts which may put in jeopardy the viability of their 
businesses and livelihoods.
    Do you and the President believe it is better for American 
manufacturers who make things out of steel or aluminum to go out of 
business, in an attempt to expand steel and aluminum production itself?
    Answer. The President's determination to impose tariffs on imports 
of steel and aluminum is based on a finding by the Secretary of 
Commerce, arrived at through an investigation conducted pursuant to 
Section 232 of the Trade Expansion Act of 1962 that the quantity and 
circumstances of these imports threaten to impair our national 
security. In taking this action, the President adopted measures to 
mitigate the impact of the tariffs on U.S. users of these products, for 
example by allowing for relief from the tariffs for products not 
available in sufficient quality or quantity in the United States. 
Instead of working with us to address a common problem, some countries 
have elected to respond to the President's action with retaliatory 
tariffs. We will take all necessary and appropriate actions to protect 
our interests in response to this unjustified retaliation. The 
administration has also taken action at the WTO to challenge illegal 
retaliation by these countries. For other questions about economic 
analyses relating to Section 232, I would refer you to the Commerce 
Department.
    Question 4b. How many American manufacturing jobs are at risk due 
to increased steel and aluminum prices?
    Answer. Please see response to Question 4a.
    Question 4c. What is your plan for addressing the harm caused to 
U.S. manufacturers and producers?
    Answer. Please see response to Question 4a.
    Question 4d. How do you respond to such long-term damage to U.S. 
businesses?
    Answer. Please see response to Question 4a.
    Question 4e. How do you expect American businesses to regain the 
market shares we are losing as a result of retaliatory tariffs?
    Answer. Also, USTR has challenged retaliatory tariffs at the WTO 
and is seeking to open new markets through additional FTAs.
    Question 5a. In your hearing you were repeatedly asked about 232 
tariffs on Canada and whether you consider one of our closest allies a 
national security threat. You argued that for the program to work we 
could not have any ``holes in the net'' and that while Canada is a 
great ally and one of America's closest friends, we need to include 
them as part of the overall program. I agree with you that Canada is a 
great ally and one of our closest friends.
    Did you consider any other avenues, and are there another avenues 
to address what you perceive to be holes in the net of our national 
trade policy other than designating or labeling our allies a 232 
national security threat?
    Answer. The President's determination to impose tariffs on imports 
of steel and aluminum is based on a finding by the Secretary of 
Commerce, arrived at through an investigation conducted pursuant to 
Section 232 of the Trade Expansion Act of 1962 that the quantity and 
circumstances of these imports threaten to impair our national 
security. The President invited allies and partners of the United 
States to discuss with us possible alternative means to address the 
threat posed by the imports of steel and aluminum. The United States 
has subsequently arrived at such satisfactory alternative means with 
several countries. We continue to urge all our trading partners to work 
constructively with us to address the problems created by massive and 
persistent excess capacity in the global steel and aluminum sectors.
    Question 5b. If so, why did you not explore those avenues first?
    Answer. Please see response to Question 5a. It should also be noted 
that efforts to work multilaterally through the Global Forum on Steel 
Excess Capacity was largely ineffective despite robust participation by 
the United States and its allies.
    Question 5c. Do you worry this sets a dangerous precedent and opens 
the door for other countries to label the United States as a national 
security threat as a justification for tariffs on U.S. imports?
    Answer. No. Please see response to Question 4a.
    Question 6a. Ambassador Lighthizer, one of the shortcomings of 
NAFTA has been the lower standards of worker rights and environmental 
protections in Mexico, which, while better than before NAFTA and 
associated agreements, continue to put U.S. and Canadian workers at a 
disadvantage.
    In your renegotiation of NAFTA, what emphasis have you placed on 
environmental standards, working conditions, and the rights of workers, 
in order to provide a more level playing field for American workers?
    Answer. Among our top priorities for the NAFTA are improvements 
that create incentives to increase manufacturing in the United States, 
lower our trade deficit, and improve exports opportunities for U.S. 
producers and workers. To support these priorities in our negotiations, 
we are ensuring that the updated NAFTA strengthens our trading 
partners' environmental and labor standards. In accordance with the 
objectives Congress set out in TPA, we are modernizing and 
incorporating environmental and labor obligations into the core of the 
agreement rather than in a side agreement, and ensuring that these 
obligations are subject to the same dispute settlement mechanisms and 
trade sanctions as the rest of the agreement. In many instances, our 
proposals are more ambitious than TPP.
    Question 7a. Ambassador Lighthizer, the President has declared on 
Twitter that ``trade wars are easy to win'' and ``tariffs are the 
greatest,'' among other claims. But in Vermont we are already seeing 
impact of tariffs that are far from the ``greatest,'' for example on 
our small breweries. Our many businesses that export dread becoming 
collateral damage if promises of better trade agreements and 
eliminating our trade deficit at the end of a so-called easy trade war 
fail to materialize.
    What assurances can you give to Vermonters and the American people 
that you take seriously the complexity and challenges of renegotiating 
one of the biggest free trade agreements in history in such a short 
time?
    Answer. The President has made it a top priority to renegotiate our 
trade agreement with Mexico and Canada. NAFTA negotiations are ongoing. 
As part of the negotiations, we are addressing transparency, 
enforcement, and supporting U.S. industry. Please rest assured that 
this administration is wholly committed to pursuing a successful 
renegotiation of NAFTA that advances the interests of the United States 
and that benefits our workers, farmers, ranchers, and companies. It is 
important to move quickly so that our businesses and workers have 
certainty.
    Question 8a. The United States' creative industries play a vital 
role in growing the U.S. economy and creating good American jobs. In 
2015, these industries accounted for nearly 7 percent of our economy, 
employed nearly 5.5 million workers, and exceeded the U.S. average 
annual wage by 38 percent. But U.S. leadership as the world's largest 
content creator is threatened by pirates who seek to steal and profit 
from U.S. creativity and innovation. Unprecedented levels of digital 
piracy risk eroding one of our Nation's premier economic and cultural 
assets. For example, in 2016 there were an estimated 5.4 billion 
downloads of pirated wide release films and primetime television and 
video-on-demand shows using peer-to-peer protocols worldwide. And there 
were an estimated 21.4 billion total visits to streaming piracy sites 
worldwide. It is in our national interest to stem the tide of online 
piracy.
    What are you doing to ensure that an updated NAFTA effectively 
tackles online piracy?
    Answer. Protection of copyrighted content from piracy is a pressing 
concern within the North American region and globally. This was 
highlighted in our recent Notorious Markets Report, which called out 
sites that traffic in illicit streaming devices and stream-ripping, 
both of which facilitate large-scale piracy. We seek to use the NAFTA 
Agreement and other appropriate trade tools to ensure that U.S. 
creators have a full and fair opportunity to use and profit from their 
copyrights and related rights. For example, in NAFTA, we are seeking 
standards similar to U.S. law to dramatically enhance protections for 
copyrighted works against this kind of piracy. We are seeking stronger 
standards against camcording in movie theaters, which fuels the damage 
done by illegal copies of new release movies being made available 
online. We want to both ensure that rightsholders and ISPs have 
incentives to cooperate against online piracy as well as ensure the 
rightsholders are protected with strong civil, criminal and other 
remedies against piracy in the digital environment. We seek strong 
protections for effective digital locks, similar to U.S. law. Ensuring 
strong intellectual property protection and enforcement by our trading 
partners is a top trade priority, including in trade negotiations.
    Question 9a. This subcommittee has for several years included 
language in its bill reports and accompanying explanatory statements 
calling for the FBI, U.S. Attorneys, and the Criminal Division to 
prioritize the investigation and prosecution of the online theft of 
American intellectual property. While DOJ and other agencies can help 
protect American intellectual property through domestic criminal 
proceedings, content creators must also invest significant resources to 
protect their property through civil proceedings including in foreign 
jurisdictions where American intellectual property is stolen.
    How is USTR ensuring through an updated NAFTA that American 
copyright holders, for example, can access justice and hold would-be 
thieves accountable through secondary liability protections?
    Answer. Please see response to Question 8a.
                                 ______
                                 
               Questions Submitted by Senator Jerry Moran
    Question 1. The fiscal year 2019 budget request listed protecting 
U.S. intellectual property rights as one of USTR's four major trade 
priorities. How will you fulfill that promise to protect American IP in 
a modernized NAFTA?
    Answer. We seek to use the Agreement to ensure that U.S. right 
holders have a full and fair opportunity to use and profit from their 
intellectual property rights in Canada and Mexico. As reflected in 
USTR's NAFTA renegotiation objectives, USTR continues to ``[s]eek 
provisions governing intellectual property rights that reflect a 
standard of protection similar to that found in U.S. law, including, 
but not limited to protections related to trademarks, patents, 
copyright and related rights (including, as appropriate, exceptions and 
limitations), undisclosed test or other data, and trade secrets.''
    Question 2. What is USTR doing to ensure that an updated NAFTA 
effectively tackles online piracy and where are you on securing 
secondary liability in an updated NAFTA?
    Answer. We seek to use the Agreement and other appropriate trade 
tools to ensure that U.S. creators have a full and fair opportunity to 
use and profit from their copyrights and related rights. Ensuring 
strong intellectual property protection and enforcement by our trading 
partners is a top trade priority, including in trade negotiations. 
Seeking to achieve an outcome where IP rights will be fully protected 
consistent with U.S. law.
    Question 3a. Intellectual property and innovation drive 
productivity, employment, and economic growth, particularly for 
industries like the U.S. biopharmaceutical industry, which supports 
approximately 4 million U.S. jobs. In your view, how does the 
negotiation and enforcement of trade agreements impact the growth of 
such innovative and IP-intensive industries?
    How successful has the USTR been in convincing foreign countries 
and their companies, especially Chinese ones, to respect U.S. 
intellectual property rights including licensing the use of Standard 
Essential Patents (SEP's)?
    Answer. The protection and enforcement of U.S. intellectual 
property rights certainly extends to the licensing of standard 
essential patents. Too often, governments issue measures that 
manipulate the standards development process to create unfair 
advantages for domestic firms, including with respect to the terms on 
which intellectual property is licensed. USTR will continue to press 
foreign governments on this issue at every opportunity.
    Question 3b. What more can USTR be doing to ensure that our trading 
partners respect U.S. intellectual property rights and value U.S. 
innovation?
    Answer. Consistent with the President's trade policy agenda, USTR 
will use all available tools to ensure that American workers, farmers, 
ranchers, manufacturers, innovators, service providers, consumers, and 
investors receive fair treatment in trade and win the full benefit of 
the economic opportunities the United States has negotiated. USTR is 
seeking robust commitments for IP protection and enforcement that 
update and modernize the IP Chapter of NAFTA consistent with the Trump 
administration's commitment to ensuring strong intellectual property 
protection and enforcement. USTR takes the proper and complete 
implementation of all FTA commitments seriously and engages with 
trading partners on a regular and sustained basis to advance 
implementation of all of FTA commitments. Each year, USTR issues the 
Special 301 Report, which identifies countries that do not provide 
adequate and effective protection of intellectual property. The 
listings in this Report have been a valuable tool in engaging with 
other countries on specific laws and policies in order to correct 
systemic enforcement problems. USTR also issues a Notorious Markets 
List, that calls out the types of online and physical markets that are 
most damaging to rightsholders and reflect evolving trends in piracy 
and counterfeiting that countries must respond to in order to 
effectively protect intellectual property rights.
    Question 4a. Earlier this year Bureau of Economic Analysis (BEA) 
published its initial prototype statistics that illustrate the large 
economic impact of outdoor recreation. This first report calculated the 
outdoor recreation industry's annual gross output to be $673 billion or 
2 percent of GDP, surpassing other sectors such as petroleum and coal, 
and computer and electronic products. The U.S. marine industry is now 
facing a triple threat from 232 action on steel and aluminum, anti-
dumping and countervailing duties on Chinese aluminum sheet, and 301 
tariffs on nearly 300 marine related products. As a result of these 
factors, U.S. marine manufacturers are confronted with rising costs of 
raw materials, component parts, and retaliation from our top trading 
partners. The compounding effects of these tariffs threaten to increase 
the cost of manufacturing in the U.S., which will in turn result in 
less domestic production, higher prices for American consumers, and 
fewer jobs for American workers.
    What are you and the administration doing to ensure U.S. 
manufacturers, such as marine manufactures, are not negatively impacted 
by the Administrations tariff actions?
    Answer. The actions in the Section 301 investigation are intended 
to obtain the elimination of China's unfair and harmful acts, policies, 
and practices related to technology transfer, intellectual property, 
and innovation, thereby promoting the interests of all U.S. 
stakeholders that rely on innovation for their competitiveness. To 
minimize the impact of tariffs on American companies and workers, the 
Administration has set up an exclusion process.
    Question 4b. What are you doing to ensure U.S. manufacturers are 
not unfairly impacted by retaliation?
    Answer. As noted, we are challenging retaliatory actions at the 
WTO. The administration has also launched a mitigation for farmers 
suffering economic harm from retaliation.
    Question 4c. How are you measuring the downstream impact of tariffs 
on American business?
    Answer. Please see response to Question 4a.
    Question 4d. Are you concerned with the spillover effects of the 
Administrations tariffs into other sectors of the economy?
    Answer. Please see response to Question 4a.
    Question 4e. How do you explain to consumers the increased price of 
goods associated with the administrations tariff proposals?
    Answer. Please see response to Question 4a.
    Question 5a. As fiscal year 2018 comes to a close, it is my 
understanding that USTR is unable to spend the full amount that it was 
appropriated in the 2018 omnibus signed into law in March. This is a 
bit surprising given comments during your confirmation hearing in which 
you indicated that USTR needed more resources. Those statements 
obviously preceded the Section 301 tariffs and increased trade 
activity, for which USTR faces a number of growing responsibilities. 
Both the House and Senate Appropriations Committees approved funding 
proposals for fiscal year 2019 that would provide USTR with level 
funding from the fiscal year 2018 enacted amount.
    In light of your past public statements, and what seems to be a 
growing workload at USTR, please explain what USTR's current and future 
resource needs are? Does USTR need less funding to execute its mission? 
And, if so, why has your opinion on resourcing levels changed since 
your confirmation?
    Answer. The proposed fiscal year 2019 funding levels will allow 
USTR to pursue aggressive enforcement of existing agreements and 
negotiation of new or renegotiation of existing agreements.
    In fiscal year 2018, similar to fiscal year 2017, continuing 
resolutions prevailed well into the year. Meanwhile, USTR developed 
hiring plans for fiscal years 2018 and 2019, but delayed implementation 
until full-year appropriations were enacted. With these appropriations 
in hand, USTR has been aggressive at filling personnel vacancies 
existing at the end of the previous administration. We have also added 
trade policy staff, especially to support NAFTA and KORUS negotiation 
efforts, and increased our monitoring and enforcement capabilities with 
more trade attorneys in the Office of the General Counsel. We have also 
been using contractors and consultants to assist in managing the 
workload associated with the Section 301 process.
    Now that we have all four deputy USTRs on board and good 
indications from both the House and Senate Appropriations Committees on 
what will likely be our funding for fiscal year 2019, we plan to spend 
fiscal year 2019 appropriations foremost to our aggressive hiring plan. 
This effort is intended to result in a 25 percent increase in staffing 
(positions) by the end of fiscal year 2019, compared with the end of 
fiscal year 2017. Second, funds will also support an aggressive trade 
negotiation effort with multiple parties, including the EU, UK and 
Asian and African countries. These efforts will substantially increase 
our travel costs which have been historically low in both fiscal years 
2017 and 2018 due to the change in administrations, lack of Senate-
confirmed personnel, and focus on the much needed improvements to NAFTA 
with our adjacent neighbors. If provided by appropriations in fiscal 
year 2019, $15 million in the Trade Enforcement Trust Fund will support 
continued trade monitoring and enforcement activities.
    Question 5b. Does USTR have the personnel needed to perform the 
evaluations of the section 301 exclusion petitions? What criteria and 
metrics will USTR apply to ensure these petitions are processed 
efficiently? Will USTR in fact be able to complete the evaluations on a 
timely basis?
    Answer. USTR is using career staff and contract staff, along with 
input from other agencies upon USTR's request, to review and process 
the exclusion requests. USTR will continue to adjust the resources 
allocated to the exclusion process, taking account of the number of 
requests.
    Question 5c. Some in the business community have reached out to my 
office and raised concerns that USTR's exclusion process will be all 
encompassing and therefore very few exclusions will actually be 
granted. What would you say to address that concern?
    Answer. The Federal Register Notice published on July 11, 2018 (83 
F.R. 32181) outlines the information USTR will consider in making its 
product exclusion determination:

  --Specific product description criteria.
  --Whether the particular product or a comparable product are 
        available only from China.
  --Whether the imposition of additional duties on the particular 
        product would cause severe economic harm to the requestor or 
        other U.S. interests.
  --Whether the particular product is strategically important or 
        related to ``Made in China 2025'' or other Chinese industrial 
        programs.

    USTR will evaluate each request on a case-by-case basis, taking 
into account the objective of the Section 301 investigation.
                                 ______
                                 
                Questions Submitted by Senator Jack Reed
    Question 1a. We are currently engaged in increased competition, 
including economic competition, with adversaries across a variety of 
domains. A prominent example of this competition is from China who 
through its Belt and Road Initiative is seeking to gain influence 
across the globe. What role do you think trade should play as part of a 
broader effort to counter our adversaries, especially China?
    Would working with our allies to blunt Chinese economic influence 
be more effective than alienating some of our closest allies with 
tariffs?
    Answer. Most of our allies and trade partners share the same 
concerns about China's state-driven, mercantilist policies on trade and 
technology transfer. Many countries also agree that China continues to 
game the WTO's international rules-based trading system and the 
openness of our economies in ways that threaten all of our economies 
and our long-term competitiveness.
    In addition, we have maintained a sustained engagement effort with 
our allies and other like-minded countries in confronting China.

  --We continue to work closely with Japan and the European Union to 
        ensure that WTO members maintain their rights to use non-market 
        economy methodologies in antidumping proceedings in order to 
        curb China's distortive economic behavior.
  --During the WTO Ministerial Meeting in Argentina last December, the 
        EU Trade Commissioner, the Japanese Trade Minister and the U.S. 
        Trade Representative issued a joint statement recognizing that 
        forced technology transfer threatens the proper functioning of 
        international trade, the creation of innovative technologies, 
        and sustainable growth of the global economy. Together, we 
        agreed to enhance trilateral cooperation in the WTO and in 
        other fora to address this and other critical trade concerns, 
        including excess capacity, industrial subsidies and state-owned 
        enterprises.
  --In March of this year in Brussels, the EU Trade Commissioner, the 
        Japanese Trade Minister and the U.S. Trade Representative 
        underscored ``their shared objective to address non market-
        oriented policies and practices.'' They also highlighted the 
        need to develop stronger rules to address excess capacity.
  --More recently, in May of this year in Paris, the three trade 
        ministers met again and continued to advance their shared work 
        in the areas of non-market economy conditions, technology 
        transfer and industrial subsidies and state-owned enterprises.
    Question 2a. As you know, there is no Softwood Lumber Agreement. 
This has led to a significant increase in the costs of materials 
utilized for homebuilding, which necessarily makes homes less 
affordable. It also negatively impacts many other industries and 
consumers. Are there any plans for these negotiations to be restarted 
or wrapped into NAFTA?
    Answer. No, softwood lumber is covered by trade remedy laws 
administered by the Department of Commerce.
    Question 2b. Does this administration have a plan to assist 
industries and consumers who rely on lumber products?
    Answer. This administration is committed to the robust enforcement 
of U.S. trade remedy laws. Ensuring that U.S. softwood lumber producers 
compete on a level playing field against the injurious effects of 
unfairly subsidized and dumped Canadian imports is an important 
priority for the Trump administration. These tariffs are in place to 
remedy the harm that was caused by the unfair trade practices in the 
Canadian industry. These unfair trade practices, which are extensively 
documented in the Commerce Department's recent investigation, are 
harmful to U.S. jobs and impose high costs on the economy. No one 
benefits from unfair trade. It is my view that U.S. trade remedy laws 
are working as intended and the burden rests with Canada to reach an 
agreement with the United States.
    Question 3a. In your testimony, you stated that you are making 
progress towards renegotiating NAFTA. Uncertainty in our trading 
relationships with Canada and Mexico is detrimental to my State's 
economy. I am particularly interested in ensuring that there are 
adequate protections for Rhode Island workers and the environment. With 
regard to NAFTA negotiations, can you provide an update on your efforts 
to ensuring that any new agreement has stringent labor as well as 
environmental protections?
    Answer. I am committed to negotiating a modernized NAFTA that 
incorporates robust protections for workers and the environment, in 
accordance with TPA, including by incorporating high standard labor and 
environmental provisions into the core of the agreement rather than in 
a side agreement as is currently the case with the original NAFTA.
    Question 3b. What stakeholders have you engaged with on these 
issues?
    Answer. USTR has engaged a wide range of stakeholders, including 
the Labor Advisory Committee for Trade Negotiations and Trade Policy 
(LAC), which I co-chair along with Labor Secretary Alex Acosta. The 
members of this committee are labor union presidents from all of the 
major U.S. unions, including the AFL-CIO, the United Steelworkers, the 
United Auto Workers, the Teamsters and several others. In addition, 
USTR has regularly consulted the Trade and Environment Policy Advisory 
Committee (TEPAC), which includes environmental non-governmental 
organizations (NGOs), academics, and industry representatives.
    Question 4a. The administration has placed tariffs on some of our 
closest allies and partners utilizing national security as a 
justification. Please provide the legal opinion on which the 
administration has relied to justify Section 232 tariffs.
    Is the administration planning on utilizing this authority more in 
the future?
    Answer. The Secretary of Commerce has initiated investigations 
under Section 232 of the Trade Expansion Act of 1962 to determine 
whether imports of automobiles and automotive parts and whether imports 
of uranium ore and products threaten to impair our national security. 
With respect to the tariffs on steel and aluminum products, the 
President took these actions based on a finding by the Secretary of 
Commerce, following an investigation conducted pursuant to Section 232 
that the quantities and circumstances of imports of these products 
threaten to impair U.S. national security. With respect to the legal 
framework within which the President made his determination, I would 
refer you to the reports of the Secretary in those investigations and 
to the proclamations subsequently issued by the President.
                                 ______
                                 
             Questions Submitted by Senator Lisa Murkowski
    Question 1a. As U.S. Trade Representative, you oversee the ongoing 
Section 301 dispute with China. These tariffs are doing real harm to 
the Alaska seafood industry, in at least three ways: by making our 
exports less competitive, by imposing duties on American-caught 
seafood, and by injecting considerable uncertainty into our seafood 
economy. On June 15, in retaliation for an original round of tariffs 
imposed by the United States, China hit dozens of U.S. exports with a 
25 percent tariff, on top of whatever tariff already applies. This 
decision immediately made our salmon, cod, crab, whiting, Alaska 
pollock, sole, and other products far less competitive--and in some 
cases entirely uncompetitive--at a time when China is unilaterally 
reducing its seafood tariffs. This is a severe problem, as China is the 
single largest destination for our seafood exports in the world. 
Further, because this dispute has no apparent end date or end game, 
both fishermen and the commercial seafood industry are facing 
persistent uncertainty that is deadly for any international business. 
If the overall dispute widens, China could hit Alaskan exports even 
harder, by: (1) eliminating the exemption from the 25 percent tariff 
for fish that gets exported to the U.S. or EU; (2) applying the 25 
percent tariff to Alaska products that to date have been spared, such 
as fishmeal; or (3) erecting nontariff barriers that make it impossible 
to reliably ship to the PRC. Number 3 is already happening to U.S. 
farmers. The cumulative impact of these actions would be the erosion of 
overseas markets that both the State of Alaska and members of our 
seafood industry have worked hard to cultivate over multiple years
    Please provide a detailed accounting of the amount of U.S. seafood 
that will be affected by China's 25 percent tariff on U.S. seafood 
imports, including specific HS codes for each individual product type.
    Answer. Currently, China has imposed 25 percent tariffs on 224 
tariff lines (according to the Chinese tariff schedule, at HTS-8 level) 
covering U.S. fish and seafood, with imports valued at $1.5 billion in 
2017.
    Attached in Annex A is a detailed list of products that are 
currently subject to the Chinese retaliatory tariff of 25 percent (as 
of the submission date of this document).
    Question 1b. What steps are you taking to build and maintain 
overseas markets for American seafood producers?
    Answer. USTR works consistently to expand market access 
opportunities for U.S. seafood producers in our various bilateral 
engagements with trading partners, including FTA negotiations and 
discussions under Trade and Investment Framework Agreements (TIFAs) 
that we have with our trading partners. We work regularly with industry 
representatives and other U.S. Government agencies to address unfair 
trade barriers resulting from sanitary and phytosanitary measures and 
other issues that affect U.S. seafood exports.
    Question 1c. Has your office or the administration taken any steps 
to encourage Russia to lift its embargo on American seafood imports?
    Answer. Russia imposed a ban on imports of certain agricultural 
products, as well as seafood, from the United States (and other 
countries) in response to our sanctions against Russia following its 
aggression in Ukraine and attempted annexation of Crimea. Our policy 
with respect to Ukraine has not changed. Russia must fully implement 
its commitments in the Minsk agreements in order for sanctions related 
to Russia's aggression in eastern Ukraine to be lifted. In addition, 
Russia must withdraw from Crimea and return control of the peninsula to 
the Ukrainian Government before our Crimea-related sanctions will be 
lifted.
    Question 2a. China is the largest export destination for our 
Nation's seafood harvest, accounting for somewhere between 23 to 27 
percent of total U.S. exports. Further, depending on the item involved, 
substantial amounts of Alaska's overall harvest go to China for 
processing and then re-exportation to U.S. customers. China has 
exempted from its 25 percent tariff any fish that are processed in 
China and then sent to the U.S. or a third country, including fish 
originally harvested in the United States. Your July 10 proposal for a 
10 percent tariff--which you recently announced may become a 25 percent 
tariff--on $200 billion of Chinese products includes fish harvested in 
Alaska, processed in China, and then shipped back to the U.S. It is 
estimated that about 1/3 seafood we import from China is actually 
harvested in the United States by American--and mostly Alaskan--
fishermen. Though this number is based on certain assumptions, the 
central idea is unquestionably correct: hundreds of millions of dollars 
of fish harvested by U.S.-flagged vessels in our tightly-managed 
fisheries will now be subject to an import tariff in order to reach 
American consumers.
    How did your office consider and weigh the impacts of your proposed 
tariffs on domestic seafood producers who process some of their product 
in China? How will your office consider and weigh the impacts of an 
increased tariff of 25 percent? What is the specific process for 
evaluating these impacts on American businesses?
    Answer. The administration's proposed action followed China's 
improper retaliatory tariffs on U.S. goods. The next working day after 
China announced its retaliation, the President instructed USTR to 
consider a supplemental action covering $200 billion in trade from 
China. USTR proceeded to publish a proposed list of tariff subheadings, 
and the public notice and comment process on the proposed list 
concluded on September 6.
    Certain stakeholders have raised concerns about possible effects of 
the proposed supplemental action on U.S. fishery products exported to 
China for processing and then re-exported from China to the United 
States. The public comment period for the proposed supplemental action 
closed September 6. USTR is carefully considering all input from 
stakeholders and Congress, as well as the advice of the interagency 
Section 301 Committee, in deciding upon the scope of a possible 
supplemental action.
    Furthermore, USTR works consistently to expand market access 
opportunities for U.S. seafood producers in our various bilateral 
engagements with trading partners, including FTA negotiations and 
discussions under Trade and Investment Framework Agreements (TIFAs) 
that we have with our trading partners. We work regularly with industry 
representatives and other U.S. Government agencies to address unfair 
trade barriers resulting from sanitary and phytosanitary measures and 
other issues that affect U.S. seafood exports.
    Question 2b. What outreach or engagement did your office conduct 
with representatives from the seafood industry, the National Marine 
Fisheries Service, or commercial fishing organizations in developing 
these proposed tariffs on seafood and evaluating their impacts on the 
U.S. economy?
    Answer. USTR found in the Section 301 investigation that Chinese 
Government acts, policies, and practices related to technology 
transfer, intellectual property (IP), and innovation are unreasonable 
or discriminatory and burden or restrict U.S. commerce and that these 
unfair acts, policies, and practices cause tens of billions of dollars 
in damage to the U.S. economy. U.S. stakeholders that rely on 
technology, IP, and innovation for their competitive edge suffer 
substantial damage from these acts, policies, and practices. The 
actions taken by the United States as a result of the Section 301 
investigation are intended to obtain the elimination of China's unfair 
and harmful acts, policies, and practices, thereby promoting the 
interests of all affected U.S. stakeholders, as well as the strength of 
the U.S. economy as a whole.
    Throughout the Section 301 investigation, USTR has engaged with 
stakeholders from all interested industries, including through formal 
public comment procedures, public hearings, and industry trade advisory 
committees. To date, USTR has held four public hearings and has engaged 
in four separate notice and comment periods.
    The hearings are held by the interagency Section 301 Committee, 
which includes representatives of the Department of Commerce (of which 
the National Marine Fisheries Service is a component). The interagency 
committee also reviews the written comments, and provides advice on 
determinations to be made in the investigation.
    Question 2c. Please provide a detailed accounting of the amounts of 
Alaskan seafood reprocessed in China that will be impacted by your 
proposed Section 301 tariffs, which include products made with Alaskan 
fish and shellfish. Please include harmonized schedule codes for each 
individual product.
    Answer. Please see response to Question 2a.
    Question 3a. The seafood industry is not the only one that stands 
to be harmed by the administration's tariffs. The energy industry is 
another that is bracing for impact. I've heard from many different 
developers that are concerned about their project costs, the costs of 
building the infrastructure needed to transport their commodities to 
market, and the potential loss of access to valuable foreign markets as 
a result of retaliation. One estimate is that the administration's 
steel and aluminum tariffs could add millions of dollars to the costs 
of energy development projects in Alaska. Yet the recent focus of the 
administration has been on farmers and the agricultural sector. Now, 
you mentioned that existing programs through USDA that will be used to 
assist farmers hit by tariff impacts. Some of those programs have been 
leveraged to assist Alaska's fishermen in the past by purchasing 
surplus seafood that is then donated.
    Will the USDA use part of its $12 billion aid package to assist 
Alaskan seafood harvesters by purchasing their products through the 
Purchase and Distribution program?
    Answer. We recommend that you contact the U.S. Department of 
Agriculture as to its authorities.
    Question 3b. What specific steps is your office or the 
administration taking to ensure that China does not retaliate through 
other non-tariff barriers, such as shipping delays, which are already 
happening to farmers?
    Answer. The U.S. Government has been closely monitoring activities 
by China to assess whether they are taking inappropriate actions 
against U.S. products and will work to address those actions as needed.
    Question 3c. What aid, financial or otherwise, will be available to 
seafood producers, energy producers, and the manufacturing sector to 
mitigate the impacts of the trade war? How does the administration plan 
to support other sectors of the economy as they experience negative 
effects of this ongoing trade dispute?
    Answer. USTR and the Section 301 Committee are carefully reviewing 
public comments and testimony from the recent 6-day public hearing to 
determine next steps in the Section 301 process.

                                 ANNEX A
 Chinese Imports of U.S. Fish and Seafood Currently Facing an Additional
                            25 Percent Tariff
                         (2017 Value in Dollars)
------------------------------------------------------------------------
 Chinese HS                 Description                2017 Import Value
------------------------------------------------------------------------
   03011100   Live Ornamental Freshwater Fish........             11,819
   03011900   Other Live Ornamental Fish.............            649,314
   03031100   Frozen Sockeye Salmon..................         23,087,007
   03031200   Other Frozen Pacific Salmon............        295,357,547
   03031300   Frozen Atlantic Salmon And Danube                      123
               Salmon................................
   03031400   Frozen Trout...........................            409,500
   03031900   Other Frozen Salmonidae................            846,155
   03032300   --Tilapias (Oreochromis spp.)...  .................
   03032400   Frozen Catfish.........................  .................
   03032500   Frozen Carp............................            136,069
   03032600   Frozen Eels............................  .................
   03032900   Frozen Nile Perch And Snakeheads.......  .................
   03033110   Frozen Greenland Halibut...............          2,374,379
   03033190   Other Frozen Halibut...................          1,174,116
   03033200   Frozen Plaice..........................            631,297
   03033300   Frozen Sole............................  .................
   03033400   Frozen Turbots.........................  .................
   03033900   Other Frozen Flat Fish.................        183,650,154
   03034100   Frozen Albacore Or Longfinned Tunas....          1,026,463
   03034200   Frozen Yellowfin Tunas.................          3,531,983
   03034300   Frozen Skipjack Or Stripe-Bellied               13,054,246
               Bonito................................
   03034400   Frozen Bigeye Tunas....................            159,678
   03034510   Frozen Atlantic Bluefin Tunas..........  .................
   03034520   Frozen Pacific Bluefin Tunas...........             51,921
   03034600   --Southern bluefin tunas (Thunnus     .................
               maccoyii).........................
   03034900   Frozen Tunas, Nes......................  .................
   03035100   Frozen Herrings........................         13,878,443
   03035300   Frozen Sadines, Sardinella, Brisling Or  .................
               Sprats................................
   03035400   Frozen Mackerel........................                 28
   03035500   Frozen Jack And Horse Mackerel.........  .................
   03035600   Frozen Cobia...........................  .................
   03035700   Frozen Swordfish.......................  .................
   03035900   Frozen Anchovies, Indian Mackerels,                581,940
               Seerfishes, Ja........................
   03036300   Frozen Cod.............................        145,687,870
   03036400   Frozen Haddock.........................  .................
   03036500   Frozen Coalfish........................  .................
   03036600   Frozen Hake............................          4,133,630
   03036700   Frozen Alaska Pollack..................         59,729,712
   03036800   Frozen Blue Whitings...................  .................
   03036900   Other Frozen Fish Of The Families                1,183,135
               Bregmacerotidae,......................
   03038100   Frozen Dogfish And Other Sharks........             15,568
   03038200   Frozen Rays And Skates.................             21,368
   03038300   Frozen Toothfish.......................  .................
   03038400   Frozen Seabass.........................  .................
   03038910   Frozen Scabber Fish....................             74,343
   03038920   Frozen Yellow Croaker..................  .................
   03038930   Frozen Butterfish......................            162,841
   03038990   Frozen Fish, Nes.......................         74,929,186
   03039100   Frozen Fish Liver, Roes And Milt.......         30,311,578
   03039200   Frozen Shark Fins......................  .................
   03039900   Other Frozen Edible Fish Offal.........          2,097,725
   03046100   Frozen Fillets Of Tilapias.............  .................
   03046211   Frozen Fillets Of Channel Catfish......  .................
   03046219   Frozen Fillets Of Other Ictalurus......  .................
   03046290   Frozen Fillets Of Other Catfish........  .................
   03046300   Frozen Fillets Of Nile Perch...........  .................
   03046900   Frozen Fillets Of Carp/Eels/Snakeheads.             16,005
   03047100   Frozen Fillets Of Cod..................            173,856
   03047200   Frozen Fillets Of Haddock..............             71,730
   03047300   Frozen Fillets Of Coalfish.............  .................
   03047400   Frozen Fillets Of Hake.................  .................
   03047500   Frozen Fillets Of Alaska Pollack.......         13,668,110
   03047900   Frozen Fillets Of Fish Of The Families   .................
               Bregmacerot...........................
   03048100   Frozen Fillets Of Pacific/Atlantic/                 72,884
               Danude Salmon.........................
   03048200   Frozen Fillets Of Trout................  .................
   03048300   Frozen Fillets Of Flat Fish............            251,733
   03048400   --Swordfish (Xiphias gladius)...  .................
   03048500   Frozen Fillets Of Toothfish............  .................
   03048600   Frozen Fillets Of Herrings.............  .................
   03048700   Frozen Fillets Of Tunas, Skipjack Or     .................
               Stripe-Bellie.........................
   03048800   --Dogfish, other sharks, rays and        .................
               skates (Rajidae)...............
   03048900   Frozen Fillets Of Other Fish...........              6,650
   03049100   Frozen Meat Of Swordfish...............  .................
   03049200   Frozen Meat Of Toothfish...............  .................
   03049300   Frozen Meat Of Tilapias, Catfish ,                  32,823
               Carp, Eels, Nil.......................
   03049400   Frozen Meat Of Alaska Pollack..........         16,657,081
   03049500   Frozen Meat Of Fish Of The Families              9,944,835
               Bregmacerotida........................
   03049600   Frozen Meat Of Dogfish And Other Sharks            138,456
   03049700   Frozen Meat Of Rays And Skates.........                810
   03049900   Frozen Meat Of Other Fish..............          2,690,199
   03051000   Flours, Meals & Pellets Of Fish, Fit     .................
               For Human Con.........................
   03052000   Dried/Smoked/Salted Fish Livers,Roes               297,948
               And Milt..............................
   03061100   Frozen Rock Lobsters And Crawfish......            447,995
   03061200   Frozen Lobsters........................             21,763
   03061410   Frozen Swimming Crabs..................             22,302
   03061490   Other Frozen Crabs.....................         34,785,037
   03061500   Frozen Norway Lobsters.................  .................
   03061611   Frzen Cold-Water Shelled Shrimps.......             20,981
   03061612   Other Frozen Cold-Water Northern                   776,796
               Pandalus..............................
   03061619   Other Forzen Cold-Water Shrimps........  .................
   03061621   Frozen Cold-Water Shelled Prawns.......  .................
   03061629   Other Frozen Cold-Water Prawns.........  .................
   03061711   Other Frozen Shelled Shrimps...........             65,661
   03061719   Other Frozen Shrimps...................             19,759
   03061721   Other Frozen Shelled Prawns............          1,515,703
   03061729   Other Frozen Prawns....................  .................
   03061911   ----Shelled............................  .................
   03061919   Other Frozen Freshwater Crawfish.......            201,677
   03061990   Frozen Crustaceans, Nes, Incl. Flours,   .................
               Meals, Pellets........................
   03063110   Live Rock Lobster And Other Sea          .................
               Crawfish For Culti....................
   03063190   Live/Fresh/Chilled Rock Lobster And             43,637,934
               Other Sea Craw........................
   03063210   Live Lobsters For Cultivation..........  .................
   03063290   Live/Fresh/Chilled Lobsters, Not For           122,873,641
               Cultivation...........................
   03063310   Live Crabs For Cultivation.............  .................
   03063391   ----Freshwater crabs...................  .................
   03063392   Live/Fresh/Chilled Swimming Crabs, Not   .................
               For Cultiva...........................
   03063399   Other Live/Fresh/Chilled Crabs, Not For         78,469,504
               Cultivatio............................
   03063410   ---For cultivation.....................  .................
   03063490   ---Other...............................  .................
   03063510   ---For cultivation.....................  .................
   03063520   ---Prawns, fresh or chilled............  .................
   03063590   Live Cole-Water Prawns And Live/Fresh/             447,248
               Cold Cold-Wa..........................
   03063610   Other Shrimps/Prawns For Cultivation...          8,969,361
   03063620   Other Fresh/Chilled Prawns.............  .................
   03063690   Other Live Prawns And Live/Fresh/Cold                1,309
               Shrimps, Not..........................
   03063910   ---For cultivation.....................  .................
   03063990   Live/Fresh/Chilled Crustaceans Nes,                  8,651
               Incl.Edible Fl........................
   03069100   Rock Lobster And Other Sea                           1,993
               Crawfish,Prepared Other...............
   03069200   Lobsters,Prepared Other Than Fresh/      .................
               Chilled...............................
   03069310   ----Freshwater crabs...................  .................
   03069320   ----Swimming crab......................  .................
   03069390   Other Crab, Prepared Other Than Fresh/   .................
               Chilled...............................
   03069400   --Norway lobsters (Nephrops           .................
               norvegicus).......................
              ---Cold-water shrimps and prawns         .................
               (Pandalus spp., Crangon.....
   03069510   crangon)...........................  .................
   03069590   Other Shrimps And Prawns,Prepared Other  .................
               Than Fresh............................
   03069900   Crustaceans Nes, Incl. Edible Flours/    .................
               Meals/Pellets,........................
   03071110   ---For cultivation.....................  .................
   03071190   Live/Fresh/Chilled Oysters, Not For                720,685
               Cultivation...........................
   03071200   Frozen Oysters.........................  .................
   03071900   Dried/Salted/Smoked Oysters............  .................
   03072110   Scallops For Cultivation...............  .................
   03072190   Live/Fresh/Chilled Scallops, Not For                   524
               Cultivation...........................
   03072200   Frozen Scallops........................            503,084
   03072900   Dried/Salted/Smoked Scallops...........            302,494
   03073110   ---For cultivation.....................  .................
   03073190   Live/Fresh/Chilled Mussels, Not For                 36,710
               Cultivation...........................
   03073200   Frzen Mussels..........................  .................
   03073900   Dried/Salted/Smoked Mussels............  .................
   03074210   ---For cultivation.....................  .................
   03074291   Live/Fresh/Chilled Cuttle Fish(Sepia Of  .................
               Ficinalis,............................
   03074299   Other Live/Fresh/Chilled Cuttle Fish     .................
               And Squid.............................
   03074310   Frozen Cuttle Fish (Sepia Of Ficinalis,         61,192,664
               Rossia Macro..........................
   03074390   Other Frozen Cuttle Fish And Squid.....         12,975,673
   03074910   Dried/Salted/Smoked Cuttle Fish (Sepia             367,866
               Of Ficinalis..........................
   03074990   Other Dried/Salted/Smoked Cuttle Fish              973,879
               And Squid.............................
   03075100   Live/Fresh/Chilled Octopus.............  .................
   03075200   Frozen Octopus.........................  .................
   03075900   Dried/Salted/Smoked Octopus............  .................
   03076010   Snails (Not Sea Snails), For             .................
               Cultivation...........................
   03076090   Snails (Not Sea Snails), Not For                   767,295
               Cultivation...........................
   03077110   ---For cultivation.....................  .................
   03077191   Live/Fresh/Chilled Clams, Not For                   16,604
               Cultivation...........................
   03077199   Live/Fresh/Chilled Cockles And Ark                   2,471
               Shells, Not For.......................
   03077200   Frozen Clams, Cockles And Ark Shells...                530
   03077900   Dried/Salted/Smoked Clams, Cockles And             290,983
               Ark Shells............................
   03078110   ---For cultivation.....................  .................
   03078190   Live/Fresh/Chilled Abalone, Not For      .................
               Cultivation...........................
   03078210   ---For cultivation.....................  .................
   03078290   Live/Fresh/Chilled Stromboid Conchs,                 9,656
               Not For Culti.........................
   03078300   Frozen Abalone.........................  .................
   03078400   Frozen Stromboid Conchs................  .................
   03078700   Dried/Salted/Smoked Abalone............  .................
   03078800   -Other stromboid conchs (Strombus     .................
               spp.?.................................
   03079110   Other Molluscs For Custivation, Shelled  .................
               Or Not................................
   03079190   Molluscs Nes, Live/Fresh/Chilled, Not           40,733,923
               For Cultivat..........................
   03079200   Frozen Mollus Nes......................  .................
   03079900   Molluscs Nes, Dried/Salted/Smoked,       .................
               Incl. Edible Fl.......................
   03081110   ---For cultivation.....................  .................
   03081190   Live/Fresh/Chilled Sea Cucumbers, Not               10,131
               For Cultivat..........................
   03081200   Frozen Sea Cucumbers...................            119,482
   03081900   Dried/Salted/Smoked Sea Cucumbers......            431,634
   03082110   ---For cultivation.....................  .................
   03082190   Live/Fresh/Chilled Sea Urchins, Not For             47,543
               Cultivatio............................
   03082200   Frozen Sea Urchins.....................  .................
   03082900   Dried/Salted/Smoked Sea Urchins........  .................
   03083011   ----For cultivation....................  .................
   03083019   ----Other..............................  .................
   03083090   Frozen/Dried/Salted/Smoked Jellyfish...            151,976
   03089011   ----For cultivation....................  .................
   03089012   Live/Fresh/Chilled Sea Clamworm, Not     .................
               For Cultivati.........................
   03089019   Live/Fresh/Chilled Aquatic                           1,330
               Invertebrates(Excl. Crus..............
   03089090   Other Frozen/Dried/Salted/Smoked         .................
               Aquatic Invertebr.....................
   16030000   Extracts & Juices Of Meat, Fish/         .................
               Crustaceans/Aquati....................
   16041110   Prepared/Preserved Atalantic Salmon,     .................
               Whole/Pieces..........................
   16041190   Prepared/Preserved Salmon, Nes, Whole/                 995
               Pieces................................
   16041200   Prepared/Preserved Herrings, Whole/      .................
               Pieces................................
   16041300   Prepared/Preserved Sardines/Sardinella/  .................
               Brisling/Sp...........................
   16041400   Prepared/Preserved Tuna/Skipjack/Bonito             37,530
               (Sarda Spp............................
   16041500   Prepared/Preserved Mackerel, Whole/      .................
               Pieces................................
   16041600   Prepared/Preserved Anchovies, Whole/     .................
               Pieces................................
   16041700   Prepared/Preserved Eels, Whole/Pieces..  .................
   16041800   --Shark fins...........................  .................
   16041920   Prepared/Preserved Tilapia, Whole/       .................
               Pieces................................
   16041931   Prepared/Preserved Channel Catfish,      .................
               Whole/Pieces..........................
   16041939   Prepared/Preserved Freshwater            .................
               Catfishes, Nes, Whole.................
   16041990   Prepared/Preserved Fish, Whole/Pieces,             235,071
               Nes...................................
   16042011   Prepared/Preserved Shark'S Fin In        .................
               Airtight Contain......................
   16042019   Other Prepared/Preserved Fish In                   116,604
               Airtight Containe.....................
   16042091   ----Shark fin..........................  .................
   16042099   Other Prepared/Preserved Fish, Minced..          1,395,238
   16043100   Caviar.................................  .................
   16043200   Caviar Substitutes.....................  .................
   16051000   Crab, Prepared Or Preserved............          1,168,091
   16052100   Shrimps/Prawns, Prepared Or Preserved,   .................
               Not In Airt...........................
   16052900   Other Shrimps/Prawns, Prepared Or        .................
               Preserved.............................
   16053000   Lobster, Prepared Or Preserved.........  .................
   16054011   Freshwater Crawfish Shelled, Prepared    .................
               Or Preserved..........................
   16054019   Freshwater Crawfish In Shell, Prepared               2,434
               Or Preserve...........................
   16054090   Crustaceans, Nes, Prepared Or Preserved              3,007
   16055100   Oysters, Prepared Or Preserved.........  .................
   16055200   Scallops (Incl. Queen Scallops),                       280
               Prepared Or Preserv...................
   16055300   Mussels, Prepared Or Preserved.........  .................
   16055400   Cuttle Fish And Squid, Prepared Or       .................
               Preserved.............................
   16055500   Octopus, Prepared Or Preserved.........  .................
   16055610   Clams, Prepared Or Preserved...........              3,603
   16055620   Cockles And Arkshells, Prepared Or       .................
               Preserved.............................
   16055700   Abalone, Prepared Or Preserved.........  .................
   16055800   Snails (Excl. Sea Snails), Prepared Or   .................
               Preserved.............................
   16055900   Other Molluscs, Prepared Or Preserved..  .................
   16056100   Sea Cucumbers, Prepared Or Preserved...          1,791,579
   16056200   --Sea urchins..........................  .................
   16056300   --Jellyfish............................  .................
   16056900   Other Aquatic Invertebrates, Prepared    .................
               Or Preserved..........................
   23012010   Flours & Meals Of Fish, Used In Animal         159,571,084
               Feeding...............................
------------------------------------------------------------------------
Source: MOFCOM Announced Tariff Lists, Trade data and HS Descriptions
  from Global Trade Atlas

                          SUBCOMMITTEE RECESS

    Senator Moran. The subcommittee now stands in recess 
subject to call of the chair.
    [Whereupon, at 12:16 p.m., Thursday, July 26, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]