[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                  TRANSATLANTIC POLICY IMPACTS OF THE 
                         U.S.-EU TRADE CONFLICT

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

                                HEARING

                               BEFORE THE

      SUBCOMMITTEE ON EUROPE, EURASIA, ENERGY, AND THE ENVIRONMENT

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             June 26, 2019
                               __________

                           Serial No. 116-53
                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]        
        

           Available:  http://www.foreignaffairs.house.gov/, 
           http://docs.house.gov, or http://www.govinfo.gov
                      
                             ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
37-040PDF                 WASHINGTON : 2019                      
                      
                      
                      
                      
                      COMMITTEE ON FOREIGN AFFAIRS

                   ELIOT L. ENGEL, New York, Chairman

BRAD SHERMAN, California             	MICHAEL T. McCAUL, Texas, Ranking 
GREGORY W. MEEKS, New York                 Member
ALBIO SIRES, New Jersey			CHRISTOPHER H. SMITH, New Jersey
GERALD E. CONNOLLY, Virginia		STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida		JOE WILSON, South Carolina
KAREN BASS, California			SCOTT PERRY, Pennsylvania
WILLIAM KEATING, Massachusetts		TED S. YOHO, Florida
DAVID CICILLINE, Rhode Island		ADAM KINZINGER, Illinois
AMI BERA, California			LEE ZELDIN, New York
JOAQUIN CASTRO, Texas			JIM SENSENBRENNER, Wisconsin
DINA TITUS, Nevada			ANN WAGNER, Missouri
ADRIANO ESPAILLAT, New York		BRIAN MAST, Florida
TED LIEU, California			FRANCIS ROONEY, Florida
SUSAN WILD, Pennsylvania		BRIAN FITZPATRICK, Pennsylvania
DEAN PHILLIPS, Minnesota		JOHN CURTIS, Utah
ILHAN OMAR, Minnesota			KEN BUCK, Colorado
COLIN ALLRED, Texas			RON WRIGHT, Texas
ANDY LEVIN, Michigan			GUY RESCHENTHALER, Pennsylvania
ABIGAIL SPANBERGER, Virginia		TIM BURCHETT, Tennessee
CHRISSY HOULAHAN, Pennsylvania		GREG PENCE, Indiana
TOM MALINOWSKI, New Jersey		STEVE WATKINS, Kansas
DAVID TRONE, Maryland			MIKE GUEST, Mississippi
JIM COSTA, California
JUAN VARGAS, California
VICENTE GONZALEZ, Texas
                                     
                    Jason Steinbaum, Staff Director

               Brendan Shields, Republican Staff Director
                                 ------                                

      Subcommittee on Europe, Eurasia, Energy, and The Environment

                WILLIAM KEATING, Massachusetts, Chairman

ABIGAIL SPANBERGER, Virginia         	ADAM KINZINGER, Illinois, Ranking 
GREGORY MEEKS, New York                    Member
ALBIO SIRES, New Jersey			JOE WILSON, South Carolina
THEODORE DEUTCH, Florida		ANN WAGNER, Missouri
DAVID CICILLINE, Rhode Island		JIM SENSENBRENNER, Wisconsin
JOAQUIN CASTRO, Texas			FRANCIS ROONEY, Florida
DINA TITUS, Nevada			BRIAN FITZPATRICK, Pennsylvania
SUSAN WILD, Pennsylvania		GREG PENCE, Indiana
DAVID TRONE, Maryland			RON WRIGHT, Texas
JIM COSTA, California			MIKE GUEST, Mississippi
VICENTE GONZALEZ, Texas			TIM BURCHETT, Tennessee

                                                                       
                    Gabrielle Gould, Staff Director
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Hamilton, Daniel S., Austrian Plan Foundation Professor, Johns 
  Hopkins University School of Advanced International Studies....     7
Chorlins, Marjorie, Vice President, European Affairs, U.S. 
  Chamber of Commerce, Executive Director, U.S.-U.K. Business 
  Council........................................................    32
Bown, Chad P., Reginald Jones Senior Fellow, Peterson Institute 
  for International Economics....................................    44
Bromund, Theodore R., Senior Research Fellow in Anglo-American 
  Relations, Margaret Thatcher Center for Freedom, The Heritage 
  Foundation.....................................................    49

                                APPENDIX

Hearing Notice...................................................    72
Hearing Minutes..................................................    73
Hearing Attendance...............................................    74

             ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD

The Tranatlantic Economy 2019....................................    75

 
       TRANSATLANTIC POLICY IMPACTS OF THE U.S.-EU TRADE CONFLICT

                        Wednesday, June 26, 2019

                        House of Representatives

      Subcommittee on Europe, Eurasia, Energy, and the Environment

                      Committee on Foreign Affairs

                                     Washington, DC

    The subcommittee met, pursuant to notice, at 3:13 p.m., in 
room 2172 Rayburn House Office Building, Hon. William Keating 
(chairman of the subcommittee) presiding.
    Mr. Keating. The hearing will come to order. We want to 
thank the witnesses for their patience. I will not thank you 
too much so we can get right to the hearing. You know, these 
roll calls are a democratic necessity, so here we go.
    We are meeting today to hear testimony on the transatlantic 
impacts of trade disputes between the United States and the 
European Union. Without objection, all members will have 5 days 
to submit statements, questions, extraneous materials for the 
record, subject to the length limitation in the rules.
    I will now make an opening statement and turn it over to 
the ranking member for his opening statement and officially 
start this part of the hearing.
    I would like to welcome you to the hearing today to discuss 
our trade policy toward Europe. I have been monitoring the 
positive and lately negative developments in our trade 
relationship with Europe for some time now, along with many of 
our members. That is because I am a big believer in what we can 
accomplish together as part of our transatlantic alliance and 
that we also seize on our collective economic strength.
    Together the EU and the U.S. represent nearly half the 
world's GDP. We are each other's largest trading partner. We 
have the leading services in terms of service economy globally, 
and we represent well over half the global foreign direct 
investments.
    We represent a formidable economic base that should be 
leading the world towards a better economic opportunity for 
families in our communities back home, for greater prosperity, 
for people in developing countries and in new democracies, and 
for fairer trade rules for our businesses to compete on an even 
playing field.
    Regrettably, instead of continuing negotiations with the EU 
toward a trade investment agreement, the President withdrew 
from the talks that were ongoing and pursued a hardline 
strategy of imposing tariffs on our allies that added insult to 
injury by invoking national security as a justification for 
imposing them, as if we were vulnerable to a national security 
threat from our ally because they sell us steel and aluminum.
    There are, as there have been for a long time, many real 
trade issues to figure out in our relationship with the EU. 
That is why we are negotiating an agreement with the EU and we 
have been doing so back since 2016 and that is why we are again 
negotiating. The only way out of this mess is to negotiate a 
trade agreement, except this time around businesses are 
teetering on the edge of closure as these tariffs continue. 
This tariff policy completely ignores how integrated our supply 
chains have become. It is not some foreign government footing 
the bill for these tariffs either. It is our businesses and our 
consumers. It is especially small and medium size businesses 
who bear the brunt of it because they do not have an in-house 
trade compliance field of experts that our larger corporations 
have. They chose the safe route trading with our allies who 
share our values, who share our business practices, and now 
they are paying for it.
    I hear from so many businesses back home, veteran-owned 
businesses, small manufacturing companies, farmers. Our 
cranberry industry was threatened by this as well. They are, 
and I really mean this, desperately trying to navigate the 
complex world of tariffs, exclusion from these tariffs, 
regulatory agencies, and higher costs. So many are panicked 
about going out of business altogether. I have talked to them. 
They worry about forfeiting their market shares to companies in 
other countries that have not pursued such a reckless path of 
tariffs as we have.
    So we are negotiating again with the EU, but in reality, we 
are back to square one, except now, every day, middle class 
Americans are footing the bill. We have missed out on two and a 
half years when we could have been increasing our collective 
economic strength to compete with China which is the only way 
we are going to be successful in countering Chinese practices 
through coordinated trade practices, constructed on shared 
values that reflect fair wages, safe working conditions, 
respect for intellectual property, rule of law, and 
environmental responsibilities, but with unnecessarily taking 
shots at our allies when we should be working with them more 
closely, more closely than ever before to confront deeply 
serious threats around the world. It does not strengthen our 
hand in the face of adversaries like Russia and China to drive 
unnecessary wedges between us and our allies.
    So I am pleased to be holding this hearing today so that we 
can hear from this expert panel on these issues. We have to 
hear you today and learn why these issues are so important, why 
there is a sense of urgency to negotiate a resolution to this 
trade dispute with the EU and what steps we can take going 
forward to get back to a place where our transatlantic economic 
relationship is a stronger component of our overall alliance. 
It is critical for our business back home. It is critical for 
our own economy. It is critical for projecting strength abroad 
and pushing back against our adversaries. And frankly, it is 
just common sense.
    So with that, I would like to thank the witnesses for being 
here and I turn it over to the ranking member for his opening 
statement.
    Mr. Kinzinger. Well, I thank the chairman and thank you all 
for being here and being patient with us. We mentioned with the 
votes.
    I believe in free and fair trade and I believe that free 
trade increases global security while creating jobs here in the 
United States, those of which are net positives. For that 
reason, it is important to support policies that encourages 
global trade, open new markets, break down barriers in existing 
markets, and establish rules that are fair to all participants. 
I want to stress fair because that is where the main issue is.
    Countries around the world, including some of our closest 
allies, have taken advantage of the United States' willingness 
to engage in free trade. They put up barriers, especially 
giving their workers an unfair advantage over American workers. 
Europe displays unbalanced favoritism to its manufacturing 
sector, while European companies are typically allowed to bid 
on certain U.S. Government contracts, U.S. manufacturers are 
generally not offered the same opportunities.
    Further compounding this issue are their subsidies for 
their supply base in the form of a VAT, VAT tax rebates, and 
other indirect measures. In response to these wrongs, President 
Trump took action by using a Section 232 authority to place 
tariffs on steel and aluminum. I recognize and share the 
President's interest in protecting American workers, 
innovation, and business from unfair trading practices. 
Allowing a country like China to continue to steal American 
innovations and inventions not only puts our economy at risk, 
but also our national security.
    However, I do not believe that aluminum and steel imported 
from Europe poses a national security threat to our Nation. Any 
tariffs imposed should be tailored to address individual 
irregularities caused by biased trade practices.
    Trade between the United States and Europe accounts for 
nearly half of the global GDP. We are not talking about tariffs 
amounting to pennies on the dollar or rounding errors. Any 
major disruption in the transatlantic economy would be 
devastating to the world. We must reduce the barriers put up by 
both American and European leaders in the past to increase 
competition and further attract the world's best talent to the 
West.
    In my district, the 16th District in Illinois, we are a hub 
for manufacturing and agriculture. In fact, Illinois ranks 
third in the Nation for the export of ag commodities with over 
$8 billion dollars' worth of goods going overseas. And much of 
that comes from my district.
    I have heard from many industries affected by our trade 
dispute with the EU. While the bottom line is being hurt, they 
understand that unfair trade practices placed against American 
industry hurts them more in the long run. They, like, me are 
hopeful we can come to a quick and equitable resolution to 
stand united against the main aggressor which is China.
    The so-called 16+1 Initiative between China and many 
Eastern and Central European nations have Beijing offering 
developmental projects in exchange for increased cooperation. 
China has executed over 350 mergers, investments, and joint 
ventures across Europe. In many cases, they can access critical 
information about how these systems work or even steal 
sensitive intellectual property. More than half of China's 
investment in Europe is in the largest economy, Germany, the 
U.K., France, and Italy. What concerns me though is that these 
are linchpins in our NATO alliance.
    China has now passed the U.S. as Germany's largest trading 
partner and they are closing the gap for Europe as a whole. We 
have seen the Chinese invest over $70 billion in the United 
Kingdom, trying to get a foot in the door and any anticipation 
of a Brexit deal that sees the Brits leaving the EU.
    Trade tension between the United States and Europe do not 
signal the end of the transatlantic partnership. Our bond is 
strong, forged by years of partnership and battling common 
threats which have developed our shared values. We will not 
always be 100 percent in agreement with the EU, but we will 
always work together to ensure that our people are taken care 
of and the world is a safer place for the next generation. I 
cannot stress enough the need for the United States and the EU 
to solve our differences quickly in order to develop a 
transatlantic strategy to counter Chinese-maligned influence 
and trade practices before it is too late.
    And with that, Mr. Chairman, I look forward to the 
conversation and I yield back.
    Mr. Keating. Thank you, ranking member. I will now 
introduce our witnesses briefly.
    Dr. Daniel Hamilton is the Austrian Marshall Plan 
Foundation Professor at Johns Hopkins University School for 
Advanced International Studies and a former Deputy Assistant 
Secretary of State for European Affairs.
    Ms. Marjorie Chorlins is Vice President for European 
Affairs at U.S. Chamber of Commerce and Executive Director of 
the U.S.-U.K. Business Council. She is the former Principal 
Deputy Assistant Secretary for Import Administration at the 
Department of Commerce and we thank you also for submitting 
your documents. Members will look at it as a State-by-State 
breakdown of the effects of this.
    Dr. Chad Bown is a Reginald Jones Senior Fellow at the 
Peterson Institute for International Economics and a former 
Senior Economist for International Trade and Investment at the 
White House on the Council of Economic Advisors.
    Dr. Theodore Bromund is a Senior Research Fellow in Anglo-
American Relations for the Margaret Thatcher Center for Freedom 
at the Heritage Foundation.
    We appreciate all of you being here today and look forward 
to your testimony. Please limit your testimony to 5 minutes and 
without objection your prepared written statements will be made 
part of the record.
    I will now go to Dr. Hamilton for his statement.

   STATEMENT OF DANIEL S. HAMILTON, AUSTRIAN PLAN FOUNDATION 
    PROFESSOR, JOHNS HOPKINS UNIVERSITY SCHOOL OF ADVANCED 
                     INTERNATIONAL STUDIES

    Mr. Hamilton. Thank you, Mr. Chairman. I would like to 
submit this testimony for the record and I have an appendix 
which also does State-by-State breakdown which I would like to 
add to that.
    Mr. Keating. With no objection, so added.
    Mr. Hamilton. Thank you. Thank you for the opportunity to 
speak with you today about how U.S.-EU disputes over trade and 
other issues are affecting U.S. foreign policy and broader 
economic relations.
    If we look at the kinds of tensions we are facing right now 
across the Atlantic, there are three kinds of costs that we 
have to think about. One are direct costs. As both you and the 
ranking member have mentioned, we are facing steel and aluminum 
tariffs which directly affect those industries on both sides of 
Atlantic because of the dense commercial inter-linkages that 
bind the U.S. and Europe together.
    The car industry is facing potentially 25 percent tariffs 
that the U.S. might impose on the European car industry which 
will ricochet back into the American market. And it is really 
always important to understand this dense inter-linkage of the 
transatlantic economic space. To take the car industry, for 
example, European companies directly support 173,000 U.S. jobs 
here because of their investment. If one considers indirect 
effects on hobs, including down stream suppliers, distributors 
and other related companies, European companies support 420,000 
U.S. jobs. About a quarter of the U.S. production in the auto 
industry is by European companies in the United States, 
contributing about $34 billion to U.S. GDP; many of those are 
U.S. exports. So 60 percent of the cars produced by European 
companies in the United States are made in the U.S.A. and they 
are exported to the rest of the world. So the U.S. is their 
platform for that.
    And one of the features of the U.S. auto industry is its 
innovation capacity. So European companies invest a lot in 
innovation in the United States through the auto industry, 
about $5.5 billion in R&D that they bring to the U.S. economy. 
The auto trade is about 10 percent of transatlantic trade, so 
if that goes south, that is a big chunk of our relationship.
    And Europe is also, of course, a big customer for American 
cars. About 20 percent of U.S. car exports go to Europe. So 
that is a direct cost if we would go down this road of a 
potential trade war.
    That is just one example of how a particular industry would 
be affected.
    But there are many indirect and spillover costs because of 
the distinctive nature of the U.S.-European economy. Again, we 
are so deeply linked, not only by trade but by these investment 
flows that are really the driver of the transatlantic economy 
rather than trade. Trade follows investment, not the other way 
around.
    And so what is happening now is because of these tensions, 
you can see in the numbers that this is starting to chill 
investment coming into the United States from Europe. Investors 
do not quite know should they invest right now. And because 
Europe is by far the largest investor in the United States in 
the world, about 68 percent of the $4 trillion in foreign 
capital that comes to the United States comes from Europe. And 
Europeans account for 76 percent of the world's investment in 
the U.S. manufacturing industry, so really nobody else is 
really investing in U.S. manufacturing except the Europeans and 
then they produce here and as they export from here as U.S.-
manufactured exports.
    And of course, they are the largest supplier of on-shored 
jobs in America. We estimate that up to 16 million jobs on both 
sides of the Atlantic are reliant on healthy commercial 
intracton between the United States and Europe.
    One needs to understand this deep inter-linkage between the 
investment and the trade. European investment is diverse. It is 
in all the 50 States. The data we provide to you as the 
addenddom to the testimony shows that. It generates income and 
jobs for U.S. workers, sales for local suppliers and 
businesses, extra revenues for local communities through taxes, 
a lot of capital investment, and R&D as I mentioned.
    I see Congressman Wilson is here. My example I always use 
is BMW. And it just shows you, the story just tells you all you 
need to know. So BMW in Munich has built this plant in 
Spartanburg which is now bigger than its plant in Munich. Yes. 
And what they do is they produce the engines and front bumper 
assemblies in Munich and then they send them to Spartanburg to 
assemble the final car. And then they export to the rest of the 
world, making BMW actually the No. 1 U.S. car exporter by 
value. But what happens? You take the engine from Munich. You 
send it to the United States. You pay a 2.5 percent tariff to 
put it in Spartanburg. You export it back to Europe. You pay 
another 10 percent tariff to get it back to Europe and then if 
we add another 25 percent, it is just not making a whole lot of 
sense to the people of Spartanburg. It is not about the 
Europeans. It is about the people in Spartanburg.
    So rather than imposing additional tariffs, we should be 
dismantling all of them. That is the premise of the 
negotiations that could start if we get going, between the U.S. 
and EU. And the key is to keep the investment flowing because 
that is actually what is driving all of this. The trade is sort 
of just on the top of the investment. So if you shut it down, 
you are shutting down jobs, innovation, and Spartanburg and the 
whole region, and the whole distribution channels that flow 
past Spartanburg. I have many examples in the State of 
Massachusetts and others.
    The last costs I just want to mention are opportunity costs 
because what is happening is we are missing opportunities for 
more jobs and growth across the Atlantic by fighting each other 
instead of looking at the bigger picture. I think both of you 
have mentioned how important that relationship is.
    The fact that we are squabbling about these tariffs 
overshadows the really important fact that actually the United 
States and the EU agree on what to do about China. We agree 
that China has a problem. Europeans agree with us about China's 
assault on intellectual property, on forced technology 
transfer, and all the things that we are having trouble with 
the Chinese. Unfortunately, instead of joining forces we are 
distracted and divided by our own squabbles over tariffs. So we 
are not harnessing the leverage we could have to get China into 
compliance with WTO norms and other aspects of the rules-based 
order. This is a significant opportunity cost we are missing 
out on.
    [The prepared statement of Mr. Hamilton follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Keating. Thank you.
    Ms. Chorlins.

   STATEMENT OF MARJORIE CHORLINS, VICE PRESIDENT, EUROPEAN 
  AFFAIRS, U.S. CHAMBER OF COMMERCE, EXECUTIVE DIRECTOR, U.S.-
                     U.K. BUSINESS COUNCIL

    Ms. Chorlins. Thank you, Mr. Chairman, Ranking Member 
Kinzinger. I appreciate the opportunity to testify before you 
today.
    As you said, Mr. Chairman, the transatlantic economy 
remains by far the most successful bilateral commercial 
partnership in the world. There are innumerable opportunities 
to build on that partnership and equally grave risks if the 
tensions continue to escalate.
    In June 2018, the Trump administration imposed tariffs on 
imports of EU steel and aluminum on national security grounds, 
despite the fact, as you mentioned, that most EU countries are 
NATO members and treaty allies of the U.S. When the steel and 
aluminum tariffs were announced, Chamber CEO Tom Donahue said, 
``These new unlawful tariffs will directly harm American 
manufacturers and provoke widespread retaliation from our 
trading partners.'' Unfortunately, those predictions have come 
true.
    Meanwhile, the looming threat of 25 percent tariffs on 
imports of autos and auto parts is of grave concern. We trade 
nearly ten times as much in the auto sector as we do in steel 
and aluminum across the Atlantic. Again, quoting the Chamber 
CEO, ``The U.S. Chamber strongly opposes the administration's 
threats to impose tariffs on auto imports in the name of 
national security. The U.S. auto industry is prospering as 
never before and these tariffs risk overturning all of this 
progress.''
    While the final decision on auto tariffs has been postponed 
for 6 months, the threat continues to erode trust between 
Europe and the U.S. Where the United States has been applying 
these tariffs on our friends and allies, the EU has been 
negotiating new market opening agreements. Brussels has 
concluded agreements with Japan and Canada and upgraded its 
existing agreement with Mexico. In a growing number of 
countries, European exporters actually enjoyed better access 
than U.S. companies.
    When it comes to China, the U.S. Government, the Chamber, 
and Europe are indeed aligned on the challenges, but pursuing a 
unilateral tariff-driven approach is not the optimal way to 
effect lasting change in China. A coordinated approach would be 
much more powerful.
    Another flash point concerns tax policy. Several European 
countries are considering digital services taxes that would 
disproportionately affect American companies. An informed and 
inclusive discussion on modernizing the international tax 
system is occurring at the OECD. Unilateral European actions 
erode trust and undermine prospects for an international 
agreement.
    The Chamber was among the earliest and most vocal 
proponents of the Transatlantic Trade and Investment 
Partnership negotiations. We do regret that those talks were 
not concluded, but continue to believe that progress can and 
indeed, must be made.
    Last July, President Trump and European Commission 
President Juncker announced new talks intended to lower 
transatlantic tariffs, remove non-tariff barriers, and enable 
closer cooperation on shared challenges. We are very encouraged 
that the administration has returned to the negotiating table.
    The Chamber has flagged several ways the two sides can 
boost economic growth, create good jobs and enhance 
competitiveness through a reinforced partnership. Our 
recommendations were submitted for the record today, but let me 
highlight just a few.
    First, while the Chamber advocates for comprehensive trade 
agreements that address not just trade and goods, but also 
services, investment, procurement, and other issues, tariffs on 
industrial goods have recently been the chief focus of U.S. and 
EU officials. Elimination of tariffs could boost U.S. exports 
to the EU by as much as $50 billion, according to just one 
study.
    Second, U.S. and EU policymakers should continue to promote 
regulatory cooperation. The two sides should try to establish 
common standards where none exist and where both sides are 
considering new rules. The emergence of autonomous vehicles is 
but one instance where the two sides can and should 
cooperative.
    The U.S. and EU should also pursue mutual recognition of 
existing regulations in the many cases where our different 
approaches meet common regulatory objectives. We do understand 
that any conversation about trade with the EU must tackle 
politically sensitive issues such as agriculture. It is well 
understand, indeed, that a trade-liberalizing agreement that 
does not cover agriculture is a political nonstarter in 
Congress.
    As we develop strategies on cybersecurity and artificial 
intelligence, the two sides should continue to develop common 
approaches that reflect our shared values and commitment to 
transparent stakeholder engagement. Both sides also must take 
steps to ensure the internet remains globally connected and 
interoperable. Our inter-dependent digital economies and 
securities depend on the ability to move data across borders 
efficiently and safely. The privacy shield which facilitates 
cross border data flows while protecting personal privacy must 
be reaffirmed.
    The U.S. and Europe also should work closely with 
stakeholders to incentivize circular economy investments and 
promote resource efficiency. Transatlantic cooperation will 
make it easier for American and European firms to lead the way 
in addressing resource challenges and a changing climate while 
fostering economic growth.
    Finally, transatlantic defense and security cooperation 
remains a cornerstone of our alliance. In light of a fast 
changing global security environment, including cyber attacks 
and disinformation campaigns, transatlantic cooperation remains 
essential. As the EU boosts its own strategic capabilities, its 
efforts must complement and be coordinated with NATO's 
priorities. Any new European defense project must allow for 
fair and transparent competition including for American 
companies.
    Mr. Chairman, transatlantic trade tensions are occurring 
against the backdrop of several noncommercial disagreements 
that also have significant economic spillover effect. We 
encourage the subcommittee to engage actively with the 
administration and with the European policymakers to address 
these issues collaboratively.
    In sum, there can be no effective resolution of our shared 
economic challenges without robust and constructive engagement 
between the U.S. and Europe.
    Thank you very much.
    [The prepared statement of Ms. Chorlins follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Keating. Dr. Bown.

   STATEMENT OF CHAD P. BOWN, REGINALD JONES SENIOR FELLOW, 
         PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS

    Dr. Bown. Thank you, Mr. Chairman, ranking member, and the 
subcommittee for the invitation to be here today.
    Several actions taken by the Trump administration over the 
last 2 years have severely strained trade relations between 
Europe and the United States, weakening the transatlantic 
backbone of the global rules-based trading system. But an even 
more worrisome threat to that relationship may be in the 
offing. It comes in the form of the President's warning that he 
may impose trade restrictions on tens of billions of dollars of 
imports from Europe of automobiles and automobile parts 
contending that they threaten America's national security. The 
national security threat is fanciful and Congress should amend 
existing statutes to constrain the executive branch's abuse of 
this power on trade.
    No evidence supports the argument that imports of 
automobiles and parts from our closest European allies threaten 
America's national security. In fact, invoking Section 232 of 
the Trade Expansion Act of 1962 by declaring such a threat to 
justify trade restrictions would damage the U.S. economy, 
create uncertainty, poison trust, instill massive disruption 
through both retaliation and copycat behavior relying on this 
same flimsy rationale.
    Three reasons demonstrate why imposing trade restrictions 
on European automobiles and parts would disrupt the American 
economy. First, American consumers would be hit by price hikes. 
Fiats, Volkswagens, and Volvos, amongst other brands, would 
become more expensive. And the reduced competition would 
inevitably raise prices of all cars regardless of the make and 
model.
    Second, the American manufacturing base would lose access 
to imported auto parts that it needs to produce cars for both 
domestic consumption and export. Imported parts are vital for 
American-based auto plants to keep costs low for high-quality 
cars made in States like Alabama, Tennessee, and South 
Carolina. The facilities in these and other States makes some 
of America's most successful exports. Restricting trade in 
these parts would hurt these factories and their workers.
    Third, Europe will retaliate. The European Union has 
announced it would impose counter tariffs on U.S. exports, a 
credible threat because it did so last year when President 
Trump imposed tariffs on their exports of steel and aluminum. 
Those European tariffs hit more than $3 billion worth of U.S. 
exports, hurting American farmers and businesses. It would be 
surprising if you have not already heard complaints from your 
districts. Among those suffering are corn farmers and makers of 
bourbon and whiskey, cosmetics, motor boats and yachts, peanut 
butter, playing cards, and motorcycles. I can name dozens of 
other products affected by that retaliation.
    The example of Harley-Davidson illustrates the futility of 
the Trump administration's tariffs. Harley has announced in a 
Securities and Exchange Commission filing that Europe's counter 
tariffs mean it can no longer afford to produce motorcycles in 
the United States for sale in Europe. Harley-Davidson and many 
other U.S. manufacturers know that 95 percent of their 
customers live outside of the United States' borders. By making 
it more expensive to make products for those customers, the 
Trump administration is forcing these companies to transfer 
manufacturing to some other country not hit by these cost 
increases.
    Imposing trade restrictions on European autos would also 
exacerbate three additional policy concerns. First, such a step 
would likely end bilateral trade negotiations between the U.S. 
and the EU including talks on several vital issues such as 
regulations that constitutes the largest barrier to existing 
trade. Despite President Trump's colorful anecdotes, the 
tariffs the EU applies on imports from the United States are 
not one sided. They are comparable, in fact, to the average 
tariff the United States applies on imports from Europe, 
especially for manufactured products. But these non-tariff 
barriers to trade can only be tackled through regulatory 
cooperation. The process of doing so began under the Obama 
Administration through the Transatlantic Trade and Investment 
Partnership negotiations.
    The Trump administration has, to its credit, continued some 
elements of that process. And a deal on conformity assessments 
would be an important next step for transatlantic trade, but 
new auto tariffs and counter tariffs would strangle that 
progress just as it holds promise of achieving results.
    Second, imposing these tariffs would escalate tensions, 
impeding cooperation in other areas of vital joint interests. 
More, not less, cooperation is urgently needed between Europe 
and the United States on e-commerce, the internet, data 
localization, cybersecurity, a potential digital services tax, 
and many other hugely important areas of the new economy. The 
United States cannot afford to squander or disrupt any effort 
toward protecting consumers and businesses in the increasingly 
technologically sophisticated marketplace.
    Third, the tariffs would further exacerbate the Trump 
administration's failure to take up the offer by Europe and 
other allies to resolve issues of mutual concern in other trade 
areas. The most serious, of course, is the administration's 
decision to confront its closest economic partners, including 
Japan as well as Europe, rather than enlisting them to put 
collective pressure on China. Going it alone on China may be 
doomed to fail.
    But also important is the administration's disengagement on 
many issues that desperately need to be addressed to reform the 
World Trade Organization. Its current refusal to appoint new 
members to the WTO's appellate body is undermining a dispute 
resolution framework that has helped many U.S. businesses far 
more than it has set them back.
    In sum, President Trump's threats to impose tariffs on 
imports of autos and parts from Europe must be taken seriously 
by Congress, if economically costly tariffs on steel and 
aluminum in 2018 make that current threat creditable. And 
frankly, Congress never intended Section 232 to be used for 
this purpose. Thus, Congress should legislate changes to 
Section 232, as well as the International Emergency Economic 
Powers Act, to require the President to seek its approval 
before imposing new trade restrictions in the name of national 
security.
    Congress must recover from the administration its 
constitutional prerogative to reshape these laws so that they 
can no longer be abused. The executive branch should not be 
imposing costs and unnecessary uncertainty on the American 
economy, further eroding American policy leadership and hurting 
U.S. global economic and foreign policy interests by 
circumventing the authority of Congress to establish trade 
policy as the Constitution prescribed.
    [The prepared statement of Mr. Bown follows:]

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    Mr. Keating. Dr. Bromund.

  STATEMENT OF THEODORE R. BROMUND, SENIOR RESEARCH FELLOW IN 
ANGLO-AMERICAN RELATIONS, MARGARET THATCHER CENTER FOR FREEDOM, 
                    THE HERITAGE FOUNDATION

    Dr. Bromund. Thank you, Mr. Chairman, ranking member. The 
views that I express in this testimony are my own and should 
not be construed as representing any official position of The 
Heritage Foundation.
    The U.S. imposition on tariffs on steel and aluminum 
imports from the EU in 2018, was both unwise policy and unwise 
economics. The EU retaliations, coupled with threats of 
additional U.S. tariffs in recent months in imports of cars in 
the EU are equally unwise. But as previous episodes and its 
intermittent conflict show now that the policy impacts of these 
tariffs nor their novelty should be exaggerated. The frequency 
and history of U.S.-EU trade tensions strongly implies that 
today's conflicts are likely to fade over time.
    Unfortunately, they are likely to be replaced by new 
conflicts, some of which may already be visible. These tensions 
have in the past been caused or exacerbated by U.S. 
administrations with a strong commitment to free trade and to 
major U.S. post-war institutions such as NATO. There is 
therefore no reason to assume that these trade tensions today 
will inevitably lead to wider policy impacts beyond the realm 
of trade.
    Thus, while we should work vigorously to lessen today's 
conflicts, there is no need for panic. What is lacking today in 
the EU as much as in the United States is leadership to make 
the simple and clear case for economic freedom. We need to 
emphasize the benefits that flow from free trade and free 
investment and we need to emphasize the fact that economic 
freedom means much more than just free trade.
    A history of U.S. trade diplomacy with EU over the past 
decade is deeply ironic. The Obama Administration's 
Transatlantic Trade and Investment Partnership, the TTIP, were 
in favor with European leaders until they were pushed to reject 
it by their own outraged public. The Trump administration's 
tariffs, on the other hand, are opposed by European leaders but 
have not raised nearly the same level of public opposition in 
Europe that TTIP did.
    Today, it appears that a big deal like TTIP is 
unsustainably unpopular in Europe, while smaller industrial 
goods only deal is unacceptable to the United States because it 
omits agriculture. The result, sadly, is that there is no easy 
resolution to be had of the U.S.-EU trade conflict.
    However, the history of TTIP strongly suggests that the 
most dangerous thing the U.S. can do now is to respond to the 
current conflict by advocating the negotiations of a major 
U.S.-EU trade deal in the style of TTIP. There is no reason to 
believe that an effort to revive TTIP would not fan the same 
anti-Americanism that killed TTIP. Although the hostility 
engendered by TTIP by both sides of the Atlantic was deeply 
unfortunate, TTIP's approach was also, in my view, flawed 
because tariffs between the U.S. and the EU are already 
generally low, the majority of the gains in TTIP would have 
come from reducing non-tariff barriers, NTBs, between the U.S. 
and the EU. TTIP's approach was to reduce the burdens imposed 
by differing U.S. and EU regulations over the short run or 
relying on regulatory harmonization over the long run. In time, 
the number of harmonized regulations would have grown and the 
amount of regulatory competition between the U.S. and the EU 
would have declined. But while reducing the burdens of 
differing regulations would have been good for today's 
businesses, it would have been less good for tomorrow's 
businesses. The harmonized regulations would have tended to 
prevent new competitors from entering the harmonized 
transatlantic market. Harmonization around a costly standard of 
regulations may eliminate the burden caused by a lack of 
harmonization, but it does not eliminate the burden of the 
regulations themselves.
    TTIP's flaws, however, do not mean the Trump administration 
has chosen precisely the right approach. Its zero tariffs, zero 
NTBs, zero subsidies goal is the correct one and its commitment 
to an ambitious U.S.-U.K. free trade area post-Brexit is 
laudable, but it has not found a successful diplomatic strategy 
to convince the EU to negotiate a genuinely zero, zero, zero 
agreement and includes agriculture. Furthermore, its chosen 
instrument of tariffs is both damaging to the U.S. consumer and 
raises wider concerns about its commitment to the U.S.'s post-
war supports for free trade.
    The zero, zero, zero goal and that wider commitment would 
have more credibility if the administration can point to a 
major negotiating success that involved a new trading partner, 
not merely the renegotiation of existing U.S. trading 
agreements. It is therefore good that the U.S. has emphasized 
its support for a U.S.-U.K. FTA which offers a single best 
opportunity to negotiate an ambitious new agreement.
    While tariffs do matter, greater risk to free trade and 
thus the economic growth are non-tariff barriers, an area where 
the U.S. is not guiltless, but where EU regulations poses 
greater risk. The U.S. should firmly adopt the position that 
the only acceptable level of tariff protection is zero. It 
should also move rapidly to negotiate ambitious free trade 
areas with partners such as the U.K. after Brexit would share 
its understanding that regulation imposes costs that are just 
as real and much larger than the tariffs on which the current 
U.S.-EU trade tensions have focused. Thank you very much.
    [The prepared statement of Mr. Bromund follows:]

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    Mr. Keating. Thank you, Dr. Bromund. I will now take this 5 
minutes to ask my own questions. There is some differences of 
opinion, there is some differences to be worked out with the EU 
and the United States, but in my mind there is one thing that 
just is without question and perhaps the most serious problem 
that we have that we are addressing in the current climate now. 
And it can be summed up in one word, uncertainty. Uncertainty. 
The tariffs that have been imposed and the stops and go and the 
threats for escalation have done nothing but create an 
uncertain environment. That has a tremendous cost economically 
as Dr. Hamilton mentioned in terms of opportunity and it has 
enormous costs in terms of the relationship and a coalition 
that is there that is also based on security.
    So if you could take just a second and comment on the real 
danger of creating this uncertainty and the damage that it is 
doing.
    Dr. Hamilton.
    Mr. Hamilton. Thank you, Mr. Chairman. As I mentioned, I 
agree with you fully and we see that in the numbers if you look 
at trends of investment coming into the United States from 
Europe, which I mentioned is by far the largest investor in the 
United States. Over the last couple of years European-souced 
investment into the United States has been going down. When you 
talk to many of those companies they say they do not quite know 
whether they should make that commitment, given the great 
uncertainty characterizing the U.S. domestic situation. And 
that has considerable impact on local communities in terms of 
all the spillovers that I mentioned.
    There is a second issue related to uncertainty, and that is 
we do not know where the transatlantic relationship is going.In 
a world economy that has had to accommodate four billion new 
workers in recent decadesm and in whic rising powers do not 
necesserily agree with the rules-based orders that we created 
together with Europem the window is simply closing on our 
ability to shape these rules if we squences this moment. Time 
is not neutral.
    Mr. Keating. And there is a vacuum, if I could interrupt. 
There is a vacuum that is there that will probably be filled 
with China and countries that do not share those concerns. Is 
that correct?
    Mr. Hamilton. We spend our time squabbling with each other 
rather than turning to each other to make sure we are the 
rulemakers and not the rule takers. That is where the stakes 
are these days.
    Mr. Keating. If I could, too, I just want to hit another 
issue--I do not exactly share the same views as Dr. Bromund on 
these factors. Another concern about the relationships, that is 
what made me think of this. I think if we pursue even though 
logistically it cannot be done, I do not think from a practical 
basis right off the bat, but even the discussion of talk of, 
for instance, splitting off and doing a bilateral agreement 
with U.K., U.S. to try and deal with the Brexit issue and turn 
our back in the process on 80 percent of our exports, the rest 
of Europe. I think that creates a problem, serious problem, 
going forward, too.
    Ms. Chorlins, would you like to comment on that?
    Ms. Chorlins. Mr. Chairman, I agree with you completely, 
specifically with respect to the idea of a U.S.-U.K. free trade 
agreement, you are absolutely right. Practically speaking, 
until we know the terms of the U.K.'s departure from the EU, 
and the nature of its future relationship, it is really 
impossible for the U.S. to negotiate a new relationship with 
the U.K.
    Uncertainty is indeed the greatest concern that the 
business community has. We have that in the context of Brexit 
in the U.K. and we also have it in the context of the direction 
of the transatlantic relationship. This affects investment 
decisions. This affects supply chains. This affects movement of 
people. This affects movement of data. All of these are 
significant concerns and are best addressed when we are working 
together to address common challenges.
    Mr. Keating. I have got just about a minute left, so 
quickly, I would like to follow on Dr. Bown directly, to get 
the feelings briefly of, within a minute or half a minute, of 
the rest of the panel, but in any way could this be justified, 
this tariff imposition on national security concerns?
    Dr. Bown?
    Dr. Bown. No. It is impossible, I think, to come up with a 
rationale.
    Mr. Keating. Dr. Bromund?
    Dr. Bromund. No.
    Mr. Keating. Ms. Chorlins?
    Ms. Chorlins. No.
    Mr. Keating. Dr. Hamilton?
    Mr. Hamilton. No.
    Mr. Keating. And I must tell you, I have had private 
conversations with many of our European leaders, extraordinary 
number of conversations, frankly, in the last several months 
and I must tell you, I think we miss this at home sometimes, 
they are disappointed and they are hurt about this 
relationship. They are carrying through with their NATO 
commitments in terms of working with us and trying to make good 
on promises which I think they will continue to do. But it has 
a real effect and it has an effect on the people that these 
officials represent which is a problem going forward, too.
    I have gone over my time and I would like to recognize the 
gentleman from Indiana, Mr. Pence.
    Mr. Pence. Thank you, Chairman Keating and Ranking Member 
Kinzinger and thank you all, witnesses, for being here today.
    Dr. Bromund, in reading your prepared testimony, I was 
relieved to learn that the sky is not falling. It turns out 
that the United States and our European friends have had trade-
related disagreements in the past. These disagreements span 
both Republican and Democratic administrations. I think we 
sometimes lose sight of these past disagreements when talking 
about the here and now. It is important to remember that the 
trading relationship between two of the world's largest and 
most complex economies is bound to have some principal 
disagreements, but this should not be confused as a fundamental 
change in our fantastic relationship.
    Moving into specifics, you mentioned agriculture in your 
prepared testimony. You said EU Trade Commissioner Cecilia 
Malmstrom has said agriculture will certainly not be part of 
these negotiations. This is a redline for Europe.
    I come from an agriculture area. This position has 
obviously frustrated our trade negotiators. This is something I 
am very concerned about for the farmers, not only in my 
district, but across the United States. Building on this, you 
highlight a YouGov poll conducted in 2016 that found only 1 in 
5 Germans think TTIP is a good thing, down from 55 percent in 
2014. As you state, only half of the German public considered 
free trade a good idea and a quarter rejected it completely.
    Dr. Bromund, my question is how can we address the EU 
protectionism in agricultural policies that disproportionately 
affect American farmers?
    Dr. Bromund. Thank you very much for your question, Mr. 
Pence.
    I view European agricultural protectionism as a major 
barrier to the negotiation of a successful U.S.-EU trade deal. 
And I share your profound reservation that the EU has taken 
agriculture off the table in the ongoing trade negotiations 
with the United States.
    I am obviously no apologist for U.S. tariffs and U.S. 
protectionism. I view U.S. tariffs, as I have said, as the 
wrong move to make, and I view U.S. and EU regulatory 
protectionism with an equally distrustful eye.
    However, it is vital in trade negotiations writ broad that 
we keep positive momentum going. The chairman has alluded to 
the dangers of uncertainty. I share his concern about 
uncertainty, but uncertainty is much more tolerable if we are 
moving in a positive direction. Right now, unfortunately, the 
U.S. stand on tariffs, coupled with the U.S. stand on 
agriculture makes positive momentum extremely difficult to 
achieve.
    In agriculture, I am in favor of trusting to sound science. 
U.S. food is bountiful. It is for sale. And it is safe. We 
should lose no opportunity to emphasize the scientific clarity 
of the findings that U.S. agriculture is a boon to the United 
States and a boon to the world and we should try our best to 
encourage Europe to take agricultural trade on the basis of 
sound science, not on the basis of panic, fear-mongering, and 
the anti-Americanism of the sort which did so much damage to 
the TTIP negotiations.
    Mr. Pence. I could not agree more with you, Doctor.
    Thank you, Mr. Chairman. I yield my time.
    Mr. Keating. I thank the gentleman. The chair recognizes 
the gentleman from Maryland, Mr. Trone.
    Mr. Trone. Thank you, Mr. Chairman, and thank you to the 
witnesses for coming out today.
    Dr. Hamilton, the European Commission will soon experience 
a change in leadership. Although it is not yet clear which 
candidate will win the presidency, given those dynamics between 
the U.S. and the EU, how realistic of a timeframe do you see 
for trade negotiations to be concluded during President Trump's 
current term in office?
    Mr. Hamilton. I think they are very low for a number of 
reasons. As you mentioned, one reason is this Commission is 
ending. It ends in the fall, so whoever we are negotiating with 
will not be the current person. They are all packing their 
bags. I would call the European Commission's current strategy 
``rope-a-dope''. If you are in the boxing ring and you are 
getting beat up and you are waiting for the bell to ring to 
prolong the match, you just throw your opponent up against the 
ropes, as you dance alond the rope and keep prolonging for 
time. And I think basically that is what the Commission is 
doing. This Commission is not going to be the partner to finish 
the deal and we do not know what comes after that.
    If I may add to Dr. Bromund's statement and what was just 
said, we also have just the fundamental disagreement of what 
the negotiation is supposed to be about. The Europeans do not 
want agriculture. I would share his view it is a non-starter 
with the Congress, certainly, to have anything unless 
agriculture is included.
    The Trump Administration, however, does not want to include 
government procurement and that is the EU's major ask. The EU 
resists including agriculture in the negotiations, the US 
resists including public procurement. And with the tariff 
threat looming, prospects for progress on an agreement are 
slim.
    Mr. Trone. So quickly, President Obama, very popular with 
many of our European partners despite ups and downs in the 
transatlantic relationship, and yet the TTIP, of course, 
failed.
    President Trump, much less popular in Europe, any potential 
U.S. trade deal play out given these dynamics at all and does 
this popularity matter?
    Mr. Hamilton. I think it does. I think the idea, if I may 
be frank, of concluding a trade deal with President Trump is 
not going to gain a lot of European support, not just in terms 
of public opinion, but on very specific issues and with 
specific countries. The French in particular did not sign up 
for the mandate the EU gave to the Commission to negotiate 
right now. They are adamant that they are not going to agree to 
any trade deal with any country that has not signed the Paris 
Climate Change Agreement. So they are now blocking what they 
can within the EU. That is just one example of that.
    And so I think the time to negotiate these things just 
takes so long. This Commission is going to transition toward 
the end of the year. We will be in our election season. I just 
do not see a prospect that this is going to happen during the 
remainder of this congressional term or Presidential term.
    Mr. Hamilton. Dr. Bown, I am concerned about linkages 
President Trump has made between trade tariffs and sometimes 
unrelated political issues like his surprise announcement early 
this month to put tariffs on Mexico for their failure to stop 
migration into the U.S. While he has since pulled back on that 
threat, I think this approach is counterproductive, confusing, 
especially with our allies.
    My question is how does this impact U.S. Government's 
ability to negotiate trade deals going forward and are our 
trade partners wary of agreeing to any concession knowing the 
President might add new, unrelated demands at the eleventh 
hour?
    Dr. Bown. I think that is exactly the problem. By 
essentially reneging on the agreement which was close to what 
happened with Mexico, tying it to something that was completely 
not trade related, a serious issue, but not related to trade, 
that in a very real sense undermined the value of Mexico 
conducting the USMCA negotiations in good faith with the Trump 
administration. And partners around the world watch that, saw 
that, and said you know, we may be wary to negotiate a trade 
deal with this administration in the first place, but this 
gives us even less comfort because anything that we might 
negotiate with them could then be taken away.
    Mr. Hamilton. One last question quickly there. The German 
Federation of Industries has started referring to China as a 
systematic, systemic competitor. Does that change their 
alliance, their stance toward China and does that open up an 
opportunity for us to work more closely with the Europeans to 
make progress vis-a-vis China, Dr. Bown?
    Dr. Bown. I think there are real opportunities for 
additional cooperation with Europe. I think to its credit, the 
Trump administration by highlighting these concerns with China 
has raised them globally. And I think the Europeans are in a 
very different place than they were two or three or 4 years ago 
on a lot of these issues and there are now opportunities that 
we really should not be wasting.
    Mr. Hamilton. Thank you.
    Mr. Keating. The chair now recognizes a gentleman who has 
been waiting a long time for this hearing because he can speak 
first hand of so many of its effects potentially, the gentleman 
from South Carolina, Mr. Wilson.
    Mr. Wilson of South Carolina. Thank you, Mr. Chairman, and 
thank each of you for being here today, and indeed, I have 
appreciated the reference to BMW. It is incredible. I was there 
for the ground-breaking for BMW and the subsequent nature of 
this last year they achieved $10.4 billion in exports from the 
United States around the world. And you had referenced how 
significant it was, but it is a multi-billion of export and 
then our State has so benefited from foreign investments.
    In my home community, we have Michelin Corporation has 
their largest tire manufacturing facilities in the world and to 
be exported out of the Port of Charleston also. And this goes 
along with Continental Tire of Germany. And now South Carolina 
is the leading manufacturer and exporter of tires of any State 
in the union beginning just 30 years ago with zero. So we see 
the benefit.
    And I want to thank each of you for your--for the input you 
have had here today.
    Ms. Chorlins, what would be the potential impact of auto 
tariffs on the U.S. auto industry? Would we feel as much pain 
as the Europeans do?
    Ms. Chorlins. Thank you for your question, Congressman. I 
think it is important to state at the outset that indeed there 
is no domestic constituency for these proposed auto tariffs. I 
think my colleagues on the panel have identified the potential 
costs in terms of the increased price of cars and auto parts. 
They have talked about the potential for job loss and unfair 
competition.
    It is important to understand that as compared to steel and 
aluminum, imposing tariffs on autos and auto parts would amount 
to a tenfold increase in the impact of potential trade 
barriers. So I think that it goes without saying that the 
impacts would be felt far and wide.
    I want to underscore though just one point and that is that 
while we are spending a lot of time talking about these 
potential tariffs, it is important to recognize that Europe is 
not above reproach in its trade practices and I just want to 
make sure that members of the subcommittee do understand that 
there are several issues, legitimate issues, that we have to 
address in doing business with Europe and that is why we think 
these negotiations are so critically important.
    Mr. Wilson of South Carolina. And Dr. Bromund, where do 
things currently stand on Brexit? Is there a role for the U.S. 
to play to encourage the successful conclusion to the Brexit 
dilemma?
    Dr. Bromund. Thank you, Congressman. The U.S. should exert 
all of its energies to encourage both the United Kingdom and 
the European Union to come to a speedy resolution of this 
dilemma. It seems clear from the U.K.'s successive votes on 
Prime Minister May's withdrawal agreement that there is no 
domestic basis in U.K. for passing this withdrawal agreement 
through the House of Commons. It is therefore likely that the 
U.K. will either exit EU without a deal or that the basis for a 
new deal will have to be negotiated. If the former, the no deal 
scenario was true, and U.K. opens itself up as a negotiating 
partner for FTA with the United States, an opportunity we 
should seize. However, if there is an opportunity for a 
satisfactory negotiated exit for the U.K. from the European 
Union, this is something the United States could, and I believe 
should use its good offices to seek both sides to persuade and 
to accept.
    Mr. Wilson of South Carolina. And Dr. Bromund, at the 
beginning of the year the U.K., France, and Germany announced a 
new channel for non-dollar trade between the EU and Tehran in 
order to bypass U.S. sanctions of Iran called INSTEX. What are 
the ramifications of setting up such a mechanism and what has 
been the consequence?
    Dr. Bromund. The immediate ramifications in financial terms 
have been relatively small. However, the broader implications 
of this measure are significant. One of the U.S.'s most 
important tools in international relations broadly defined, I 
am not talking here simply about a trade, is the power of the 
U.S. dollar and the centrality of the U.S. as a financial 
market and a global investment market. Measures like this 
European measure threaten to circumvent the U.S. ability to 
achieve foreign policy objectives by using the power of the 
dollar and the centrality of the U.S. in investment markets. 
And this can only have a negative effect on the U.S.'s ability 
to achieve its foreign policy objectives in areas far divorced 
from trade.
    Mr. Wilson of South Carolina. Thank you very much. And 
thank you, Chairman Keating.
    Mr. Keating. I thank the gentleman. The chair now 
recognizes the vice chair of the committee, Ms. Spanberger from 
Virginia.
    Ms. Spanberger. Thank you, Mr. Chairman, and thank you to 
our witnesses for being here today.
    Following up on the line of questioning and discussion that 
we have heard so far just for level setting, on February 17, 
2019, the Secretary of Commerce transmitted to the White House 
a report on his investigation into the effects of imports of 
automobiles and certain automobile parts on the national 
security of the United States under Section 232 of the Trade 
Expansion Act. And on June 14th, President Trump sent a letter 
to Congress stating that he concurred with the secretary's 
finding that automobiles and certain automobile parts are being 
imported into the United States in such quantities and under 
such circumstances as to threaten and impair the national 
security of the United States.
    So I share some of the concerns that have been expressed 
here today, notably, 232 emerged out of the cold war--under the 
cold war, has typically been used against oil and petroleum. 
And when we look at auto related trade accounts, auto related 
trade accounts were only 8 percent of bilateral trade between 
the United States and the EU and we see such an impact on U.S. 
jobs. I am struggling and challenged with this notion of how 
this national security determination has been made.
    And so my question for you as experts, former U.S. 
officials as well, and in your current role, Ms. Chorlins, for 
example, with the U.S. Chamber, is it clear to you what 
criteria was used to assign a national security threat to the 
automobile imports?
    Ms. Chorlins. Thank you for the question, Congressman. 
Because the report has not been made public, it is impossible 
for us to know the exact criteria that were used. I think what 
we can say is that the administration has made it clear that 
especially with the case of steel and aluminum tariffs and 
presumably with the auto tariffs as well, or the threat of auto 
tariffs, that this is indeed designed to develop or create 
negotiating leverage, to bring our trading partners to the 
table and to force concessions from them.
    So in terms of the actual criteria, I am afraid I do not 
have specifics for you.
    Ms. Spanberger. And how does that create a challenge in 
your current role, for example, in trying to advocate on behalf 
of U.S. businesses being privy to those sorts of relationships 
between the United States and the EU having this lack of 
understanding related to the 232 tariffs that the United States 
has imposed?
    Ms. Chorlins. Well, I think as the other panelists have 
suggested, the tremendous uncertainty is of grave concern 
certainly to the American business community. Mainly what we 
would like to see is for the U.S. and Europe to actually make 
progress on the areas that they have agreed to discuss so they 
have talked about reducing non-auto industrial tariffs. We 
think that kind of conversation should go forward. They have 
talked about improvements regarding conformity assessments and 
mutual recognition agreements. It is our understanding that 
those conversations are happening at a technical level. Those 
sorts of somewhat arcane measures are nonetheless of great 
significance to American businesses. So we would like to see 
these existing talks go forward. We would love for them to be 
more comprehensive to include not just industrial goods, but 
also as I said earlier services, investment, and procurement, 
but we recognize that we have limited opportunities here and we 
feel like we should leverage this momentum.
    Ms. Spanberger. Thank you. And Dr. Hamilton, I would like 
to pose a question to you given your previous background with 
the Department of State in an issue that has been important for 
many of us here is ensuring that we are asserting our Article 1 
authorities.
    Do you have an opinion, sir, on what role Congress should 
play in overseeing Section 232 tariffs, particularly given the 
foreign policy implications of such decisions and frequently 
the--in this case, the national security reasoning for the 
implementation of such tariffs?
    Mr. Hamilton. Thank you for the question. I agree with Dr. 
Bown's comments. Constitutional authority for commerce rests 
with the Congress, and Congress should uphold that authority. 
The topic under discussion is an example of a commercial issue 
with national security implications, which indicated that this 
committe is an appropriate deliberative forum for the 
challenges it poses. It is the constitutinal prorogative of the 
Congress to assert its rule and its rights, not just conduct 
oversight. As Dr. Bown said, this should be examined very 
closely and there should be a congressional role here whenever 
the executive is trying to encroach upon these rights.
    Regarding your other question, the uncertainty impact 
extends to other areas. You mentioned the national security 
implication of this had been done before with oil and gas. 
Well, we are now in a new position with oil and gas. We are 
trying to sell it to the Europeans, but you can imagine if 
there is uncertainty about us as a reliable supplier, what that 
will do then to our ability now to create this new channel of 
transatlantic commerce. The Trump Administration is making 
essentially the same charge about the Russians not being 
reliable suppliers when it comes to providing Europe with oil 
and gas. Well, you can imagine the Europeans might be asking 
themselves well, are you reliable either?
    Ms. Spanberger. Thank you very much. I yield back.
    Mr. Keating. The chair thanks the gentlelady for your 
questions and particularly bringing up Congress' role because 
we have another role, too, in Congress, and that is 
representing a jurisdictional district, territories, and 
regions of the United States. If you look at the materials that 
have been forwarded to the committee breaking that down by 
State, you will see the importance of that from a State-by-
State basis. Thank you for the question and your responses.
    The chair recognizes the gentleman from Mississippi, 
Representative Guest.
    Mr. Guest. Thank you, Mr. Chairman. Dr. Bromund, I want to 
start by following up a little bit on what Congressman Pence 
was speaking about as it relates to agriculture. Mississippi is 
a large producer of agricultural products. American poultry has 
been banned in the EU. American Farm Bureau statistics tell us 
that we have $11 billion deficit with the EU as it relates to 
agricultural products. The average U.S. tariff for imported 
agricultural products is roughly 5 percent. For the EU, the 
average tariff on imported agricultural products is roughly 3 
times higher, at 14 percent. We know that trade negotiators on 
behalf of the EU have said that agriculture will not be part of 
these negotiations, that this is what they describe as a 
redline.
    You say in your written testimony on page 4 and 5, you talk 
a little bit about some of those. You say that eliminating 
tariffs for non-automobile industrial goods would be a major 
gain for the U.S. economy and EU, but so would an end to the 
EU's agricultural protectionism. And you list both France and 
Belgium as two of the major driving factors behind their 
reluctance to include that in current negotiations.
    And so I guess my question to you, Dr. Bromund, what can we 
do to make sure that we are applying the necessary pressure on 
our friends in the EU that they are seriously considering 
opening up their agricultural industry to American products?
    Dr. Bromund. Thank you for the question, Congressman. I 
would point out that EU and this began even before the European 
Union came into existence as the EU, EU agricultural 
protectionism has two fundamental sources. First, there is the 
long-run impact of the Common Agricultural Policy which rests 
on the political importance of agricultural constituencies in 
the European Union. Although, of course, the relative size of 
the EU agricultural sector has declined over the years as it 
has in the United States, this still represents an important 
political constituency in the EU and we need to recognize that 
fact without for a moment excusing the protectionism that flows 
from it.
    Second, and this is unfortunately more recent, there is a 
broad based and very popular political campaign in the European 
Union against U.S. agricultural exports. This was, in my 
judgment, the single most important factor behind the European 
rejection of TTIP, the belief that opening up the EU markets 
through TTIP to U.S. agriculture would be bad for EU consumers 
as well as, less importantly, bad for EU agricultural 
producers.
    What I am afraid these two things have in common is they 
only be resolved by EU European political leadership. We need 
to make it very clear that just as I condemned U.S. industrial 
protectionism through steel, aluminum, and potentially car 
tariffs, we expect to EU political leaders to show the same 
level of support in condemning their own protectionism. We 
cannot negotiate, politically speaking, an industrial free 
trade goods agreement without also negotiating politically in 
the United States an agriculture free trade agreement. For us, 
those two things are politically inseparable and I would add 
they are both economically beneficial for us and EU consumers.
    So I think we have to exercise, we have to call on European 
political leaders to exercise significant political leadership 
as the Congress is trying to do in this U.S. case to push 
European agricultural producers and to push EU agricultural 
consumers to recognize that importing U.S. agricultural goods 
is a good thing, a healthy thing, and an important thing for 
the wider health of the U.S.-EU trade relationship.
    Mr. Guest. Do you believe the EU leaders understand the 
importance of opening up agriculture as at least a negotiating 
point for any future agreements?
    Dr. Bromund. I have no doubt they understand its 
importance. That is why the French refuse to do it.
    Mr. Guest. And one final question, Dr. Bromund, just kind 
of changing gears, you say on page 9 of your written statement, 
you say that today it is becoming commonplace that the world 
will be divided into spheres of trading influence, either a 
Chinese sphere and a Western one or a U.S. sphere, a European 
one, and a Chinese one.
    Can you expand on that just very briefly?
    Dr. Bromund. This is now a commonplace observation. The 
idea that the future of the world rests with great powers or 
great trading spheres, potentially a U.S. one, a European one, 
and a Chinese one, or else a U.S. and European one combined 
versus a Chinese sphere. This is an outcome that we should do 
everything in our power to avert.
    U.S. strategy in the cold war did not rest around trying to 
create a bipolar world between the U.S. and the USSR. In the 
cold war, we fought for freedom for our allies, as much as 
freedom for ourselves. It is profoundly not an American 
interest for the world to be divided up into two or three 
economic trading spheres of influence. We want the broadest 
freedom for ourselves and we want broad freedom for our allies, 
even to the extent that they may, on occasion, disagree with us 
as they have in the past, as they are now, and as they will 
undoubtedly do in the future. But the idea of a world divided 
up, George Orwell style, into three competing trading 
continents is a profoundly unappealing and I would say un-
American one. We should do everything in our power to preserve 
certainly our own trading freedom and our own prosperity, but 
also the trading freedom and prosperity of our allies as well.
    Mr. Guest. Thank you. Mr. Chairman, thank you. I yield 
back.
    Mr. Keating. Thank you. The chair recognizes a leader in 
transatlantic relationships, the gentleman from California, Mr. 
Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. This is an 
important hearing for the subcommittee.
    Taking your thesis, which I tend to agree with, Dr. 
Bromund, it seems to me that yet when you look at the United 
States and Canadian economies with Europe, we still constitute 
over half the world's economy. And when you talk about rules-
based systems, you know, integrity and respect for law, a 
judiciary system for appeals of these cases, we have far more 
in common with our transatlantic relationship, Canada and us, 
than these other parts of the world. And frankly, we have the 
ability still to write the rules for the 21st century in terms 
of a world-based economy and I think we should not lose sight 
of that opportunity notwithstanding our current differences.
    I think the politics that we are both aware of in Europe 
and here have to be played out. Do you think that ultimately 
the procurement issue in Europe and the agricultural issues 
here ultimately constitute the basis for some sort of a 
compromise as we, at some point, move to the position of 
renegotiation, some version of a TTIP, both Mr. Bromund and Dr. 
Hamilton, and anyone who would like to opine.
    Dr. Bromund. It is an intriguing idea. Unfortunately, the 
question is what are the relevant constituencies in the EU and 
the United States? In the United States, the opposition to 
opening up government procurement rests on the idea that U.S. 
taxpayer funds should be directed to benefit U.S. consumers and 
U.S. corporations. In the EU, the opposition to opening up 
agricultural markets to U.S. competition rests partly on EU 
agricultural producers, but also on a sector of EU----
    Mr. Costa. I realize that, but let's give examples of what 
reality is. When you look at the automobile market, we are 
playing both sides, both Europeans and the U.S. When you look 
at the issues of our new strike joint fighter, you know, the 
Europeans are buying it. We are manufacturing it and you have 
got parts being made in Europe. I mean the reality is is that 
when Europeans come to America, they can go to any of our major 
grocery stores and find all the wonderful cheeses that are 
produced in Europe as well as the European wines. That is the 
reality.
    So I mean how we get past that in terms of--I get the 
politics in France and in Italy and in all the other countries 
when it comes to Parma, our Gorgonzola, or all those kinds of 
nice naming items.
    So therefore, my question is the Commission and the 
commissioners negotiate the trade agreements. The Parliament 
ultimately has to pass. We are not as familiar with their 
system as we should be, I think.
    Under the next new European Commission, I think we ought to 
try to figure out a way to break through this in terms of the 
politics and to get our own committees that have the 
jurisdiction in these areas, even with the European 
Parliamentary committees and having hearings here and having 
hearings there in Europe to meet with these constituencies. Do 
you think there would be some mileage in that, Dr. Hamilton?
    Mr. Hamilton. Absolutely. Congressman, you know from your 
great work that there is a great appetite for it on the 
European side. The EU Caucus here could play a role, the 
Transatlantic Legislators' Dialogue plays a role. There are a 
number of things that could be done.
    One idea would be simply when you are considering 
legislation on each side of the Atlantic that might affect the 
other, whether you sort of have an early warning type of 
mechanism so you can understand what the potential legislation 
coming down the road might be, and understand how that might 
affect each other. That could be just a video conference with 
your colleagues. You would not have to necessarily fly 
everywhere. I think modern technology allows sort of these 
parliamentary-type exchanges now on fundamental, substantive, 
legislative ideas that could help things.
    Mr. Costa. Well, once that commission gets formed, I think 
we have got to figure out a way to get out of the box here 
because--let me ask another question. They have completed an 
agreement with Canada and now with Mexico and they are 
negotiating with the Mercosur countries. Do you think those 
successful conclusions of those treaties offer a template for 
us, once we are ready to sit down and have a real negotiation 
again?
    Mr. Hamilton. I do not because I think we are--we would be 
the pioneers. We would be negotiating something that is far 
beyond what any of these other agreements have been which 
always contain lower standards than what we have.
    I think you are right that the critical thing to me seems 
to be these two issues. The US wants the EU to open up its 
agriculture market; the EU wants the US to open up its public 
procurement market. Each has a problem. The Federal Government 
often is not the real answer on public procurement because many 
U.S. States actually do not subscribe to a lot of international 
standards on opening up public procurement markets. So somehow 
our States would have to go along with this. That is very hard.
    On the European side, instead of just thinking market 
access which is, I agree, a problem, one can think about the 
types of things you mentioned, that there are a lot of 
regulatory issues where we can agree to certain standards on 
health and safety that I could see us moving forward on in the 
agricultural area that is beyond just the trade piece of 
things. So I do think if the will is there, there is a 
possibility.
    The problem we have is we have a limited mandate on both 
sides now or we are arguing about it. For the trade agreement 
to be WTO compliant, it has to cover substantially all trade. 
Well, the current negotiation will not do that. So that was the 
original idea behind the TTIP which was to say ``let's put it 
all together so that there is enough room for some tradeoffs on 
both sides.'' We were 97 percent of the way there in January 
2017.
    Mr. Costa. We have made a lot of progress.
    Mr. Hamilton. We have and I think we can come back to some 
of that in the future.
    Mr. Costa. I think we are going to have to and your 
definition of bilateral, because I know the president attempted 
to do as Chancellor Merkel tried to explain that the European 
Union is one entity and we are one entity, so that is 
bilateral.
    Mr. Hamilton. That is right.
    Mr. Costa. That is my definition of bilateral. Do all of 
you agree that is a definition of bilateral? OK. It seems to 
me.
    My time has expired and we need to continue this 
conversation, Mr. Chairman, and I look forward to working with 
you as we figure out ways with the Constitution. And this is 
part of the problem. After the elections, they are reorganizing 
now and only 250 of the returning members of the European 
Parliament out of 761 which means over 500 of them are brand 
new, and so we are going to have to have some time and patience 
as we work through this aspect and with a new Commission as 
well.
    Mr. Keating. The chair would like to thank the witnesses 
for adjusting their schedule because of the roll calls and the 
delay that ensued from that. And thank you for your very well-
informed testimony. This is something that we will have to 
pursue not just as a subcommittee, but as a full committee, and 
as a Congress.
    The opportunities here are enormous. The challenges are 
great. It is unfortunate--I would have liked to have seen, 
frankly, what would have happened if TTIP had been in the front 
end, instead of TPP when there was a lot more commonality of 
thought and I think we could have really had the thing moving 
and it picked up a lot of momentum. We are not there because of 
circumstances we could not control, but the greater good for 
the U.S., the greater good to our allies in Europe, is so 
enormous, not just an economic benefit, but also in our shared 
values and the environment, the shared concern we have for 
that, intellectual property being guarded, having a rule of 
law, and a belief in fair wages and safe working conditions, 
all these values that we share together are great. But I would 
say this, that in the absence of us moving forward in this area 
of mutual benefit there will be indeed a vacuum and that vacuum 
will be filled with countries and entities that do not share 
those same values and it will not have the beneficial effect. 
So to me, I know the challenges, but the penalties that are 
there and what is going to happen if we do not move forward 
ourselves and what we will be facing is a far greater concern.
    So I hope we can continue this discussion. I hope we can 
move forward as a Congress and Parliament and engage the 
business community to be a part of this. It is necessary. And 
move forward. There will be a little rebranding. TTIP probably 
will be a thing of the past, but I believe if we work together, 
we will have success. So thank you for your words here today, 
your testimony and if there are any other questions, we will 
followup. This hearing is adjourned.
    [Whereupon, at 4:30 p.m., the subcommittee was adjourned.]

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