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


                  PROMOTING ECONOMIC GROWTH: EXPLORING
                  THE IMPACT OF RECENT TRADE POLICIES
                          ON THE U.S. ECONOMY

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

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                     INTERNATIONAL DEVELOPMENT AND
                            MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 19, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-31
                           
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
39-451 PDF                  WASHINGTON : 2020                     
          
--------------------------------------------------------------------------------------                           
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
           Subcommittee on National Security, International 
                    Development and Monetary Policy

                  EMANUEL CLEAVER, Missouri, Chairman

ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio, Ranking 
JIM A. HIMES, Connecticut                Member
DENNY HECK, Washington               PETER T. KING, New York
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
JUAN VARGAS, California              ROGER WILLIAMS, Texas
JOSH GOTTHEIMER, New Jersey          FRENCH HILL, Arkansas
MICHAEL SAN NICOLAS, Guam            TOM EMMER, Minnesota
BEN McADAMS, Utah                    ANTHONY GONZALEZ, Ohio
JENNIFER WEXTON, Virginia            JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia, Vice 
TULSI GABBARD, Hawaii                    Ranking Member
JESUS ``CHUY'' GARCIA, Illinois
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 19, 2019................................................     1
Appendix:
    June 19, 2019................................................    35

                               WITNESSES
                        Wednesday, June 19, 2019

Baughman, Laura M., President, The Trade Partnership/Trade 
  Partnership Worldwide..........................................     5
Bergsten, C. Fred, Senior Fellow and Director Emeritus, Peterson 
  Institute for International Economics..........................     7
Boyd, John, Founder and President, National Black Farmers 
  Association (NBFA).............................................     9
Gray, Gordon, Director, Fiscal Policy, American Action Forum.....    12
Russell, Ronnie, Missouri farmer, and member, Board of Directors, 
  American Soybean Association (ASA).............................    10

                                APPENDIX

Prepared statements:
    Baughman, Laura M............................................    36
    Bergsten, C. Fred............................................    73
    Boyd, John...................................................    76
    Gray, Gordon.................................................    80
    Russell, Ronnie..............................................    90

              Additional Material Submitted for the Record

Cleaver, Hon. Emanuel:
    Discussion Draft.............................................    92
    Politico article entitled, ``Lighthizer won't rush USMCA in 
      Congress...................................................   102
Stivers, Hon. Steve:
    Peterson Institute for International Economics paper by C. 
      Fred Bergsten entitled, ``18-21 China and the United 
      States: Trade Conflict and Systemic Competition,'' dated 
      October 2018...............................................   103

 
                       PROMOTING ECONOMIC GROWTH:
                        EXPLORING THE IMPACT OF
                         RECENT TRADE POLICIES
                          ON THE U.S. ECONOMY

                              ----------                              


                        Wednesday, June 19, 2019

             U.S. House of Representatives,
                 Subcommittee on National Security,
                          International Development
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Emanuel Cleaver 
[chairman of the subcommittee] presiding.
    Members present: Representatives Cleaver, Perlmutter, 
Himes, Sherman, Vargas, Gottheimer, Wexton, Garcia of Illinois; 
Stivers, Williams, Hill, Gonzalez of Ohio, Rose, and Riggleman.
    Ex officio present: Representatives Waters and McHenry.
    Also present: Representative Axne.
    Chairman Cleaver. The Subcommittee on National Security, 
International Development and Monetary Policy will come to 
order. Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of this subcommittee are authorized to 
participate in today's hearing.
    Today's hearing is entitled, ``Promoting Economic Growth: 
Exploring the Impact of Recent Trade Policies on the U.S. 
Economy.''
    I now recognize myself for a 5-minute opening statement.
    Thank you for all being here today and for your shared 
focus on the crisis in which we find ourselves. Our country has 
entered day 512 of what can only be described as a trade war. 
The opening salvo came when the President's tariff-targeting 
solar panels and washing machines took place. As our witnesses 
will attest, it has cascaded into nearly $400 billion worth of 
traded goods and has triggered retaliation from countries 
including China, India, Canada, Mexico, and even members of the 
European Union.
    The trade war has impacted nearly every facet of our 
economy, from agriculture to manufacturing. While I know, and 
have read, the works of many of you who are kind enough to lend 
your time to us today, I have one person who is not only a 
witness but a constituent. I have heard from Ronnie Russell and 
a number of other farmers in my Fifth District of Missouri, and 
I will ask him to explain the devastating toll this trade war 
has had on the lives of those farmers trying to make a living 
in Missouri.
    I understand that in response to U.S. actions, American 
agricultural and food exports to China declined precipitously, 
largely due to a drop in exports from U.S. soybeans. China has 
levied retaliatory tariffs of 25 percent on soybeans, raising 
the total tariff rate to 27 percent, and effectively 
restricting access to what was the largest U.S. export market 
for that crop. About half of all soybeans produced in the 
United States were exported prior to the application of the 
tariffs.
    As the farmers on this panel will attest, there was hardly 
a place in the world that could compete with us in terms of the 
exportation of soybeans. Many of the folks that Ronnie Russell 
and John Boyd are representing here today don't have another 
few months for the trade war to linger. Their farms are 
literally on the line. The cost of this trade war is not 
limited just to my rural communities. It traverses the length 
of Missouri's I-70 and across all rural and urban divides 
around this country.
    Federal Reserve Chairman Jerome Powell, in his testimony 
before this committee earlier this year, told us that 
uncertainty is being injected into manufacturing sentiment due 
to the trade disputes adversely impacting the sector. This is 
costing American jobs. Trade Partnership Worldwide finds that, 
on net, my home State of Missouri stands to lose over 45,000 
jobs as a result of the trade war and our country could lose 
over 2 million. There is no American who is insulated from this 
pain.
    The Federal Reserve found that U.S. tariffs were almost 
completely passed through into U.S. domestic prices, so that 
the entire incidence of the tariffs fell on domestic consumers 
and importers up to now, with no impact so far on the prices 
received by foreign exporters. They said that, ``Producers 
respond to reduced import competition by raising their 
prices'', making it more expensive for Americans to buy the 
necessities of life.
    Americans are already struggling with low wages and long 
hours. These tariffs are taxes that hamper American growth and 
threaten our future. Projections indicate that these taxes 
threaten to reduce U.S. GDP by nearly a percentage point, and 
as we have this morning's hearing, down the hall my colleagues 
in the Ways and Means Committee are receiving testimony from 
the President's leading lieutenant in this war, the U.S. Trade 
Representative. Down the street, the Commerce Department is 
entering their third day of testimony from industry groups 
suffering and crying out for an end to this war.
    My time is running down.
    The consequences of inaction compel us to have this 
important conversation and derive solutions to protect our 
economy and the country. I would ask my colleagues for 
unanimous consent to enter into the record a discussion draft 
of a bill that I am working on, and this bill would require the 
President to conduct thoughtful analysis of the cost to the 
very segments of the American economy and public before 
imposing any new tariffs. It would require him to seek advice 
from a council comprised of Cabinet officials to ensure that a 
decision that could impact every American is more thoughtful 
than a tweet.
    With that, I would like to, again, thank you for lending 
your voices here this morning--we appreciate it very much--to 
this conversation.
    I now yield to the ranking member of this subcommittee, the 
gentleman from Ohio, Mr. Stivers.
    Mr. Stivers. Thank you, Mr. Chairman. I appreciate you 
holding this hearing. It is a very important topic, and I look 
forward to hearing from our panelists today. Every member of 
this committee hears back home about how the trade disputes 
with China, the European Union, and our North American 
colleagues are affecting our constituents. We have all heard 
from constituents and businesses located in our districts about 
the impact of the trade war.
    Just last week, I spoke to a gentleman who works for a 
company called Linden Lumber, and this company sells lumber 
products into China, which helps reduce our trade deficit with 
China and employs Americans. But the retaliatory tariffs now 
threaten the survival of their business and it is an example 
that demonstrates the seriousness of the topic that we are 
discussing today and our importance of finding solutions.
    Like Mr. Russell, I have a lot of farmers in my district. 
They are watching their incomes decline. Their businesses have 
an impact on supply chains, and that further demonstrates the 
urgent need to solve these problems. But we also shouldn't 
oversimplify the issue.
    I have another constituent company, RG Barry, which makes 
slippers, and their slippers can be found all throughout China. 
The problem is that they are not their slippers. They are 
stolen intellectual property. They steal the slipper, the 
design, the box, the logo. You wouldn't know it wasn't an RG 
Barry slipper if you bought it, but it is not. They see none of 
the profits.
    The intellectual property is stolen from them, and other 
American companies who operate in China have to agree to share 
their technology, which potentially seeds their future Chinese 
competition, and that future Chinese competition can get 
unlimited backing from the Chinese government, giving it the 
ability to undercut the pricing of U.S. firms, steal market 
share, and destroy American jobs and industrial capacity. And, 
in particular, in the area of emerging technology, this lost 
industrial capacity can have significant implications on our 
military's edge over foreign adversaries. Both sides of the 
aisle have long recognized these problems with China, yet still 
they continue.
    And I am a free-trade Republican. I believe tariffs hurt 
consumers and they stunt economic growth. So, that is why I 
think it is important we get to a negotiated agreement that 
puts an end to China's currency manipulation, forced technology 
transfers, subsidies by state enterprises, and other trade 
abuses. I also believe that it is in America's long-term 
national security interest that any trade debate highlights 
these issues now, because the longer we wait, the worse deal we 
are going to get.
    My question I am looking forward to asking the panel is, if 
you think these abuses of currency manipulation, forced 
technology transfer, subsidized industry, and cyber theft are 
real problems, what are your proposed solutions, because I do 
believe we need to get to a negotiated settlement.
    I look forward to the panel's testimony, particularly your 
thoughts on China and the United States-Mexico-Canada Agreement 
(USMCA).
    With that, I would like to yield my remaining time to the 
ranking member of the full Financial Services Committee, the 
gentleman from North Carolina, Mr. McHenry.
    Mr. McHenry. I thank my colleague, and I thank you for your 
leadership on trade and promoting American economic activity 
globally, and I want to thank Chairman Cleaver for organizing 
today's hearing.
    When this hearing was first announced, committee 
Republicans were puzzled at the title. It was originally 
called, ``Slowing Economic Growth: The Impact of Recent Trade 
and Tax Policies on the U.S. Economy.'' Well, they dropped the 
word ``slowing'' because that is actually inaccurate--we have 
quite robust growth, especially under this Administration--and 
they dropped the word ``tax.'' Well, if you are going to talk 
about growth, I think we should talk about the tax bill that we 
passed and are now bearing the fruits of in the economy, and I 
think we have greater growth because of the regulatory relief 
of this Administration and the Tax Cuts and Jobs Act.
    Nonetheless, I am encouraged that my Democratic colleagues 
are interested in trade. I would also encourage them to talk to 
the Speaker of the House, Nancy Pelosi, to expedite the 
consideration of the U.S.-Mexico-Canada Act so that NAFTA can 
be updated and improved for the 21st century.
    I also think it is important to talk more broadly about the 
prosperity that the American people are feeling and how every 
sector in the economy is benefitting from the broad growth that 
we have, and, long-term, we will benefit from a renewed 
understanding between us and China in our trading relationship. 
Their economy has changed dramatically and I think it is really 
important that we update our relationship with global trading 
partners, and now is the time.
    With that, I yield back the balance of my time.
    Mr. Stivers. I yield back.
    Chairman Cleaver. I thank the ranking member.
    Without objection, I now yield to the Chair of the Full 
Committee, Chairwoman Waters, for such time as she may consume.
    Chairwoman Waters. Thank you, Mr. Chairman. The Federal 
Reserve, the International Monetary Fund, and the World Bank 
all have forecasted an economic slowdown, due primarily to the 
risk of the President's trade war. The Federal Reserve Bank of 
New York estimates that tariffs could cost the average 
household up to $831 this year, and the Trade Partnership 
estimates net job losses of 248,399 in California alone.
    There are legitimate grievances regarding the employment 
practices in many foreign countries like China, but the 
President's tactics of provoking a global trade war on 
unrelated political issues such as immigration is reckless. The 
Congress needs to act to stop the President from further 
damaging our economy and harming our international 
relationships.
    I yield back the balance of my time.
    Chairman Cleaver. The Chair of the Full Committee yields 
back the balance of her time.
    Let me take this opportunity to welcome the testimony of 
our five witnesses. Our first witness is Laura Baughman. Ms. 
Baughman currently serves as the president of The Trade 
Partnership and Trade Partnership Worldwide.
    Ms. Baughman, you have 5 minutes.

     STATEMENT OF LAURA M. BAUGHMAN, PRESIDENT, THE TRADE 
          PARTNERSHIP AND TRADE PARTNERSHIP WORLDWIDE

    Ms. Baughman. Thank you, Mr. Chairman. Good morning. My 
name is Laura Baughman and I am the president of The Trade 
Partnership and Trade Partnership Worldwide. We prepare studies 
that assess the economic impacts of trade on U.S. and 
international economies. I have been asked to talk to you today 
about some of our research and about the economic impacts of 
the tariffs that we have been experiencing.
    I will briefly summarize our research and then describe 
some ways in which the implementation of the current spate of 
tariffs and quotas has been affecting companies in the hope 
that that information will be helpful to the subcommittee's 
deliberations on the role that Congress could play in the 
process.
    The briefing memo prepared for the subcommittee for this 
hearing did an excellent job of summarizing the various import 
restraints that have been imposed since 2018, or contemplated, 
and how they impact consumers and producers. As the memo notes, 
the impacts affect nearly every gear in the economic machine.
    We took a comprehensive look at the potential impacts of 
various tariff and quota scenarios, assuming those tariffs have 
been in effect from 1 to 3 years. We used the same model the 
U.S. International Trade Commission uses to assess the impacts 
of trade agreements. We found that steel and aluminum Section 
232 tariffs plus quotas, tariffs on imports from China on Lists 
1, 2, and 3, and related retaliation will reduce U.S. GDP 
annually by 0.3 percent, raise costs to consumers such that the 
average family of 4 must shell out $767 more to buy goods, and 
result in a net loss of nearly 935,000 jobs.
    Adding in tariffs on imports from China of products on List 
4, plus retaliation, amplifies the costs. The steel and 
aluminum restraints and tariffs on all imports from China, plus 
retaliation, will reduce U.S. GDP annual by 1 percent, raise 
costs to consumers such that the average family of 4 must shell 
out $2,294 more to buy goods, and result in a net loss of 
nearly 2,160,000 jobs.
    In each scenario, while some sectors gain jobs, more lose, 
so that on balance, the impact is a net negative for U.S. 
workers, nationally and in every State.
    You have a copy of our study which was attached to my 
written testimony.
    Our results are consistent with those of other researchers. 
While scenarios examined and modeling details differ, everyone, 
including the Administration, has concluded that the various 
tariffs will have a net negative impact on trade, economic 
growth, and employment.
    I also thought it would be helpful to summarize some of the 
principles that have heretofore undergirded trade policymaking 
in the United States and complaints we are hearing, and likely 
you as well, about the ways the current tariffs are being 
rolled out in a manner that is inconsistent with those 
principles. I mentioned four in my written statement. I will 
focus on three, two if I run out of time.
    Principle 1. Businesses and financial markets hate 
uncertainty. Companies universally tell me they can deal with 
the higher costs of tariffs or other U.S. Government actions if 
they just know about them well enough in advance and know how 
long those costs will be a problem for them. They will then 
take the steps needed to minimize the disruption to their 
businesses.
    Yet, hovering over companies are the following 
uncertainties that have all of them in a state of limbo: Will 
the President impose tariffs of as much as 25 percent on 
imports from Mexico? Will the President impose tariffs on $300 
billion in imports from China, and when? Will the President 
impose tariffs on imports of cars and parts from Europe and 
Japan? Will Congress pass the United States-Mexico-Canada 
Agreement (USMCA)? Will the President terminate NAFTA to 
motivate Congress to pass the USMCA? Will a company give an 
exemption from the tariffs for products it cares about, and 
when will it hear one way or the other?
    Companies must guess on the answer to each of these 
questions to plan sourcing. A wrong guess will be expensive.
    Principle 2. Informed policymaking should be the foundation 
of all government actions. This typically entails public notice 
and comment periods that are realistic and provide the 
opportunity for a full vetting of the various pros and cons of 
a proposed action or policy. It means that policymakers weigh 
the input and address concerns. It means an opportunity for 
independent assessments of the economic impacts of the tariffs 
by the U.S. International Trade Commission, for example, before 
the tariffs are imposed, not after.
    This did not happen in the case of the steel and aluminum 
quotas and tariffs. Section 301 process has been deemed by many 
as pro forma, with the expectation that the President will 
impose tariffs notwithstanding the comments submitted.
    Principle 3 is that companies need time to adjust to 
changes. It can take 6 months to 2 years to change suppliers. 
Sufficient advance notice is needed to preclude high costs, and 
that has not been the practice of the tariff implementation 
since 2018. They are announced and imposed less than a month 
later. The potential tariffs of 5 percent on imports from 
Mexico were threatened with an implementation date just 11 days 
later.
    In conclusion, there is a role for Congress to play in 
helping to lessen some of the costs of import restraints on 
American companies, their workers, and the economy generally.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Baughman can be found on 
page 36 of the appendix.]
    Chairman Cleaver. Thank you very much. The next witness is 
Dr. Fred Bergsten, the director emeritus at the Peterson 
Institute for International Economics, who has previously 
served as Assistant Secretary for International Affairs at the 
Treasury, Under Secretary of Monetary Affairs, Assistant for 
International Economic Affairs at the National Security 
Council, and on the Advisory Committee for Trade Policy and 
Negotiation.
    Having done all of that, here is the highlight. You are 
serving as a witness before this committee today.
    Welcome. You have 5 minutes, Dr. Bergsten.

   STATEMENT OF C. FRED BERGSTEN, SENIOR FELLOW AND DIRECTOR 
    EMERITUS, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS

    Mr. Bergsten. Mr. Chairman, thank you very much. As you 
know, I am also a native of Kansas City. My parents lived there 
for a long time, so we have a particularly close relationship.
    Mr. Chairman, I want to support the economic analysis that 
Laura Baughman just gave you. I will refer to some similar 
numbers, but she has basically gotten it right. I have even 
bigger numbers.
    But I want to stress, in addition to the economic effect, 
how the Trump Administration has clearly abused congressional 
intent and probably some of its legislative authorities in 
implementing his current trade policies. Those policies are 
levying heavy costs on the economy and foreign policy, and 
Congress should therefore take a series of urgent measures to 
rein in the excesses of the Executive Branch.
    I want to support what Chairwoman Waters just said, and 
what you said a moment ago, Mr. Chairman, in your introductory 
comments. I believe Congress needs to act urgently to rein in 
the excesses of the Executive Branch.
    Let me tick off the difficulties in terms of these abuses, 
as I term them.
    First, there is no evidence that imports of steel and 
aluminum from some of our closest allies have damaged the 
national security of the United States. Hence, there is no 
justification for invoking the national security authorities of 
the Trade Expansion Act.
    Second, there would be even less justification for invoking 
the national security provision to impose import restrictions 
on motor vehicles and auto parts. It is ludicrous to argue, as 
the Secretary of Commerce did in February, that research and 
development by American auto companies--there are only three of 
them, as he defines it--is essential for U.S. national 
security. It is also ludicrous to argue that R&D investment 
would be encouraged by restricting investment, by restricting 
competition in the U.S. auto market. Economics just don't work 
that way.
    Third, an even more egregious stretch is the President's 
threat, clearly still in place, to apply tariffs against all 
imports from Mexico unless that country takes far-reaching 
steps to restrict immigration. The legal justification would be 
a declaration of national emergency under the International 
Economic Emergency Powers Act, a highly dubious proposition. 
And even if there were such an emergency, tariffs have never 
been used to pursue such a non-trade objective, and the Act has 
never been used to impose tariffs.
    Fourth, the President has threatened to withdraw from 
NAFTA, including as a tactic to force Congress to support his 
renegotiated U.S.-Mexico-Canada Agreement. Withdrawal from 
NAFTA would disastrously disrupt supply chains in many sectors, 
including autos. The U.S. has never withdrawn from a free trade 
agreement and it is unclear whether the President has the legal 
authority to do so without congressional approval.
    On a whole variety of counts, the President is abusing or 
threatening to abuse authority. This pattern, along with his 
extensive tariffs on China, this pattern of protectionism 
represents an unprecedented and massive reversal of U.S. trade 
policy. If fully implemented, all of these mooted tariffs would 
essentially apply a tax of 25 percent to over $1 trillion of 
U.S. imports. This would amount to a tax increase of more than 
$250 billion on the American public, which ultimately pays 
most, it not all of the cost of the tariffs, without 
congressional approval--massive tax increase without 
congressional approval, which more than offset the tax cuts of 
a year ago.
    As Laura said, the uncertainty surrounding all of these 
actions and threats dampens confidence in the economic outlook 
and will deter investment, as indicated in many business 
surveys of late and by the Blue Chip Business Council just last 
week, including when they met at the White House. These three 
economic effects--the massive tax cuts, the foreign retaliation 
against them, that hits our exports, and doubles the cost of 
the tariffs, plus the uncertainty--
    Chairman Cleaver. I am going to give the gentleman another 
minute, because of the malfunction in the microphone.
    Mr. Bergsten. --that could take a full percentage point or 
more, probably 2 percentage points on Laura Baughman's 
analysis, off U.S. growth, and even tilt the country into 
recession. The uncertainty also has a profound impact, around 
the world, on the credibility of the United States as a 
potential negotiating partner and as a faithful proponent of 
the rule of law.
    So, in conclusion, the Administration is clearly violating 
congressional intent, and arguably, at least some of the laws 
that it is invoking. I believe that Congress, or what 
Chairwoman Waters was saying just a moment ago, I believe 
Congress should now take action to require the President to 
seek its approval, to seek congressional approval, or at least 
consult with us, regarding any proposed new tariffs on the 
basis of an analysis of their potential benefits and costs in 
both economic and foreign policy terms.
    Congress should specify--just as the Congress must approve 
any new trade agreement, it must approve withdrawal from any 
trade agreement that it had previously adopted. The upcoming 
USMCA legislation might provide an opportunity to make such 
changes in U.S. trade law, and I hope you will take it.
    Thank you very much.
    [The prepared statement of Dr. Bergsten can be found on 
page 73 of the appendix.]
    Chairman Cleaver. Thank you. The next witness is Mr. John 
Boyd. Mr. Boyd is a Virginia farmer who produces soybeans, 
corn, and wheat, in addition to raising cattle, hogs, and other 
animals. He is president and founder of the National Black 
Farmers Association, and has served on the Clinton 
Administration's Tobacco Commission.
    Mr. Boyd, you now have 5 minutes.

 STATEMENT OF JOHN BOYD, FOUNDER AND PRESIDENT, NATIONAL BLACK 
                   FARMERS ASSOCIATION (NBFA)

    Mr. Boyd. Thank you very much. I would like to thank the 
subcommittee and the chairman for inviting me, and for having 
the opportunity to speak to the subcommittee today. I would 
also like to recognize Chairwoman Waters. Thank you very much, 
Chairwoman Waters.
    My name is John Boyd, and I am founder and president of the 
National Black Farmers Association. I am a fourth-generation 
grain farmer and beef farmer from South Hill, Virginia, and, 
quite frankly, Mr. Chairman, we are struggling. Because of the 
President's tariffs, farmers are in a national crisis. I want 
to say it again: a national crisis. And it seems as though many 
have turned a deaf ear to America's small farmers and black 
farmers alike.
    I have been farming since 1983, and I can tell you, Mr. 
Chairman, I wouldn't be farming since 1983 if I was not a good 
farmer. We are faced with acts of Mother Nature. We have to 
have a great relationship with Mother Nature and the weather, 
and my heart goes out to those Midwestern farmers today who are 
facing all of the rain that we can't control.
    But we should not be forced with a tariff. A tariff should 
come as a last-ditch effort. We need more diplomacy.
    A few years ago I was selling soybeans, my major crop, for 
$16.80 a bushel. This past season was a disaster for my family 
farm, where I sold soybeans at $8 a bushel. And for those who 
don't understand the math, if you make $100,000, you are now 
making $50,000. And I have the same debts that I had last year. 
I have the high cost of seed per bag for these soybeans, $60 a 
bag, Mr. Chairman, that I am paying for Roundup Ready soybeans, 
that I really don't want to use anyway. That is another 
hearing. Sixty dollars a bag for soybeans.
    I am faced now, with the President's tariffs, with the high 
cost of machinery, and my family was recently featured on a 
reality series called ``American Farm'', and you could see some 
of the conditions of my equipment. I need a new combine but I 
can't pay $400,000. And now, because of these tariffs, prices 
for that equipment are steadily rising.
    Something needs to be done to help small-scale farmers and 
black farmers like myself. The President recently had a meeting 
with farmers and invited them to the White House. I have asked 
the President and the Agriculture Secretary for a meeting for a 
very long time, in a public way--on CNN, on MSNBC, even on Fox 
News. I have requested to meet with the Agriculture Secretary. 
That request has fallen upon deaf ears. We are shuffled around 
from person to person. I have asked to meet with the President 
about this. We have 109,000 members in 42 States. We have some 
real issues that we would like to speak to this Administration 
about. We reached out to the Trade Representative and asked for 
a meeting there.
    How can you close the largest market for soybeans in 
America, which is China, and not open up other avenues for 
farmers? That is the reason why you have $8 a bushel. These 
things should have been thought about before you imposed the 
tariffs.
    And, quite frankly, the President is affecting his base. 
The people who elected him, the people who elected the 
President are the American farmers out in the red States. Quite 
frankly, I didn't vote for this President. I didn't vote for 
him. But I believe in treating every person, regardless of 
party, with dignity and respect. And I can tell you right now, 
my financial situation on my farm isn't Republican. My 
financial situation on the farm isn't Democratic. My financial 
situation on the farm is real. We are facing a financial 
crisis.
    And this thing with the payout to the farmers, the 
President announced a swift payout to farmers, said, oh, it 
will come quickly. I am just now getting a $5,000 or $6,000 
payment on the first of June. How can a farmer expect to make 
it on that? And then, we are helping companies that are in 
Brazil, and Smithfield Foods. Smithfield Foods was the company 
that, when I rolled my truck up, Mr. Chairman, they said, ``We 
are not taking any grain right now because of the President's 
tariffs.''
    My testimony here today is we need to set aside some of 
this $16 billion that the President is proposing to help 
America's farmers and make sure that farmers like myself, who 
look like me, can get a check too. Any time the government gets 
involved, when they say there is going to be a speedy payout to 
farmers, it is always last for African American farmers. It is 
also last for Latino farmers, and small-scale farmers, and 
women farmers. And it is just a call. All you do is call and 
call and call.
    So, Mr. Chairman, I am requesting that this committee come 
up with some bipartisan legislation to help farmers like us and 
set aside at least $5 billion of this $16 billion that the 
President is proposing to help farmers.
    Thank you.
    [The prepared statement of Mr. Boyd can be found on page 76 
of the appendix.]
    Chairman Cleaver. Thank you, Mr. Boyd.
    Our next witness is Mr. Ronnie Russell. Mr. Russell is a 
Missouri farmer and a constituent of mine. He produces corn, 
soybeans, wheat, hay, and alfalfa, and he serves on the 
American Soybean Association Governing Committee, the Missouri 
Soybean Association Board of Directors, and as chairman of the 
Missouri Fertilizer Control Board.
    Mr. Russell, you now have 5 minutes.

STATEMENT OF RONNIE RUSSELL, MISSOURI FARMER, AND MEMBER, BOARD 
        OF DIRECTORS, AMERICAN SOYBEAN ASSOCIATION (ASA)

    Mr. Russell. Good morning, Chairman Cleaver, Ranking Member 
Stivers, and members of the subcommittee. Thank you for 
inviting me to testify.
    I am Ronnie Russell, a soybean farmer from Missouri, where 
I farm in Ray County. I am a member of the American Soybean 
Association Board of Directors and serve on the ASA Governing 
Committee. My written testimony has been submitted on behalf of 
ASA. However, I would like to give you a first-hand account of 
how the current trade and tariff uncertainties have impacted my 
family and the long-term health of our farm.
    Things are bad in farm country right now, Mr. Chairman. If 
I were back on my farm in Missouri today, I would be planting 
my spring crops. However, the concerning reality of the farm 
economy and our rural communities has led me to speak today to 
give you an idea of what farmers in my rural community, and 
many other communities across the heartland of America are 
experiencing.
    As a farmer producing soybeans, corn, wheat, hay, and 
alfalfa, I am no stranger to the perils and unpredictability of 
farming. I have been farming for 43 years and have seen my 
share of low prices and crop losses due to weather. This season 
has been one of the most challenging I have ever experienced, 
but as a farmer who has always had to deal with the possibility 
of inclement weather, I have tools at my disposal to mitigate a 
year with poor planting, flooding, or even drought.
    However, over the past year I have endured threats to my 
farm that I cannot control or predict. The use of tariffs by 
the U.S. Government has resulted in punitive retaliatory 
tariffs on U.S. exports, particularly agriculture products. The 
most detrimental of these is the 25 percent retaliatory tariff 
on U.S. soybeans imposed by China on July 6, 2018. These 
retaliatory tariffs have all but halted the shipment of U.S. 
soybeans to China, which up until last year was by far our 
largest export destination. In 2017, China purchased $14 
billion worth of soybeans. This is no drop in the bucket. It 
represented 31 percent of our total soybean production that 
year and 60 percent of our annual exports.
    The imposition of retaliatory tariffs by China has caused 
immediate and severe damage to the prices of U.S. soybeans, 
which fell from $10.89 cents a bushel to $8.68 a bushel last 
summer. These low prices have continued, and, in some cases, 
have dropped even further. Farmers are losing money on every 
acre of beans that we plant.
    The impact on my farm has been significant, and because 
this drop was driven not by weather or increased competition 
but instead as a result of the government's use of tariffs, it 
is hard to determine the exact damage to my business.
    Soy farmers like me feel the impacts of the tariff war and 
they are not sure if they will be able to make it through 
another growing season. Older farmers are considering retiring 
early to protect the equity that they have built up in their 
farms, while younger producers are looking at finding other 
employment. We may also see the shuttering of more businesses 
in our rural communities whose livelihoods depend on the health 
of the farm economy.
    As late as April of this year, U.S. farmers were hopeful 
that an end to the ongoing tariff war with China was at hand. 
However, the recent increase in tariffs and the potential for 
future escalation is unacceptable. Our finances are suffering, 
and stress from months of living with the consequences of 
tariffs is mounting.
    Soybean growers need Chinese tariffs removed now. Long-
term, what farmers and rural communities need is predictability 
and certainty, which only comes through maintaining and opening 
new markets where we can sell our products. For decades, the 
U.S. soybean farmer check-off dollars went into developing 
Chinese markets for soybeans. Our investments grew the Chinese 
market from $414 million in 1996 to $14 billion in 2017. While 
we are working hard to diversify and expand other market 
opportunities, the loss of the Chinese market cannot be fully 
replaced.
    I ask Congress and urge the Administration to conclude 
negotiations with China that immediately lift the Section 301 
tariffs by the U.S. in exchange for China removing its 25 
percent tariffs on U.S. soybeans.
    Thank you for inviting me to testify, and I am happy to 
answer any questions from the committee. Thank you.
    [The prepared statement of Mr. Russell can be found on page 
90 of the appendix.]
    Chairman Cleaver. Thank you, Mr. Russell.
    Our final witness is Mr. Gordon Gray. Mr. Gray is director 
of fiscal policy for the American Action Forum. Mr. Gray 
previously served in a series of congressional and campaign 
positions, most recently as Senior Policy Advisor to Senator 
Rob Portman, and he was also Deputy Director of Domestic and 
Economic Policy for Senator John McCain's presidential 
campaign.
    Welcome, Mr. Gray. You have 5 minutes.

 STATEMENT OF GORDON GRAY, DIRECTOR OF FISCAL POLICY, AMERICAN 
                          ACTION FORUM

    Mr. Gray. Thank you. Chairman Cleaver, Chairwoman Waters, 
Ranking Member Stivers, and members of the subcommittee, I am 
honored to be here before you and among my fellow witnesses 
today to discuss the outlook for the U.S. economy, and to 
discuss that outlook in the context of developments in trade 
policy.
    In my testimony, I wish to make three basic observations. 
First, recent economic growth outperformed the trend that 
prevailed throughout the recovery, underscoring the 
significance of pro-growth policy. Second, public policy has a 
meaningful effect on this outlook and can be instrumental in 
sustaining the recovery. Third, in the context of trade, 
reducing global trade barriers in expanding markets are pro-
growth trade policies and should be pursued, where possible.
    Let me discuss each of these in turn.
    According to the National Bureau of Economic Research, the 
U.S. economy began to recover from the Great Recession in June 
of 2009. Ten years on, the recovery continues. But the pace and 
character of the recovery matters deeply for American workers 
and households. For 7 years after the start of the recovery, 
the pace of national income, employment, and wage growth was 
positive but disappointing. Real GDP growth averaged 1.9 
percent per year. That sluggish pace of growth equates to an 
average 1 percent per capita income growth. At that rate, it 
would take 70 years for an individual to double their standard 
of living, an achievement that used to take just 35 years, or 
about one working career.
    But more recently, the pace of growth has accelerated, and 
has averaged somewhat above the sub-2-percent pace that 
prevailed during the most recent recovery. Indeed, over the 
past 9 quarters, GDP growth has averaged 2.7 percent.
    Reflecting this acceleration in growth, productivity has 
also strengthened. The most recent productivity data reflects 
the strongest annual growth since 2010. With higher growth and 
productivity, unemployment has continued to fall as payroll and 
wage growth have accelerated. Wage growth has improved overall, 
including for non-supervisory workers.
    The upshot of recent economic performance is that past need 
not be prologue--moribund economic growth is not preordained. 
Ascribing the recent improvement in economic policy to any 
single policy would be dubious, but certainly public policy has 
had an effect on economic output. To the extent that the 
economy has improved, one could reasonably conclude that recent 
policy developments have contributed to more robust economic 
growth.
    The combined effects of the regulatory policy changes of 
the TCJA and recent spending measures contributed to the recent 
improvement in economic growth and the related uptick in hiring 
and wage growth. These measures do not present unalloyed growth 
opportunities, however. Tradeoffs and future risks attend to 
each of these and other policy changes, particularly with 
respect to trade, that have been pursued by the current 
Administration.
    The current trade policy outlook is challenging. The United 
States is the most robust trading partner in the world, with 
combined trade volume in 2017 of goods and services valued at 
over $5.2 trillion. Among nations, the United States was the 
second-largest exporter of goods and the largest exporter of 
commercial services. Trade is vital to the United States, the 
largest economy in the world, and the trade policy landscape is 
unsettled.
    Congress has an opportunity to contribute to improving the 
trade outlook by considering the USMCA. The USMCA modernizes 
the existing NAFTA by adding protections for intellectual 
property and updating rules on digital trade. The agreement 
also updates prevailing trade rules related to the agriculture, 
manufacturing, and automotive industries. While the economic 
implications for the USMCA should not be overstated, 
demonstrating the capacity to ratify trade agreements would 
send a meaningful signal to global trading partners and remove 
some policy uncertainty from the economic horizon.
    The Executive Branch's approach to trade is also uncertain. 
The tariffs threatened and imposed by the President and related 
retaliatory actions by U.S. trading partners is irreducibly 
costly. According to estimates by my colleague, Jackie Varas, 
the Administration has imposed tariffs costing $69.3 billion on 
a combined $283.1 billion worth of imports. In response, the 
EU, China, Russia, Turkey, and India have imposed tariffs on 
$110 billion of U.S. goods. The Administration has threatened 
additional tariff actions that could substantially raise costs 
to U.S. consumers.
    Ultimately, the cost of these tariffs must be weighed 
against the degree to which they are successful in achieving 
other beneficial trade policy aims. To the extent that the 
Administration can use tariffs as a negotiating tool that 
secures more beneficial trade terms, particularly with respect 
to China's practices, the tariffs could be justified. If the 
tariffs do not produce an improvement in trading terms, 
however, they will simply remain a new tax on U.S. households.
    Thank you for the opportunity to speak to this important 
topic, and I look forward to answering your questions.
    [The prepared statement of Mr. Gray can be found on page 80 
of the appendix.]
    Chairman Cleaver. Thank you, Mr. Gray. I would like to 
express appreciation on behalf of the committee to all of the 
witnesses. Thank you very much.
    I will now recognize myself for 5 minutes for questions. 
And without objection, the written statements of all of the 
witnesses will be made a part of the record.
    I am trying to get something straight. The Treasury 
Secretary has appeared before our committee twice this year, 
the Full Committee, and at both appearances I focused my 
questions on the impact of the trade war on our country, but in 
particular the agricultural component of our economy. And 
during his first appearance the Secretary, in response to my 
question, said that the Chinese, ``have committed to 
significant orders in the soybean markets.''
    So, I go home, and I meet with the Missouri Governor, and a 
number of farmers, including Mr. Russell. We met with farmers, 
and I am talking with people who are soybean farmers, and they 
know nothing about this significant order. And so he said that 
they are in the markets executing those orders.
    Then, he returned. I was a little frustrated but I always 
try to control my emotions, and so I did explain to him that he 
answered the question but I had no evidence that what he said 
was accurate. And so he sent a letter, on May 28th, after the 
committee had that hearing, and in this letter he highlights 
that when looking at a snapshot of orders in a band of time, 
more orders were made. But it overlooks the point of where 
those orders were executed and whether they provided any real 
relief to farmers.
    I need for at least those of you, the two farmers, to help 
me understand if you are feeling or seeing or know of any 
farmers who have been uplifted as a result of the Chinese 
issuing new purchasing orders?
    Mr. Russell or Mr. Boyd, or both of you?
    Mr. Russell. Mr. Chairman, I would be happy to address that 
question. In my particular area, which is your district, we 
have seen no benefits from that. There maybe had been a little 
bit of movement within the price of soybeans from the Chicago 
Board of Trade, based upon rumors. It is my understanding that 
the Chinese have verbally committed up to 20 million metric 
tons in purchases. However, the information that the American 
Soybean Association, through our partner and soy family member, 
the United States Soybean Export Council, the information that 
we have is that they only really have imported 6.5 million 
metric tons, from those commitments.
    Chairman Cleaver. Mr. Boyd?
    Mr. Boyd. Mr. Chairman, we haven't seen any results from 
that, and the farmers, especially the African-American farmers, 
mostly in the southeastern corridor of the United States and 
also in your district as well, the Bootheel, we are hurting. We 
are hurting. We have lost our largest market, which is our 
soybeans, and like I said earlier, we are selling our soybeans 
for $8 a bushel. And there is no way that--I have heard some 
experts say, ``Well, why don't you guys just sit it out?'' We 
are not in the financial condition to sit it out, because we 
have equipment loans, we have mortgages.
    And for the first time in a very long time, I don't have a 
farm operating loan. I am at home planting right now on our 
grain operation off of credit cards and things of this nature. 
The top 10 banks, Mr. Chairman, haven't been favorable to 
African-American farmers. They greet us with a sense of 
arrogance.
    Chairman Cleaver. I have heard my farmers say--because I 
had a century farmer at our meeting complain that his son may 
not be able to carry on and that they are having difficulty 
borrowing.
    Mr. Boyd. Can I say something about that?
    Chairman Cleaver. Sure. Absolutely.
    Mr. Boyd. My son, who, for the first time, was involved--
our sons, excuse me--were involved in our farming operation, 
and because of what they experienced after these tariffs, I 
don't believe I am going to have a son who is going to be 
interested in farming, because we are selling soybeans at $8 a 
bushel. It is a hard sell to sell to the next generation of 
farmers.
    Chairman Cleaver. My time has expired. I now yield to the 
ranking member of the subcommitte, Mr. Stivers, for 5 minutes.
    Mr. Stivers. Thank you, Mr. Chairman. Again, I want to 
thank you for holding this hearing. I think it is really 
important.
    My first question is for Mr. Gray. Mr. Gray, many of us are 
concerned that the House is kind of dragging its feet with 
consideration of the USMCA, and I am curious if you could talk 
about the importance of the need for expedited approval so we 
can reduce some of the uncertainty that was talked about by 
these colleagues, witnesses.
    Mr. Gray. I would be happy to address that, and I believe 
my fellow witnesses have also spoken to this.
    The uncertainty relating to trade, in general, has a 
chilling effect on business investment, which is one of the key 
channels through which we expect to see productivity growth, 
wage improvement from the Tax Cuts and Jobs Act. That law was 
structured to improve the incentives to invest. The uncertainty 
relating to trade policy acts as a counterweight to that 
policy. So we have sort of two conflicting policy aims here 
that should be reconciled, in my view.
    And so I believe that consideration of the UCMCA--and as I 
said in my statement, I don't believe that the economic effects 
of that agreement should be overstated. There is quite a bit to 
like in there but there are also some downsides as well. And so 
I would just encourage the Congress to consider that, and also 
consider it in the context of removing that policy uncertainty.
    Mr. Stivers. Mr. Russell and Mr. Boyd, as farmers, do you 
want to speak to what you think USMCA would mean to the 
American farmer, either one of you, or both?
    Mr. Russell?
    Mr. Russell. Obviously, for American agriculture, and, in 
particular, soybeans, having a working agreement and adopting 
the USMCA is extremely important for the American soybean 
farmers. Mexico is the number two importer of American 
soybeans, so obviously it is very important. Canada and Mexico 
represent our two largest trade partners in agriculture 
products as a whole. And I know that I, personally, and also 
speaking on behalf of the American Soybean Association, we 
would certainly encourage the passage of the USMCA.
    Mr. Stivers. Mr. Boyd?
    Mr. Boyd. I would like to say this: Farmers want free 
trade. We want free trade. I would much rather have a good fair 
market price for my commodity than have anything to do with 
getting in line, signing up for a program, and do the waiting 
game and the paper shuffle. Any time those two things are in 
combination it is always bad for farmers like me. So, any way 
that this committee could work with the Administration and lean 
into their ear, and let the Administration know that farmers--I 
am really not interested in a $16 billion bailout. We need 
creative ways to open up new markets so that we can get the 
prices back up, so that I could go on and farm. Because I am 
what is called a cash-and-carry farmer. I am not storing any 
grain or my farming operations, and we farm on numerous tracts 
of land.
    Mr. Stivers. Thank you. And you stated it earlier very well 
when you said your farm is not a Republican farm or a 
Democratic farm. It is a farm.
    Mr. Boyd. It is a farm.
    Mr. Stivers. And you have to open markets to make money.
    Mr. Boyd. Yes, sir.
    Mr. Stivers. I appreciate that, and I hope all of my 
colleagues will take note of that.
    I would like to switch to China and I would like to enter, 
for the record, a paper that Dr. Bergsten produced in October 
of 2018, entitled, ``China and the United States: Trade 
Conflict and Systematic Competition.''
    Chairman Cleaver. Without objection, it is so ordered.
    Mr. Stivers. Thank you. Dr. Bergsten, I think this paper 
provides a really insightful context of some of the issues that 
we are discussing today. In your testimony today you stated 
that there is widespread agreement that China's trade and 
industrial policies have to be reformed. How do you think we 
can convince China to come to the negotiating table and make 
changes, and are there ways to do that, either without 
inflicting pain on the United States economy through tariffs or 
with inflicting as little pain as possible on the United States 
economy? And I know that I am only giving you 36 seconds.
    Mr. Bergsten. I appreciate your kind comments on my paper. 
I think the main thing we need to do to get those needed 
reforms in China--and they are needed--is to forge an 
effective, multilateral coalition of all the world's major 
trading countries, which I think would join us in that effort, 
to focus on the main issue.
    The problem is, the Administration, I think, has correct 
goals in its effort with China, but its methods have been 
wrong, and it has compounded that error by waging war against 
its own allies with the steel tariffs, the aluminum tariffs, 
and other trade actions, disrupting the World Trade 
Organization. We need to rally around the traditional U.S. 
coalition of free-trading countries who want to get rid of 
barriers, to approach China to do it. China never wants to be 
isolated internationally.
    Mr. Stivers. Dr. Bergsten, I am out of time.
    Mr. Bergsten. But we have isolated ourselves 
internationally, and we need to reverse that.
    Mr. Stivers. Would you be willing to submit, for the 
record, a fuller explanation? You did a great job, but since I 
am out of time I yield back, and if you could give that to us 
in writing, that was a good start, but thank you for that.
    Mr. Bergsten. I would be happy to do so.
    Mr. Stivers. Thank you. I yield back.
    Chairman Cleaver. Thank you, Mr. Stivers. The gentlewoman 
from California, Chairwoman Waters, the Chair of the Full 
Committee, is now recognized for such time as she may consume.
    Chairwoman Waters. Thank you very much, Mr. Chairman. 
First, let me welcome all of our witnesses here today, and let 
me say a special welcome to Mr. Boyd. He has been in this 
struggle for so many years now. He was at the very first 
hearing that was ever held about the plight of black farmers, 
that I conducted as Chair of the Black Caucus, and I want you 
to know he has been a strong advocate who helped us get rid of 
discrimination in the USDA. And I want to tell you, I see him 
here today, but I don't know if he brought his horse and buggy 
with him, the way he used to do. He used to bring along a 
parade of farmers advocating for justice, particularly for 
minority farmers.
    Having said that, I understand very thoroughly the negative 
impact that these tariffs are having on all of our States, but 
let me tell you, California stands to lose a lot. In terms of 
sheer volume, California conducts more trade with China than 
any other State in the country. Total trade with China tops 
$175 billion. That, along with the flow of China's investment 
into the State, can seriously impact California's GDP growth 
and crush its $2.7 trillion economy. I am quoting from an 
article by Mr. Scott Cohen, who wrote extensively about how the 
trade war with China could crush California's $2.7 trillion 
economy and hurt other States.
    Having taken a look at what this President is doing--and I 
am so pleased that I am hearing from this panel and other 
panels about the fact that the President is creating harm to 
his so-called base. And some of that base is saying, ``We don't 
want charity. We don't want a bailout. We want to do 
business,'' as you have described here, and I think others have 
described.
    But I want to know what the President is doing bailing out 
plants that are operated by something called JBS. Is anybody 
familiar with this, what JBS is, the largest meatpacker in the 
world with a program designed to help domestic companies and 
producers under economic stress? This is a Brazilian firm.
    Would you please respond to that, Mr. Boyd?
    Mr. Boyd. Yes. I would like to, and thank you very much for 
your comments. And that hearing was September 22, 1997. I will 
never forget that date--
    Chairwoman Waters. Wow. Thank you for reminding me what 
date it was.
    Mr. Boyd. --in my life.
    Farmers like myself receive a miniscule amount from the 
President's relief package. Hopefully, when I was going to 
receive some $40,000-plus, by the time they do the deductions 
on the dollar, it is 67 cents per bushel, is what the 
Administration said each farmer would be able to get per bushel 
for their losses.
    From that, Congresswoman, I actually received a little, 
believe somewhere around $6,000, and I just received that this 
month, and I applied way back in the last year.
    But to answer your question, companies like that should not 
be benefitting from America's tax dollars. And you have farmers 
like myself out here struggling, who can't make ends meet. And 
the Administration isn't acting swiftly enough to make sure 
farmers like myself and other small-scale farmers around the 
country receive their payments as well. And there seems to be 
no accountability at the Department of Agriculture, and as you 
heard me express in my testimony, I have reached out to meet 
with Agriculture Secretary Sonny Perdue. Well, I don't think 
that was the same gentleman who was lobbying years ago in 
Georgia. Something has happened there, Congresswoman. But this 
Administration has turned a deaf ear.
    My point is, foreign-owned companies--
    Chairwoman Waters. Brazilian companies--
    Mr. Boyd. --should not be benefitting--
    Chairwoman Waters. --this Brazilian company--
    Mr. Boyd. --while farmers like me are suffering.
    Chairwoman Waters. --has gotten part of the first bailout 
money. USDA signed a contract to purchase $22.3 million of that 
pork from JBS USA, and that is the American arm of this 
gigantic Brazil-based meat company that owns massive shares of 
U.S. beef, chicken, and pork markets. And I understand that 
there is some fraud involved. We are looking at that in my 
office. And we are hoping to unveil that.
    But if I may just say that I wish we could get some money 
back from him, of the $16 billion that he is getting from USDA. 
We are not going to be able to do that. And he is going to keep 
on with this tariff, this trade war that he has created. So you 
are going to have to get back on the street again. We are going 
to have to organize again. We are going to have to go up 
against this President who does not care about the harm that he 
is causing.
    And having said that, the final answer is, we have to get 
rid of the President. I know the other side of the aisle won't 
like this, but he is a problem, and he is a problem in more 
ways than one, and he is hurting the farmers of this country.
    I yield back.
    Chairman Cleaver. Hello. Thank you for bringing that up, 
Madam Chairwoman.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams. Thank you, Mr. Chairman. I might be somewhat 
of a unique person here today as I am a car dealer and I am a 
rancher, and we do have elections coming up in 2020, so you can 
do what you want to do with that.
    President Trump has made renegotiating NAFTA one of the top 
priorities in his office. His Administration has come up with a 
new free trade agreement, which we have been talking about, 
with our two most reliable trade partners, Mexico and Canada, 
called USMCA. After reviewing the specifics of the deal it 
seems as if he has done a really good job of negotiating for 
the American people.
    Of all the partisan issues that we deal with on Capitol 
Hill, I am hopeful this trade agreement will be something that 
my colleagues on both sides of the aisle can rally behind to 
show the American people that we can still get important things 
accomplished in these polarized times.
    And I would like to say to you, Mr. Russell and Mr. Boyd, I 
want to thank you for expressing to us the importance of 
Congress acting on this deal and I appreciate your support of 
it. That is a big deal to have that happen.
    The Tax Cuts and Jobs Act is working. Businesses are 
spending more money on inventories, employment, and capital 
goods that are revitalizing Main Street America. Capitalism is 
working and it is showing it more than ever, and we need to 
continue this momentum.
    Mr. Gray, my first question to you is, are you a capitalist 
or are you a socialist?
    Mr. Gray. I am a capitalist.
    Mr. Williams. Thank you. We seem to be winning that battle. 
Thank you very much.
    In your testimony, you expressed a similar sentiment on the 
benefits the tax bill is having on the economy. However, you 
also state that major forecasters predict that the U.S. economy 
will slow over the next few years. But this is not inevitable. 
Sound pro-growth policy can meaningfully improve the economic 
outlook.
    My question is, what pro-growth policy would you recommend 
we focus on in this committee so we can assure that there is no 
economic slowdown in the next several years?
    Mr. Gray. I think one of the key decisions that the 
Congress can consider is, first, do no harm, and that includes 
the very hard work of removing some risks from the economic 
outlook. Those risks include long-understood risks. We know 
that the society is aging, and so we can't count on a growing 
labor force. That means that we have to really think about and 
focus on sort of the other half of the long-term economic 
growth equation, and that is productivity, and that is where 
public policy can really matter. That is where business 
investment can really matter. That is where sound tax policy 
can really matter. That is why introducing more certainty in 
the trade outlook can matter. That is also why removing the 
risk of a future fiscal crisis can really matter.
    I would encourage the Congress to turn to the structural 
challenges that we have long understood and try to remove some 
of those risks.
    Mr. Williams. Thank you. I am not a fan of tariffs--I will 
tell you that right now--and I have spoken with the White House 
about our differences on this issue. As a small business owner, 
I have seen how tariffs turn into indirect taxes on consumers 
and increase the cost of doing business.
    With that being said, many countries around the world levy 
tariffs on our exports so we import goods with far fewer 
restrictions. A study from the World Economic Forum states that 
the average tariff the U.S. faces in foreign markets is 5.9 
percent, which is 4 times higher than the average tariffs 
imposed on goods coming into our country.
    Now, I know these numbers have changed somewhat because of 
the Administration's trade actions, but it leaves me with a 
question. Ms. Baughman, what tools are at our disposal to 
ensure that other countries are treating United States exports 
fairly, other than retaliatory tariffs?
    Ms. Baughman. We have a host of trade remedies in this 
country that address unfair import competition--anti-dumping 
rules, countervailing duty rules, Section 201 rules. We have 
lots of ways to address unfairness in foreign markets.
    With respect to our exports and retaliation against our 
exports, the best thing we can do is adhere to our WTO 
commitments and not do things that trigger retaliation, if I am 
understanding your question correctly.
    Mr. Williams. We want to be on a fair playing field. My 
question is, what would you do?
    Ms. Baughman. To get a fair playing field with China, for 
example?
    Mr. Williams. What would you do that would help the U.S. 
exports be fairly treated, other than tariffs?
    Ms. Baughman. Oh. Trade agreements, number one. Number one, 
two, and three. Negotiate good, strong trade agreements, 
bilateral, regional, and multilateral through the WTO. 
Strengthen the rules of the WTO to apply to more trade 
practices, including some of the trade practices that issue in 
China. Strengthen those rules and make them enforceable in some 
way. There are a number of things that we can do in that 
regard.
    Mr. Williams. Okay. Thank you. My time is up. Tax cuts 
work.
    Chairman Cleaver. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. I thank the chairman and I thank the panel 
for its testimony today. My friend, Mr. Williams, and I 
disagree on the tax cuts and the benefits to everyday 
Americans, and the fact that this year we are going to have a 
$896 billion deficit because of those tax cuts that cost us a 
couple trillion dollars.
    But I don't want to talk about that. I want to talk about 
tariffs, and I want to talk about the corrupting effect these 
tariffs have on capitalism. And so, Dr. Bergsten, I was 
interested in your testimony. I feel like we have an imperial 
presidency. These tariffs that the President--one day we are 
going to raise tariffs on China and the next day we are going 
to lower them, and the next day we are going to raise them. The 
stock market goes up and down and up and down. And if we can 
find some insider trading based on that, it is going to be 
interesting.
    But you were talking about the fact--you know, this is the 
National Security Subcommittee, and the President is using 
national security to raise and lower and raise and lower and 
jawboning on the tariffs. Talk to me a little bit about how you 
think the Congress should be involved in establishing any kind 
of protectionism that these tariffs might introduce into the 
system.
    Mr. Bergsten. I think there are at least two things the 
Congress should do. One is to define national security much 
more sharply than is the case in current statute. The phrase, 
``national security'', is used broadly in the Trade Expansion 
Act, and it is used broadly in the International Emergency 
Economic Powers Act. Internationally, it is used very broadly 
in the World Trade Organization. And it provides a gigantic 
loophole for anybody who wants to abuse the concept, as I would 
argue the President is now doing. So, point one.
    Mr. Perlmutter. I would say when we challenge Canada, and 
we claim we need to raise tariffs on Canada, one of our best 
friends, if not our best friend in the world, in the name of 
national security, is ridiculous. And that is what I am talking 
about, an imperial presidency, that there are checks and 
balances and responsibilities, and this President has run amok 
in the name of national security.
    So, your second point?
    Mr. Bergsten. Just to amplify what you say, to think about 
doing it for autos against NATO allies like Germany and France 
and the UK and others would be equally ludicrous. But that has 
also been put on the table and still is out there and could 
happen. So, that is point one.
    Point two, as I emphasized in my statement, is to require 
that any future tariff increases be approved by the Congress.
    Mr. Perlmutter. Thank you very much, and I agree with that. 
And I want to say to Mr. Russell, Mr. Boyd, and to you, you all 
are free traders, and, let's talk about capitalism, talk about 
free trade. Let's win because of competition and the ability to 
be a good farmer, or a good salesman, or produce a good 
product.
    Ms. Baughman, I want to turn my attention to you. In my 
district, just outside of Denver, we have a major can company. 
I have lots of craft breweries. I have Coors Brewing. I have 
the outdoors industry. So when the President says we are 
winning on these tariffs, how would you respond to that?
    Ms. Baughman. Well, we are definitely not. Those companies 
that you have mentioned are all facing, or are about to face, 
in the Outdoor Industry Association, huge increases in their 
costs. They are becoming less productive, less competitive in 
producing goods here in the United States because their inputs 
to production have gone up in price. Consumers and families in 
your districts are going to start screaming pretty soon if the 
tariffs go into effect on all of those products on List 4, many 
of which are produced by the Outdoor Industry Association and 
others, members of that association.
    So, yes, we are going to start seeing, in the next year or 
so, if not by this fall, some substantial increases in 
inflation, and reductions. We are already starting now to see 
reductions in manufacturing indexes.
    Mr. Perlmutter. Thank you. I guess just to conclude my 
tirade up here, Dr. Bergsten, you wanted to say something?
    Mr. Bergsten. Just to add, some Americans do win from the 
tariffs. They do protect some jobs and some firms, but at an 
enormous price. The steel tariffs save about 12,000 U.S. Steel 
jobs at a cost of almost $1 million per job.
    Mr. Perlmutter. And the aluminum tariffs hurt my district 
substantially, because of the craft brewers and the canning 
companies that I have.
    And with that I yield back to the Chair.
    Chairman Cleaver. Thank you, Mr. Perlmutter. The gentleman 
from Arkansas, Mr. Hill, is now recognized for 5 minutes.
    Mr. Hill. I thank the chairman, and thank the panel for 
being here, and I want to echo my thanks to Mr. Russell and Mr. 
Boyd for talking about USMCA and the importance of getting that 
agreement through the Congress promptly. In fact, I think that 
would be a much better use of our time today, is for our 
panelists to all be over in the Capitol advocating for that, in 
Mrs. Pelosi's office. I am pleased that she has continued her 
due diligence on this, but this is the single most important 
thing I think we can do for employment, sales in our 
agriculture industry and in America, in the near term, is get 
USMCA through the Congress successfully.
    I share Dr. Bergsten's concerns about across-the-board use 
of tariffs as a weapon and not a distinct targeted approach. I 
certainly share that I have written the President many times 
about Section 232 as not well used in this instance. I agree 
with my friend from Colorado that applying it to Canada and 
Mexico might be a good short-term negotiating tactic but it is 
certainly not in keeping with the intent of the Act on national 
security purposes.
    And we do have other ways to deal with dumping, in terms 
of--if we think China, which is the largest dumper of steel and 
aluminum in the world, and impacting the EU and the United 
States, and Canada, for that matter, then we ought to put those 
penalties on China as a part of our negotiation and not do it 
as we have done it across the board.
    I will say, though, that all Presidents deal in trying to 
protect American industry. Every Administration does that, and 
I think we are here today because the majority control of this 
panel, they don't support this President, so we are picking on 
Donald Trump's trade policy. But we could have--I think the 
Democratic House did the same thing during the Reagan 
Administration, and I am sure the Republican House did the same 
thing in the Clinton Administration. So, let's be clear that 
this is, for the most part, a lot about politics.
    On soybeans in Arkansas, we are obviously not in the top 10 
producers but we produce a lot of soybeans. A third of my 
career was lending money to people like Mr. Russell and Mr. 
Boyd in agriculture, and I know what a bad 3 years it has been. 
But I also recall that when I started that lending, soybeans 
were $5 a bushel in 1999, and we always joked that a pack of 
cigarettes cost more than a bushel of soybeans then, but 
somehow we made it through those very, very low prices in 1999 
and 2000, and yields are certainly somewhat improved over that 
period.
    My question, Mr. Gray, is this macro impact of tariffs. 
People are projecting forward and using the most pessimistic 
case about it. But in my review of the economic literature, it 
looks like two-tenths to three-tenths of GDP growth is what is 
being projected as the most GDP impact of fully implemented 
tariffs that are contemplated with China. Do you agree with 
something in that range?
    Mr. Gray. That is broadly consistent with some of the 
estimates I have seen, but there is certainly a range.
    Mr. Hill. There is, and I just want to be on the record 
that it could potentially be a fairly modest GDP hit if fully 
implemented. I am not supportive of it. I am just simply 
describing that not everybody agrees that it is a major, major 
downturn in American business.
    I am more concerned about the inflationary aspect of it, if 
it were fully implemented, when we go from intermediate goods, 
where I think producers are eating a lot of that cost 
currently, versus directly on consumer goods. Do you share my 
concern about inflation impacts?
    Mr. Gray. Certainly to the extent that that translates into 
general welfare loss, and that is one of the more pernicious 
aspects. It is a risk.
    Mr. Hill. And this is why I think it is also bizarre how 
people are suggesting that the Federal Reserve and monetary 
policy is supposed to have something to do with trade. I would 
submit that if it doesn't have major macro-economic growth 
factors and yet it is inflationary, then the Fed ought to be 
concerned about raising rates, not cutting rates. What is your 
view on that, Mr. Gray?
    Mr. Gray. My own view is that the Federal Reserve has their 
dual mandate and I think they are charged with exercising that 
mandate with respect to sort of the circumstances in front of 
them.
    Mr. Hill. I thank you for that. This is a complex area. I 
think we need to be targeting our work and focus on China and 
get results from that. I know on behalf of the agriculture 
community, we want a prompt success to that negotiation with 
China, to benefit America and the EU in Japan. But the most 
important thing we can do is get the USMCA promptly approved in 
the Congress.
    Thank you. I yield back.
    Chairman Cleaver. The gentlewoman from Virginia, Ms. 
Wexton, is now recognized for 5 minutes.
    Ms. Wexton. Thank you, Mr. Chairman, and thank you to the 
witnesses for appearing before us today and providing this 
interesting testimony.
    I represent a very economically diverse district in 
northern Virginia. Mr. Boyd, I am proud to have you here as a 
fellow Virginian, and while you are down all the way on the 
south side, I represent the northernmost part of Virginia, from 
just outside of Washington, D.C., out to the Shenandoah Valley. 
And so it is very economically diverse. It includes a vibrant 
tech sector in the eastern part of the district through to, as 
it becomes more and more rural, we have wineries, distilleries, 
and a whole lot of apple growers out in Frederick County. But 
one thing that is happening is that the impacts of the tariffs 
are being felt across economic sectors, even in places where 
you wouldn't expect it.
    Just yesterday, in fact, I received an email from a 
constituent, which I want to read to you,--``HELP!!!--in all 
caps with 3 exclamation points--We own a small, local, large-
format printing business, based in Sterling.--in my district--
``We are getting swamped by increases from our vendors since 
many of our products use hardware made from aluminum, often 
from China, i.e., banner stands. The Chinese trade war is bad 
for our business. Today, I just received notice from my largest 
hardware vendor that pricing on our most popular banner stand 
base jumped 26 percent. I will have to pass this along to 
customers but I can see that this may reduce demand for many of 
our products. This could be super painful. It is already 
difficult enough to run a small business.''
    These are the things that we are hearing every day from 
producers, from agricultural producers to small businesses to 
high-tech businesses. And a couple of questions that I have for 
some of the panelists, a recent report from the Peterson 
Institute shows that while China is raising tariffs on U.S. 
imports, they are actually lowering tariffs on other nations 
that compete with the U.S., and they are trying to limit their 
economic damage in that way.
    I would ask Ms. Baughman and Dr. Bergsten, can you 
elaborate on what we can expect to see, in terms of long-term 
consequences, changing the supply chains, and are other 
countries taking them up on this and filling the void left by 
the lack of American imports?
    Mr. Bergsten. On that specific analysis, you are absolutely 
right. The U.S. has hit itself doubly with the trade war. It 
has prompted retaliation against the U.S., like the high China 
tariffs that we are all talking about, but it has also prompted 
other countries to liberalize to their trading partners other 
than the United States.
    As you said, China actually--many people don't realize 
this--reduces its barriers, its import tariffs across-the-board 
in autos and many other sectors, except to the United States 
because of the trade war. Now, the average Chinese tariff 
against the United States is 20, and the average tariff against 
the rest of the world is 6. That is against a base of 8, where 
they started--8 to 20 against us, 8 down to 6 against everybody 
else. So, that is a double whammy.
    In addition, lots of other countries have been forming free 
trade agreements among themselves. President Trump erroneously 
dropped out of the Trans-Pacific Partnership, which would have 
been a huge boon to U.S. agriculture. But it didn't stop the 
Trans-Pacific Partnership. It went ahead without us. So the 
other countries, who represent a third of the world economy, 
are now giving each other duty-free treatment into each other's 
markets while maintaining their barriers against us. So, we now 
are discriminated against in the markets of other countries 
because of our own trade policy. It is exactly what you say, in 
spades.
    Ms. Wexton. Thank you. I am going to reclaim my time at 
this point because I am running out.
    Also, in my district, the tech industry supports more than 
100,000 jobs. Mexico is the number one export market for our 
U.S. consumer technology sector. The industry estimates that it 
has lost about $1 billion per month since October. If the plan 
to impose tariffs on Mexico goes forward, what should we expect 
to see in this consumer technology sector, and what do you 
think will happen? Ms. Baughman, do you have an estimate of 
that?
    Ms. Baughman. People are terrified about that. A lot of the 
folks who have been moving out of China in response to the 
tariffs on China have been moving to Mexico, among other 
countries, but Mexico, of course, is at the top of their list 
because of the potential for USMCA. So, they will get slammed 
pretty badly, and they are very, very concerned about it.
    Ms. Wexton. Okay. Thank you very much. I will yield back my 
time at this point.
    Chairman Cleaver. The gentlewoman yields back. The 
gentleman from Ohio, Mr. Gonzalez, is now recognized for 5 
minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. And thank 
you, everybody, for being here. My questions will be fairly 
quick. I want to focus on USMCA and how critical its 
consideration is for my home State of Ohio and the rest of our 
country.
    Ohio exports rely on trade with Canada and Mexico. They are 
2 of our largest markets, with $28 billion exported to these 
two countries from our State last year. Canada and Mexico buy 
more U.S.-made goods than the United States' next 11 trading 
partners combined. To me,this is a no-brainer. We should be 
acting swiftly to kick-start the TPA process and begin 
consideration of USMCA. The USITC report came back, and it 
said, I believe, over a quarter of a percent in GDP, over 
170,000 jobs added to the economy will lift all boats, in 
particular, manufacturing and agriculture.
    I have yet to hear a single argument, not one, anywhere, 
from my colleagues on the other side of the aisle, as to why 
they would not be willing to support this and why they do not 
want to see it on the House Floor. I would love to hear 
somebody argue that. I have heard a lot about how we don't like 
President Trump from the other side. I understand that. But I 
have not heard any economic case whatsoever that we shouldn't 
be considering USMCA. It is a no-brainer and I would love to 
hear somebody make that case.
    Let me ask a quick question to everybody on the panel. Yes 
or no, is USMCA an improvement of NAFTA? I'll start with Mr. 
Gray.
    Mr. Gray. I think all in on that incrementally. That would 
be my judgement.
    Mr. Russell. I would say yes, especially for the 
agriculture sector, yes.
    Mr. Gonzalez of Ohio. Mr. Boyd?
    Mr. Boyd. I don't think so.
    Mr. Gonzalez of Ohio. You don't think so?
    Mr. Boyd. I think it is a very modest improvement but it 
should be voted, because the alternative could be a withdrawal 
from USMCA, and, therefore, it should go ahead.
    Mr. Gonzalez of Ohio. Thank you.
    Ms. Baughman. Yes, because it really updates NAFTA in very 
significant ways.
    Mr. Gonzalez of Ohio. Thank you very much.
    And sort of a second point, obviously it has been a brutal 
year for farmers, absolutely brutal. In Ohio, we have had 
horrible weather, as you highlighted earlier, and the tariffs 
have hurt our farmers, absolutely. No argument from me on that. 
It is my belief--again, back to USMCA--this makes us stronger 
in the negotiation against China. This gives certainty to our 
markets.
    Mr. Gray, would you agree with that assessment?
    Mr. Gray. Yes. I think in substance and in the overall, in 
terms of processes, it is worthwhile.
    Mr. Gonzalez of Ohio. Thank you. And in closing, I want to 
go back to where I started. Somebody please, on the other side 
of the aisle, make the argument against USMCA. This won't cost 
us a thing to vote on this bill. It is a massively important 
trade deal. Everybody on the panel, with the exception of Mr. 
Boyd, has suggested that it is a good idea that we go forward 
with it. I haven't met a single person in my district who is 
against the USMCA--Republican, Democrat, Independent. This is 
good for business. This is great for American jobs. It is great 
for manufacturing. It is great for agriculture.
    And I yield back.
    Chairman Cleaver. The gentleman yields back. Just for the 
record, I don't know of anybody who has made a statement that 
they are opposed to the USMCA. So, just for the record.
    The gentleman from California, Mr. Sherman, is recognized 
for 5 minutes.
    Mr. Sherman. Let me ask three of our witnesses to focus on 
economic and trade issues, but I will also ask the whole panel.
    Raise your hand if you were actively working against NAFTA 
back in the 1990s? I see no hands going up. And raise your hand 
if you were actively opposing permanent MFN for China, back 
roughly around the year 2000? No hands go up.
    If I lead an unworthy life and the Almighty decides to send 
me somewhere where I would pay for my sins, I will be sent to a 
place where I am surrounded by Wall Street Democrats and Wall 
Street Republicans, and told that both sides are represented. I 
will use my 5 minutes here not in defense of Donald Trump but 
in defense of the traditional Democratic view.
    Democrats voted no on NAFTA, CAFTA, and SHAFTA. Democrats, 
by two-thirds, voted no on MFN for China, and yet we have a 
panel where we don't have anybody who took those positions. 
Someone has to speak for the traditional Democratic view, and 
that is that trade deficits matter, that every billion dollars 
of trade deficit is another 10,000 jobs lost, and that while 
our unemployment rate is low, if we don't two or three more 
million jobs we will not create the labor shortage necessary to 
see the increase in wages that the working class of this 
country has been denied for the last 2 decades. Unless we can 
raise real wages by 10, 20, or 30 percent, we will not redeem 
what has been over 2 lost decades.
    People say, ``How can you oppose USMCA?'' It is obvious the 
country has some questions or they would call it what it is. If 
you support it, be honest enough to say it is NAFTA 2.0.
    And so the question is, do we want NAFTA 2.0? Well, if the 
choice is between NAFTA 2.0 and NAFTA 1.0, we can lay the two 
agreements next to each other. They are incredibly similar. We 
will notice a few changes and we can decide. But if the choice 
is whether to pull out of NAFTA altogether or to go with NAFTA 
2.0, that is a very complicated issue, especially when, over 
the objections of the Democratic Party in this House, we have 
knitted together these three economies in a way that would be 
difficult to respond to.
    I Chair the Asia Subcommittee. Trump didn't start the trade 
war. China started the trade war 20 years ago, and the wreckage 
of America exceeds anything done to us at Pearl Harbor. And 
yet, for 20 years, we did nothing. For 20 years, we were told 
tariffs are bad, so we will go through legal processes and 
trade dumping disputes. How has that worked out for us? We have 
the largest trade deficit in the history of a million life on 
this planet and we keep saying, let's go back to giant trade 
deficits. Let's go back to just checking the boxes and not 
looking at the non-tariff barriers that China is able to put 
up. Let's just say, well, if we can just get them to reduce 
their tariffs--that is not a market economy. That is an economy 
where any major corporation that imports any major American 
product in contravention of the policies of the Communist Party 
of China will be sent to a re-education camp. They know that, 
and that is why they don't buy American planes, unless we move 
the plane factories. That is why you can't make something in 
the United States and sell it in China, until they force you to 
make it in China and then transfer the technology. And we are 
told, ``Let's go back to the good old days.'' Those days were 
so bad that they elected Donald Trump as a scream of pain from 
western Pennsylvania, from Michigan, and from Wisconsin, and 
that pain has not been forgotten.
    If the Democratic Party abandons the Democratic Party, we 
will get, in 2020, what we got in 2016.
    I yield back.
    Chairman Cleaver. The gentleman does not yield back. Oh, 
the gentleman is out of time.
    Mr. Sherman. The gentleman is out of time.
    Chairman Cleaver. Thank you. The gentleman from Tennessee, 
Mr. Rose, is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairman Cleaver. In simple terms, 
economic growth is a function of an increase in the number of 
hours worked times an increase in labor productivity of those 
hours. It follows, then, that in order to increase economic 
output the focus should be on increasing the amount of hours 
worked and the productivity of those hours. Allowing capital to 
flow where it is most productive should enable these two things 
to occur.
    Mr. Gray, can you talk a little bit about how the Tax Cut 
and Jobs Act has helped increase labor productivity in our 
country?
    Mr. Gray. Certainly. I would be delighted. In particular, 
the business portions of the Tax Cuts and Jobs Act, the 
reduction in the statutory rate, the 5-year expensing provision 
were designed to improve the incentive to invest in the United 
States. That was to reverse what the previous Administration's 
Economic Report to the President noted as a problem in terms of 
productivity, which was the slowing of capital deepening, 
essentially the accumulation of capital for workers, which is 
central to productivity growth.
    That was what the business elements of the Tax Cuts and 
Jobs Act was designed to incentivize. The evidence is that 
there has been an investment response. However, there are some 
other risks in the economy that have possibly muted that, and 
that is something that we are going to want to keep our eye on.
    Mr. Rose. And what about on the employment side?
    Mr. Gray. I think we have observed, particularly for this 
late stage in the recovery--we are about to hit the 10-year 
anniversary--we saw an acceleration in payroll growth. We saw 
the labor market draw in workers who were not in the labor 
force for the balance of the Great Recession. That was 
remarkable, particularly in the 10th year of the recovery, to 
see the pace of employment growth actually accelerate. I think 
these are important accomplishments for the economy.
    Mr. Rose. Thank you. We have a record-low unemployment rate 
in this country. Unemployment incredibly low at 3.6 percent, 
the lowest rate in my lifetime, and for those of you who can 
see me, that has been quite a while. So I applaud the President 
and I applaud the initiative of the prior Congress for helping 
to extend and expand the current expansion.
    In my home State of Tennessee, we have an incredibly low 
unemployment rate, historically low there as well, of 3.2 
percent, and I might add record low unemployment for minorities 
and for women and for other typically or historically 
disadvantaged groups. So, the great fruits of the economic 
policies that President Trump and his Administration and the 
prior Congress put in place.
    But as a country, we can and must improve our labor 
participation rate. The most recent numbers from the Bureau of 
Labor and Statistics have the labor force participation rate at 
62.8 percent. There are still a lot of potential workers 
sitting on the sidelines, not actively seeking employment. Can 
you talk, Mr. Gray, a little bit about how the TCJA will help 
facilitate getting people off the sidelines and back in the 
game?
    Mr. Gray. I think you have kind of two primary channels 
that we can sort of identify. One is just specific provisions. 
The CBO mentioned this in their recent baseline, which is that 
the reductions in labor taxes, all else being equal, 
incentivize the supply of labor, so people will tend to work 
more than they otherwise would, given the reduction in labor 
taxes. So, that is one element.
    The second is to the extent that the TCJA improves the 
economy, then that improving economic environment will draw 
workers into the labor force as they see wages grow. That 
incentivizes them to work as well.
    Mr. Rose. Thank you. While some of my colleagues on the 
other side of the aisle may wish to denigrate the tax reform 
passed into law last year, I do think it is in all Americans' 
interest to be supportive of policies that help increase the 
amount of workers and the productivity of their work. That is 
where capital should flow, to the places it can be most 
productive. We should avoid picking winners and losers here in 
Washington, and, after all, we don't have to because a rising 
tide truly does lift all boats.
    A simpler Tax Code and lower effective rates will help 
American businesses compete on merits, and I believe American 
workers. Small business owners and shareholders under these new 
conditions are only poised to succeed.
    And with that, I yield back.
    Chairman Cleaver. The gentleman yields back.
    You know, this partisan polarization grows almost without 
bounds, so I don't think we need to fight any fights that don't 
exist. So I want to enter into the record, without objection, 
where the Trade Representative is saying, ``We won't rush the 
USMCA in Congress.'', And I will repeat again, I don't know of 
anybody trying to fight against it from here. And this is 
today, June 19, 2019, at 11:13 Eastern Standard Time. So, I 
would like to enter this into the record. And without 
objection, it is so ordered.
    I now recognize the gentleman from Illinois, Mr. Garcia, 
for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman, and I 
would like to thank all of the witnesses who have testified 
this morning. I would like to begin with Dr. Bergsten. In an 
online Peterson Institute post on March 11th of this year, 
entitled, ``A Courtesy Deal With China?'' you stated that, 
``Trump has long been upset about the U.S. bilateral trade 
deficit with China, which actually rose to a record $419 
billion in 2018, despite his imposing tariffs of $250 billion 
worth of imports from China.''
    According to economist Robert Scott, the IMF predicts that 
the U.S. current account deficit will nearly double between 
2016 and 2022. Scott writes that, ``Unless these trends are 
offset by a rapid decline in the value of the U.S. dollar, 
rapidly rising trade deficits could be devastating for U.S. 
manufacturing, likely giving rise to massive job loss on the 
scale experienced in the 2000-2007 period, when 3.5 million 
U.S. manufacturing jobs were lost.''
    In March, President Trump said, ``I want a strong dollar 
but I want a dollar that does great for our country, not a 
dollar that is too strong to make it prohibitive for us to do 
business with other nations.''
    Dr. Bergsten, can you talk about the impact of a strong 
dollar on this trade deficit?
    Mr. Bergsten. That is a crucial point, Congressman Garcia, 
because the single most important price for U.S. international 
competitiveness is the exchange rate of the dollar, because 
that is what prices all of our products, in both export markets 
and import competing markets, vis-a-vis the competition in the 
rest of the world.
    By most people's estimates, including those at the Peterson 
Institute but also the IMF, the dollar is now overvalued by 
probably 10 to 15 percent, and that does translate into a much 
larger U.S. trade deficit than if the dollar was not 
overvalued.
    I have always been in favor of a competitive dollar. 
Secretaries of the Treasury have talked over the years about a 
strong dollar without ever defining it, but it implies a dollar 
that maybe responds primarily to financial flows, capital 
movements, and does not accurately reflect the underlying 
competitive position of the United States and other countries.
    But the trick is how to achieve an equilibrium exchange 
rate for the dollar. Over the years, we have done it in 
different ways. In the Reagan Administration, Secretary of the 
Treasury Jim Baker negotiated the Plaza Agreement with our 
major trading partners who cooperatively agreed to bring down 
an overvalued dollar, cut the U.S. trade deficit at the time in 
half. We saw an equilibrium.
    Now the situation is very tricky, because, as various 
Members, particularly on the Republican side have said today, 
the U.S. economy is very strong, and that attracts capital from 
around the world. It strengthens our investment, and that is a 
good thing. But is also pushes up the exchange rate of the 
dollar.
    In the current environment, when we have full employment, 
when we have rapid growth, when we have a strong economy, it is 
hard to argue, as Scott does, that we need a better trade 
balance or a weaker dollar. At the same time, he is right that 
over time, if the dollar remained overvalued, it would weaken 
our manufacturing sector and other tradable goods industries, 
including, incidentally, agriculture.
    So what the Administration should be doing is trying to 
work toward a gradually depreciating dollar that will reduce 
the U.S. trade deficit over time without disrupting the world 
economy and adding more uncertainty to the current situation 
which, because of the trade war, is already very uncertain.
    Mr. Garcia of Illinois. So, ``gradual'' is the key word 
there, I believe.
    And finally, before my time runs out, how might tariffs 
further impact the strengths of the dollar, and what policy 
proposals are you aware of that might correct the strong 
dollar's impact on our trade deficit?
    Mr. Bergsten. The tariffs have a paradoxical effect. The 
tariffs aim to reduce U.S. imports, and they do, and that would 
strengthen our trade balance, but that would lead to a stronger 
dollar in the exchange markets. And, in fact, empirical studies 
show that countries that put on lots of trade barriers do not--
repeat, do not--improve their trade balances, in part, because 
there is an offsetting effect in the exchange markets.
    So anybody, including the current Administration, who 
thinks that tariffs strengthen the trade balance are simply 
incorrect, both theoretically and empirically.
    Now, what to do about it. It's a big problem, and I 
mentioned it in that article--
    Chairman Cleaver. The gentleman's time has expired.
    Mr. Bergsten. --that other countries have manipulated the 
currency. The answer to that, frankly, is for us to counter it 
directly. I have supported, for many years, countervailing 
currency intervention. If China buys a billion dollars' worth 
of dollars to keep our currency overvalued, we buy a billion 
dollar of their currency--
    Chairman Cleaver. The gentleman's time has expired.
    Mr. Bergsten. --to offset it, neutralize its impact on the 
currency markets, and believe me, if we commit to do that, they 
won't do it--
    Chairman Cleaver. Thank you very much.
    Mr. Bergsten. --the manipulation will disappear, and that 
part of the dollar overvaluation will be avoided.
    Mr. Garcia of Illinois. Thank you.
    Chairman Cleaver. I now recognize the gentleman from 
Virginia, Mr. Riggleman, for 5 minutes.
    Mr. Riggleman. Thank you very much, Mr. Chairman. I 
appreciate it. And Mr. Boyd, I am happy to be your Congressman. 
I love Mecklenburg County, yes, sir, and I don't think people 
realize the size of our district, before I get started. We go 
from Fauquier County down to the North Carolina border, and if 
you talk about Mecklenburg County, it actually borders four 
counties and North Carolina, so it is huge.
    Number two, I almost laughed when somebody said ``NAFTA 
2.0'', because Mr. Boyd knows if we say ``NAFTA'' down in South 
Hill, or we say ``NAFTA'' in Lunenburg County, or we say 
``NAFTA'' in Pennsylvania County or Halifax County, or Franklin 
County, or Bedford County, or Campbell County, you will get run 
out of town. That is why I don't want to call it ``NAFTA 2.0'', 
and you know that, sir. So, I am glad you are here.
    I also have my aide here, and he is going to give you a 
card, so if you have any issues getting a meeting with anybody 
in the Administration or with me, I will go ahead and we will 
try to make that happen, and I will come see you on your farm. 
How does that sound?
    As we get started, I find it a little bit interesting 
because I know a little bit about farming in the Fifth District 
of Virginia. After I was a CEO of a DoD company, as a lot of 
people, know I ran a distillery. So, I deal with wheat, corn, 
barley, rye. We deal with everything you could possibly imagine 
when it comes to agricultural produce, spent mash. So, I have a 
little bit of an interest in that, and plus I grow some of that 
on my own farm.
    I think the second thing that we have is that when I looked 
at the comparison between NAFTA and USMCA, and I looked at what 
it would create, I think it is pretty spectacular. And for me, 
when you look at Southside, and I think where me and Mr. Boyd 
probably are of like minds, we talk about a 3.6 percent sort of 
unemployment rate in the United States.
    The Fifth District is around 3 percent, but there is 
actually a 2 to 2.5 percent delta between the northern part of 
my district and the southern part of my district. Last year, 
there was 2.4 percent unemployment in Fauquier County, which 
you know is 4 hours from you, and down around--you are talking 
about Danville and Brunswick County, it was as high as 4.7 to 
5.2 percent. So, there is a huge delta. Why? Because we have 
had problems with agriculture.
    The reason the USMCA is so important to me--and I want to 
go into something that I know a little bit about--number one, 
here just are some of the USITC's stats on this. USMCA would 
raise the US real GDP by $68 billion, would create 
approximately 176,000 new jobs, directly related to 12 million 
jobs in the United States, it would increase exports to Canada 
and Mexico by $33.3 billion, and it would actually increase 
total U.S. agriculture and food exports by $2.2 billion. And in 
Denver, why is that so darn important? It is because my 
district is 65 percent rural--65 percent. And, by the way, it 
is over 10,000 square miles.
    Some of the other issues--I had questions written out, and 
as you can see, I am not looking at my questions too much right 
now because I know a little bit about this. And that is why I 
think right now, when we talk about this, the same questions 
that everybody asks, they were going to ask you, I was going to 
ask you--how do we level the playing field against China, and 
how do we continue the economic boom that we have experienced 
over the last 2\1/2\ years? Well, that is fantastic. It is 
fantastic for the first part of my district. For the bottom 
part of my district, it is not so fantastic. There isn't an 
economic boom. And that is why the USMCA is so important to the 
Fifth District.
    I usually like to ask a lot of questions, as people know, 
and I try to take a lot of time. But there is one thing I want 
to talk about, and that is why I am so happy everybody is here. 
We have talked about soybeans, which are big in my district, 
right? We have talked about all kinds of issues. But in my 
district, do you know what the big three are? Not soybeans, not 
corn, not wheat, not rye. The big three are timber--believe it 
or not--dairy, and tobacco. So, that is my issue.
    Let's talk about dairy and what the USMCA does for dairy. 
Fluid milk--50,000 metric tons by year 6 of the agreement. And 
some of the other things, and I want to skip the 47 things I 
have here, but there is something that is very, very important 
to my dairy farmers and the USMCA and everything that we are 
talking about, and it is actually Class 6 and Class 7, when you 
are talking about the amount of milk and processed milk that we 
can actually bring into Canada.
    My question here is this, and it is probably a pretty 
simple one. I don't want the perfect to be the enemy of the 
good, and if we are looking at farmers in my district, not only 
do we have to deal with China as soon as possible, we have to 
get the USMCA passed. And a lot of that comes from me not being 
in politics very long. See, I see the rising prices. And also, 
when you talk about tariffs, you talk about steel and aluminum, 
I have to get aluminum totes.
    So, really, I don't even want to ask you yes or no, because 
you have already answered the question, but if anybody wants 
any of this last 30 seconds of their time to talk about the 
importance of USMCA or the perfect for the good, I would like 
to hear it. And if not, I am the last. As you can tell, I am 
probably the last. Am I the last one? Is Cindy the last one? Am 
I the last one?
    I just wanted to end easy for you all. I want the USMCA. I 
want it to pass. I think you guys--Mr. Boyd, I am going to be 
in touch with you and we will make sure it happens, whatever 
you need, because I represent you.
    Thank you, sir, and I yield back the whole 4 seconds of my 
time, Mr. Chairman.
    Chairman Cleaver. The gentleman yields back. The 
gentlewoman from Iowa, Mrs. Axne, is recognized for 5 minutes.
    Mrs. Axne. Thank you, Mr. Chairman, for saving the best for 
last, I appreciate that, and I thank the witnesses for being 
here, and a special thank you to Mr. Boyd and Mr. Russell. I am 
Cindy Axne from Iowa's Third District, the flooded area, which 
is, of course, filled with agriculture and farming, and I know 
how difficult this is for all of you right now.
    I appreciate everything you are doing for our country and 
what you do to feed the world, and I appreciate all the hard 
work. I come from 5 generations of Iowans. My mom grew up on a 
farm in my district. I know how hard it is to stay viable in 
these circumstances, so thank you.
    But I did want to talk today about tariffs and the impact 
on America's pocketbook. As you know, the President has 
repeatedly said China is paying for these tariffs, and I 
questioned Secretary Mnuchin here last month, and he seemed to 
agree with that.
    Mr. Bergsten, in your expertise, what research or theory 
could the Secretary or the President be referring to, to 
support these claims, because I am at a loss and I would like 
to hear from an expert?
    Mr. Bergsten. There is no theory that says that China can 
pay the tariffs. One does have to make a distinction how you 
break down the payments of the tariff. In the first instance 
they are clearly paid by the importer, the American importer. 
It is he or she who pays the tariff into the Treasury that the 
President keeps talking about. That clearly comes 100 percent 
from the American importer.
    The economic analysis then says, how does that change in 
the price of the product get disaggregated among the buyers and 
the sellers? Most of the theories suggest, and most of the 
empirical work suggests that the great bulk of the increased 
tariff is paid by the consumers of the product. It will go 
through several intermediate stages. It may be a direct 
consumer product, but most of it is paid by the consumer.
    That higher price reduces demand for the product, so the 
exporter in China, or wherever, may, down the road, have to 
take a somewhat lower price for his or her product, and may, 
therefore, in that indirect sense, pay some of the cost.
    Mrs. Axne. Okay.
    Mr. Bergsten. The great bulk comes on the import side and 
the consumer side.
    Mrs. Axne. I appreciate that. But what you are saying is 
that what we are experiencing right now is that the expectation 
is that the tariffs are passed on through additional expenses 
to the consumer for the price of goods.
    Mr. Bergsten. Either higher prices for the consumer or 
reduction in the profits of the importer, the retailer, 
somebody on the import side, right.
    Mrs. Axne. Thank you. And then I asked the Secretary about 
the impact of tariffs on consumers and he told me that he 
didn't believe American consumers would pay a significant 
price. I would like to ask you, Ms. Baughman, and Dr. Bergsten, 
both of your groups have estimated the impact of these tariffs 
on American consumers, is that correct?
    Ms. Baughman, you said the cost to the average family of 4 
was around $750, is that correct?
    Ms. Baughman. Yes, $767.
    Mrs. Axne. $767? I personally think that that is a 
significant price for people in my district, and for Iowans to 
pay.
    I was then told by Secretary Mnuchin that his research 
about the cost consisted of speaking to executives of major 
companies, and I find that to be completely insufficient. So I 
sent him a letter to follow up and asked his Department if they 
had done any analysis on the actual cost, the impact on the 
existing tariffs on consumers. And although the deadline for 
this response was now 12 days ago, we have not received an 
answer, so I will be sending a letter today to follow up.
    Since your group has modeled this, my question is, do you 
believe the Treasury Department actually conducted analysis 
focused on the impact of American consumers before imposing 
these tariffs?
    Ms. Baughman. No, I do not think that they looked at that. 
Two-thirds of the products that are on List 1, 2, and 3, when 
imported from China, those are things used to make things here 
in the United States--raw material, parts, components. So, not 
a lot of consumer goods. So, you are not going to actually see 
too much impact on the price of something that you buy at 
Walmart from Lists 1, 2, and 3. List 4, which is pending right 
now, three-quarters of that is consumer goods. You are going to 
see it when the 25 percent tariffs get put onto those goods.
    We took a look, for the National Retail Federation, at what 
the impact would be on apparel, footwear, household appliances, 
and toys, and in every single case we found significant 
increases in consumer prices and reductions in purchase.
    Mrs. Axne. Thank you. I appreciate that. And so to confirm, 
you believe that this Administration did not conduct an 
analysis to see what the impact would be on the American 
consumer.
    Ms. Baughman. If they did, it is not evident.
    Mrs. Axne. You haven't received it either?
    Ms. Baughman. No.
    Mrs. Axne. Okay. Thank you.
    Chairman Cleaver. The Chair would like to thank all of our 
witnesses today, and also thank Ranking Member Hill for sitting 
in admirably and powerfully. He just really stood in today when 
the ranking member had to leave.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Unless there are any objections, this hearing is now 
adjourned.
    [Whereupon, at 11:57 a.m. the hearing was adjourned.]

                            A P P E N D I X


                             June 19, 2019
                             
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