[Senate Hearing 116-285]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-285

                  APPROACHING 25: THE ROAD AHEAD FOR THE 
                          WORLD TRADE ORGANIZATION

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                                HEARING
				
			       BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 12, 2019

                               __________

                                                                          
            Printed for the use of the Committee on Finance

                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
41-994 PDF                  WASHINGTON : 2020                     
          
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                          COMMITTEE ON FINANCE

                     CHUCK GRASSLEY, Iowa, Chairman

MIKE CRAPO, Idaho                    RON WYDEN, Oregon
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
JOHNNY ISAKSON, Georgia              SHERROD BROWN, Ohio
ROB PORTMAN, Ohio                    MICHAEL F. BENNET, Colorado
PATRICK J. TOOMEY, Pennsylvania      ROBERT P. CASEY, Jr., Pennsylvania
TIM SCOTT, South Carolina            MARK R. WARNER, Virginia
BILL CASSIDY, Louisiana              SHELDON WHITEHOUSE, Rhode Island
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana

             Kolan Davis, Staff Director and Chief Counsel

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman, 
  Committee on Finance...........................................     1
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     3

                         ADMINISTRATION WITNESS

Lighthizer, Hon. Robert E., United States Trade Representative, 
  Executive Office of the President, Washington, DC..............     5

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Brown, Hon. Sherrod:
    ``How the WTO Undermines U.S. Trade Remedy Enforcement,'' by 
      Terence P. Stewart and Elizabeth J. Drake, February 2017...    39
Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement...........................................    50
Lighthizer, Hon. Robert E.:
    Testimony....................................................     5
    Prepared statement with attachment...........................    51
    Responses to questions from committee members................    54
Wyden, Hon. Ron:
    Opening statement............................................     3
    Prepared statement...........................................    84

                             Communications

Center for Fiscal Equity.........................................    87
Stewart, Terence P...............................................    90
United States Council for International Business.................    98
U.S. Global Value Chain Coalition................................   100

                                 (iii)

 
    APPROACHING 25: THE ROAD AHEAD FOR THE WORLD TRADE ORGANIZATION

                              ----------                              


                        TUESDAY, MARCH 12, 2019

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:35 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. 
Chuck Grassley (chairman of the committee) presiding.
    Present: Senators Roberts, Cornyn, Thune, Isakson, Portman, 
Toomey, Scott, Cassidy, Lankford, Daines, Young, Wyden, 
Stabenow, Cantwell, Carper, Cardin, Brown, Casey, Warner, 
Whitehouse, Hassan, and Cortez Masto.
    Also present: Republican staff: Andrew Brandt, 
International Trade Policy Advisor; Brian Bombassaro, 
International Trade Counsel; and Nasim Fussel, Chief 
International Trade Counsel. Democratic staff: Jayme White, 
Chief Advisor for International Competitiveness and Innovation.

 OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM 
              IOWA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. I usually wait until Senator Wyden gets here 
before I start, but he will probably be here before I get my 
statement done. The reason I want to start on time is--Senator 
Wyden is here; okay--so everybody can plan accordingly. 
Ambassador Lighthizer has to leave at 12 o'clock.
    I want to welcome everybody for our first trade hearing of 
this Congress. The subject today is the future of the World 
Trade Organization.
    The WTO is a critically important institution. It is our 
responsibility on the Finance Committee to monitor the WTO, and 
the United States' role in that organization. Since the start 
of the World Trade Organization, international trade volumes 
have increased by 250 percent. Countries representing 98 
percent of the global merchandise trade are currently members 
of the WTO, with 22 more countries negotiating membership.
    Overall then, it is indisputable that the World Trade 
Organization has moved global commerce forward. The rules-based 
trading system that the WTO promotes and oversees has been very 
successful at integrating people around the world into the 
global economy and raising millions of people out of poverty.
    One of the WTO's primary functions is to serve as a forum 
for trade negotiations. Although well-intended to be a forum 
for multilateral trade negotiations, the challenges of our 
modern economy have proven this goal to be extremely and 
increasingly difficult. The Doha Round of negotiations started 
in 2001 and resulted in the successful negotiations of the 
Trade Facilitation Agreement of 2013. But Doha failed to 
deliver on other ambitious targets, such as further reduction 
of tariffs and farm subsidies.
    Current plurilateral discussions on e-commerce and on 
fisheries show promise. And of course, I fully support 
continuing those efforts.
    The second point is that the World Trade Organization is 
responsible for implementing and monitoring trade agreements.
    Third and finally, the institution serves as a forum for 
settling disputes amongst its members over the meaning and 
application of WTO agreements.
    As we approach the 25th year of operation for the WTO, it 
would be wise for us to acknowledge that the United States has 
overall been a beneficiary of WTO dispute settlement processes. 
But we cannot overlook the serious challenges preventing the 
system from working as it was intended to, and as we intended. 
And we must all agree that updates and reforms would improve 
the effectiveness of the organization.
    Let us get to the Appellate Body. It soon could lose a 
minimum quorum needed to function. That is in particular need 
of reform.
    The administration's concerns about systemic and procedural 
problems with the Appellate Body are not new, nor are they 
partisan. Three Presidents on both sides of the aisle have 
raised concerns for many years about the Appellate Body, what 
it does and how it functions, and tried to get reform.
    The United States first refused to consent to a new 
Appellate Body appointment under the Obama administration. And 
the Trump administration has maintained the same position. So 
when we see both a person like President Obama and a person 
like President Trump claiming reform of the Appellate Body is 
needed, all WTO members ought to take it as a very serious 
issue.
    It is very unfortunate that this tactic is the only way 
that the United States has been able to get serious attention 
from other WTO members. I am not necessarily endorsing this 
approach, but now we are here. Since we are here, we cannot 
waste time lamenting the tactics. WTO members must take the 
United States seriously and commit to meaningfully addressing 
our concerns. The areas of much-needed reform are not limited 
just to dispute settlement.
    The administration is very right to point out that some WTO 
members consistently fail to meet their obligations to 
accurately notify of the subsidies they provide to domestic 
industries. This is simply unacceptable.
    The WTO also needs to address the treatment of state-owned 
enterprises. State-owned enterprises are becoming more 
prevalent in the global economy. China is notorious for using 
state-owned enterprises to buy private companies around the 
world and has used these enterprises as a conduit for 
subsidizing its industries.
    The ability of WTO members to self-certify as a developing 
country is another problem for the organization's long-term 
credibility. When my constituents in Iowa at my town meetings 
ask me why China--which happens to be the world's second 
largest economy--gets to self-certify as developing, I cannot 
explain it.
    There are other countries, including OECD members, that the 
administration rightly points out have advanced economies, but 
still declare themselves developing.
    Also for sure, we cannot have a hearing on the WTO without 
talking about China. The fact of the matter is that China 
simply has not lived up to the commitments it made when it 
joined the WTO. This is detailed every year by the USTR's 
annual report on China and whether or not they comply with the 
World Trade Organization's decisions. And we have seen over the 
last decade or so that WTO rules have not effectively 
constrained China's mercantilist policies and their distortion 
of global markets.
    So there is a heck of a lot of work to be done. And of 
course, being that the organization operates mostly under 
consensus, we cannot do it alone. The United States, Japan, and 
the European Union are discussing WTO reform options through a 
trilateral process that also seeks to address industrial 
subsidies and forced technology transfers. Partnerships such as 
this example are critical to showing China that the United 
States is not the only country complaining.
    The world certainly has come a long way on trade policy in 
the last century. I hope to learn from history and never repeat 
the protectionist mistakes of beggar-thy-neighbor policies that 
came about as a result of the infamous Smoot-Hawley tariffs. 
Yet there are also many legitimate bipartisan issues that we 
must address with some of our trading partners and within the 
WTO.
    To conclude, I probably do not need to remind many in this 
room of the following fact: the Constitution gives Congress the 
power to impose and collect taxes, tariffs, and duties and to 
regulate interstate and foreign commerce.
    As chairman of this committee, working very closely with 
Ranking Member Wyden, I intend to assist President Trump and 
Ambassador Lighthizer with their efforts at the WTO and in 
seeking strong and enforceable trade deals. If I am not doing 
enough for the President or for Ambassador Lighthizer, just 
tell me what more to do.
    However, I want you and President Trump to understand I do 
so with the understanding that erecting new market barriers 
with tariffs and quotas cannot be a long-term solution. I am 
looking forward to working in a bipartisan way with the members 
of the committee and the Trump administration to ensure the 
United States has a sound and constructive trade policy that 
benefits our country.
    [The prepared statement of Chairman Grassley appears in the 
appendix.]
    The Chairman. Senator Wyden?

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman.
    Mr. Chairman, first of all, thank you for holding this 
hearing. I certainly share many of the views that you have 
articulated today. And, colleagues, I am just going to start 
off by saying that what we are going to be talking about this 
morning is one of the least-known and biggest issues facing our 
country as it relates to creating more good-paying jobs and 
expanding markets for our country around the world.
    And as the chairman indicated, I am very much interested in 
addressing the proposition that it is long past time to fix 
what is wrong with the World Trade Organization. In my view, 
that process has to begin with China. China became a member of 
the World Trade Organization in December 2001. Based on nearly 
2 decades of hard evidence, it is clear that the agreements 
that allowed China to join the World Trade Organization have 
fallen far short.
    The rules that underpin the WTO were crafted more than 2 
decades ago when China was essentially an economic 
middleweight. At that time, multiple States within our country 
actually had economies that were larger than China's.
    During the debate on China entering the World Trade 
Organization, many predicted that membership would drive China 
away from one-party control of government and economics. And 
the Chinese made specific commitments dealing with economic 
reforms as a precondition of joining the WTO. That was the 
basis on which the Congress granted China normalized trade 
relations with the United States, legislation which I 
supported.
    Today, China is no longer a middleweight. China is an 
economic heavyweight, second only to the United States, and 
continues to grow rapidly. Much of that growth has come at our 
direct expense and in violation of World Trade Organization 
rules and World Trade Organization commitments that were made 
in 2001.
    What I am talking about are the following: subsidized 
state-owned enterprises, intellectual property theft, forced 
tech transfers, the great Internet firewall, and government-led 
shakedowns of foreign investors. China has used those schemes 
to strong-arm American businesses, steal American innovations, 
and rip off American jobs. Especially under President Xi, the 
government has tightened its grip on power.
    For our purposes in today's hearing, the Chinese government 
identifies weaknesses in the WTO system, and then it seizes on 
them to further their country's explosive growth. The U.S. and 
our economic allies have not done enough to crack down on those 
abuses. WTO rules, as I have indicated, date back to a time 
before the Internet was, in effect, this country's shipping 
lane and the center of gravity for international commerce. It 
was a time when smartphones were still science fiction. It 
should not be any surprise that those rules cannot keep up with 
China's modern-day trade rip-offs.
    As the chairman and I have both indicated, there is 
bipartisan interest in addressing that problem, and today gives 
us a chance to accelerate the effort to find real solutions. I 
am hopeful that the talks currently happening with respect to 
digital trade rules will finally drag the WTO into this 
century. And I am quite certain that Ambassador Lighthizer 
shares that perspective.
    One topic that is particularly important to the Pacific 
Northwest is under active discussion at the WTO, and this is 
the matter of unfair fishing subsidies. Senator Crapo, a senior 
member of this committee, and I held the Trade Subcommittee 
hearing on this issue dating back to 2010.
    The bottom line is that an agreement that curbs fishing 
subsidies is going to protect jobs in our fisheries and promote 
sustainable oceans, and, obviously, accomplishing both of those 
objectives is also a bipartisan goal.
    Finally, it is quite clear that our workers, and this is 
true from sea to shining sea--I see it in Oregon; I see it when 
I go elsewhere. Our workers have had enough with respect to 
cheating by China and other countries. And when the WTO proves 
too slow to stop the cheats, and when it announces decisions 
that clash with the founding principles, I think it is pretty 
obvious that lawmakers are no longer just going to grin and 
bear it.
    It is important for our country to fight for the economic 
system that was created after World War II and was built on 
strong democratic alliances. It faced down the Soviet Union and 
helped to reduce violent conflict around the world.
    Unfortunately, I think this administration too often 
signals to our allies that they are not interested in defending 
that system from attackers and cheats. So updating the WTO is 
an issue where we cannot have a bunch of tough talk and then 
take a pass on real action. An effective, fair, and enforceable 
trade system is the best defense our country can have against 
underhanded economic tactics by China.
    Mr. Chairman, I look forward to working with you and our 
colleagues.
    The Chairman. Thank you, Senator Wyden.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. Today I have the distinct pleasure of 
introducing Ambassador Lighthizer. He was sworn in as the 18th 
U.S. Trade Representative May 15, 2017, and you have not had a 
day off since you took that job. Since members of this 
committee have gotten to know Bob, and know him well over the 
past several months, I will dispense with further introduction.
    It is a pleasure to have you here today and to remind all 
of my colleagues--because I have been around here a long time--
you were an employee of this committee for 2 years, my first 2 
years on the committee, 1981 and 1982, as I recall. Go ahead.

  STATEMENT OF HON. ROBERT E. LIGHTHIZER, UNITED STATES TRADE 
REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, 
                               DC

    Ambassador Lighthizer. Well, thank you very much.
    Chairman Grassley and Ranking Member Wyden, distinguished 
members of the committee, it is a pleasure to be here today.
    I should begin with saying that I am inspired by and agree 
almost completely with both your statement, Mr. Chairman, and 
the ranking member's statement. I think they summarize and 
make, in many ways, unnecessary my own statement. Nonetheless, 
I will read it.
    Before I get in to talking about the WTO, I would like to 
note that, under President Trump's leadership, U.S. trade has 
been surging. From 2016 to 2018, total exports have grown by 
12.8 percent. During that same time, imports grew by 14.8 
percent. Last year we exported almost $2.5 trillion worth of 
goods and services. Further, last year alone we created 264,000 
manufacturing jobs, the highest figure in 21 years. And our 
economy is growing at a rate faster than any other country, 
substantially faster than any other country in the G7.
    As you all know, we have had a very busy trade agenda. We 
renegotiated KORUS. We have been working with Congress on the 
newly renegotiated USMCA agreement. We are in discussions with 
Europe, Japan, the United Kingdom, and several other countries.
    In addition, we have been very active at the WTO. We work 
closely with the very able Director-General Roberto Azevedo, 
and we are busy on the various standing committees that do the 
actual day-to-day work of the organization. The WTO is a very 
important organization, as you say, but we believe it has 
significant deficiencies.
    First, over the last 20 years it has migrated from a 
negotiation forum to a litigation forum. This development has 
unfortunate consequences. Developing new trade agreements has 
been stifled, and the commitment to the organization has been 
undermined.
    Second, many countries have very high ``bound'' tariffs and 
other barriers, and it is difficult to see how pressure can be 
created to get them to reduce either.
    Third, many members have gotten into the habit of not 
living up to their basic obligations. The requirements for 
subsidy notification by members are often ignored, and numerous 
transparency obligations go unfulfilled on a regular basis.
    Another problem is the anomaly that many members self-
declare themselves to be developing countries, even though they 
are among--in many cases--the richest in the world.
    Fourth, the dispute settlement process is in need of 
reform. We have an Appellant Body that often does not follow 
its own rules. The administration has complained about this, as 
have previous administrations. I have some quotes and the like 
I will do at another time.
    In spite of these challenges, the administration is working 
diligently to jumpstart new negotiations in the areas of 
digital trade, fish subsidies, and other areas. We look forward 
to working with the committee to solve these and other very 
important trade issues.
    I am sorry I ran a little over, Mr. Chairman.
    [The prepared statement of Ambassador Lighthizer appears in 
the appendix.]
    The Chairman. There are two reasons I would give committee 
members an admonition to keep their questions short. First of 
all, our witness has to leave at noon. And secondly, we are 
soon going to have a hearing on the President's 2019 trade 
policy agenda where many of you will be able to ask questions 
at that time on trade policy as well.
    I am going to start my questions with China. Like you, I 
agree that China has not done enough to honor its WTO 
commitments. Like you, I have been disappointed by China's lack 
of respect for commitments it made to liberalize its economy 
and play by the rules, exactly the same thing that Senator 
Wyden has referred to. And I fully agree that countries like 
China should not be able to self-identify.
    How do you expect countries like China, India, and South 
Africa to agree to reassess the WTO's approach to special and 
differential treatment?
    Ambassador Lighthizer. Well thank you, Mr. Chairman. First 
of all, this is a major problem. It affects both ongoing 
obligations, but it is even more of a problem when you look at 
new negotiations, because, when we start off a new negotiation, 
everyone immediately says, ``Oh, but these new rules we're 
going to negotiate are not going to apply to us.''
    And if you look at the European Union as one country, it 
is--about 90 percent of the organization is in this category of 
self-
declared special and differential treatment. And it is 
countries like Korea and Saudi Arabia. I mean, it is rich 
countries and big countries, and of course as you say, China. 
It is a very difficult problem, because this is a consensus 
organization.
    So what we have proposed--and we have been complaining 
about this for a long time--what we have proposed and we have 
some support for is the idea that if you do not, for example, 
notify your commitments, you have certain penalties in terms of 
budget costs and the like.
    In terms of the self-declaration, we put a proposal forward 
where we are trying to get people to say that you cannot self-
designate if you are in the OECD, if you are one of the rich 
countries in various criteria that are internationally 
recognized. Now, the problem with that is going to be that it 
has to be agreed to by all the members, and the people who are 
taking advantage of it are not going to agree to it.
    So it is a fundamental problem. It is something that we are 
shedding light on. I think some other countries are starting 
also to talk about it. There has even been the suggestion that, 
well, maybe the United States just ought to self-designate 
itself as a developing country, and then we are all treated the 
same.
    So if I knew the actual answer, I would give it to you. 
What we are doing now is shedding light on it, telling people 
what a problem there is, and we need to have new negotiations 
making it clear that we are not going to give people other than 
the truly poor nations of the world any kind of a benefit in 
terms of the kind of obligations that we're undertaking.
    The Chairman. I have referred to this trilateral process of 
the United States, Japan, and the EU to address nonmarket-
oriented policies and practices of third countries that lead to 
overcapacity and create unfair competition, while 
simultaneously we are negotiating bilaterally with China 
regarding very legitimate issues outlined in the section 301 
investigation.
    So explain those two coinciding processes. Do they inform 
each other, or should we consider them two distinct processes 
that will have independent outcomes?
    Ambassador Lighthizer. Thank you, Mr. Chairman.
    First of all, I consider them to be independent, but 
related. So we have a trilateral group. It is the United 
States, Japan, and the EU. We have had five meetings now. We 
put out statements, and we tried to say what we are doing and 
get people to have a similar understanding and similar actions 
with respect to technology transfer, with respect to a variety 
of trade cases that we have, with respect to investment in 
their country where technology is scooped up by China.
    So I think it has been very successful. It has brought 
other people along, but the focus really has been the three of 
us, and we are trying to come up with specific examples.
    Separate from that is the 301 action. By U.S. law, that is 
a separate process. We do tell the EU and Japan when we meet 
what we are doing, and what the developments are, and the like. 
But I think that it is a very serious problem. It is one that 
we cannot just rely on the WTO for. We cannot just rely on this 
trilateral group. We have to act unilaterally to the extent we 
can.
    And so they are independent, but we do report back and 
forth, and we inform each other. And I think you have seen 
developments in Japan and in Europe that have mirrored some of 
the things we are doing as a result of this activity.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Ambassador Lighthizer, you were part of the Reagan 
administration when the theme on enforcement was ``trust, but 
verify.'' And that is particularly important when it comes to 
any deal with China. And of course, you all are discussing a 
China trade deal, in effect, on tariffs. And you know that I 
feel very strongly that any deal with China needs to address 
intellectual property, technology transfer issues, and be 
enforceable.
    So what I would like to do is have you state this morning, 
on enforcement of any deal with China, do you intend to lift 
the current tariffs, or will you condition the lifting of 
tariffs on demonstrable progress on technology, IP, and the 
major issues? I think we want to know what is going to be your 
measure with respect to actually having enforcement, making 
sure the Chinese will follow through on their commitments, and 
whether you are going to lift the tariffs before you see hard 
evidence--hard evidence, on the ground, that the Chinese are 
changing.
    Ambassador Lighthizer. Well yes, thank you very much, 
Senator.
    I would say first of all, I am involved in the negotiation, 
and I am not going to talk about what we are doing in the 
negotiation. Although, as you know well, I do not keep any 
secrets from you, and I am happy to have that conversation on a 
private basis in terms of precisely where we are on all 
matters.
    So I want it clear that I have you completely in my 
confidence, and you know that. And we talk about all these 
issues, but I am more reluctant to talk about them publicly, in 
this environment, number one.
    And then number two, you put your finger on what are, to 
me, the key structural issues. There are some others, but these 
are really, really important, and that is to say technology 
transfer, theft of intellectual property, lack of protection of 
intellectual property. And then there are some others; they are 
subsidy issues and the like that I have talked to various 
members about that are also fundamental. And there are some ag 
and other issues that we're involved with.
    But these real structural issues have to be addressed. And 
in our negotiations, I would say they are being addressed, and 
they are being addressed with precision. That is not to say 
that we have come to conclusion, because we have not. But we 
are making headway there.
    Your point is that--and you have made it to me repeatedly 
privately--none of it makes any difference if it is not 
enforceable. We are going to have an enforceable agreement, or 
the President will not agree to an agreement.
    I should----
    Senator Wyden. Let me just ask right at that point. Is it 
your intent to make sure you see evidence of changes on the 
ground before you lift the tariffs? I am not talking about any 
particular item that is under discussion.
    What I want to know is, what is going to be the test with 
respect to lifting the tariffs? And is it your intent to say we 
have to see evidence on the ground of real changes before we 
lift the tariffs?
    Ambassador Lighthizer. Well, I would say that is a subject 
of negotiation. So I am not getting into it here in public, but 
I do agree with you that we have to have real progress, and we 
have to maintain the right to be able--whatever happens to the 
current tariffs--to raise tariffs in situations where there are 
violations of the agreement. And that is the core. If we do not 
do that, than none of it makes any difference in terms of where 
we are on the specific tariffs.
    That is a matter of negotiation. And once again, I am happy 
to talk to you about it.
    Senator Wyden. We are not talking, Mr. Ambassador, about a 
specific tariff, or intellectual property, or one particular 
area or another one. I am trying to discern--and that is what 
my constituents ask at home in Oregon. You are a former Staff 
Director for this committee, so you know we have to be 
responsive to our constituents.
    They say, you know, we have been promised again and again 
that there are going to be changes with respect to China. I do 
not want you to have to get into a specific area right now with 
me, and my colleagues are going to have their own questions.
    What I want to see is what the test is for lifting the 
tariffs. And I will tell you what my test is, just so you know: 
my test is you are able to see evidence of real changes on the 
ground, in the real world, before we lift the tariffs. And my 
sense is, that is sort of what Bob Lighthizer has been 
interested in, but we need to hear it from you. And I do not 
suspect I will be the only Senator asking you today about your 
test. But that is mine.
    Thank you, Mr. Chairman.
    The Chairman. Senator Roberts, and then Senator Stabenow.
    Senator Roberts. That is the team.
    Senator Stabenow. That is the team.
    The Chairman. That is the Aggie team.
    Senator Roberts. Yes.
    Do not start my time until now, if you would please. 
[Laughter.]
    Bob, it is good to have you back. Senator Grassley, when 
you were on this committee and were the only member of this 
committee at that time when Bob was the top gun for Senator 
Dole during those days, I was in the House. And whenever I 
would have a question that I thought I could take the time of 
Senator Dole for, he would always say, ``See Bob.'' So it is 
good to see you back, sir.
    I think that I had a sanitary and phytosanitary question 
and a WTO question. And I think Senator Wyden put it very well. 
Senator Wyden gets a little wound up, but he was born in 
Wichita. He is a good guy.
    But he said ``real progress on the ground'' and was talking 
about jobs and continuing these tariffs. But there is tariff 
retaliation. There is also price recovery with regards to farm 
country.
    We are still 50 percent off from last year, for goodness 
sakes, in terms of farm income, farm revenue. We are still in a 
very bad way. And so there is a lot of feeling out in farm 
country, especially--and you know this forwards and backwards.
    But what I want to ask is, in the last 2 years, the 
administration has focused on bilateral trade agreements. The 
United States has stepped away from major multilateral 
agreements, including the Trans-Pacific Partnership. That is 
still very popular out in farm country, if we would hitch our 
wagon there.
    Especially as it relates to the WTO agreement on the SPS 
measures, do you see room for multilateral agreements to 
advance the U.S. trade agenda and improve market access? And I 
think you and I just visited about a particular country that we 
think we ought to really focus on as opposed to the TPP, which 
might be a little bit big to swallow right now.
    Ambassador Lighthizer. Well, thank you.
    So I would say, first of all, the President is very focused 
on what is happening in farm country, as you know well. And we 
have seen an unfortunate decline in farm income with some 
bounce, but a basic decline for a long period of time. And it 
is something that has to be reversed.
    You are right: there has been retaliation that has had a 
negative effect in farm country. But I always point out that, 
particularly with respect to China, no one has a bigger upside 
to opening up China than agriculture. We sell them, in a normal 
year, $18 or $19 billion worth of product, less last year for a 
variety of reasons.
    But they import a lot of goods from a lot of other places 
that they ought to be importing from the United States. So it 
is a big, big upside for agriculture generally. And it is 
something we are focused on.
    On the question of TPP, as you know, we are in the process 
of negotiating with Japan. I always tell people that there are 
11 countries in TPP. We have FTAs with six of them. With 
respect to the other five, 95 percent of the GDP is Japan. So 
if we can get an agreement with Japan that is a good agreement, 
that will go a long way towards having essentially the same 
effect as being in TPP.
    Personally, I did not like TPP for a lot of the same 
reasons the President did not, but I will not go into those now 
unless another member asks me to do it.
    So I want to move forward on Japan. I think that is really 
important for farmers. It is also important that we have a 
deal, if we can get a good deal, with China, because that will 
open up a lot of agriculture sales. But also we are focusing, 
as you know well, very much on SPS issues, impediments to trade 
across the board, which there are a lot of, but particularly in 
China.
    We are also spending a lot of time at the WTO working on 
these issues. This is one of those areas where you are in a 
committee, and you are doing the actual day-to-day work.
    So it is a major focus of our activity. And if we end up 
with a deal on China, and if we end up with a deal--at least an 
agricultural deal--at an early time with Japan, I think there 
is a bright light on the horizon for agriculture. And that 
certainly is our objective, all while we are trying to take 
care of these SPS issues, which we do sort of one at a time, 
sometimes a little bit like peeling an onion, but one at a 
time.
    And the SPS issues, I should say, have been a major focus 
of our discussions with China. We have gone through a whole lot 
of their various--I do not want to say schemes, but processes 
that keep U.S. agricultural products, and other agricultural 
products, out.
    Senator Roberts. I appreciate your answer. I yield back.
    The Chairman. Senator Stabenow?
    Senator Stabenow. Thank you very much, Mr. Chairman and 
Ranking Member.
    Ambassador, it is always good to see you, and I appreciate 
that you have a lot on your plate, and I appreciate the work 
you are involved in. I do have to, though, follow up to what my 
chairman in the Agriculture, Nutrition, and Forestry Committee 
was asking and your comment that President Trump is focused on 
supporting agriculture.
    I know we are not in a budget hearing, but for the record, 
I just want to say that the budget came out yesterday. It has a 
31-
percent cut in farm bill programs for rural America that was 
overwhelmingly supported by the Senate, plus a 15-percent cut 
to the USDA to be able to enforce and provide the farm bill 
program. So I have a hard time believing that statement, with 
all due respect, even though I understand your reason for 
saying it.
    Senator Roberts. Would the Senator yield on that?
    Senator Stabenow. Yes, Mr. Chairman.
    Senator Roberts. We are not cutting crop insurance. Get a 
hold of the budget----
    Senator Stabenow. Which is in the President's budget.
    Senator Roberts. We are not cutting crop insurance to the 
degree--they say it is reform. It is not--it would gut the 
program, and that is the one thing that farmers, ranchers, and 
growers all over the country said was the number one issue.
    And I agree with the distinguished ranking member, the 
former chairman of the committee. Thank you.
    Senator Stabenow. Thank you.
    So we realize we are not in the Agriculture Committee, but 
that is important to say, just for the record, and to also say 
that nobody has had a bigger downside from the administration's 
actions on China than agriculture.
    So let us talk about the WTO. We certainly have a lot to 
talk about in terms of reform. And issues like China's non-
market economy status at the WTO will continue to be something 
that many of us care about. And I want to talk specifically 
about something you and I have talked a lot about related to 
China, and that is currency manipulation, which we know is 
uncompetitive and an unfair trade practice.
    I also know that you know that Senator Portman and I had a 
bipartisan amendment to address this that almost got included 
in the TPA to add enforceable standards on this issue in trade 
negotiations. Now the U.S. negotiated currency provisions in 
USMCA--which is good--which were transparency and reporting 
obligations, as well as commitments to market-determined 
exchange rates.
    The transparency portion has enforcement behind it, but not 
the other commitment. So that is another issue.
    And then with South Korea, when the agreement came before 
us in previous Congresses, there was an understanding put in on 
currency manipulation, though there does not seem to be 
enforceability behind that.
    So now we get to China. Can you shed some light for us on 
what exactly it means when we hear that there is a currency 
agreement with China? How does it compare with what has been 
negotiated with the USMCA, and how far does it go in terms of 
being enforceable?
    Ambassador Lighthizer. Well, yes, thank you, Senator.
    First of all, I would say we do not have an agreement with 
China, as you know. So nothing is really done, and, as in these 
kinds of negotiations, nothing is ever done until everything is 
done.
    Nonetheless, we have talked a lot about currency. I know it 
has been a major factor for you and a number of other Senators. 
Senator Schumer has also been a leader on this for a long 
period of time.
    As you say, we have what is the farthest-reaching 
commitment on this ever in USMCA. And I just want to continue 
to point that out, because the members will consider that at 
some point. And that is a commitment not to have competitive 
devaluation.
    But as you say, it is not covered by the dispute process. 
But the transparency provisions are. And our objective really 
was not to stop currency problems with Mexico and Canada, as 
you know, but to have it be like the model of how we are going 
to be going forward.
    We have had discussions with China. We have come, I think, 
pretty close to agreement. And if we have an agreement, I 
believe we will have a commitment not to have competitive 
devaluation, and we will have a commitment to certain 
transparency. And the terms, the actual terms of the 
transparency, we will have to talk about, because they are 
reasonably complicated.
    And the Treasury Department, as you know, is very much 
involved with us with advice from the Federal Reserve. But the 
Treasury Department is very much involved with us. But as it 
stands now, it is a provision. It has real commitments, and it 
is enforceable under the agreement as it stands right now. So--
--
    Senator Stabenow. Let me just--my time is running out.
    It is a negotiation. And so the question I would have, as 
just a quick follow-up is, did the United States have to 
provide concessions on our end to be able to get to the point 
of what you are talking about?
    Ambassador Lighthizer. So let me say first of all, with 
respect to the actual language, I am happy to sit down with the 
Senator and just show you the language and you can tell me, 
give me your opinion, and I would like to have your opinion, 
because you are a leader in this area, number one.
    Number two, yes, this is a negotiation. The focus of the 
negotiation from the Chinese side is the removing of 301 
tariffs. If that is the concession, then that is something that 
is under debate. In addition, they have some specific market 
access provisions that we also are considering.
    The Chairman. Senator Cornyn, and then Senator Cantwell.
    Senator Cornyn. Mr. Ambassador, let me ask you a question 
about the USMCA, and then I would like to talk about the WTO 
briefly.
    According to my calculations, the administration could send 
over the proposed USMCA for congressional action by mid-April. 
And I just, one more time, want to encourage you--first of all, 
to congratulate you and the administration for successfully 
negotiating this deal, which I support, but also to encourage 
you to keep working closely with us to make sure that what you 
send us in mid-April is something we can pass. It is very, very 
important, as you know, and so I look forward to working with 
you on that.
    And that is not a question. I guess that is a statement.
    Secondly, let me just ask you a broad question about the 
WTO. If in fact--I mean, this is like the Articles of 
Confederation. It is a consensus organization. We found out 
that did not really work very well for us, and it does not seem 
to me that the WTO is working very well as currently 
constituted.
    You say it is not a negotiation forum. It is more a 
litigation forum. But then, once the disputes are decided, 
assuming we have an Appellate Body in place, then there is no 
real compliance with what the WTO orders.
    And if someone can game the system, a country can game the 
system, by identifying themselves as a developing country and 
reduce the number of items that they need to comply with--let 
me just ask you the broad question. Why is the WTO still 
relevant?
    Ambassador Lighthizer. Well, thank you very much.
    I mean, that is a fundamental question. Let me say first of 
all, thank you for your comments about USMCA. I think it is the 
best trade agreement we have ever negotiated, and I think that 
is true with respect to most of the things that members have 
come to me about, for a lot of reasons. And I do want to get it 
up here as soon as we can, consistent with the prerogatives of 
the House and the Senate. And we are working very hard to have 
that get done.
    So the next question is the basic question on the WTO, 
because we had these conversations. What is the WTO? So it is 
the Council of Ministers, and then it is something called the 
General Council, which is like all the Ambassadors from the 
various countries, and it is out there. And then it has a bunch 
of committees. And those committees deal with everyday problems 
on a regular basis, and they solve some of those problems, and 
they interpret the negotiations, and they interpret the 
agreements, and they avoid problems. And this is an important 
function, because I think people tend to just look at the big 
picture.
    The fact is, things are going on on a regular basis that 
are diffusing problems, interpreting things, and moving people 
towards consensus. So there are good things going on there.
    The problem that I have, as you say, is because of a 
variety of changes that were made in the mid-1990s in the 
Uruguay Round, it has morphed from really a forum where we 
ought to be sitting down negotiating how to open up trade to a 
litigation forum. And so you have lots and lots and lots and 
lots and lots of litigation. And because of that, you find 
people who will not make concessions because they realize if 
they sue the United States, for example, they might have an 
Appellate Body give them something that they would have to pay 
for or could not otherwise get from the United States. And 
there are lots of examples of this.
    So it is a problem. And it is made more difficult by the 
fact, as you say, that it is a consensus organization. How do 
you end up moving a consensus organization forward when the 
beneficiaries would have to concede their advantage? And that 
is a fundamental problem.
    So for me, one, the dispute settlement thing has to be 
sorted out, and we can talk about that separately. But what we 
have tended to see is--and I think the way forward for the WTO 
is, you take small groups of countries that actually have 
something in common, that are willing to take on extra 
obligations, and those countries get together.
    Like, for example, in the digital trade that the ranking 
member spoke about. So you have a group, in that case it is 70, 
and we can talk about whether it is being done properly or not. 
And those people get together and they say, ``We will take on 
extra obligations, and we will just exclude the rest of these 
people from it.'' And you try to use that kind of, if you will, 
sort of plurilateral approach.
    So I guess I would say three things. One, we are doing some 
real things there. It is not like it is just a waste of time. 
There are real things going on on an everyday basis.
    Two, we have the dispute settlement process, which we have 
to worry about, which is quite troubling to me.
    And then, three, we are probably moving more in the 
direction of the negotiation forum of this plurilateral thing.
    And there is another thing that is troubling to me that I 
want to work with members on, and that is--I will be very quick 
about this and talk about it more if someone else cares.
    There is a situation where somebody joined the WTO in 1950. 
They took on certain obligations. They can keep their tariffs 
at a certain level. We find ourselves 70 years later--the whole 
world has changed. They are big, they are rich, or whatever.
    They still have locked in what they did in 1950, and there 
is no way to get them to change it, because we are in the 
position where we have, over a period of time, lowered our 
tariffs way down. And it is hard to figure out a way to put 
pressure on those people so that they will change their tariffs 
and non-tariff barriers.
    The Chairman. Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman.
    I thank you and Ranking Member Wyden for holding this 
hearing. I actually think this is the hard work of trade. And I 
think--if you ask me, we could spend a lot of time on this 
subject.
    We should. We should spend a lot of time. In fact, I find 
that more important to how we move for the future. But I come 
from a part of the world where trade--we are one of the most 
trade-
dependent States, and I guarantee we were trading with China 
before Lewis and Clark showed up.
    So we want access, and we appreciate all the things that 
you just said. So I think I spend every day sending you a 
letter about--whether it is cloud computing or agriculture, 
access or--I do appreciate your trilateral meetings with Japan 
and the European Union with the United States, because I think 
that is something I agree with the administration on, that you 
can continue to put pressure on the larger China discussion by 
bringing more people to the table. I would be bringing more 
people to the table.
    On that point, I appreciate your testimony. I wanted to ask 
you, given this discussion, and for somebody who wants market 
access, and sees--I guess that is where I disagree with the 
administration in this context. I appreciated that the last 
President wanted to increase exports by 50 percent, and he set 
that goal. He did not reach it, but I thought it was a great 
goal and that we should keep doing that.
    This committee pushed through that Trade Enforcement Trust 
Fund in part of the Customs bill, and then you have been able 
to use that Trade Enforcement Trust Fund to hire more lawyers 
to successfully challenge China's tariffs on wheat and rice at 
the WTO. Why is that not more the direction that we need to go?
    If so much more of the economy is outside the United 
States, and we are very good at growing things and 
manufacturing things, why are we not spending more time winning 
the day and putting the tools towards trade to win the day?
    Ambassador Lighthizer. Let me see. First of all, I want to 
commend you for your leadership on the Trade Enforcement Trust 
Fund. It is extremely important to USTR. And when you look at 
the enforcement things we do and how much of our budget is 
spent on it--a small budget, but how much of the budget is 
spent on enforcement is a matter of debate, right? Because 
almost everything that I do I look upon, more or less, as 
enforcement, as you know.
    But that trust fund is the reason we can bring so many of 
these cases. It is the reason we have people who speak Chinese 
and can read the Chinese papers and the Chinese regulations and 
help us interpret those and put those into legal filings and 
briefs. So it is a real world benefit to us.
    And I guess I do not--I agree with you and the committee 
completely on the issue of enforcement. I do not think that the 
enforcement is--I think enforcement is basically opening up 
markets. And I think what the President has done, and what he 
has had me do, in using some of these tools to take actions 
against other countries--the real objective is to get market 
access. It is to get reform.
    So if you look at China as the principal example, our 
objective is to get better access and reform in China, and 
really to work with reformers who are in China who want to have 
pressure to reform their own system. So the trust fund is 
extremely important. We use it, I think, very efficiently. We 
would be in dire straits without it, and we use it on 
enforcement, and most of that enforcement is really directed at 
getting more market access, whether it is the 301 kind of 
action we are talking about or all the WTO cases. They are all 
designed for that purpose.
    I think relying solely on the WTO litigation has its flaws, 
because you will win cases, as you know, and in fact, you are 
the absolute expert on this issue of winning cases for years 
and years and years and years and years and not getting real 
outcomes. Having said that, in your particular case with 
Boeing, we are close. I think we are close to getting a really 
important outcome. But it has been a long time coming.
    Senator Cantwell. Well, I guess I would say I look at this 
as the first line of action. And when I look at the tariff 
situation, I look at it as throwing down in such a major way. 
This polysilicon issue with REC is a perfect example, not even 
started by this administration; started by the last 
administration. And I do not even know what year we are in, 
year 6 or something. And I am not sure we have made--I am sure 
it is on the table in your negotiations, and you are talking 
about it. But that is where tariffs got us. We have fewer and 
fewer employees at a polysilicon facility because we could not 
come up with a path forward.
    So I am just saying, to me, if us giving you funds helps 
you hire the lawyers to bring up these cases and get them 
going, then I am all for it. Because I just think so much more 
of trade is going to be outside the United States, with 
developing countries who are not going to necessarily play by 
the rules. And making sure we call people out on that in the 
broadest possible fashion to start that discussion, I just 
think, is helpful in this access issue.
    So thank you.
    The Chairman. Senator Thune would be next, but Senator 
Casey will take his place, and then after Senator Casey, 
Senator Portman, unless Senator Thune returns.
    Senator Casey. Thank you, Mr. Chairman.
    Mr. Ambassador, thank you for being here, and thanks for 
your service.
    I appreciate the fact that, with your work, you have been 
leading an effort to confront China, frankly in ways that are 
overdue, and we are grateful for that. I am also grateful for 
the time you have spent with individual members of the 
committee, like me, to talk about these issues and to consult, 
especially on China and the 301 investigation.
    I want to start there with regard to the scope of the 
negotiation so far. Based upon what you have said today--and I 
think this is probably a pretty good list of the issues, and if 
there is anything else, please add to this. In terms of the 
scope, you talked about intellectual property, technology 
transfer, agriculture, market access, currency--that is at 
least five. And I am assuming state-owned enterprises are also 
part of it, but is there anything else in terms of the scope of 
your negotiation so far?
    Ambassador Lighthizer. So I would say--just in terms of 
scope, I would say that we mentioned currency, we have 
mentioned most of the things here. One thing we have not 
mentioned is services. The services--there are a lot of 
specific access problems we have in the services. It is 
extremely important to the U.S. economy and an area of real 
genuine U.S. competitive advantage, we believe.
    And I would say the final thing is non-tariff measures. And 
non-tariff measures are--I do not want to say this, but sort of 
a hodgepodge of a lot of different problems that we have. But 
in that category for us is the very important issue of 
subsidies that China uses, right now at least, to create excess 
capacity in a whole variety of areas.
    But there are a lot of other specific things under, 
particularly services and non-tariff measures. But that is kind 
of the universe.
    Senator Casey. And second, I guess the goal, obviously, is 
to enter into an enforceable agreement.
    Ambassador Lighthizer. Yes, sir. Absolutely.
    Senator Casey. And the basis of my question is really about 
what the involvement of Congress would be in that. And so I 
guess the question I want to ask about today with regard to 
your commitment is, do you commit to give Congress ample time 
to do three things: read, review, and evaluate this agreement 
before entering the United States into this legally binding 
agreement with China, if and when it would be in place?
    Ambassador Lighthizer. So I would say first of all--as you 
well know, Senator--this is not an agreement where we are using 
TPA. And I know we have talked about that and you are aware of 
that. So a lot of the obligations we would have under TPA, we 
do not have to follow.
    If we have an agreement--and once again, it is a big if--
this will be in the nature of settling a trade dispute that we 
have, which trade dispute was brought under the auspices of 
section 301.
    So as we move forward, we will have an agreement. I am 
happy to consult with members. There will by no means be 
secrets in any of this, right? I mean, everything we have will 
be open and public.
    And as we move forward, I am happy to sit down with members 
and show them. How we will make it public, I do not know yet. 
But it will be a public agreement. It is in no way private. 
When we enter into it, you know, will be when the President 
decides that we have a package that, in his opinion at least, 
is a great package.
    And what I view as my obligation is to move forward with 
Senators who are particularly interested in this, and sit down 
with them on a regular basis, and tell them precisely where we 
are on these various positions, and the precise language, 
right? I mean, I cannot operate a negotiation in public, of 
course. But I can certainly sit down with Senators who are 
interested and show them exactly where we are on all these 
provisions, and what we expect to do.
    It is fair for you to say, ``Well, I want to know where you 
are when you are close to getting an agreement.'' And it is 
fair, and we will do that. We will undertake to make sure that 
you are aware of that, and I will sit down with you when we get 
to that point.
    Senator Casey. Would the commitment then be--and I want to 
characterize it the right way. But would you commit to formally 
consulting with Congress?
    Ambassador Lighthizer. I am not quite sure what that means. 
I do not go a day without talking to three or four Senators or 
members of the House, usually 10.
    So I mean, I view myself as consulting on a regular basis 
with Congress. I think the idea of saying, should we sit down 
with the chairman and ranking member of this committee and Ways 
and Means when we get very close to the end, I think that is a 
very constructive thought. And I want to think about how best 
to do that.
    But in terms of you, personally, and your involvement, I 
will sit down and tell you where we are. As we get forward, as 
we get close, I will call you and say, ``We have to sit down 
again.'' And, if you have time, we will do it, and I will go 
through it with you. But it may be that it makes sense to do 
something with the chairman and ranking member of the two 
committees of jurisdiction in some organized way. And I want to 
think about that. I think that is a very constructive thought.
    The Chairman. Senator Portman, and then in 5 minutes, we 
will turn it over to Senator Whitehouse.
    Senator Casey. Mr. Chairman, could I make one more--not a 
question, just one quick statement.
    The Chairman. Yes.
    Senator Casey. I want to make sure that as part of this, 
both committee staff--and obviously our staff are engaged 
directly, so I ask for your cooperation on that.
    Thank you.
    The Chairman. Yes. And then it will be Senator Whitehouse 
after Senator Portman. I will be right back.
    Senator Portman. Bob, thank you for being here again.
    And on China, as you know, I appreciate the fact that you 
are so focused on that, because it is incredibly complex, 
incredibly important, and I strongly support us landing that 
plane, and I hope you have success in doing it. Tell us today 
what you think the timing is on China.
    Ambassador Lighthizer. Well, thank you very much, Senator. 
I appreciate the comments. I appreciate your leadership in this 
area, and I walk by that picture every single day, and I look 
at all these ugly former USTRs, and there you stand right in 
the middle of----
    Senator Portman. Yep. The ugliest of all. [Laughter.]
    By the way, 13 years ago, I think I was sitting in that 
exact seat when Chuck Grassley was chairman of this committee 
talking about the WTO. So some things never change--I mean on 
China.
    Ambassador Lighthizer. So I would say we--Secretary Mnuchin 
and I--were on the phone with China last evening. We are going 
through a lot of issues--very, very complicated issues.
    If we have an agreement it will be a 110/120 pages. It is 
very, very detailed, very specific. As I say, I am happy to sit 
down with members and talk it through, particularly members who 
have specific issues.
    We are working, more or less, continuously. Our staffs are 
getting drafts back and forth. So this is a process that is 
ongoing. I will be on the phone again with them tomorrow. As I 
said, I was on the phone up to 9 o'clock----
    Senator Portman. Your thought is by the end of this month?
    Ambassador Lighthizer. Well, we will see. As you know 
probably more than most members because of your experience, you 
know I do not know when something is going to happen. We are 
going to have a good result or we are going to have a bad 
result before too long.
    But I am not setting a specific time frame, and it is not 
up to me. I work as hard as I can, and the President will tell 
me when the time is up, or the Chinese will.
    Senator Portman. So I noticed--I looked at the cases I had 
filed in WTO when I was USTR. They were all about China. Every 
single one involved China. And it continues to be our number 
one issue on this committee.
    On USMCA for a second, I think it is an improvement over 
NAFTA. I think you have negotiated a good agreement. I am 
supportive of it, as are a lot of my colleagues.
    However, 232 is a problem, in two ways. One, it is tough 
for them to ratify with the existing 232. Second, this 232 on 
autos that is being considered--the President now has a report 
from Commerce. I know that is not your leadership, but I would 
hope that you would communicate back the importance of not 
moving ahead with a 232 on autos, in part so that we can move 
forward on other things like USMCA.
    I cannot imagine with what I am hearing from the Canadians 
and Mexicans already on steel and aluminum, that if we did 
autos, we could have a successful completion of USMCA here on 
the Hill, and that they would be able to ratify it. Any 
response to that?
    Ambassador Lighthizer. Well, I would say I will certainly 
take back what you tell me to the President, as I always do. 
The 232 car thing is complicated, and you probably more than 
any other member know where my own position is, where I am, and 
how I am working through it.
    It is a very serious issue, the auto industry and what has 
happened to the U.S. auto industry.
    With respect to USMCA, and Canada and Mexico on cars, there 
are provisions that will take them out of it, whatever we do. 
But that does not in any way diminish your overall point. I 
just want to make that technical point.
    And on steel and aluminum, as you know, we are in 
discussions with them and trying to find a way out of that 
dilemma for them and for us.
    Senator Portman. Finally, WTO, just quickly.
    As you have expressed, there is a lot of frustration. You 
listed five specific issues we need to address. Again, I 
approve of every one of them. The reform agenda is incredibly 
important.
    It is a rules-based body that we cannot live without. In my 
view, things would be even worse without having a WTO there. 
Having spent many, many hours 50,000 feet over the Atlantic 
trying to negotiate Doha, you know, back in the day--very 
frustrating. We could not get that done.
    It does not mean we should not move forward again with 
these other agreements. You talked about e-commerce today. We 
talked about the fisheries agreement. We did do a trade 
facilitation agreement with China that was very positive.
    Here is my question to you, and it is really a very simple 
one. Is it time for us to look at the consensus idea fresh and 
to say, ``Does consensus really work?'' I mean, there has 
always been a fear among the major trading partners, including 
us, that if it was not by consensus, that somehow we could be 
disadvantaged. On the other hand, consensus is not working.
    Let us just be honest. You cannot get 98 percent of the 
trade in the world, all those countries, to agree on hardly 
anything anymore, particularly as it relates to reforming 
dispute settlement.
    Is there any interest in looking at this issue and trying 
to get some allies to join us in looking at whether it should 
be not 
consensus-based, but based on some sort of a--if it is not 
majority, maybe it is a super-majority, to make decisions?
    Ambassador Lighthizer. Well, that is a huge question, and 
it was perfect timing. You got me to use up most of your time.
    So, I mean, I am happy to get involved in that 
philosophical argument. I do not ever want to be in a 
position--to be honest, I would never recommend that we are in 
a position where a majority of any countries get around and 
say, ``We are going to make rules that will have a negative 
effect on the United States.''
    It is troubling to me that other countries would use this 
consensus to protect--in an unfair way--their own economies. On 
the other hand, I would never recommend anyone to say, let us 
have two-thirds of the people in the world sit down and vote 
and make rules that would have a negative effect on the U.S.
    So to me, the consensus is like a--it is a dilemma. As long 
as we are required to be in the consensus, well and good. I 
just do not like other people having it. And my guess is, they 
all have the same view. And so I think the solution is probably 
to try to do something to reform the things we can reform, and 
then move in the direction of, like you say, the e-commerce.
    There are some things you can do on a plurilateral basis, 
and make real headway on. And those things we ought to do.
    Fisheries is kind of trickier, because if 80 percent of the 
people say they are going to do something sensible on 
fisheries, and the other 20 percent, like China for example, go 
out and get--it is kind of trickier on fisheries.
    But some things like digital trade are clearly a kind of 
thing we can move on in a plurilateral way.
    Senator Portman. Thank you, Chairman Grassley.
    The Chairman. Senator Whitehouse?
    Senator Whitehouse. Mr. Lighthizer, welcome.
    Since you are talking about fisheries, we are headed for a 
planet that will have more plastic waste in the oceans than it 
will have swimming fish by 2050 if we keep things up. And with 
the very energetic support of Senator Sullivan of Alaska, the 
Congress passed the Save Our Seas Act on marine plastic debris. 
It passed in the Senate unanimously. When we went up to the 
oval office for the bill signing, the President lamented what 
he called, I think, other countries using our beautiful oceans 
as their waste dumps or their landfills. I do not remember the 
exact words he used.
    But the President was quite engaged on this. So you have 
bipartisanship. You have the support of the President, and I 
think we actually have a win-win here, because most of the 
plastic waste flowing into our oceans comes from five 
countries, five Asian countries that have been identified. And 
90 percent of it comes from 10 rivers, which provides a really 
specific focus for various methods of trying to avoid it.
    The problem appears, more than anything else, to be a 
failure of upland waste management in those countries. And so 
something goes into the gutter, and then it goes into the 
creek, and then it goes into the stream, then it goes into the 
river, and maybe 2 years later it is in the ocean, because 
nobody bothered to clean it up. And we have very good waste 
management companies.
    So because this is an overseas problem, we hope very much 
that, because it has the President's support we believe, we 
hope that you will be leaning in with these other countries in 
the trade discussions that you have with them. Try to get them 
to clean up their act on their own upland waste management, 
because we pay the price of plastic-fouled seas, and they get 
the benefit of not having to have their businesses and their 
people pay for cleaning up their waste the way we do.
    So, could you tell me where this falls in your world? Is 
this something you have heard of before? Is this something that 
is a priority for you? Is it somewhere in between? Where are 
you on using your authority to try to solve this marine plastic 
waste problem?
    Ambassador Lighthizer. Well, thank you, Senator.
    And thank you for your leadership too, because we have for 
the first time, I believe ever in a trade agreement, a 
provision on this in USMCA. And it----
    Senator Whitehouse. ``To take measures to prevent and 
reduce marine litter'' is the phrase. So I hope that that will 
be enforced and there will be metrics for it.
    But my opening question was more generally where this falls 
as a priority for you.
    Ambassador Lighthizer. So anything that the Senators of 
this committee or members of the Ways and Means Committee, 
other members of the Congress bring to me as a priority, is a 
priority. So I guess I do not know quite how to rank it. It is 
a priority if you say it is a priority. I bring up issues that 
the members want me to bring up.
    I have a lot of priorities, right? And I guess if I had to 
rank them, I would say jobs for workers, ranchers, and farmers 
is kind of like my first thing. And then I move--everything 
else kind of flows from there. Those are the things that I 
focus on.
    Senator Whitehouse. Okay. Well, we will do what we can to 
make sure that this stays high in the priority chain, and let 
me ask you more specifically----
    Ambassador Lighthizer. You have done a very good job.
    Senator Whitehouse. Well, Senator Sullivan has done a 
really good job. I want to give him credit, because he has 
access to more doorways in the administration----
    Ambassador Lighthizer. He has spoken to me about it.
    Senator Whitehouse [continuing]. And he has knocked on 
virtually all of them.
    With respect to the U.S.-Mexico-Canada agreement and that 
language about the obligation of each country to take measures 
to prevent and reduce marine litter, what metrics are being 
used to facilitate and enforce this provision? As you know, we 
live in a world in which there is often very agreeable language 
thrown into these agreements, and then there is never any 
enforcement, never any metric, and it evaporates in practice.
    What is the metric that will drive that ``prevent and 
reduce marine litter'' provision?
    Ambassador Lighthizer. Well, I would say first of all that 
it is important that we, in fact, have it in there, that we 
pass USMCA. So I will make that pitch, because people will be 
disappointed if I do not.
    I would say I think realistically the way this is going to 
have to be enforced is like a lot of other provisions. That is 
to say, people for whom this is a high priority are going to 
have to come to me, or to the USTR, and say, ``We have a 
problem; we have an enforcement problem.'' And then I am going 
to have to bring consultations first, and then go through the 
dispute settlement process with both countries.
    And I certainly pledge to do that. I expect to do it, and I 
expect members to hold me accountable for it, you know, for 
doing that. I think also it is the kind of thing----
    Senator Whitehouse. Well, my time is expired. So I will 
just accept here your invitation to keep after you.
    Thank you.
    The Chairman. Senator Lankford?
    Senator Lankford. Thank you, Mr. Chairman.
    Well, thanks for being here again, and for the engagement 
on this issue. WTO has just ruled against China that they have 
consistently exceeded their ag subsidies that are allocated, 
which they have done for years. That is something the United 
States has worked with WTO on for several years now, have won 
that.
    And now the challenge is, if China appeals that and it goes 
to the Appellate Body and we do not have enough individuals on 
that Appellate Body once it goes into next year, what happens 
then?
    So my question for you is, where are we now that we have 
just won a ruling from the WTO on ag subsidies with China and 
where this goes if it goes to the Appellate Body and it extends 
out past next year and we do not have enough people to have a 
quorum there at that point?
    Ambassador Lighthizer. So I would say first of all, with 
respect to that case, it was a big case, as you know, a major 
win, and we have another case that is floating out there, which 
is also important--that is their tariff-rate quota management, 
which I know you also are aware of and involved with.
    So it is a major win. I should also say that in the context 
of our discussions with China, we are trying to resolve this 
case in a way that we think achieves our goals and avoids the 
possibility of an Appellate Body decision. It is, of course, 
not impossible that you go to the Appellate Body and lose the 
case also.
    So I would not necessarily assume that you are going to win 
just because you go to the Appellate Body.
    So my hope with respect to that specific case is that we 
can work it out in the context of this negotiation. And we are 
having those discussions, and that is my objective.
    In terms of the general question of what do you do, how do 
you get reform? That is a big question, as you know. And if you 
are not willing to be bold and use the only leverage you have 
with the WTO--which is to say that we will not approve the 
appointment of Appellate Body members without reform--I do not 
know any other way to do it.
    And I could go through--I know you know well, the Appellate 
Body does not follow its own rules. It is creating a 
jurisprudence, and there was never any contemplation that this 
would be part of this process, right? The whole--I should take 
a step back for members who have not spent a lot of time with 
this.
    The notion was, you would have specific disputes decided by 
a panel, and the Appellate Body would come in in 90 days and 
say, okay fine. Is there a crisis here? If not, the panel would 
decide; there would be no jurisprudence.
    What has developed over time is in fact these things. The 
Appellate Body takes years. They have developed their own 
jurisprudence. So they will cite their own things. And the 
effect of this has been to create obligations that we never 
agreed to, and to take away rights that we bought.
    So what you are saying is, what do you? Your creating a 
problem to force reform has to have a short-term impact on an 
important matter. I am saying I am trying to deal with that 
matter in the context of these negotiations.
    But that does not in any way obviate your more important 
point.
    Senator Lankford. But the bigger issue is, your opposition 
is not to the Appellate Body. It is to how it is actually 
operating. So the hope is to be able to get it back to 
operating functionally and consistently and predictably, rather 
than sporadically, and to be able to get it back to full 
functioning.
    Ambassador Lighthizer. Yes. I mean, we clearly need reform. 
And there are a whole lot of things that I could talk about at 
the appropriate time, whenever anybody asks me, that are major 
problems. Every other country, or almost every other country, 
has made the same point. It goes to why we are not a 
negotiating body anymore, the WTO, but we are a litigation--I 
mean, these are all sort of linked things.
    I have, you know, three former WTO Directors-General who 
even 15 years ago were saying this is a bad trend. It is a 
problem, and we have to get away from it. It is a major, major 
change from what the WTO was supposed to do. And the result is, 
we do not have rounds. We are not making any real headway.
    I mean, it is a very large, fundamental problem. And I 
think it is generally recognized to be such by the thoughtful 
members.
    Senator Lankford. Right.
    Ambassador Lighthizer. I mean members of the organization.
    Senator Lankford. So let me bring one thing up quickly on 
this, what you and I have talked about: the 301.
    I do appreciate that in the first two tiers of 301 there 
has been an exclusion process in place, that there has been a 
dialogue, and you and I have discussed before that, if it moves 
from 10-percent tariffs to 25-percent tariffs, there will be an 
exclusion process at that point as well.
    But I would tell you, some Oklahoma companies that do a lot 
of trade and manufacturing are concerned that there may be a 
point where the 10-percent tariffs are left in place, and there 
is still no exclusion process. So there has been an exclusion 
process for tiers 1 and 2, but there never would be for tier 3. 
And I would just say that is inherently inconsistent for how we 
have handled things in the past, and we can continue that 
conversation in the future.
    Ambassador Lighthizer. I appreciate that.
    The Chairman. Senator Hassan?
    Senator Hassan. Thank you, Mr. Chairman, and thank you, Mr. 
Ambassador, for being here today.
    The section 301 investigation undertaken by your office 
into China's trade practices identified several serious 
concerns facing American businesses and workers, to be sure. 
You have stated previously, and again in this hearing, that 
your office has made significant progress in securing an 
agreement with China. However, we have yet to see any draft of 
this agreement.
    Ambassador Lighthizer, there are businesses in my State 
that are having to make decisions now about their upcoming 
investments and whether, for instance, to move their supply 
chains. These are critical decisions that are going to impact 
these businesses, their employees, and our economy for many 
years to come.
    What would you say to the businesses in my State that are 
trying to make important decisions about the future of their 
companies with little to no indication from this administration 
on the status, not to mention the content, of a potential 
agreement with China?
    Ambassador Lighthizer. In the first place, I am, of course, 
sympathetic to people who are in the real world and have to 
deal with these matters. I am also sympathetic to the, in my 
opinion, thousands of Americans who have lost their jobs 
because of unfair trade practices by China. I am sympathetic to 
all the companies----
    Senator Hassan. I understand your sympathy. Sympathy does 
not go very far, though, sometimes. So I am talking about 
transparency in a process that would allow the American people 
and American businesses to understand where we are with this.
    Ambassador Lighthizer. So we are involved in a negotiation. 
It is not going to be any more transparent than it is. It is 
just the nature of a negotiation. It is not something you can 
negotiate with another country in public.
    I am happy to sit down, of course, with the Senator and go 
over any of these matters. But I am not going to make public 
statements about where we are and specifically talk about terms 
and put text out, because I think it will make it more 
difficult----
    Senator Hassan. So could you at least give us a sense of 
timetable and framework so that people would have a sense of--I 
have businesses that need to make $50-million investments, or 
not, depending on whether this agreement gets done in the next 
month or not.
    Ambassador Lighthizer. So I am happy to do that, Senator, 
of course. In terms of time frame, our hope is that we are in 
the final weeks of having an agreement, but I am not predicting 
one. There still are major, major issues that have to be 
resolved. And if those issues are not resolved in a way that is 
beneficial to the United States, we will not have an agreement.
    So it is one of those things. And there is nothing harder 
to predict than when you are going to end a trade agreement, 
right? These are sovereign countries that have their own 
interests.
    Senator Hassan. Right.
    Ambassador Lighthizer. So I cannot predict success at this 
point, but we are working hard, and we have made real progress.
    Senator Hassan. And you think you are getting towards an 
end point, one way or the other?
    Ambassador Lighthizer. Yes, I think that is correct; yes. 
And in terms of structure, because that is a fair statement, 
what we want to do is have real provisions that specifically 
and clearly preclude forced technology transfer. And that is 
complicated, as you know well, because we spoke. And then it 
goes down to the local level. And you know a lot about some of 
the horror stories that American companies have had.
    We also have to have real detailed protection for U.S. 
intellectual--everyone, not just the U.S., but I care about the 
U.S. intellectual property rights. China does not really have a 
system to protect intellectual property. We have to have that 
in place. And that could--just to give you a sense--that could 
be what you would consider to be sort of 20 pages of statute.
    Senator Hassan. Right.
    Ambassador Lighthizer. I mean, it is difficult, complicated 
stuff.
    We have currency provisions, which I expect to be in there, 
and I talked a little bit about that earlier. We will have 
specific provisions with respect to various people who have--
various companies who have problems with access on services. 
And there is a whole variety of these that we are dealing with 
with members.
    We will have a whole variety of issues on agriculture that 
we are working our way through. And then we will have what are 
called non-tariff barriers and non-tariff measures, which are 
kind of a hodgepodge of complicated things.
    Senator Hassan. Okay.
    Ambassador Lighthizer. And then an enforcement provision. 
So that is more or less the structure of it.
    Senator Hassan. Thank you. And I appreciate that, and we 
will likely follow up with you for a little bit more detail 
around that.
    I want to shift gears a bit and discuss another area of 
negotiations where it is essential that China upholds its 
promises. In December, President Trump tweeted that one thing 
to come out of his meeting with President Xi in Buenos Aires 
was President Xi's ``promise to me to criminalize the sale of 
deadly fentanyl coming into the United States.''
    Just last month you testified before the House Ways and 
Means Committee that this is ``something that the President 
views himself as having a commitment on'' and ``may very well 
be something that we end up writing into this agreement.''
    I have concerns that you seem to be backtracking from the 
President's assurance that this would happen. Given the level 
of importance this has for so many, will you commit that any 
final agreement will include this step which the President has 
touted as a game changer?
    Ambassador Lighthizer. So let me say, Senator, first of 
all, I am not backtracking from anything. Fentanyl is not 
something that people talk about in trade agreements, right? 
This is something that the President in a meeting with the 
President of China raised, made a very big issue about. And the 
President of China agreed with him.
    And then the question is, do we write it in the trade 
agreement? And my own preference would be that we do. But 
whether it is in the trade agreement or not, the President of 
the United States views himself as having a commitment, and he 
views this as something that is going to happen.
    Senator Hassan. I am over time, and I understand that. I 
will say that it seems to me that you all are being pretty 
creative in your use of the 301 process here with China. Almost 
500 people died in 2017 and in 2016 from overdoses of opioids 
in my State, most of which came from fentanyl. So I would ask 
you to identify this as a priority.
    Thank you, Mr. Chairman.
    The Chairman. Senator Daines?
    Ambassador Lighthizer. Could I just say, Mr. Chairman----
    The Chairman. Yes.
    Ambassador Lighthizer. I completely agree with you as a 
personal matter, but more importantly, the President completely 
agrees with you. He has exactly the same level of concern about 
this as you do. I assure you, I will talk to him in the next 
few days, and I am going to tell him that we had this 
conversation.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman.
    Bob, good to have you up here today. So you know I spent 
nearly 6 years working on the ground in China with Procter and 
Gamble back in the 90s. I ran Asia-Pacific for a software 
company for 5 years, most recently. I spent a lot of time 
working on business and trade in the region. But if I think 
about my home State of Montana--and there is an old saying in 
business, ``The main thing is to keep the main thing the main 
thing.''
    Our number one economic driver in Montana is agriculture. 
The number one cash crop for Montana is wheat. The number one 
livestock is beef. The largest market for U.S. beef is Japan. 
Eighty percent of Montana's wheat harvest goes overseas, most 
of that to Japan.
    So as we think about China in the moment, I applaud what 
you are doing; taking on the issues related to intellectual 
property, forced technology transfer, and so forth--that needed 
to be done, Bob, and I am grateful for your leadership there. 
My farmers and ranchers back home are very anxious, and they 
want to see results.
    So I think about the strategy as it relates to China, and 
then, stepping back and thinking about TPP and Japan, I am 
concerned at the moment about what is going on, and losing 
market share in Japan specifically. TPP provided a great 
opportunity for us to see significant tariff reductions. As you 
know, moving beef tariffs, import tariffs in Japan, from 38 
percent to 9 percent, to see a 45-
percent reduction in tariffs on wheat in Japan over a course of 
9 years for wheat--these are huge markets.
    And just yesterday, I was meeting with some of my barley 
producers. They have now lost contracts. They have lost malt 
barley contracts with Japanese clients, and they are very 
concerned.
    And so my plea is to move this to getting some results now, 
because the results we are seeing at the moment are losing 
market share. And when we lose that share to foreign 
competitors, it is tough to get that back.
    So the question I am asking here, then, for you is, when 
can we expect negotiation to begin with Japan, because that is 
a very important market for us. Now as part of helping the 
efforts here to remove the beef import ban in China that had 
been there for 16 years--we saw that removed. That is good 
news.
    And we need to get into the Chinese market long-term 
because of, certainly, the huge potential here for Montana and 
U.S. ag producers. But I want to come back to Japan for a 
moment because it is such a huge market force today, and we are 
starting to lose share. When can we expect to get a deal with 
Japan?
    Ambassador Lighthizer. First of all, on the broader 
question of China, I appreciate our conversations and your 
experience. It has been very helpful in terms of informing how 
we are operating here.
    So if we get a bad result, everybody will be blaming you 
now because I said that. But you have been very helpful, and I 
do appreciate your experience. That is number one.
    Number two, on the issue of Japan, that is extremely 
important. As you know, it is not just what is happening in the 
market now. It is what is going to happen when TPP is fully 
implemented----
    Senator Daines. Right.
    Ambassador Lighthizer [continuing]. Because we have a whole 
variety of competitors there, but also the European agreement. 
So we are--we have a real problem. We have a situation that is 
not good now, and it is going to get bad very quickly.
    Senator Daines. Yes. Well, that is the concern, Bob. As you 
know, we are now behind in Japan because our other allies here 
have signed agreements and are moving forward and receive the 
benefits of the tariff reductions. It is going to put U.S. 
producers at a significant disadvantage.
    And again, my malt barley folks were in talking to me 
yesterday, literally showing me contracts they have lost now in 
Japan.
    Ambassador Lighthizer. Well, I would say first of all, I 
want to have my staff contact your staff. I want to get 
information on the barley situation.
    Senator Daines. Yes.
    Ambassador Lighthizer. That kind of helps me make my case. 
I would say we began the process of TPA some time ago. It takes 
several months before you can get to the stage where you can 
negotiate. We are at that stage now. We are talking to the--we 
have spoken with--he calls it a prenegotiating, but we have 
spoken a fair amount with the Japanese.
    But this is a very high priority for me, and I think it is 
something--let me take a step back. So it will take a while to 
get an entire FTA, but my own view has been that we have to 
take care of the agricultural part of it and some other 
things----
    Senator Daines. Right.
    Ambassador Lighthizer [continuing]. So it is balanced at an 
earlier stage. Some Senators probably will not like that. Some 
will like it, but I think, because of the market situation in 
Japan, we have to move in that direction.
    I have talked to the chairman and the ranking member and 
others about this, and some other Senators----
    Senator Daines. I am out of time here, Bob. I think there 
could be a parallel path here of continuing work with the 
multilateral agreement here with Japan and a bilateral 
agreement here in other places.
    But anyway, I know you have a lot on your plate, but our 
farmers and ranchers are concerned with the results they are 
seeing here.
    The Chairman. Senator Cassidy?
    Senator Cassidy. Hey, Mr. Lighthizer, you have always been 
so responsive, and you mentioned to Senator Portman you speak 
to Senators on a regular basis. I am one of those. Thank you 
very much.
    One thing that is important to my State which has not yet 
been discussed is India importing shrimp. And since the EU has 
put phytosanitary restrictions upon Indian shrimp, they are 
flooding the U.S. market, which is negatively impacting 
domestic producers.
    Now if it was fair trade, that would be fine. But they 
subsidize--as you know--they subsidize their aquaculture. And 
so that subsidy with the restrictions ends up disadvantaging 
our folks disproportionately. I will note that if the EU finds 
their shrimp unsanitary, I am a little reluctant to have that 
shrimp in our State for health reasons. But that is almost a 
side issue.
    So with that kind of preamble and knowing that USTR just 
announced the termination of India's GSP status last week, what 
additional authorities would the administration consider, or 
feel as if it needs, to address this shrimp dumping issue?
    Ambassador Lighthizer. Well, I mean, I am generally aware 
of the problem with shrimp. We have laws in place, as the 
Senator knows, where you can bring cases, and this industry has 
availed themselves of them at the Department of Commerce on 
anti-
dumping. But also more importantly, in the case of India 
countervailing duty cases, in the event that you can show 
injury--and in this case, at least, there is a history where 
the shrimp industry has been able to show injury.
    If the Senator has specific ideas, I am happy to go 
forward. Generally in a situation like this, you are better off 
bringing litigation. As you know well, I brought a lot of this 
litigation over the years, and it is a very effective remedy to 
actual subsidies in this case.
    I do not know anything about the sanitary issue. I am happy 
to raise that with the Department of Agriculture, which I think 
has jurisdiction over that. And I am happy to do that, and I 
will do it to see whether there is some avenue with this being 
overlooked.
    Senator Cassidy. Now it seems as if, going to that point, 
it just seems like knowing that, it is difficult to do this. 
But it does seem a scenario in which a kind of all-of-
government response would be nice to have--FDA, for example, 
looking at the phytosanitary aspect of it. I do not know if a 
301 tariff would be adequate to get India's attention. But 
India, so far, has not paid attention to this.
    There are antibiotics and, allegedly, fecal material being 
found in the farms where these shrimp are being grown. And 
which, again, the EU finds objectionable. But to what degree 
could we hope for a coordinated response where, for example--I 
understand right now if there is a sanction, if the shrimp is 
found to be contaminated, it is a business-to-business 
transaction. This shipping business is then sanctioned.
    On the other hand, it really should go back to the farmer, 
because a farmer might be supplying several export businesses. 
And if you just sample and find this one is bad, but you do not 
sample this one, it is actually the originating farm which is 
the issue. Again, it is phytosanitary, not trade-related. But 
on the other hand, it ultimately involves trade, if you follow 
what I am saying.
    Ambassador Lighthizer. I do, Senator, and we are concerned 
with phytosanitary standards. Usually we are on the other side 
of it. We are objecting to other countries that are using them 
artificially as a form of protectionism.
    But in this case, I am happy to look into this. I do not 
know what the Department of Agriculture does in this situation. 
I am happy to look at it, and to the extent there are 
countervailing duty cases, I am sure that the industry is 
looking at them.
    We have had trouble. As you know, we have given notice that 
we are going to stop the GSP program for India, and it is 
because largely there have been a very large number of trade 
access problems that we have had on which they have shown 
really no interest in making improvement.
    So the President has given them notice, and that is going 
to go forward unless there is some change in the situation. 
This is an issue that I am happy to raise in that context.
    Senator Cassidy. Sounds great.
    One more thing. I have 30 seconds left. I will point out--I 
understand the USMCA does have something I have been interested 
in, which is trade-based money laundering. My understanding is 
the USMCA does have new provisions allowing for the two 
governments, Mexico and the United States, to collaborate more 
effectively in terms of looking at the financial aspects of it; 
if you will, correlating the invoice with manifest.
    We would love to work with you on that, because I think 
that is a way cartels move billions out of our country, and it 
is something that, again speaking of all-of-government, seems 
like it will take an all-of-government approach to address.
    The Chairman. Senator Thune?
    Senator Thune. Thank you, Mr. Chairman.
    Thank you, Ambassador. You know we sat down a couple of 
weeks ago and talked about trade and its importance to South 
Dakota's economy, and to our State's ag producers in 
particular. And as you know, I strongly support the 
administration's efforts to correct long-standing and unfair 
trade practices with countries around the world, especially 
China.
    But with two out of every three rows of South Dakota 
soybeans being exported, I am deeply concerned about the impact 
these retaliatory tariffs are having on our ag producers, which 
is why I firmly believe it is important for us not only to 
maintain the existing market access that we have, but to look 
at expanding market access for agricultural producers.
    And new or improved trade deals that help open markets, 
like those that are being discussed with the EU and Japan, I 
think would be a welcome and positive development for American 
producers who continue to face low commodity prices. So we have 
a lot of work to do with markets around the world, but I look 
forward to continuing to engage with you on these and other 
trade-related matters.
    I wanted to bring up the EU. They are notorious, as already 
has been alluded to, for imposing non-tariff barriers on 
American agricultural products in an effort to protect their 
domestic producers, something that I know troubles both you and 
me. While I am hopeful that you will be able to gain 
significant concessions from Europe, if history tells us 
anything, the negotiation is not going to be easy.
    So, given that ag seems to be a prerequisite for getting an 
EU trade deal through Congress but that EU officials continue 
to insist that agriculture is not on the table, tell me, just 
kind of handicap, what you think the prospects for success are 
in a deal with the European Union.
    Ambassador Lighthizer. Well, thank you, Senator.
    I would say I met with their trade commissioner last week 
and went through a variety of issues. And one of the issues, of 
course, was this--what you say--which is the United States 
cannot have a trade agreement with Europe that does not deal 
with agriculture. And their view is that they cannot have one 
that does. So as you say, well, we are at a stalemate. We will 
see how that develops.
    But from my point of view, I am completely committed that 
any FTA has to deal with agricultural products. We have an 
enormous trade deficit. We have a trade deficit of $15 billion 
a year in agricultural products with Europe, and it has nothing 
to do with economics, or competitiveness, or quality of 
products.
    It has more to do with protectionism, in my judgment. And I 
think we have to have some erosion of that, of those barriers. 
So this is something we have talked about. From their point of 
view, they have no mandate, because they have a variety of 
member states that just will not give him a mandate. So they 
have no mandate. They will not talk about it.
    There are some issues that we do talk about that are like 
in the aquatic area--nothing that would be of interest to you--
that are, because of peculiarities of where tariffs are, in the 
industrial tariffs area. But on the basic agriculture issue, we 
are at a complete stalemate with them.
    So we are working on other areas, with the realization that 
there is not going to be any FTA without agriculture, and that 
is just the provision. It does not even matter whether we 
showed--the Congress would never go along with us. So it would 
not make any difference whether we conceded or not. We would be 
a dead letter if we tried to come up here and do it. The 
members have made that very clear.
    Senator Thune. Thank you. I appreciate that and encourage 
you to continue to take the hard line in dealing with them.
    Section 232 tariffs--we talked a little bit about that 
with, particularly, Canada and Mexico. Now that we have 
concluded that deal, when do you see us intending to lift those 
232 tariffs on Canada and Mexico?
    Ambassador Lighthizer. So I am very much engaged in this 
issue. I realize how important it is to members, both because 
of the retaliatory tariffs but also because of the effects that 
market access has on prices of downstream items in the United 
States. It is something we are fully engaged on.
    As you know, Senator, my view is that we have to have a 
solution with Canada and Mexico that protects the President's 
basic program, which he believes and I believe has been a very 
successful program. That is on steel and aluminum. But I think 
there is a sweet spot there that allows us to have a solution 
that satisfies Canada and Mexico and also maintains the basic 
integrity of the program.
    And it is a very high priority. I have ongoing negotiations 
with both of them on this subject. So you know, we are moving 
forward. But I find myself constantly in the position of not 
being able to predict when the end of negotiations is going to 
be. But I can assure the Senator they do eventually end, 
because a bunch of them have.
    Senator Thune. All right, I am out of time. I will submit a 
question, Mr. Chairman, for the record.
    The Chairman. Senator Isakson?
    Senator Isakson. Thank you, Mr. Chairman.
    Ambassador Lighthizer, thank you so much for the 2 hours of 
your time you have given us and the job that you are doing.
    The problem I have is, after 2 hours of listening to a 
bunch of members of the Senate, it is pretty hard for me to say 
anything that is going to be memorable for you to take home. I 
came up with something about five speeches ago.
    I am going to talk to you about the four Cs of trade in 
Georgia. Are you ready for this--cars, cans, cinema in China, 
and chickens. Got that? Cars, cans, cinema in China, and 
chickens.
    Cars and cans obviously are big products in our State. We 
are an agricultural State. A lot of food is sold, processed and 
sold, in cans. A lot of beverages and soft drinks are done in 
cans. The 232 tariffs have been tough. And you have heard me 
talk about this before.
    Do you have any idea--I am hearing concerns that they are 
going to be replaced by some type of quota, or replaced by 
other types of burdensome expenses, or just increase 
themselves. Do you have any idea of the longevity of the 
current treatment of 232 or whether we can expect to be able to 
compete without that type of burden?
    Ambassador Lighthizer. So, thank you. The cinnamon, I have 
to confess that that is memorable now. But I guarantee, when I 
think about chickens and I think about cars, you are one of the 
ones I think about. So that I can guarantee, and there are a 
couple of others on this committee whom I also think about a 
lot on cars, but a couple others on chickens.
    So I would say the President's view is--and I share this 
view--the 232 tariffs on steel and aluminum are working, are 
necessary. And I would say, particularly in the case of steel, 
we would be in dire straits if we did not have them. Those 
industries would be very vulnerable.
    Having said that, it is a legitimate question as to what we 
are going to do with respect to Canada and Mexico, which I 
think is the core of your question. You raise this issue of 
quotas. So the question becomes, how do you relieve the burden 
of tariffs on steel and aluminum on Canada and Mexico and still 
maintain the integrity of the program?
    So there are a variety of tools that are available. One of 
those tools is that you put in place a historic quota so the 
product can come in under the normal course, not pay a tariff, 
but that Mexico and Canada will not take advantage of the 
program in a way where all the benefit of the program goes to 
them instead of to the U.S. And all I am saying is, I think 
there is a sweet spot there.
    Quotas are not necessarily good or bad. It depends on the 
level of the quota, right? If the quota is at the right level, 
it is not troubling for your downstream people. If it is at the 
wrong level, it is very troubling.
    So what I am trying to do is just have a practical solution 
to a real problem, and that is to say, get rid of the tariffs 
on these two. Let them maintain their historic access to the 
U.S. market, which I think will allow us to still maintain the 
benefit of the steel and aluminum program. That is more or less 
what I am trying to do, and it is something that we are working 
on very hard at this point.
    Senator Isakson. I appreciate that, and I appreciate your 
attention to how much we care about chickens in Georgia. And I 
will add one other factoid about China and chickens. The Asian 
people love the feet. The Americans hate the feet. If we get 
those markets more open, we get a product we are not getting 
any money for in the United States--we will get a lot of money 
for it in China and Asia.
    It will be a good thing to have. So that is one thing to 
keep in mind.
    Ambassador Lighthizer. I appreciate that. I was aware of 
it. And if we have a deal--if we have a deal; it is by no means 
certain--there are a lot of important things that will have to 
come into place for us.
    The chicken farmers will be happy if we have a deal. That I 
can guarantee.
    Senator Isakson. And lastly on China and cinema--cinema, 
not cinnamon. That is like movie cinema, motion pictures. 
Georgia is where--most of the motion pictures produced in the 
United States are now filmed in Georgia. It is a huge industry 
in our State.
    In China since 2012, there has been an agreement between 
China and the United States that the United States would pay 25 
percent to the Chinese for the movies they produce, and China 
gets 75 percent. I want to just see if you have heard of any 
talk of renegotiating our position on that or that agreement at 
all in terms of motion pictures.
    Ambassador Lighthizer. Thank you, Senator.
    I apologize for mis-hearing you. Yes, I am aware that an 
awful lot of movies are made in Georgia. Somebody brought that 
to my attention. It is sort of an abnormally large number. It 
is a big, big industry there. And yes, we are currently in the 
process of renegotiating that split. What we have right now is 
a very unfair situation.
    There are some related issues that we are working on too, 
but the split is probably the most important thing to the 
producers, to the MPAA. And it is something we are actively 
engaged in right now with the Chinese.
    Senator Isakson. Thank you very much. Thanks for your 
service too.
    The Chairman. We are almost reaching 12 o'clock. We have 15 
minutes here. Could you stay 15 minutes for the three Democrats 
who have not asked questions? Can you do that?
    Ambassador Lighthizer. Absolutely.
    The Chairman. Okay. Senator Cortez Masto?
    Senator Cortez Masto. Thank you, Ambassador. It is good to 
see you, and I will be quick. I actually will not use all of my 
time.
    Specific to Nevada, 87 percent of our exports are by small 
and medium-sized enterprises. Can you provide greater detail of 
the USTR's role in opening foreign markets to the small and 
medium-sized enterprises like those in Nevada? Those are the 
companies I am hearing from, in particular, those small 
enterprises that have been impacted by the 301 tariffs.
    Ambassador Lighthizer. First of all, we have a full program 
on small and medium-sized enterprises, SMEs. We have it in all 
of our agreements. We have it in the USMCA. It is a regular 
part of what we do, and there are a whole lot of pieces to it.
    A lot of it is trying to alleviate paperwork and all these 
sort of technical requirements which have a disproportionate 
negative effect on small and medium-sized enterprises than they 
do on big companies that can more easily deal with them.
    I guess I did not get the question. Is the question what 
effect are the 301 tariffs having on them?
    Senator Cortez Masto. And how are we addressing them? I 
mean, it is the number one impact I am hearing about from the 
small businesses, the tariffs under 301.
    Ambassador Lighthizer. So well, I mean, I do not know the 
specific industry. I would have to hear the specific company. 
You know we have 10-percent tariffs. There is no particular 
carve-out for small and medium-sized enterprises. So those 
tariffs are on those products and across the board. There is, 
with respect at least to the 25-percent on the first $50 
billion, the exclusion process.
    And if small industries in your State are having problems 
accessing themselves to the exclusion process, I am happy to 
figure out a way to help them do that.
    Senator Cortez Masto. Thank you. I appreciate that, and we 
will reach out to you.
    And then, one final question. I know--I think Senator Wyden 
had talked about this, but I have also heard the enforcement 
component of the U.S.-China trade negotiation is still poorly 
developed. I am curious. Can you identify some of the 
enforcement and verification mechanisms that you could envision 
in a final deal?
    Ambassador Lighthizer. So the question is, how would the 
enforcement mechanism work? I think what you have to envision--
and once again, this is not something that is agreed to at this 
point.
    You have to assume that you have--I would say monthly 
meetings at the office director level. This is what we are 
talking about now, quarterly meetings at a vice minister level 
and at least semiannual meetings at the actual minister level--
that companies come to us with specific problems and we try to 
work our way through those problems, hopefully at the lowest 
level going up.
    And to the extent we get to issues that are substantial and 
cannot be resolved, they are to be resolved at the level of the 
Vice Premier and me. And if we get to the point that they still 
cannot be resolved, then the United States would have the 
right, or the reverse--any obligations they may have would have 
to have the right--to unilaterally act to enforce change.
    So anything short of that, in my judgment, is just what we 
have right now. I am not foolish enough to think that we are 
going to have an agreement--if we have one that is going to 
solve all our problems, what we need to do is solve as many 
problems as we can and put in place a framework so that we try 
to have our differences within that framework on a going-
forward basis. And then over time, that will lead to a good 
result.
    So that is more or less what we are thinking. It is 
probably what you would have thought too if we had sat--I mean, 
it is a logical way to approach it, and that is what we are 
trying to do.
    Senator Cortez Masto. Thank you. I appreciate it.
    Ambassador Lighthizer. Thank you, Senator.
    The Chairman. Ten seconds to Senator Wyden, and then 
Senator Brown, and then Senator Cardin.
    Senator Wyden. Mr. Chairman, I would take my 10 seconds 
after my colleagues, because they have been very patient.
    The Chairman. Okay then, Senator Brown?
    Senator Brown. No disrespect to the ranking member, but he 
just took the 10 seconds. [Laughter.]
    Before I get to my question, Mr. Chairman, I ask unanimous 
consent to insert in the record a report entitled ``How the WTO 
Undermines U.S. Trade Remedy Enforcement.'' I released it last 
year with the Alliance for American Manufacturing. It details 
the extent to which the legitimate use of U.S. trade remedy 
laws has been attacked frequently and disproportionately by the 
WTO. It clearly is not fair.
    The Chairman. Without objection.
    [The report appears in the appendix beginning on p. 39.]
    Senator Brown. Thank you, Mr. Chairman.
    We all know the elephant in the room on WTO is China. 
Ambassador, good to see you. Thank you.
    The statistic I am going to cite is from 2014. It has 
probably not changed, certainly not significantly: 9 out of the 
top 10 Chinese steel producers are state-owned. These state-
owned enterprises arguably have caused a steel global 
overcapacity crisis. It is what has forced thousands of steel 
workers to lose their jobs in the community you grew up in, in 
fact.
    The question is, do you expect these nine state-owned 
enterprises to be operating ``business as usual'' even if an 
agreement is reached with China?
    Ambassador Lighthizer. Well, I would say first of all, I 
want to salute your study on trade remedy enforcement at the 
WTO. That is probably the biggest single area where the dispute 
settlement process has failed to do what it was supposed to do, 
where it has denied us obligations that we paid for and put in 
place responsibilities that we never negotiated for.
    And we could go through case after case after case. It is a 
serious, serious problem. And there are a lot of people who are 
not working right now because of this overreach by the dispute 
settlement process.
    I think the gist of your question, I believe, Senator, is 
will there be provisions in here that will limit subsidies that 
have created excess capacity and state-owned enterprises? And 
by the way, also quasistate-owned enterprises, right, because 
there is a blurring line.
    But in actual state-owned enterprises, then the answer to 
your question is ``yes.'' If we have a successful agreement, 
there will have to be provisions in there that go directly to 
the question that you are raising--that is to say, subsidies 
which lead to excess capacity in competitive industries. And 
that is something that we are negotiating and that I expect to 
have in there.
    Then the next question is--just because we are short of 
time--are we going to enforce it? And of course, my objective 
will be to enforce it. And whether or not it is as successful 
as you want it to be will determine entirely how----
    Senator Brown. Thank you. And as you know, as we have 
talked about, that structural issue is as important as anything 
in this relationship.
    Ambassador Lighthizer. To me, it is most important. It is 
the most important thing.
    Senator Brown. Let me shift to something else. We have 
seen--and you and I have talked about this too--a unique 
phenomenon in this country over the last few decades where 
companies will shut down production in Ashtabula or Mansfield. 
They will take tax breaks, they will move overseas and reopen 
factories in China, then ship their products back to American 
customers. It has become the business plan for thousands of 
American companies, again, unknown to history before a third of 
a century ago.
    If the U.S.--my question is this. Ambassador, if the U.S. 
in these trade talks is trying to ease investment restrictions 
and strengthen IP protections in China, does it not then follow 
that you can end up creating more incentives for a 
multinational corporation to close down their American 
facilities, to lay off their American workers and open up new 
factories? Doesn't the direction we are going in just 
accelerate that trend?
    Ambassador Lighthizer. Well, I do not believe that to be 
the case. I think the way we are losing jobs in America is 
because people are going there anyway for their own reasoning, 
then their technology is being stolen, competitors are being 
created. Those competitors are then not only wiping out the 
U.S. industry, which went there--which happens, as you know, 
over and over and over again--but also then coming in and 
taking over the U.S. market.
    So I see the other end of the stick. I hear what you are 
saying, but to me the problem is forced technology transfer is 
having a negative effect. And that is really where we are 
losing the jobs.
    I certainly am not--I do not salute the companies that go 
over there. Obviously, I agree completely with you and your 
interpretation of that.
    And I also think that one of the--and you and I talked 
about this many, many, many times. One of the unforeseen, but 
clearly unforeseeable aspects of PNTR was it certainly created 
the shift from the U.S. to manufacturing in China. And that is 
basically what happened, and then an outgrowth of it was the 
loss of all this technology because of these various practices.
    Senator Brown. I do not entirely agree with you. Thank you 
for your assessment. I do think that we have to be careful 
about providing more incentives for companies to invert.
    My last question will be quick, and it involves a bill I 
have been working on with you, Chairman Grassley. A lot of this 
stuff has been making it easier for U.S. companies to invest in 
China.
    We need to pay attention to Chinese investment in the U.S. 
The Chinese government wants U.S. market share, of course. They 
are using unfair trade practices to get it. They use strategic 
investments to capture important parts of our supply chain. We 
have seen this in food and transportation, especially. This 
should be a major defensive concern for the U.S.
    Senator Grassley and I have a bill, the Foreign Investment 
Review Act--we have talked to you about it--to set up a process 
to screen Chinese investment, not just for national security--
that is CFIUS--but to screen it for domestic security, if you 
will, for American jobs, job growth.
    I have asked you and Secretary Ross to support our 
legislation. You have both said in this committee you will 
support that legislation. We have not gotten much yet in the 
way of actual support, and I would like your commitment today, 
as part of your effort to get tough on China, to make our, 
Senator Grassley's and my Foreign Investment Review Act a 
legislative priority for your administration.
    The Chairman. Short answer.
    Ambassador Lighthizer. I do not make the priorities for the 
administration. I completely agree with the sentiment in the 
bill, as you know. But in terms of the priorities, somebody 
higher than me makes priorities for the administration.
    Senator Brown. But you know people invested.
    Ambassador Lighthizer. I know you, Senator. [Laughter.]
    The Chairman. Senator Cardin?
    Senator Cardin. Mr. Ambassador, thank you very much for 
your service.
    As we look at the WTO at 25, some of us remember the 
discussions leading up to WTO under GATT and the hope that we 
would have not only change with WTO, but an evolutionary change 
over time. And yet, in the last several ministerial meetings, 
we have not seen much progress in regards to the evolution of 
the WTO.
    Do you expect at the next ministerial that we will have an 
agenda for potential improvements of the WTO when it takes 
place? I believe it is early next year.
    Ambassador Lighthizer. Yes, thank you, Senator. I mean, I 
would say the expectations were very high in 1994 and 1995. We 
went through this process. Part of what people saw was there 
was this view that opening up trade in this way would lead to 
democracy and greater growth, and we have not seen that. We 
have seen entirely--we have seen protectionism and the like.
    But having said that, I think we should not underestimate 
the WTO. It has done a lot of good things. If we did not have 
it, we would be, at least in my judgment, worse off. And a lot 
of the everyday work gets overlooked that it in fact does.
    What do I think the agenda will be when we have our 
biannual meeting? I would say my hope is that, between now and 
then, we tee up reform in a way that is important in the 
dispute settlement process, and also in the way they run the 
organization, that we reenergize the committees which are 
involved, but we need more on that.
    And then we have specific areas where--such as e-commerce--
we are going to have to do that, I think, on a plurilateral 
basis. I do not think you are ever going to get a consensus and 
then hope the plurilateral basis grows.
    We have a real problem with agriculture, right? And moving 
forward, because people do not want to commit themselves to any 
real reform--the United States does. But other people do not 
want to commit themselves to that. But that has to be a part of 
whatever we do moving forward.
    There is fisheries. There is just a whole----
    Senator Cardin. And I hope that we deal with the problem of 
nonmarket economies. You have talked about that a little bit, 
about a level playing field. You have talked about enforcement. 
I could also say a level playing field in regards to our anti-
dumping and countervailing duty laws that have been 
disrespected.
    To me there is an agenda that is consistent with this 
administration's policies that I hope we can get in a manner 
where we can make progress at the next ministerial.
    Clearly, most of the questions today are centered on China, 
and for good reasons. China is a member of the WTO, and there 
are now active negotiations between our two countries.
    I would hope that that could become a model on how to deal 
with a nonmarket economy. So some of that we could take into 
the WTO ministerial to try to deal with it.
    Congress attempted to give direction under Trade Promotion 
Authority with good governance issues because we were dealing, 
in TPP, with nonmarket economies.
    Senator Isakson mentioned the bilateral issue with China in 
regards to motion pictures. Let me remind you Maryland is also 
a large State for motion pictures, and we do hope that you can 
resolve that conflict.
    I also want to mention Mongolia for one moment and China, 
because Mongolia qualifies for GSP, but most of its cashmere 
products do not. And as a result, their cashmere usually ends 
up in China, which is part of our trade challenge as to how 
that cashmere ends up in the U.S. market.
    So I would just urge you to work with us. There is some 
legislation pending to try to give Mongolia the benefits of GSP 
as it relates to cashmere.
    Ambassador Lighthizer. I cannot say I spent much time on 
that. But if it is something you are interested in, I certainly 
am interested in it, and I will work with you on it.
    Senator Cardin. I appreciate it.
    Thank you, Mr. Chairman.
    The Chairman. Senator Wyden for a short question.
    Senator Wyden. Thank you, Mr. Chairman.
    Ambassador, thanks for your time.
    I would like for the record--because the chairman has been 
correct in saying you are past the time you would give us. I 
would like you to get us for the record, say within 10 days, 
how you intend to take on the discriminatory anti-American 
digital services taxes that are being pursued by European 
countries. As you know, this is one of our most promising 
economic sectors. It is okay to get that to us within 10 days?
    Ambassador Lighthizer. Absolutely, but I would even--if the 
Senator has time, I would like to sit down and talk to the 
Senator about it too. I think this is one of those areas where 
we can go down the tax, you know, OECD approach, and that is 
fine. But I think that this is so important we may have to find 
ourselves being somewhat more creative. And I would like to 
work with the Senator, sort of in the creative realm.
    Senator Wyden. Good enough. Thank you.
    The Chairman. Questions for the record are due by March 
26th. I thank you, Ambassador Lighthizer, for doing this, 
particularly your coming now with your plate full of so many 
different negotiations that are going on. It speaks about the 
importance of reforming the WTO. And thank you for recognizing 
the constitutional role of Congress in the national trade 
agenda.
    Thank you very much for coming. Thanks to my colleagues for 
their attention.
    [Whereupon, at 12:14 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


       Submitted by Hon. Sherrod Brown, a U.S. Senator From Ohio
                                                      FEBRUARY 2017

          How the WTO Undermines U.S. Trade Remedy Enforcement

Authors:
Terence P. Stewart and Elizabeth J. Drake
Mr. Stewart is the Managing Partner of the Law Offices of Stewart and 
Stewart.
Ms. Drake is a partner at the firm. This paper reflects the authors' 
individual views.

First published February 2017 by the Alliance for American 
Manufacturing

I. Introduction

On December 12, 2016, China filed a dispute at the World Trade 
Organization (``WTO'') challenging the U.S.'s continued practice of 
treating China as a ``non-
market'' economy in antidumping cases. China argues that it is entitled 
to be treated as a market economy as of December 11, 2016 according to 
the terms of China's protocol of accession to the WTO. The U.S. 
disagrees that such a change in treatment is required, and it has 
continued to find that an array of distortions in China's economy make 
it ineligible for market economy treatment under U.S. law. While the 
dispute may take a couple of years or more to reach resolution, it 
could have far-
ranging implications. If the U.S. is required to use internal Chinese 
prices and costs to determine the extent of dumping that is occurring, 
it would result in unreliable dumping comparisons due to on-going 
problems such as Chinese government restrictions on currency 
convertibility, a lack of free bargaining over wages, and state control 
over firms, the allocation of resources, and price and output 
decisions. This would dramatically weaken the ability to effectively 
remedy harmful Chinese dumping in the U.S. market.

Unfortunately, the current track record of the WTO does not bode well 
for the outcome of this latest dispute. Since it was established in 
1995, the WTO has repeatedly ruled against trade remedy enforcement, 
both by the U.S. and other WTO members. The WTO has found at least one 
violation of WTO rules in over 90 percent of the trade remedy disputes 
it has ruled on to date--a remarkable record of violations given that 
the WTO rules were negotiated by the members themselves. The U.S. has 
been the disproportionate focus of these disputes. Since 1995, the WTO 
has issued 38 separate decisions against U.S. trade remedy measures, 
nearly five times the number of such decisions issued against any other 
member.

As a result, WTO decisions are undermining the ability of the U.S. and 
other countries to effectively enforce their trade remedy laws, laws 
which provide the vital first line of defense for domestic industries 
and workers injured by dumped and subsidized imports. There is mounting 
concern that these decisions result from the failure of WTO dispute 
settlement panels and the Appellate Body to respect some of the key 
founding principles of the organization, including long-standing 
recognition of the legitimacy of trade remedies and limitations WTO 
members put on the proper role of the dispute settlement system.

This paper provides background on these founding principles and on the 
WTO's record in trade remedy disputes. It summarizes some of the 
important WTO decisions that have led the U.S. to revise its 
determinations, alter its administrative practice, or amend its trade 
remedy laws. The paper ends with recommendations to policy makers to 
address these problems and help protect our trade remedy laws from 
additional erosion. Unless the WTO changes its approach to trade remedy 
disputes, it threatens to further undermine U.S. trade remedy 
enforcement--as well as public confidence in the WTO system itself--in 
the coming years.

II. The WTO's Role in Trade Remedy Disputes

The right of countries to effectively redress dumping and subsidization 
is part of the foundation of the international trading system. Article 
VI of the GATT states that dumping which injures a country's domestic 
industry is ``to be condemned,'' and it permits parties to impose 
antidumping and countervailing duties to offset the amount of dumping 
and subsidization from which imports benefit. For decades, ensuring 
countries can remedy unfair trade practices has provided a vital relief 
valve as global trade has expanded and liberalized at a rapid pace.

Through successive rounds of negotiations, the GATT parties elaborated 
additional rules governing countries' imposition of antidumping 
(``AD'') and countervailing duties (``CVD''). In many respects, the 
rules mirrored existing provisions in U.S. law. When Congress 
implemented the Uruguay Round of trade agreements that established the 
WTO, it modified U.S. trade remedy laws to ensure we would continue to 
be in compliance with international rules.

One important feature of the WTO was the strengthening of the GATT 
dispute settlement system. A standing Appellate Body was established to 
hear appeals from dispute settlement panels. In addition, the WTO can 
authorize members to take countermeasures against countries that are 
found to be out of compliance, a step that previously required the 
consent of the non-compliant party. To ensure the newly strengthened 
system respects the sovereignty of WTO member states, the rules also 
prohibit panels and the Appellate Body from adding to or diminishing 
the rights and obligations in the covered agreements, and the right to 
adopt interpretations of the agreements is reserved solely to WTO 
members.\1\
---------------------------------------------------------------------------
    \1\ Understanding on Rules and Procedures Governing the Settlement 
of Disputes, Marrakesh Agreement Establishing the World Trade 
Organization, Annex 2 arts. 3.2 and 19.2 (April 15, 1994), 1869 
U.N.T.S. 401. See also Marrakesh Agreement Establishing the World Trade 
Organization art. IX.2 (April 15, 1994), 1869 U.N.T.S. 154.

Members' trade remedy measures have been a disproportionate focus of 
WTO disputes. Of the 160 disputes on which the WTO has issued final or 
interim decisions since 1995, 73 of these disputes--or more than 45 
percent of the total--have challenged a country's use of its trade 
remedy laws.\2\ This focus on trade remedies is remarkable given that 
such measures affect only a minuscule portion of world trade.
---------------------------------------------------------------------------
    \2\ A list of these 73 disputes is attached at Annex I. The list 
includes any WTO dispute where a panel and/or Appellate Body decision 
has been adopted by the Dispute Settlement Body as of the date of this 
writing. It also includes three disputes (DS442, DS471, and DS482) 
where a panel report has been issued but an appeal remains pending 
before the Appellate Body. The tally is based on the number of 
decisions issued rather than the number of disputes, as a single 
decision may cover a number of disputes filed regarding the same 
underlying measure. Other disputes never result in a decision because 
they are resolved in consultations or not further pursued by the 
complainant. Such disputes that did not result in a panel or Appellate 
Body decision are not included in the tally. The tally also does not 
include decisions by compliance panels or arbitrators. For the purposes 
of this white paper, disputes are included as involving trade remedies 
if they concern antidumping measures, countervailing duty measures, 
safeguard measures, and ancillary matters such as Customs enforcement 
of trade remedies. The tally does not include disputes regarding 
Section 301 of U.S. trade law or safeguards under the Agreement on 
Textiles and Clothing.

Of the 73 decisions identified above, 42 have involved trade remedies 
imposed by the United States. The U.S. has been the subject of nearly 
five times as many trade remedy decisions as the second most frequent 
respondent in such cases, the EU. This number is far out of proportion 
to the U.S. share of global imports and its share of trade remedy 
measures. From 1995 to 2015, the U.S. imported 14.17 percent of global 
imports and imposed 12.73 percent of all trade remedy measures imposed 
by WTO members.\3\ Yet the U.S.--one country out of the WTO's now 164 
members--was the subject of 57.5 percent of the WTO's decisions in 
trade remedy disputes.
---------------------------------------------------------------------------
    \3\ Cumulatively from 1995 to 2015, the U.S. imported $34 trillion 
worth of goods and all countries combined imported $240 trillion worth 
of goods. WTO Statistics Database. From 1995 to 2015, the U.S. imposed 
460 individual antidumping, countervailing duty, and safeguard 
measures. All WTO members combined imposed 3,611 such measures during 
the same period. See ``Anti-dumping Measures: By Reporting Member 01/
01/1995-31/12/2015,'' ``Countervailing Measures: By Reporting Member 
01/01/1995-31/12/2015,'' and ``Safeguard Measures by Reporting 
Member,'' available on the WTO website at: https://www.wto.org/english/
tratop_e/adp_e/AD_MeasuresByRepMem.pdf, https://www.wto.org/english/
tratop_e/scm_e/CV_MeasuresByRep
Mem.pdf, and https://www.wto.org/english/tratop_e/safeg_e/SG-
MeasuresByRepMember.pdf, respectively.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 


The WTO has found the U.S. to be in violation of at least one aspect of 
WTO rules in 38 of the 42 trade remedy decisions identified above, or 
in over 90 percent of the cases.\4\ Some of the notable WTO decisions 
that have eroded the effectiveness of U.S. trade remedy law and 
practice are described in the next section.
---------------------------------------------------------------------------
    \4\ See Annex I. Almost all cases involve more than one issue. Of 
the 38 cases cited here, there are many in which the U.S. was found to 
be in compliance in some respects and out of compliance in others. It 
is beyond the scope of this white paper to provide an issue-by-issue 
tally for each of the disputes. There are only four trade remedy cases 
in which the U.S. was not found to be out of compliance with any of its 
WTO obligations in any respect.

These decisions have prompted legal scholars to criticize dispute 
panels, and especially the Appellate Body, for going beyond their 
mandate and creating new rights and obligations beyond those contained 
in the WTO agreements.\5\ The U.S. Trade Representative and other WTO 
members have also repeatedly expressed concern about the Appellate 
Body's failure to abide by these standards and its propensity for over-
reaching and gap-filling, to little avail.\6\
---------------------------------------------------------------------------
    \5\ See e.g., Terence P. Stewart, et al., ``The Increasing 
Recognition of Problems With WTO Appellate Body Decision-Making: Will 
the Message Be Heard?'', 8 Global Trade and Customs Journal 390 (2013).
    \6\ See id. at 393-394.
---------------------------------------------------------------------------

III. Selected WTO Decisions on U.S. Trade Remedies

1. Subsidies to Privatized Producers \7\
---------------------------------------------------------------------------

    \7\ Appellate Body Report, United States--Countervailing Measures 
Concerning Certain Products From the European Communities, WT/DS212/AB/
R, adopted January 8, 2003.
---------------------------------------------------------------------------
In response to a number of countervailing duty orders on various steel 
products from Europe, the EU challenged the Department of Commerce's 
practice of countervailing subsidies that had been provided to foreign 
producers prior to their privatization. Commerce countervailed such 
subsidy benefits as long as the pre-privatization producer and post-
privatization producer were the same legal person. The Appellate Body 
found that the Department's privatization practice was inconsistent 
with WTO rules. The Appellate Body instructed that a privatization that 
occurred at arm's length and for fair market value should be presumed 
to extinguish the benefit of any pre-privatization subsidies, though 
the presumption could be rebutted if government distortions or other 
market factors prevented the establishment of an accurate market price 
for the transaction. Commerce revised its practice to conform to the 
Appellate Body's decision, making it more difficult to countervail 
subsidies provided prior to a privatization.\8\
---------------------------------------------------------------------------
    \8\ See Notice of Final Modification of Agency Practice Under 
Section 123 of the Uruguay Round Agreements Act, 68 Fed. Reg. 37,125 
(Department of Commerce, June 23, 2003). The Department's practice was 
also being challenged in appeals in the U.S. court system. Id. at 
37,125.
---------------------------------------------------------------------------

2. Continued Dumping and Subsidy Offset Act \9\
---------------------------------------------------------------------------

    \9\ Appellate Body Report, United States--Continued Dumping and 
Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 
January 27, 2003.

In 2000, Congress passed the Continued Dumping and Subsidy Offset Act 
(``CDSOA''). The Act permitted domestic industries and workers who 
supported AD and CVD orders to receive distributions of the duties that 
were collected on imports that continued to be dumped and/or 
subsidized. The purpose of the law was to remedy continued dumping and 
subsidization that harmed domestic industries. In 2003, the Appellate 
Body ruled that the WTO agreements did not specifically permit the U.S. 
to distribute such duties to affected domestic industries. Congress 
subsequently repealed the law.\10\
---------------------------------------------------------------------------
    \10\ Deficit Reduction Act of 2005, Pub. L. No. 109-171, 
Sec. 7601(a), 120 Stat. 4, 154 (2006).
---------------------------------------------------------------------------

3. Safeguards \11\
---------------------------------------------------------------------------

    \11\ Appellate Body Report, United States--Safeguard Measures on 
Imports of Fresh, Chilled, or Frozen Lamb Meat From New Zealand and 
Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted May 16, 2001; 
Appellate Body Report, United States--Definitive Safeguard Measures on 
Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R, WT/
DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, 
WT/DS259/AB/R, adopted December 10, 2003.
---------------------------------------------------------------------------
The WTO Agreement on Safeguards allows parties to impose temporary 
global import safeguards where imports are increasing in such 
quantities and under such conditions as to cause or threaten to cause 
serious injury to the domestic industry. Not one WTO member's global 
safeguard measure has ever been found to be in compliance with the 
Agreement.\12\ In 1999, the U.S. imposed safeguards on imports of lamb 
meat, and, in 2002, the U.S. imposed safeguards on surging imports of 
steel products. The WTO found that the measures violated WTO rules in 
various respects, including through a failure to identify unforeseen 
developments and adequately address other conditions for the imposition 
of safeguards, as well as due to alleged deficiencies in the 
International Trade Commission's causation analysis. The U.S. ended 
both the lamb safeguard measure and the steel safeguards before their 
terms were otherwise set to expire.\13\
---------------------------------------------------------------------------
    \12\ See Annex I. The China-specific safeguard the U.S. imposed on 
passenger vehicle and light truck tires from China was found to be 
consistent with U.S. obligations under China's Protocol of Accession. 
Appellate Body Report, United States--Measures Affecting Imports of 
Certain Passenger Vehicle and Light Truck Tyres From China, WT/DS399/
AB/R, adopted October 5, 2011.
    \13\ Proclamation 7502 of November 14, 2001: To Provide for the 
Termination of Action Taken With Regard to Imports of Lamb Meat, 66 
Fed. Reg. 57,837 (November 19, 2001); Proclamation 7741 of December 4, 
2003: To Provide for the Termination of Action Taken With Regard to 
Imports of Certain Steel Products, 68 Fed. Reg. 68,483 (December 8, 
2003).
---------------------------------------------------------------------------

4. Zeroing \14\
---------------------------------------------------------------------------

    \14\ See, e.g., Appellate Body Report, United States--Laws, 
Regulations, and Methodology for Calculating Dumping Margins 
(``Zeroing''), WT/DS294/AB/R, adopted May 9, 2006; Appellate Body 
Report, United States--Measures Relating to Zeroing and Sunset Reviews, 
WT/DS322/AB/R, adopted January 23, 2007; Panel Report, United States--
Anti-Dumping Measure on Shrimp From Ecuador, WT/DS335/R, adopted 
February 20, 2007; Appellate Body Report, United States--Final Anti-
Dumping Measures on Stainless Steel From Mexico, WT/DS344/AB/R, adopted 
May 20, 2008; Appellate Body Report, United States--Continued Existence 
and Application of Zeroing Methodology, WT/DS350/AB/R, adopted February 
19, 2009; Panel Report, United States--Anti-Dumping Administrative 
Reviews and Other Measures Related to Imports of Certain Orange Juice 
From Brazil, WT/DS382/R, adopted June 17, 2011; Panel Report, United 
States--Anti-Dumping Measures on Polyethylene Retail Carrier Bags From 
Thailand, WT/DS383/R, adopted February 18, 2010; Panel Report, United 
States--Use of Zeroing in Anti-Dumping Measures Involving Products From 
Korea, WT/DS402/R, adopted February 24, 2011; Panel Report, United 
States--Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades 
From China, WT/DS422/R and Add.1, adopted July 23, 2012.
    Many commentators have criticized the Appellate Body's approach to 
the zeroing cases. See Terence P. Stewart, et al., ``The Increasing 
Recognition of Problems With WTO Appellate Body Decision-Making: Will 
the Message Be Heard?'', 8 Global Trade and Customs Journal 390, 395-
396 n. 23 (2013) (citing articles critiquing the decisions).
---------------------------------------------------------------------------
In a series of cases, the EU, Japan, and other countries challenged an 
important aspect of U.S. practice in antidumping cases. Under this 
practice, the Department of Commerce did not give offsets or credits 
for sales that were not dumped against those sales that were dumped. 
Instead, it ``zeroed'' such non-dumped sales from the calculation of 
the total amount of dumping. The goal of the practice, long upheld by 
U.S. courts, was to ensure that non-dumped sales did not mask injurious 
dumped sales. Commerce did include such non-dumped sales in the 
denominator to determine the overall margin of dumping.

The WTO ruled that this practice was not allowed under WTO rules. These 
rulings ignored the fact that capturing 100 percent of dumping had been 
U.S. practice at the time the WTO agreements were negotiated, and that 
the U.S. and others explicitly refused to agree to negotiating 
proposals that would have prohibited the practice. WTO members 
challenged the practice in over a dozen cases involving products 
ranging from orange juice and shrimp to steel and bearings, requiring 
Commerce to revise margins and revoke orders against specific countries 
and companies.\15\ In the end, Commerce abandoned the practice of 
zeroing both in investigations and in administrative reviews, and it 
developed an alternative set of practices in efforts to continue to 
unmask targeted dumping while complying with the WTO's decisions.\16\
---------------------------------------------------------------------------
    \15\ See, e.g., Implementation of the Findings of the WTO Panel in 
U.S.--Zeroing (EC): Notice of Determinations Under Section 129 of the 
Uruguay Round Agreements Act and Revocations and Partial Revocations of 
Certain Antidumping Duty Orders, 72 Fed. Reg. 25,261 (Department of 
Commerce, May 4, 2007); Implementation of the Findings of the WTO Panel 
in United States Antidumping Measure on Shrimp From Ecuador: Notice of 
Determination Under Section 129 of the Uruguay Round Agreements Act and 
Revocation of the Antidumping Duty Order on Frozen Warmwater Shrimp 
From Ecuador, 72 Fed. Reg. 48,257 (Department of Commerce, August 23, 
2007); Implementation of the Findings of the WTO Panel in U.S.--Zeroing 
(EC); Notice of Determination Under Section 129 of the Uruguay Round 
Agreements Act: Antidumping Duty Order on Stainless Steel Sheet and 
Strip in Coils From Italy, 72 Fed. Reg. 54,640 (Department of Commerce, 
September 26, 2007); Notice of Implementation of Determination Under 
Section 129 of the Uruguay Round Agreements Act Regarding the 
Antidumping Duty Order on Certain Cut-to-Length Carbon-Quality Steel 
Plate Products From Japan, 73 Fed. Reg. 29,109 (Department of Commerce, 
May 20, 2008); Notice of Implementation of Determination Under Section 
129 of the Uruguay Round Agreements Act and Partial Revocation of the 
Antidumping Duty Order on Polyethylene Retail Carrier Bags From 
Thailand, 75 Fed. Reg. 48,940 (Department of Commerce, August 12, 
2010); Notice of Implementation of Determination Under Section 129 of 
the Uruguay Round Agreements Act and Revocation of the Antidumping Duty 
Order on Diamond Sawblades and Parts Thereof From the Republic of 
Korea, 76 Fed. Reg. 66,892 (Department of Commerce, October 28, 2011); 
Notice of Implementation of Determination Under Section 129 of the 
Uruguay Round Agreements Act and Revocation of the Antidumping Duty 
Order on Stainless Steel Plate in Coils From the Republic of Korea; and 
Partial Revocation of the Antidumping Duty Order on Stainless Steel 
Sheet and Strip in Coils From the Republic of Korea, 76 Fed. Reg. 
74,771 (Department of Commerce, December 1, 2011); Certain Frozen 
Warmwater Shrimp From the People's Republic of China and Diamond 
Sawblades and Parts Thereof From the People's Republic of China: Notice 
of Implementation of Determinations Under Section 129 of the Uruguay 
Round Agreements Act and Partial Revocation of the Antidumping Duty 
Orders, 78 Fed. Reg. 18,958 (Department of Commerce, March 28, 2013).
    \16\ See Antidumping Proceedings: Calculation of the Weighted-
Average Dumping Margin During an Antidumping Investigation; Final 
Modification, 71 Fed. Reg. 77,722 (Department of Commerce December 27, 
2006). See also Antidumping Proceedings: Calculation of the Weighted-
Average Dumping Margin and Assessment Rate in Certain Antidumping Duty 
Proceedings; Final Modification, 77 Fed. Reg. 8101 (Department of 
Commerce February 14, 2012).
---------------------------------------------------------------------------

5. Customs Bond Directive \17\
---------------------------------------------------------------------------

    \17\ Appellate Body Report, United States--Measures Relating to 
Shrimp From Thailand/United States--Customs Bond Directive for 
Merchandise Subject to Anti-Dumping/Countervailing Duties, WT/DS343/AB/
R / WT/DS345/AB/R, adopted August 1, 2008.

In 2004, Customs and Border Protection issued a continuous bonding 
directive with regard to billions of dollars of shrimp imports from six 
countries that were subject to preliminary antidumping findings. 
Importers were defaulting on hundreds of millions of dollars of duties 
owed on similar agriculture and aquaculture products under existing 
orders.\18\ In order to protect the revenue, the directive required 
importers of shrimp from six countries to post bonds covering the full 
amount of their preliminary duty liability rather than the usual ten 
percent. The Appellate Body ruled that the directive violated WTO 
rules, because there was insufficient evidence establishing that the 
additional security was both reasonable and necessary. As a result of 
the WTO decision, Customs rescinded the continuous bonding 
directive.\19\
---------------------------------------------------------------------------
    \18\ See id. at 71-72 and n. 194.
    \19\ Enhanced Bonding Requirement for Certain Shrimp Importers, 74 
Fed. Reg. 14,809 (CBP April 1, 2009).
---------------------------------------------------------------------------

6. Countervailing Duty Cases Involving China \20\
---------------------------------------------------------------------------

    \20\ Appellate Body Report, United States--Definitive Anti-Dumping 
and Countervailing Duties on Certain Products From China, WT/DS379/AB/
R, adopted March 25, 2011; Appellate Body Report, United States--
Countervailing Duty Measures on Certain Products From China, WT/DS437/
AB/R, adopted January 16, 2015; Appellate Body Report, United States--
Countervailing and Anti-Dumping Measures on Certain Products From 
China, WT/DS449/AB/R and Corr.1, adopted July 22, 2014.
    For a critique of the Appellate Body's approach in these cases from 
former WTO officials, see Michel Cartland, Gerard Depayre, and Jan 
Woznowski, ``Is Something Going Wrong in the WTO Dispute Settlement?'', 
46 J. World Trade 979 (2012).
---------------------------------------------------------------------------
In 2006, the Department of Commerce determined that China's economy had 
evolved sufficiently to allow the identification and measurement of 
subsidies, and thus the application of countervailing duties to imports 
from China. Commerce determined that China's economy was still too 
distorted by state intervention to be treated as a market economy in 
antidumping cases. China challenged dozens of Commerce determinations 
in a series of cases, claiming various flaws in the countervailing duty 
methodology and that adjustments must be made in antidumping cases for 
so-called ``double remedies'' allegedly arising from the simultaneous 
application of the CVD law and the non-market economy AD methodology to 
imports from China.

The Appellate Body found the U.S. had violated WTO rules in several 
respects. For example, with regard to subsidies provided by state-owned 
enterprises, the Appellate Body ruled that majority government 
ownership alone was insufficient to establish that such firms operated 
like government entities and thus were capable of conferring subsidies. 
It required Commerce to examine numerous other factors to determine 
whether these entities in fact exercised government authority. Commerce 
changed its practice to implement the decision.\21\
---------------------------------------------------------------------------
    \21\ Implementation of Determinations Under Section 129 of the 
Uruguay Round Agreements Act: Certain New Pneumatic Off-the-Road Tires; 
Circular Welded Carbon Quality Steel Pipe; Laminated Woven Sacks; and 
Light-Walled Rectangular Pipe and Tube From the People's Republic of 
China, 77 Fed. Reg. 52,683 (Department of Commerce, August 30, 2012).

In addition, based on its interpretation of the word ``appropriate,'' 
the Appellate Body ruled that the U.S. had to make adjustments to AD 
margins to account for any alleged ``double remedies'' that were found 
to exist. Congress changed the law to require Commerce to make such 
adjustments.\22\ The Department now routinely lowers AD cash deposit 
rates on imports from China where it finds that some amount of the 
subsidies found in a parallel CVD investigation likely passed through 
to the Chinese export prices used in the AD calculations.
---------------------------------------------------------------------------
    \22\ An Act to Apply the Countervailing Duty Provisions of the 
Tariff Act of 1930 to Nonmarket Economy Countries, and for other 
Purposes, Pub. L. No. 112-99, Sec. 2, 126 Stat. 265, 265-267 (2012).
---------------------------------------------------------------------------

7. Cross-Cumulation in Injury Determinations \23\
---------------------------------------------------------------------------

    \23\ Appellate Body Report, United States--Countervailing Measures 
on Certain Hot-Rolled Carbon Steel Flat Products From India, WT/DS436/
AB/R, adopted December 19, 2014.
---------------------------------------------------------------------------
For many years, the International Trade Commission has cumulated 
subject imports from different countries that are subject to AD and CVD 
cases on the same product in order to consider those imports in the 
aggregate to determine whether they are causing material injury, or 
threatening material injury, to a domestic industry. The Commission has 
also done so in cases where some countries are subject to only an AD 
investigation and/or other countries are subject only to a CVD 
investigation. India challenged this practice of ``cross-cumulation,'' 
and the WTO found the practice was inconsistent with U.S. obligations. 
While the Commission did not alter its general practice, it did 
consider Indian imports individually in a revised injury determination 
in order to comply with the WTO decision.\24\ The WTO ruling provides 
an opening for additional challenges to the practice, and at least one 
Commissioner has invited parties to brief the WTO decision in future 
cases.\25\
---------------------------------------------------------------------------
    \24\ See U.S. International Trade Commission, Hot-Rolled Steel 
Products From India, Inv. No. 701-TA-405 (Section 129 Consistency 
Determination), USITC Pub. 4599 (March 2016).
    \25\ U.S. International Trade Commission, Polyethylene 
Terephthalate (PET) Resin from Canada, China, India, and Oman, Inv. 
Nos. 701-TA-531-532 and 731-TA-1270-1273 (Final), USITC Pub. 4604 
(April 2016) at 35-39 (Separate Views of Commissioner F. Scott Kieff on 
Cross-Cumulation).
---------------------------------------------------------------------------

8. Targeted Dumping \26\
---------------------------------------------------------------------------

    \26\ Appellate Body Report, United States--Anti-Dumping and 
Countervailing Measures on Large Residential Washers From Korea, WT/
DS464/AB/R, adopted September 26, 2016.
---------------------------------------------------------------------------
As explained above, in response to adverse WTO decisions, the 
Department of Commerce abandoned zeroing and adopted alternative 
methodologies to identify targeted dumping (as specifically authorized 
in the WTO Anti-Dumping Agreement) and to ensure such dumping is not 
masked by non-dumped sales. In 2016, the Appellate Body ruled against 
the U.S.'s targeted dumping methodology in a case brought by Korea. The 
Appellate Body found various flaws with the U.S. methodology, including 
the way in which Commerce combined different calculation methodologies 
when targeted dumping was found (a sub-issue never raised by Korea 
itself). The U.S. is now in the process of determining how it might 
implement the decision, whether implementation may require Congress to 
make changes to U.S. law, and what options may remain available to the 
U.S. to unmask and remedy targeted dumping going forward.

9. Non-Market Economy Antidumping Methodologies \27\
---------------------------------------------------------------------------

    \27\ See Appellate Body Report, European Communities--Definitive 
Anti-Dumping Measures on Certain Iron or Steel Fasteners From China, 
WT/DS397/AB/R, adopted July 28, 2011. See also Panel Report, United 
States--Anti-Dumping Measures on Certain Shrimp From Viet Nam, WT/
DS404/R, adopted September 2, 2011; Appellate Body Report, United 
States--Anti-Dumping Measures on Certain Shrimp From Viet Nam, WT/
DS429/AB/R, adopted April 22, 2015. See also Panel Report, United 
States--Certain Methodologies and Their Application to Anti-Dumping 
Proceedings Involving China, WT/DS471/R, circulated to WTO members 
October 19, 2016 (appeal in progress).
---------------------------------------------------------------------------
In a 2011 decision, the Appellate Body ruled that the EU was not 
permitted to presume that entities in China were state-controlled and 
require Chinese companies to demonstrate otherwise. The EU subsequently 
changed its practice for investigating whether such state control 
existed. In follow-on cases brought against the U.S. by Vietnam, 
Vietnam challenged the Department of Commerce's practice for dealing 
with entities that are not independent from the state in antidumping 
cases on products from non-market economies. In those cases, panels 
followed the earlier Appellate Body decision regarding the EU and found 
that the U.S. was not allowed to employ a rebuttable presumption that 
entities in such countries are state-controlled. In one case, the panel 
ruled that the U.S. had to assign even to state-controlled entities the 
average of dumping margins found for companies independent of the 
state. Those cases were settled pursuant to a mutually agreeable 
solution and were not implemented.

China made similar claims in a follow-on case brought against the U.S. 
in 2013. In 2016, the panel echoed earlier rulings regarding the 
impermissibility of the rebuttable presumption, but it made no findings 
regarding the rates Commerce was allowed to apply. China has appealed 
that latter finding to the Appellate Body, where it remains pending. If 
China is successful, Commerce will have to struggle with how to address 
foreign producers that are not independent from the government of China 
(or Vietnam) in antidumping proceedings.

10. Price Comparability and Distorted Markets \28\
---------------------------------------------------------------------------

    \28\ See Request for Consultations by China, United States--
Measures Related to Price Comparison Methodologies, WT/DS515/1, G/L/
1169, G/ADP/D115/1 (December 15, 2016); Request for Consultations by 
China, European Union--Measures Related to Price Comparison 
Methodologies, WT/DS516/1, G/L/1170, G/ADP/D116/1 (December 15, 2016). 
See also Appellate Body Report, European Union--Anti-Dumping Measures 
on Biodiesel From Argentina, WT/DS473/AB/R, adopted October 26, 2016.
---------------------------------------------------------------------------
As noted above, China has recently challenged the U.S.'s continued 
treatment of China as a non-market economy under the AD law. China 
filed a similar challenge against the EU on the same day. If the WTO 
ultimately rules in China's favor in these cases, it would strip the 
U.S. and the EU of an important tool they currently rely upon to 
address distortions in China's economy when calculating dumping 
margins.

An October 2016 Appellate Body ruling regarding AD measures the EU 
imposed on biodiesel from Argentina (which it treats as a market 
economy) could further limit the tools available to the U.S. if it is 
required to treat China as a market economy notwithstanding continued 
government interventions in the Chinese economy. In the biodiesel case, 
the EU relied on alternative production costs to determine if dumping 
was occurring, because Argentine producers' own production costs were 
artificially depressed by a differential export tax that Argentina 
imposed on soybeans, a key biofuel feedstock. The Appellate Body ruled 
that the EU had to rely on the artificially depressed soybean costs 
regardless of the Argentine government's distortions to those costs. 
This decision could greatly restrict Commerce's ability to develop 
alternative tools for addressing distortions in China's economy if it 
is required to start relying on China's internal costs and prices in 
its dumping determinations.

IV. Conclusion and Recommendations

For more than two decades, WTO decisions have put sustained pressure on 
U.S. trade remedy law. Despite the long-standing international 
recognition of the need for effective AD and CVD laws to remedy unfair 
trade, and despite the safeguards members attempted to build into the 
WTO dispute settlement system, the WTO has dealt numerous setbacks to 
U.S. trade remedy enforcement. The U.S. has been the subject of far 
more adverse trade remedy decisions than any other WTO member, and it 
has suffered losses in 90 percent of WTO decisions to date.

As the U.S. has implemented these adverse decisions, it has had to not 
only revise duties and/or revoke orders on individual products, it has 
also had to change its administrative policies and, in some cases, ask 
Congress to change domestic trade remedy laws. Legal scholars, various 
administrations, and members of Congress have all expressed their 
concern about the WTO Appellate Body's over-reaching in its rulings 
against trade remedy enforcement. For years, Congress has identified 
reining in the WTO dispute settlement system and preserving the ability 
of the United States to rigorously enforce its trade remedy laws as key 
trade negotiating objectives.\29\
---------------------------------------------------------------------------
    \29\ See, e.g., Defending Public Safety Employees' Retirement Act, 
Pub. L. No. 114-26, Sec. 102(b)(16)(C) and (17), 129 Stat. 319, 330-331 
(2015) (setting out Congressional negotiating objectives for dispute 
settlement and trade enforcement under the most recent grant of Trade 
Promotion Authority).

Yet efforts to use WTO challenges to undermine U.S. trade remedy 
enforcement continue. Until and unless the WTO changes its approach to 
trade remedies, it will remain an inviting forum for those who wish to 
further weaken the enforcement of U.S. antidumping and countervailing 
duty laws in the years to come. The latest dispute filed at the end of 
last year by China against the U.S. could eviscerate our ability to 
effectively redress dumped Chinese imports that harm American 
---------------------------------------------------------------------------
industries and workers.

Policy makers should make it a priority to counteract these trends and 
protect domestic trade remedy laws from further erosion. Possible steps 
to consider, including both new efforts and the strengthening and 
expanding of existing efforts, include:

u  Vigorously defending U.S. trade remedy decisions at the WTO and 
seriously considering whether and how to implement any adverse 
decisions depending on the weakening effect they may have on 
enforcement;

u  Forming a coalition with other WTO members concerned about trends in 
the dispute settlement system's trade remedy decisions to mount a 
coordinated campaign to critique and reform the decision-making of 
panels and the Appellate Body;

u  Investing in efforts to educate other WTO members, particularly 
developing countries, about the importance of trade remedies in the 
international system and the economic contribution they make by 
reducing market distortions and enabling balanced economic growth;

u  Refusing to agree to the nomination or re-nomination of Appellate 
Body members who have failed to adhere to the standard of review and 
shown a willingness to overreach and ``interpret'' WTO agreements 
rather than merely apply them as negotiated by the members;

u  Protest any statements by the WTO Director-General and other WTO 
officials that paint all trade remedy measures with a broad brush as 
protectionist without acknowledging the historical recognition that 
such measures play a key role in facilitating legitimate trade;

u  Impressing on other WTO members that further expansion of WTO 
agreements and routine implementation of adverse decisions is at risk 
if the dispute settlement system is not effectively reformed to reduce 
overreach by panels and Appellate Body members;

u  Establishing an independent Commission of legal experts to determine 
whether a WTO panel or the Appellate Body has exceeded its authority or 
deviated from the applicable standard of review in making a decision 
adverse to the United States, and creating procedures for Congress to 
respond to Commission determinations with appropriate action regarding 
U.S. negotiating positions and membership in the WTO;\30\ and
---------------------------------------------------------------------------
    \30\ Former Senator Robert Dole (R-KS) introduced legislation that 
would have established such a Commission in 1995, shortly after the WTO 
came into existence, but the legislation was not enacted. See S. 16, 
104th Congress (1995).

u  Working with members of Congress, the media, and academia to build 
strong public support for effective trade remedy enforcement that 
strengthens the hand of U.S. negotiators in Geneva to underscore the 
political importance of real reform in the WTO dispute settlement 
---------------------------------------------------------------------------
system.

The world trading system depends on countries' ability to take rapid, 
effective, and meaningful action against unfair dumping and 
subsidization that is harming their manufacturers, farmers, ranchers, 
and workers. That ability is currently being undermined by the WTO 
dispute settlement system, contrary to the system's original design. A 
strong and coordinated response by policy makers is needed to reverse 
these troubling trends, preserve our trade remedy laws, and help 
restore faith in the international trading system.


                                      WTO Trade Remedy Decisions, 1995-2016
                                          Sorted by Respondent Country
----------------------------------------------------------------------------------------------------------------
            Dispute
    #         No.         Respondent         Complainant          Short Name        WTO  Violation?    Adoption
----------------------------------------------------------------------------------------------------------------
1                121  Argentina          EU                  Footwear (EC)         Yes                      2000
----------------------------------------------------------------------------------------------------------------
2                189  Argentina          EU                  Ceramic Tiles         Yes                      2001
----------------------------------------------------------------------------------------------------------------
3                238  Argentina          Chile               Preserved Peaches     Yes                      2003
----------------------------------------------------------------------------------------------------------------
4                241  Argentina          Brazil              Poultry AD Duties     Yes                      2003
----------------------------------------------------------------------------------------------------------------
5                 22  Brazil             Philippines         Desiccated Cocnut     No                       1997
----------------------------------------------------------------------------------------------------------------
6                482  Canada             Chinese Taipei      Carbon Steel Welded   Yes                        na
                                                              Pipe
----------------------------------------------------------------------------------------------------------------
7                414  China              U.S.                GOES                  Yes                      2012
----------------------------------------------------------------------------------------------------------------
8                425  China              EU                  X-Ray Equipment       Yes                      2013
----------------------------------------------------------------------------------------------------------------
9                427  China              U.S.                Broiler Products      Yes                      2013
----------------------------------------------------------------------------------------------------------------
10               440  China              U.S.                Autos (U.S.)          Yes                      2014
----------------------------------------------------------------------------------------------------------------
11               460  China              EU                  HP-SSST               Yes                      2015
----------------------------------------------------------------------------------------------------------------
12               415  DR                 Costa Rica, et al.  Safeguard Measures    Yes                      2012
----------------------------------------------------------------------------------------------------------------
13               211  Egypt              Turkey              Steel Rebar           Yes                      2002
----------------------------------------------------------------------------------------------------------------
14               141  EU                 India               Bed Linen             Yes                      2001
----------------------------------------------------------------------------------------------------------------
15               219  EU                 Brazil              Tube or Pipe          Yes                      2003
                                                              Fittings
----------------------------------------------------------------------------------------------------------------
16               299  EU                 Korea               CVDs on DRAM Chips    Yes                      2005
----------------------------------------------------------------------------------------------------------------
17               337  EU                 Norway              Salmon (Norway)       Yes                      2008
----------------------------------------------------------------------------------------------------------------
18               397  EU                 China               Fasteners (China)     Yes                      2011
----------------------------------------------------------------------------------------------------------------
19               405  EU                 China               Footwear (China)      Yes                      2012
----------------------------------------------------------------------------------------------------------------
20               442  EU                 Indonesia           Fatty Alcohols        Yes                        na
----------------------------------------------------------------------------------------------------------------
21               473  EU                 Argentina           Biodiesel             Yes                      2016
----------------------------------------------------------------------------------------------------------------
22                60  Guatemala          Mexico              Cement I              No                       1998
----------------------------------------------------------------------------------------------------------------
23               156  Guatemala          Mexico              Cement II             Yes                      2000
----------------------------------------------------------------------------------------------------------------
24                98  Korea              EU                  Dairy                 Yes                      2000
----------------------------------------------------------------------------------------------------------------
25               312  Korea              Indonesia           Certain Paper         Yes                      2005
----------------------------------------------------------------------------------------------------------------
26               132  Mexico             U.S.                Corn Syrup            Yes                      2001
----------------------------------------------------------------------------------------------------------------
27               295  Mexico             U.S.                AD Measures on Rice   Yes                      2005
----------------------------------------------------------------------------------------------------------------
28               331  Mexico             Guatemala           Steel Pipes and       Yes                      2007
                                                              Tubes
----------------------------------------------------------------------------------------------------------------
29               341  Mexico             EU                  Olive Oil             Yes                      2008
----------------------------------------------------------------------------------------------------------------
30               122  Thailand           Poland              H-Beams               Yes                      2001
----------------------------------------------------------------------------------------------------------------
31               468  Ukraine            Japan               Certain Passenger     Yes                      2015
                                                              Cars
----------------------------------------------------------------------------------------------------------------
32                99  U.S.               Korea               DRAMS                 Yes                      1999
----------------------------------------------------------------------------------------------------------------
33               136  U.S.               EU and Japan        1916 Act              Yes                      2000
----------------------------------------------------------------------------------------------------------------
34               138  U.S.               EU                  Lead and Bismuth II   Yes                      2000
----------------------------------------------------------------------------------------------------------------
35               166  U.S.               EU                  Wheat Gluten          Yes                      2001
----------------------------------------------------------------------------------------------------------------
36               177  U.S.               Australia and New   Lamb                  Yes                      2001
                                          Zealand
----------------------------------------------------------------------------------------------------------------
37               179  U.S.               Korea               Stainless Steel       Yes                      2001
----------------------------------------------------------------------------------------------------------------
38               184  U.S.               Japan               Hot-Rolled Steel      Yes                      2001
----------------------------------------------------------------------------------------------------------------
39               194  U.S.               Canada              Export Restraints     No                       2001
----------------------------------------------------------------------------------------------------------------
40               202  U.S.               Korea               Line Pipe             Yes                      2001
----------------------------------------------------------------------------------------------------------------
41               206  U.S.               India               Steel Plate           Yes                      2002
----------------------------------------------------------------------------------------------------------------
42               212  U.S.               EU                  CVD Measures on       Yes                      2003
                                                              Certain EC Products
----------------------------------------------------------------------------------------------------------------
43               213  U.S.               EU                  Carbon Steel          Yes                      2002
----------------------------------------------------------------------------------------------------------------
44               217  U.S.               Australia, et al.   Offset Act (Byrd      Yes                      2003
                                                              Amendment)
----------------------------------------------------------------------------------------------------------------
45               221  U.S.               Canada              Section               No                       2002
                                                              129(c)(1)URAA
----------------------------------------------------------------------------------------------------------------
46               236  U.S.               Canada              Softwood Lumber III   Yes                      2002
----------------------------------------------------------------------------------------------------------------
47               244  U.S.               Japan               Corrosion Resistant   No                       2004
                                                              Steel Sunset Review
----------------------------------------------------------------------------------------------------------------
48               248  U.S.               Brazil, et al.      Steel Safeguards      Yes                      2003
----------------------------------------------------------------------------------------------------------------
49               257  U.S.               Canada              Softwood Lumber IV    Yes                      2004
----------------------------------------------------------------------------------------------------------------
50               264  U.S.               Canada              Softwood Lumber V     Yes                      2004
----------------------------------------------------------------------------------------------------------------
51               268  U.S.               Argentina           Oil Country Tubular   Yes                      2004
                                                              Goods Sunset
                                                              Reviews
----------------------------------------------------------------------------------------------------------------
52               277  U.S.               Canada              Softwood Lumber VI    Yes                      2004
----------------------------------------------------------------------------------------------------------------
53               282  U.S.               Mexico              AD Measures on Oil    Yes                      2005
                                                              Country Tubular
                                                              Goods
----------------------------------------------------------------------------------------------------------------
54               294  U.S.               EU                  Zeroing (EC)          Yes                      2006
----------------------------------------------------------------------------------------------------------------
55               296  U.S.               Korea               CVD Investigation on  Yes                      2005
                                                              DRAMs
----------------------------------------------------------------------------------------------------------------
56               322  U.S.               Japan               Zeroing (Japan)       Yes                      2007
----------------------------------------------------------------------------------------------------------------
57               335  U.S.               Ecuador             Shrimp (Ecuador)      Yes                      2007
----------------------------------------------------------------------------------------------------------------
58               343  U.S.               India and Thailand  Shrimp (Thailand),    Yes                      2008
                                                              Customs Bond
                                                              Directive
----------------------------------------------------------------------------------------------------------------
59               344  U.S.               Mexico              Stainless Steel       Yes                      2008
                                                              (Mexico)
----------------------------------------------------------------------------------------------------------------
60               350  U.S.               EU                  Continued Zeroing     Yes                      2009
----------------------------------------------------------------------------------------------------------------
61               379  U.S.               China               AD and CVD Duties     Yes                      2011
                                                              (China)
----------------------------------------------------------------------------------------------------------------
62               382  U.S.               Brazil              Orange Juice          Yes                      2011
                                                              (Brazil)
----------------------------------------------------------------------------------------------------------------
63               383  U.S.               Thailand            AD Measures on PET    Yes                      2010
                                                              Bags
----------------------------------------------------------------------------------------------------------------
64               399  U.S.               China               Tyres (China)         No                       2011
----------------------------------------------------------------------------------------------------------------
65               402  U.S.               Korea               Zeroing (Korea)       Yes                      2011
----------------------------------------------------------------------------------------------------------------
66               404  U.S.               Vietnam             Shrimp I (Viet Nam)   Yes                      2011
----------------------------------------------------------------------------------------------------------------
67               422  U.S.               China               Shrimp and Sawblades  Yes                      2012
                                                              (China)
----------------------------------------------------------------------------------------------------------------
68               429  U.S.               Vietnam             Shrimp II (Viet Nam)  Yes                      2015
----------------------------------------------------------------------------------------------------------------
69               436  U.S.               India               Hot-Rolled Carbon     Yes                      2014
                                                              Steel Flat Products
----------------------------------------------------------------------------------------------------------------
70               437  U.S.               China               CVD Measures on       Yes                      2015
                                                              Certain Products
----------------------------------------------------------------------------------------------------------------
71               449  U.S.               China               CVD and AD Measures   Yes                      2014
                                                              (China)
----------------------------------------------------------------------------------------------------------------
72               464  U.S.               Korea               Washers               Yes                      2016
----------------------------------------------------------------------------------------------------------------
73               471  U.S.               China               AD Proceedings        Yes                       na
                                                              Involving China
----------------------------------------------------------------------------------------------------------------
Note: Where a single decision involved more than one dispute number, only the first dispute number is listed.


                                 ______
                                 
              Prepared Statement of Hon. Chuck Grassley, 
                        a U.S. Senator From Iowa
    Current plurilateral discussions on e-commerce and on fisheries 
show promise, and I fully support continuing those efforts.

    Next, the WTO is responsible for implementing and monitoring trade 
agreements.

    Finally, the institution serves as a forum for settling disputes 
amongst its members over the meaning and application of WTO agreements. 
As we approach the 25th year of operation for the WTO, it would be wise 
to acknowledge that the United States has overall been a beneficiary of 
the WTO dispute settlement process.

    But we cannot overlook the serious challenges preventing the system 
from working as we intended it to. And we can probably all agree that 
updates and reforms would improve the effectiveness of the 
organization.

    The Appellate Body, which soon could lose a minimum quorum needed 
to function, is in particular need of reform. The administration's 
concerns about systemic and procedural problems with the Appellate Body 
are not new, nor are they partisan.

    Presidents on both sides of the aisle have raised concerns for many 
years. The United States first refused to consent to new Appellate Body 
appointments under the Obama administration, and the Trump 
administration has maintained the same position.

    It's unfortunate that this tactic is the only way the United States 
has been able to get serious attention from other WTO members. I'm not 
necessarily endorsing this approach, but now that we are here we can't 
waste time lamenting the tactics. WTO members must take the United 
States seriously and commit to meaningfully addressing our concerns.

    The areas of much-needed reform are not limited just to dispute 
settlement. The administration is right to point out that some WTO 
members consistently fail to meet their obligations to accurately 
notify the support they provide to domestic industries. That is simply 
unacceptable.

    The WTO also needs to address the treatment of state-owned 
enterprises or SOEs. SOEs are becoming more prevalent in the global 
economy. China is notorious for using SOEs to buy private companies 
around the world and has used SOEs as a conduit for subsidizing its 
industries.

    The ability of WTO members to self-certify as a ``developing 
country'' is another problem for the organization's long-term 
credibility.

    When my constituents ask me why China, the world's second largest 
economy, gets to self-certify as ``developing,'' I can't explain it.

    There are other countries, including OECD members that the 
administration rightly points out have advanced economies, which still 
declare themselves developing countries.

    But we cannot have a hearing on the WTO without talking about 
China. The fact of the matter is that China simply has not lived up to 
the commitments it made when it joined the WTO. This is detailed every 
year in USTR's annual report on China's WTO compliance. And we have 
seen over the last decade or so that WTO rules have not effectively 
constrained China's mercantilist policies and their distortion of 
global markets.

    So, there is a lot of work to do. And we cannot do this alone.

    The U.S., Japan, and the European Union are discussing WTO reform 
options through a trilateral process that also seeks to address 
industrial subsidies and forced technology transfers.

    Partnerships such as this one are critical to showing China that 
the United States is not the only country complaining.

    The world certainly has come a long way on trade policy in the last 
century. I hope we learn from history and never repeat the 
protectionist mistakes of beggar-thy-neighbor policies like the 
infamous Smoot-Hawley tariffs. Yet, there are also many legitimate, 
bipartisan issues we must address with some of our trading partners and 
with the WTO.

    To conclude, I probably do not need to remind many in this room of 
the following fact. The Constitution gives Congress the power to impose 
and collect taxes, tariffs, duties, and to regulate international 
commerce. As chairman of this committee, I intend to assist President 
Trump and Ambassador Lighthizer with their efforts at the WTO and in 
seeking strong and enforceable trade deals. However, I do so with the 
understanding that erecting new market barriers with tariffs and quotas 
cannot be a long-term solution.

    I'm looking forward to working in a bipartisan way with the members 
of this committee and the Trump administration to ensure the United 
States has sound and constructive trade policy that benefits our 
country.

                                 ______
                                 
 Prepared Statement of Hon. Robert E. Lighthizer, United States Trade 
           Representative, Executive Office of the President
    Chairman Grassley, Ranking Member Wyden, and all the distinguished 
members of this great committee, I am pleased for the opportunity to 
testify before you this morning. You have asked me to come here today 
to discuss the World Trade Organization. To begin, I should say that 
the administration--like all members of this committee--wants an 
effective international trading system.

    Under President Trump's leadership, U.S. trade has surged. From 
2016 to 2018, total U.S. exports grew by 12.8 percent. Over the same 
period, total U.S. imports grew by 14.8 percent. Last year, Americans 
exported almost $2.5 trillion worth of goods and services--an all-time 
high. Meanwhile, the United States created 264,000 new manufacturing 
jobs last year--the largest such figure in 21 years--and we had the 
strongest economic growth of any country in the G7. These are 
encouraging figures, but of course we want to do even better. We are 
working with Congress on the USMCA, which should further spur 
production and trade in this country. We continue to seek improved 
trading rules with China, and we hope to make significant progress this 
year with Japan, the European Union, the United Kingdom, and other 
countries.

    While we are encouraged by our bilateral activities, we would also 
like to see more progress at a multilateral level. The WTO is a 
valuable institution and offers many opportunities for the United 
States to advance our interests on trade. As I have said before, if we 
did not have the WTO, we would need to invent it.

    The United States remains very active at all levels of the WTO, 
from the committees where much of the practical work is accomplished, 
to efforts to negotiate the new trade rules of the future. Last year 
the Senate confirmed Ambassador Dennis Shea as our representative to 
the WTO, and he has been tireless in advocating for U.S. interests. I 
remain in regular and close contact with the very able Director-
General, Roberto Azevedo, with whom I have had extensive conversations 
about the future of the WTO. I believe that he and his leadership team 
are working very hard to help the WTO succeed.

    Nevertheless, we have concerns about the organization. In many 
ways, the WTO is not working as expected. We joined the WTO in the hope 
that it would help us promote stronger and more efficient markets. 
Unfortunately, those hopes have too often been disappointed. Let me 
give you a few examples of why we are concerned.

    First, the negotiating process at the WTO has largely broken down. 
Under the old GATT system, from 1947 to 1994, there were eight 
negotiating rounds--each of which led to lower tariffs and fewer trade 
barriers among all GATT members. To this day, the basic rules that 
govern global trade were negotiated under the GATT. But in the 24 years 
since the WTO began operation, there has been no new significant 
multilateral market access agreement. (There have been some helpful 
agreements--such as the Trade Facilitation Agreement and the 
Information Technology Agreement--that address specific aspects of 
trade.)

    The last major effort to reach such an agreement--the Doha Round--
collapsed in 2008, and has now been dead for more than a decade. 
Despite all the dramatic changes that have taken place in the last 
quarter-century--the rise of China, the evolution of the Internet, and 
countless other developments--the WTO is still largely operating under 
the same old playbook from the early 1990s. It is now out of date.

    Second, much work remains to be done in terms of lowering tariffs--
primarily in countries that consider themselves developing. Numerous 
WTO members continue to have very high ``bound'' tariff rates that 
allow them to maintain tariffs significantly above the bound rates that 
apply to the United States. For example, the average bound tariff rate 
for all goods in the United States is 3.4 percent. In Brazil, it is 
31.4 percent. In India, it is 48.5 percent. In Indonesia, it is 37.1 
percent. It is not reasonable to agree that because the United States 
agreed to such disparities many years ago--when economic and geo-
political conditions were very different--that we are stuck with them 
forever. The rules on tariffs have to keep pace with the realities of 
the global economy.

    Third, too many WTO members are not living up to current 
obligations. For example, members take on significant commitments to 
provide regular notifications of subsidy programs and other information 
critical to trading conditions around the world. Despite the clear 
obligation to make such notifications, many of our trading partners--
including significant economies like China and India--have a very poor 
track record of providing this critical information.

    WTO members also have the option of declaring themselves to be 
``developing countries'' for purposes of obtaining special and 
differential treatment under WTO rules. The obvious purpose of such 
treatment is to help truly disadvantaged countries. Absurdly, however, 
many of the world's largest and richest economies--including China, 
India, Turkey, and South Korea--have declared themselves to be 
developing countries. Not only do such claims make a mockery of special 
and differential treatment, they also make it difficult if not 
impossible for members to come together on future market-opening deals.

    Fourth, the dispute settlement process at the WTO is being used to 
create new obligations to which the United States never agreed. Article 
3.2 of the Dispute Settlement Understanding plainly states that 
``Recommendations and rulings of the Dispute Settlement Body cannot add 
to or diminish the rights and obligations provided in the covered 
agreements.'' In other words, the dispute settlement process was never 
intended to make new rules--it was designed solely to help members 
resolve specific disputes between them.

    These provisions were vital to the United States, because it was 
essential that we not be burdened with obligations that were never 
approved by this Congress. Over the last quarter century, however, the 
United States has become the chief target of litigation at the WTO--and 
we have lost the overwhelming majority of cases brought against us. In 
other words, the WTO has treated the world's freest and most open 
economy as the world's greatest outlaw. In so doing, the WTO's 
Appellate Body has repeatedly created new obligations from whole cloth. 
For example:

          The Appellate Body has attacked U.S. countervailing duty 
        laws--thus making it easier for other countries to provide 
        market-distorting subsidies.
          The Appellate Body has interpreted WTO rules in a manner 
        that puts our tax system at an unfair and illogical 
        disadvantage compared to that of many trading partners.
          The Appellate Body has interpreted the Agreement on 
        Safeguards in a manner that significantly limits the ability of 
        members to use that vital provision.
          The Appellate Body has interfered with the appropriations 
        process by limiting Congress's ability to spend money collected 
        through antidumping and countervailing duties.

    For many years, U.S. administrations of both parties have warned 
our trading partners of the potential harm resulting from such judicial 
activism. We have also noted that in many instances, the Appellate Body 
fails to follow basic, critical rules of operation to which all members 
have agreed. Unfortunately, our concerns have been ignored. These 
developments have greatly undermined the negotiating process at the 
WTO. Why should any country negotiate with the United States if it 
believes it can obtain whatever outcome it wants by suing us? The 
administration is aggressively addressing each of these problems.

    A year and a half ago in Buenos Aires, at the first WTO ministerial 
conference held during this administration, I clearly set out our 
position on all of these issues and I invited the WTO membership to 
join us in fixing these problems. I would like to include in the record 
a copy of the remarks I delivered at that meeting.

    In spite of the serious challenges we face, the United States is 
working diligently within the body of the WTO to negotiate new rules in 
areas heretofore uncovered. To jump-start this negotiating process, we 
have pushed for important outcomes in talks on digital trade and 
fishing subsidies. We have highlighted the issue of unequal bound 
tariff rates, and continue to press other members for additional market 
access. We have put forward specific proposals to address the concerns 
resulting from lack of notification and the abuse of developing country 
status. And we have continued to press longstanding U.S. concerns 
regarding the dispute settlement process. We have taken these steps not 
to hurt the WTO--but to ensure that it remains relevant to a rapidly 
changing world.

    In sum, the WTO is an important organization that has developed 
some serious problems. We have to work with our trading partners to 
find solutions. I look forward to continuing to consult with members of 
this committee in this effort.

                                 ______
                                 

          Opening Plenary Statement of USTR Robert Lighthizer 
                   at the WTO Ministerial Conference

December 11, 2017

I would like to start by thanking the government of Argentina for 
hosting MC11, and Minister Malcorra, Director-General Azevedo, and 
their staffs for their excellent work. We appreciate all the effort 
over many months that go into creating a conference of this magnitude.

In the brief time I have, I would like to make a few basic points.

First, the WTO is obviously an important institution. It does an 
enormous amount of good and provides a helpful negotiating forum for 
Contracting Parties. But, in our opinion, serious challenges exist.

Second, many are concerned that the WTO is losing its essential focus 
on negotiation and becoming a litigation-centered organization. Too 
often members seem to believe they can gain concessions through 
lawsuits that they could never get at the negotiating table. We have to 
ask ourselves whether this is good for the institution and whether the 
current litigation structure makes sense.

Third, we need to clarify our understanding of development within the 
WTO. We cannot sustain a situation in which new rules can only apply to 
the few and that others will be given a pass in the name of self-
proclaimed development status. There is something wrong, in our view, 
when five of the six richest countries in the world presently claim 
developing country status. Indeed, we should all be troubled that so 
many members appear to believe that they would be better off with 
exemptions to the rules. If, in the opinion of a vast majority of 
members, playing by current WTO rules makes it harder to achieve 
economic growth, then clearly serious reflection is needed.

Fourth, it is impossible to negotiate new rules when many of the 
current ones are not being followed. This is why the United States is 
leading a discussion on the need to correct the sad performance of many 
members in notifications and transparency. Some members are 
intentionally circumventing these obligations, and addressing these 
lapses will remain a top U.S. priority.

Fifth, the United States believes that much can and should be done at 
the WTO to help make markets more efficient. We are interested in 
revitalizing the standing bodies to ensure they are focused on new 
challenges, such as chronic overcapacity and the influence of state-
owned enterprises. Further, we are working closely with many members in 
committee and elsewhere to address real-world problems such as SPS 
barriers.

We believe that all of us are here primarily to represent our own 
citizens to secure rules that will best help them. As President Trump 
said in his U.N. speech, institutions like this function best when all 
sovereign nations acting in their own best interest pull together and 
find ways that permit us all to prosper.

Finally, the United States looks forward to working with all members 
who share our goal of using the WTO to create rules that will lead to 
more efficient markets, more trade, and greater wealth for our 
citizens. Such outcomes will build public support not only for open 
markets, but for the WTO itself.

I'd like to end where I began and thank the Director-General for all 
his work and Minister Malcorra for their incredible work to produce a 
successful MC11.

                                 ______
                                 
    Questions Submitted for the Record to Hon. Robert E. Lighthizer
               Questions Submitted by Hon. Chuck Grassley
    Question. The original 81 charter members agreed to join the WTO, 
voluntarily, seeing it as an improvement over the GATT.

    What aspects of the WTO and the multilateral rules based system 
that derived from the GATT most benefit the United States, U.S. 
companies, and farmers? What improvements could be made to the WTO to 
enhance those benefits?

    Answer. The WTO provides multiple tools for the United States to 
counteract trade concerns that negatively impact U.S. production and 
jobs in manufacturing, agriculture, and services. The United States 
aggressively utilizes these tools in an effort to ensure U.S. exports 
have the same access and ability to compete on a level playing field 
abroad that we allow imports here in the United States.

    The WTO committee system enables the United States to build 
coalitions or act alone to address and resolve other members' trade 
actions that do not comply with their WTO obligations. For example, the 
Sanitary and Phytosanitary (SPS) Committee is important to U.S. efforts 
to prevent members from establishing and maintaining non-science based 
measures that are inconsistent with international standards and that 
block imports of safe U.S. agricultural products. The Technical 
Barriers to Trade (TBT) Committee plays a key role in U.S. efforts to 
reduce regulatory and other technical barriers, such as discriminatory 
standards and unnecessary or duplicative testing requirements, in order 
to increase exports of U.S. manufactured and agricultural goods. When 
such efforts are not successful, and USTR assesses that a WTO member 
may be in breach of its WTO obligations, the United States aggressively 
uses the dispute settlement system to obtain a finding of WTO-
inconsistency to persuade that member to remove the barrier.

    In addition, the WTO provides the United States with a platform to 
export its views on trade policy.

    That said, the WTO that we intended to create, and the WTO we seek, 
is in key respects not the WTO we have today. This is not a new or 
sudden development. For years, the United States and many other members 
have voiced concerns with the WTO system and the direction in which it 
has been headed.

    First, the WTO dispute settlement system has strayed far from the 
system agreed to by members. It has appropriated to itself powers that 
WTO members never intended to give it. This includes where panels or 
the Appellate Body have, through their findings, sought to add to or 
diminish WTO rights and obligations of members in a broad range of 
areas.

    Second, the WTO is not well equipped to handle the fundamental 
challenge posed by China, which continues to embrace a state-led, 
mercantilist approach to the economy and trade. China's actions are 
incompatible with the open, market-based approach expressly envisioned 
and followed by other WTO members and contrary to the fundamental 
principles of the WTO and its agreements.

    Third, the WTO's negotiating arm has been unable to reach 
agreements that are of critical importance in the modern economy. 
Previous negotiations were undermined by certain members' repeated 
unwillingness to make contributions commensurate with their role in the 
global economy, and by these members' success in leveraging the WTO's 
flawed approach to developing-member status.

    Fourth, certain members' persistent lack of transparency, including 
their unwillingness to meet their notification obligations, have 
undermined members' work in WTO committees to monitor compliance with 
WTO obligations. Their lack of transparency has also damaged members' 
ability to identify opportunities to negotiate new rules aimed at 
raising market efficiency, generating reciprocal benefits, and 
increasing wealth.

    The United States is at the forefront of the reform effort in 
Geneva. We are working with a diverse group of members to advance a 
proposal aimed at improving members' compliance with their notification 
obligations. In February, we submitted a proposal to the General 
Council to promote differentiation of development status in the WTO to 
reflect today's realities.

    We are pursuing reform-related discussions in other configurations, 
as well. In December 2017, Ambassador Lighthizer and the trade 
ministers of Japan and the EU announced new trilateral cooperation to 
undertake measures to combat the non-market-oriented policies of third 
countries. Discussions are continuing under the trilateral 
configuration, focused on promoting market-oriented policies and 
practices, preventing forced technology transfer from foreign companies 
to domestic companies, and exploring possible new rules on industrial 
subsidies and state-owned entities.

    Question. The U.S. just won a case at the WTO against China related 
to its subsidies for corn, wheat, and rice. Congratulations on that 
victory, it is a great example of why we need the WTO. It is also an 
example of how long these cases can take, as the case was initiated by 
the Obama administration.

    Will the administration continue pushing China to change its 
domestic agriculture support system through the traditional WTO process 
or the ongoing section 301 negotiations?

    Answer. A WTO panel found that China provided trade-distorting 
domestic support to its grain producers well in excess of its 
commitments under WTO rules, and we will monitor China closely going 
forward to ensure its compliance with panel rulings. The administration 
will take whatever steps are necessary to enforce its trading rights, 
and hold China accountable to the rules on global trade to help ensure 
that American farmers compete on a level playing field in the global 
market place.

    Question. I want to commend you and your staff for U.S. leadership 
at the WTO on a forward-looking e-commerce agenda. We were pleased to 
see the United States join the announcement at the World Economic Forum 
in Davos that countries would initiate negotiations on trade-related 
aspects of e-commerce. Plurilateral negotiations have been an effective 
way to achieve liberalization in goods in areas such as the Information 
Technology Agreement (ITA).

    What is the administration doing to ensure that a plurilateral path 
will lead to a high-standard agreement on e-commerce that includes 
strong rules on cross-border data flows, data localization, a 
moratorium on e-commerce duties and trade facilitation? What are the 
prospects for a high standard agreement if China is part of the 
negotiation?

    Answer. For the WTO digital trade initiative to be successful, it 
will need to deliver commercially significant outcomes with the same 
high-standard rules applicable to all participants. Accordingly, we are 
advocating the high-standard rules and working closely with allies to 
gain support for this approach, focusing in particular on key USMCA 
digital trade outcomes. China's participation in any such negotiation 
will, of course, add challenges and complexity; we need to ensure that 
China's participation does not lower the level of ambition for this 
initiative. Our intent is to have a high-standard, quality agreement 
even if it means fewer countries participate.

    Question. The rise of state-owned enterprises, (SOEs) has caused a 
number of challenges for private industry and regulators. These market 
participants often pursue political goals over market signals and have 
advantages like access to low cost capital. The rules to define SOEs 
are not easy to write, on top of the fact that many SOEs are opaque in 
their operations.

    What do you think are the most important factors the WTO should 
consider for new rules to address the increasing role SOEs have started 
playing in the global economy?

    Answer. Any new rules addressing the growing importance of SOEs and 
the 
market-distorting behavior of state enterprises should ensure that such 
entities are not advantaged by the government and act in accordance 
with market principles. We need to consider stronger subsidy rules that 
would prohibit government financing of entities unable to obtain 
commercial financing on their own. SOEs should also be required to act 
consistent with the normal commercial considerations of private 
entities and not to discriminate in the purchase and sale of goods and 
services.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
    Question. The digital economy is a major driver of economic growth 
for Oregon, for the United States, and for the global economy. I 
believe the Internet represents the shipping lane of the 21st century.

    The state-of-the-art Digital Trade chapter of the revised NAFTA was 
a major achievement and I think it serves as a template for the current 
WTO talks on e-commerce, or digital trade. Some are concerned that the 
inclusion of China in these talks could lead to a less ambitious 
outcome given that China aggressively discriminates against non-Chinese 
companies and manages a mass Internet censorship program known as the 
Great Firewall.

    Can you assure us that you will not accept a watered-down agreement 
on e-
commerce just to keep China in it?

    --Answer. The WTO digital trade initiative will only be successful 
if it can deliver commercially significant outcomes for firms and 
consumers in the digital sphere. We are working closely with allies to 
gain support for high-standard outcomes based on the USMCA Digital 
Trade Chapter, which we likewise view as a model for this negotiation 
and future agreements. China's participation in any such negotiation 
will, of course, add challenges and complexity; we need to ensure that 
China's participation does not lower the level of ambition for this 
initiative. Our intent is to have a high-standard, quality agreement 
even if it means fewer countries participate.

    Question. The U.S. and Japan are like-minded on digital trade 
issues. Japan has worked alongside us in the WTO, in the TPP 
negotiations, and elsewhere to push for strong digital trade rules.

    Would you agree that having a high-standard digital trade agreement 
with Japan--perhaps one that other like-minded countries could join 
over time--would send a powerful message to the EU, China, and other 
countries participating in the WTO e-commerce talks while also 
establishing strong rules on digital trade?

    Answer. In USTR's detailed negotiating objectives for a U.S.-Japan 
Trade Agreement, released December 21, 2018, several digital trade 
objectives were included, on issues such as customs duties, data flows, 
and forced data localization. USTR's intention is to work with Japan to 
develop high-standard digital trade provisions in the U.S.-Japan Trade 
Agreement outcomes. Along with the USMCA digital trade provisions, 
negotiations with Japan offer an opportunity to continue to set high 
standards on these important issues going into WTO talks and other 
trade discussions.

    Question. The WTO ``moratorium'' against imposing customs duties on 
electronic transmissions has helped American companies expand digital 
trade worldwide. This moratorium is particularly important to me 
because when I co-wrote the 1998 Internet Tax Freedom Act, I included a 
provision directing the President to seek to remove global barriers to 
e-commerce at the WTO, and the WTO moratorium on e-commerce duties was 
agreed to that same year.

    Today, however, I'm concerned that more countries seem to be taking 
steps to reassess or undermine the moratorium at the WTO. This is a new 
threat to America's digital trade and digital content.

    What steps will you take to ensure that the moratorium is continued 
at the WTO and that countries like India and Indonesia do not move 
forward on imposing customs duties on streaming content, digital 
downloads, and other content from the United States?

    Answer. The WTO moratorium on imposing customs duties on electronic 
transmissions, including content transmitted electronically, has over 
the last 20 years supported the growth of the digital economy and has 
been replicated in numerous bilateral and regional trade agreements. 
The administration is working with a broad group of like-minded 
countries to ensure the continuation of the moratorium and to address 
potential challenges within the WTO membership. This moratorium also 
will be part of our negotiating position in the WTO e-commerce talks.

    Question. A number of European countries are moving ahead with 
proposals to implement a tax on digital services that appears to be 
designed to specifically target American companies. These digital 
services tax proposals are discriminatory, which raises concerns about 
whether they are compatible with WTO obligations. In January, Chairman 
Grassley and I wrote to Secretary Mnuchin to let him know our concerns 
about countries moving forward unilaterally to implement digital 
services taxes.

    How do you intend to take on these discriminatory, anti-American 
taxes that are being pursued by European countries?

    Answer. The administration shares your concern that proposals by 
several countries to create new taxes on revenues from certain digital 
services, including the proposed law currently under consideration by 
the French legislature, are deeply flawed as a matter of policy and may 
be designed to target U.S. companies. We publicly flagged concerns with 
these taxes in our recent National Trade Estimate report. USTR is 
looking seriously at all of the tools available to address such 
potential trade barriers. We are engaged in the research and analysis 
necessary to evaluate any actions that might be available under U.S. 
law and any applicable trade agreements.

    Question. U.S. cloud service providers support thousands of 
American jobs and bring cutting-edge technology to markets all over the 
world. But, in China, U.S. cloud service providers are now facing major 
barriers that prevent them from operating or competing fairly.

    China has proposed new regulations that would effectively require 
foreign cloud service providers to turn over all ownership and 
operations to a Chinese company. Moreover, these new restrictions would 
force U.S. cloud service providers to give valuable U.S. intellectual 
property to China. It seems to me that these are exactly the type of 
unfair trade practices that you identified in the recent section 301 
investigation of China.

    What outcomes on cloud services are you seeking in the current 
China discussions?

    Answer. The administration places a high priority on the 
elimination of foreign equity limitations, discriminatory licensing 
requirements, and technology transfer requirements and incentives in 
China, including in the cloud services sector. In this sector, we are 
seeking commitments that permit U.S. firms to compete on a level 
playing field with their Chinese competitors and that also reflect the 
access that Chinese companies have today to offer cloud services in the 
United States.

    Question. The EU is taking a range of actions targeted at U.S. 
technology companies and impeding digital trade. On March 26, 2019, the 
European Parliament narrowly passed a copyright directive that diverges 
from copyright norms. The directive may have broad economic and social 
consequences.

    These new rules substantially threaten digitally enabled services 
that U.S. firms export annually to the EU, and will make it harder for 
small and large American businesses and startups to compete in Europe. 
The U.S. government's silence on this issue is deafening and there now 
appears to be an open door to both a 'link tax' and attacks on open 
platforms and the free speech they promote.

    What steps will you take to ensure that implementation of ambiguous 
language in the copyright directive at the member state level will not 
result in additional barriers for U.S. service providers and online 
collaboration?

    How do you intend to ensure that Europe's misguided approaches to 
copyright do not infect policy approaches by other countries, as has 
been the case with geographic indicators?

    Answer. USTR has been closely tracking the progress of the 
Directive and has followed its development with great interest. We 
intend to monitor the implementation of the Copyright Directive in the 
member states of the EU, particularly with regards to provisions in the 
Directive that may have an impact on U.S. suppliers in those markets. 
We have already recognized in recent National Trade Estimate Reports 
that measures requiring remuneration or authorization for short 
excerpts of text may raise concerns. We will also be focused on 
ensuring a fully transparent implementation process--one with ample 
opportunities for all U.S. stakeholders to have opportunities to 
provide input, in a public manner, about their concerns regarding 
possible barriers to trade and any other concerns on the policy being 
espoused by the Directive.

    Question. In February, President Trump announced that the U.S. and 
China had reached an agreement on currency manipulation as part of the 
ongoing negotiations.

    How does this currency agreement with China differ from the 
currency chapter in the renegotiated NAFTA?

    Will all of the obligations in the currency agreement be 
enforceable?

    If so, will those obligations be enforceable by China against the 
United States?

    Answer. The Secretary of the Treasury is responsible for evaluating 
the currency practices of the United States' major trading partners. 
With respect to the China negotiations, the talks are still underway, 
but address a range of issues including, currency practices. The aim is 
to reach agreement to refrain from competitive devaluations in currency 
and to agree to a certain level of transparency that would be 
enforceable under the agreement.

    Question. Fishing and fisheries play an important role in the 
Pacific Northwest economy, and we need to ensure that other countries--
like China--play by the rules to ensure a fair playing field for 
Oregon's fishing industry. Preventing overfishing and illegal fishing 
is also critical to protect our ocean environment. That's why I was 
glad to see that the new NAFTA has an environmental chapter with strong 
commitments to address fisheries subsidies.

    At the WTO, members have been negotiating some form of a 
comprehensive agreement on fisheries subsidies since the Doha 
Ministerial Conference in 2001. Today, our coastal State economies and 
our environment can't afford to wait too long to achieve an enforceable 
fish subsidies agreement.

    Do you agree that we should have an aggressive negotiating schedule 
to wrap up this agreement within the next year, assuming we can achieve 
a high-standard agreement? If so, what steps are you taking towards 
that goal?

    Answer. The Trump administration supports strong prohibitions on 
harmful fisheries subsidies, including those that contribute to 
overfishing and overcapacity and those that support illegal fishing 
activities. The recently concluded USMCA Environment Chapter contains 
the strongest set of internationally agreed obligations to prohibit 
harmful fisheries subsidies, and provides an important benchmark for 
the WTO negotiations. Establishing these prohibitions in the WTO so 
that they apply to all WTO members, including the largest subsidizers, 
will help level the playing field for the U.S. fishing industry. To 
help advance the WTO negotiations, the United States recently joined 
Australia in tabling an innovative new proposal that would further 
limit and reduce the fisheries subsidy programs of some of the largest 
players in the seafood sector, including China and Indonesia. While 
there is an aggressive WTO negotiating schedule and we are making 
progress, we still have a long way to go to achieve meaningful 
disciplines on the most harmful fisheries subsidies due to 
intransigence on the part of some of the most problematic actors. I 
look forward to working with you and other members and stakeholders as 
we advance these negotiations.

    Question. The United States has an American advantage in trade in 
services. The U.S. service sector supports millions of American jobs 
and is at the forefront of innovation, especially in digital services. 
Last year, I asked you whether you had a strategy to revive the ``Trade 
in Services Agreement'' negotiations in Geneva, and you responded that 
you were still evaluating options for expanding U.S. services exports.

    What are your plans to resume these negotiations, which could 
complement the work in the WTO e-commerce negotiations?

    Answer. The administration places a high priority on continuing to 
expand U.S. services exports and services trade, recognizing that 
services are a key driver of our economy. The USMCA includes a number 
of state-of-the-art provisions that will help to expand U.S. services 
exports, including in the area of digital trade. Those high-standard 
digital trade provisions serve as a template for the U.S. position in 
the WTO e-commerce negotiations and in future U.S. agreements. We 
continue to evaluate other potential negotiations to further expand 
U.S. services exports.

    Question. Last summer (August 30, 2018), President Trump threatened 
to withdraw from the WTO if it doesn't ``shape up.''

    Has the WTO shaped up since then in the President's view?

    Please describe any request to you by the President to (1) examine 
implications or consequences of a U.S. withdrawal from the WTO and/or 
(2) take any actions or steps to initiate or advance U.S. withdrawal 
from the WTO.

    Answer. The WTO that we intended to create, and the WTO we seek, is 
in key respects not the WTO we have today. This is not a new or sudden 
development. For years, the United States and many other members have 
voiced concerns with the WTO system and the direction in which it has 
been headed.

    First, the WTO dispute settlement system has strayed far from the 
system agreed to by members. It has appropriated to itself powers that 
WTO members never intended to give it. This includes where panels or 
the Appellate Body have, through their findings, sought to add or 
diminish WTO rights and obligations of members in a broad range of 
areas.

    Second, the WTO is not well equipped to handle the fundamental 
challenge posed by China, which continues to embrace a state-led, 
mercantilist approach to the economy and trade. China's actions are 
incompatible with the open, market-based approach expressly envisioned 
and followed by other WTO members and contrary to the fundamental 
principles of the WTO and its agreements.

    Third, the WTO's negotiating arm has been unable to reach 
agreements that are of critical importance in the modern economy. 
Previous negotiations were undermined by certain members' repeated 
unwillingness to make contributions commensurate with their role in the 
global economy, and by these members' success in leveraging the WTO's 
flawed approach to developing-member status.

    Fourth, certain members' persistent lack of transparency, including 
their unwillingness to meet their notification obligations, have 
undermined members' work in WTO committees to monitor compliance with 
WTO obligations. Their lack of transparency has also damaged members' 
ability to identify opportunities to negotiate new rules aimed at 
raising market efficiency, generating reciprocal benefits, and 
increasing wealth.

    The United States is at the forefront of the reform effort in 
Geneva. We are working with a diverse group of members to advance a 
proposal aimed at improving members' compliance with their notification 
obligations. In February, we submitted a proposal to the General 
Council to promote differentiation of development status in the WTO to 
reflect today's realities.

    We are pursuing reform-related discussions in other configurations, 
as well. In December 2017, Ambassador Lighthizer and the trade 
ministers of Japan and the EU announced new trilateral cooperation to 
undertake measures to combat the non-market-oriented policies of third 
countries. Discussions are continuing under the trilateral 
configuration, focused on promoting market-oriented policies and 
practices, preventing forced technology transfer from foreign companies 
to domestic companies, and exploring possible new rules on industrial 
subsidies and state-owned entities.

    Question. Section 125 of the Uruguay Round Agreements Act states 
that congressional ``approval'' of U.S. participation in the WTO 
``shall cease to be effective if, and only if'' a joint resolution 
withdrawing congressional approval is enacted by Congress.

    Would you agree that, per the Uruguay Round Agreements Act, the 
president may not withdraw the United States from the WTO without the 
approval of Congress?

    Answer. As noted in the Statement of Administrative Action 
accompanying the Uruguay Round Agreements Act (URAA), and approved by 
Congress along with the Act, section 125 establishes an expedited 
procedure permitting Congress, following the submission of every fifth 
annual report required by section 124, to adopt a joint resolution 
revoking congressional approval of the WTO Agreement. The provision 
creates a mechanism that will permit periodic congressional review of 
U.S. participation in the WTO. Section 125 specifies the procedural 
rules that apply to consideration of any such joint resolution, 
including time limits for action, automatic discharge provisions, and 
rules for consideration of the joint resolution in both Houses.

    Question. While much has changed in the global economic scene since 
the inception of the WTO, the WTO's rules have not been updated to 
adapt to these changes. For example, the WTO does not seem to have 
mechanisms to address China's failures to adopt more market-oriented 
policies and to stop government intervention in business activities. I 
am glad to see you working with allies, like the EU and Japan, on some 
of these issues, but ultimately, the adoption of new rules will require 
the consensus of all WTO members.

    How do you see the WTO being able to adopt these kinds of critical 
rule changes when the institution currently require the unanimous 
consent of all WTO members to adopt changes?

    Answer. Our long record of leadership at the WTO makes us clear-
eyed about the challenges ahead. In our assessment, members are in the 
early stages of grappling with our collective failure to confront 
problems that have been growing for years. The United States is 
committed to working with like-minded members to address our concerns 
with the functioning of the WTO. Some of this work will happen in 
Geneva, as we and other like-minded members put forth concrete 
proposals and work to build support for our ideas across the 
membership. Some of this work will happen in other configurations, such 
as our trilateral cooperation with the EU and Japan and our bilateral 
engagements. We of course are committed to meaningful action regardless 
of the WTO membership's willingness to act. Ultimately, all members 
must recognize it is in their self-interest to address the current 
issues at the WTO if the organization is to function properly.

    Question. Changes to the dispute settlement process have been 
sought for many years by multiple administrations. While I appreciate 
that the U.S. has been successful in drawing attention to the need for 
reform, some question how the reforms can be instituted before 
December, when the Appellate Body will no longer have the number of 
panelists it needs to do its job. While I am not a fan of all of the 
decisions coming out of the WTO dispute settlement system, the U.S. is 
its biggest user--with a relatively high success rate.

    What way forward do you see for these issues to be resolved so that 
the U.S. will agree to the appointment of new Appellate Body members?

    Where will a non-functioning dispute settlement system leave the 
cases that the U.S. has brought, including the case brought against 
China concerning the protection of intellectual property rights?

    In the event that the Appellate Body ceases to have the minimum 
number of members needed to act, what options will this leave the U.S. 
and others who want to ensure that other members live up to their 
obligations?

    Answer. For many years, and in multiple Administrations, the United 
States has repeatedly expressed concerns with the WTO Appellate Body's 
activist approach, which has involved overreaching on procedural 
issues; interpretative approach; and findings on substantive matters. 
In short, the Appellate Body has failed to apply the WTO rules as 
written and agreed to by the United States and other WTO members.

    During 2018, the United States made a series of statements at DSB 
meetings detailing the Appellate Body's disregard for the rules set by 
WTO members, and the Appellate Body's attempts to add to or diminish 
rights or obligations under the WTO Agreement. The issues addressed 
included the Appellate Body's disregard for the mandatory 90-day 
deadline for appeals, the Appellate Body's unauthorized review of panel 
findings on domestic law, the Appellate Body's issuance of advisory 
opinions on issues not necessary to resolve a dispute, the treatment of 
prior Appellate Body reports as precedent, and allowing persons to 
serve on appeals after their Appellate Body term has ended.

    The United States also has been expressing deep concerns for many 
years with the Appellate Body's overreach in areas as varied as 
subsidies, antidumping and countervailing duties, standards under the 
TBT Agreement, and safeguards. Such overreach restricts the ability of 
the United States to regulate in the public interest or protect U.S. 
workers and businesses against unfair trading practices.

    The responsibility to address these problems is not that of the 
United States alone, rather, it is the collective responsibility of all 
WTO members to ensure the proper functioning of the WTO dispute 
settlement system, including the Appellate Body.

    Regardless of the progress in reforming the dispute settlement 
system, the United States will remain committed to fulfilling its 
obligations under WTO Agreement, while rejecting efforts by the WTO 
Appellate Body to create new obligations to which WTO members have not 
agreed. We likewise expect U.S. trading partners to continue to fulfill 
their own obligations under the WTO Agreement. In the event that a 
member fails to fulfill its commitments, I will continue to use 
existing tools under U.S. law to enforce U.S. rights under the WTO 
Agreement.

    Question. Last November, Senator Stabenow and I sent you and 
Secretary Ross a letter about the economic impact of the rules of 
origin for autos in the revised NAFTA agreement. The president has said 
that this agreement will ``incentivize billions of dollars in new 
purchases of U.S.-made automobiles'' and create ``far more American 
jobs.'' USTR's fact sheet says that the new rules will ``transform 
supply chains to use more United States content.'' I share your support 
of a strong auto manufacturing sector in the United States, but I have 
not yet seen any quantitative analysis that backs up these assertions.

    Will you commit to providing this critical analysis to members of 
Congress so that we can fully understand the potential impact of these 
changes?

    Answer. Over the past months, I have frequently discussed auto 
rules of origin with members of Congress and explained how they will 
benefit U.S. autoworkers and the industry. Earlier this month, we 
provided Senate Finance trade staff with a white paper containing 
additional quantitative analysis and provided them with a briefing on 
the basis of our estimates.

    Question. How do you square these projected positive impacts on the 
U.S. auto sector with the Commerce Department's investigation about how 
future imports of automobiles and auto parts constitute a national 
security threat?

    Answer. The President is considering the findings of the Department 
of Commerce's report. As you know, at the time we signed the USMCA, we 
also had an exchange of letters with Mexico and Canada regarding 
automobiles.

    Question. The revised NAFTA includes some clear improvements over 
the status quo, especially in the Digital Trade chapter. But I remain 
concerned about the deal's enforceability. The agreement does not 
resolve all of the flaws in the state-to-state dispute settlement 
chapter in the current NAFTA. This includes loopholes that allow 
parties accused of violating their obligations to delay or even block 
the formation of a panel. Under NAFTA, no dispute settlement panel has 
been formed since 2000, and the dispute settlement system generally has 
been ineffective as a tool to ensure compliance with the agreement. 
Without effective enforcement, American workers, farmers, and 
businesses will not see the benefits of this new deal.

    Recent trade agreements have avoided the NAFTA loopholes with 
improved dispute settlement procedures. For example, the Comprehensive 
and Progressive Agreement for Trans-Pacific Partnership (CPTPP) closed 
these loopholes, ensuring that parties cannot unreasonably delay or 
avoid the formation of a panel. Both Mexico and Canada have ratified 
the CPTPP.

    Would you be opposed to clarifying that the text of Chapter 31 of 
the revised NAFTA is not meant to allow panel blocking?

    Answer. The text of Chapter 31 of the United States-Mexico-Canada 
Agreement (USMCA) is not meant to allow panel blocking. Indeed, panels 
have been successfully formed under Chapter 20 of the NAFTA (its 
precursor). As we move forward with congressional consideration of the 
USMCA, we look forward to discussing this and any other issues related 
to enforcement with you and your colleagues.

    Question. Many members of Congress, myself included, are concerned 
about Mexico's enforcement of its new labor obligations under the 
revised NAFTA. Under this agreement, Mexico agreed to pass key labor 
reform legislation to implement those commitments by January 1, 2019. 
As of March 26th, Mexico still has not passed this legislation.

    How can we have confidence that Mexico will enforce the new labor 
commitments in the revised NAFTA when Mexico still has not passed the 
necessary legislation to put the reforms into effect?

    Answer. The administration has worked very closely with the 
Government of Mexico to ensure that Mexico's labor legislation meets 
the obligations of the USMCA Labor Chapter and Annex, and is enacted 
before the trade agreement is considered by the U.S. Congress. On April 
29, 2019, Mexico's Congress passed legislation that complies with its 
USMCA labor commitments, and I am committed to working with you and 
other members of Congress to discuss options and policy tools for 
monitoring the implementation of these important reforms.

    Question. Recent OECD studies suggest that over half of Mexico's 
labor force is employed in the informal economy. Jobs in the informal 
economy are not formally regulated by the Mexican government. As a 
result, Mexico's commitments in the Labor Chapter of the new NAFTA--
including its commitment to adopt regulation on acceptable minimum 
wages and hours of work--will not extend to workers in Mexico's 
informal economy.

    How do you expect Mexico to fully enforce its labor laws given the 
high proportion of workers employed in the informal economy?

    Answer. The Mexican Congress has passed labor reform legislation 
that provides workers with fundamental labor protections, whether they 
have formal employment contracts or not. For example, workers have the 
right to join authentic unions and engage in true collective bargaining 
with their employer, and Mexico's labor authorities are obligated to 
ensure the protection of these rights regardless of an employer's 
status in the formal economy. The USMCA labor obligations also include 
specific commitments for Mexico to create specialized administrative 
and judicial bodies to implement and enforce fundamental labor rights.

    Question. In which ways do you expect the new NAFTA to promote and 
expand Mexico's formal economy?

    Answer. The USMCA will increase formal sector employment by 
requiring the elimination of undemocratic unions and collective 
bargaining agreements that ``protect'' employers from real collective 
bargaining. Authentic unions and collective bargaining will allow 
Mexico's workers to demand that employers provide wage benefits and 
other formal employment benefits such as affiliation to social safety 
nets, which in Mexico include government sponsored pensions and health 
care. This will improve the respect for labor rights of Mexican 
workers, and level the playing field for workers in the United States 
who will no longer compete against exploited workers in Mexico.

    Question. Please address the following inconsistencies between U.S. 
law and the revised NAFTA text:

    Definition of a biologic: U.S. law exempts chemically synthesized 
polypeptide from the definition of a biologic (PHS Act Sec. 351(i)(1)). 
Drugs that fall into this class are used by patients who, for example, 
are living with cancer and diabetes, two diseases that already cause a 
significant economic burden. The new NAFTA text's definition of a 
biologic (20.F.14.2) does not exempt drugs in this class, increasing 
the cost for patients.

    Please explain this inconsistency and why this class of drugs would 
not be exempted, as they are in U.S. law.

    Answer. U.S. law is fully consistent with the USMCA IP Chapter 
provisions, and nothing in the newly negotiated USMCA will require 
changing U.S. laws on pharmaceutical intellectual property rights. The 
plain meaning of the treaty text is that Article 20.49 of the USMCA 
describes biologics as including products ``produced through 
biotechnology processes,'' as distinguished from ``chemically 
synthesized'' products, such as chemically synthesized polypeptides.

    Question. Market vs. Data Protection: Article 20.F.14 of the 
revised NAFTA refers to Article 20.F.13.1 and states that a party must 
``provide effective market protection through the implementation'' of 
that article. Although this provision refers to ``market protection,'' 
Article 20.F.13.1 refers to data protection, and to a period of 5-year 
data protection. This could appear to conflict with the 4-year ``data 
protection'' period under the Biosimilars Act (PHS Act 
Sec. 351(k)(7)(b)) preventing a BLA submission. Furthermore, to the 
extent this provision allows for a 10-year period of ``data 
protection'' prohibiting a BLA submission, it could conflict with the 
Biosimilars Act.

    Please explain these inconsistencies.

    Answer. U.S. law is fully consistent with the USMCA IP Chapter 
provisions, and nothing in the newly negotiated USMCA will require 
changing U.S. laws on pharmaceutical intellectual property rights. 
Articles 20.49 and 20.48 are without prejudice to a party's ability to 
stipulate a period of time during which an application for a follow-on 
biologic product that relies on the innovator's safety and efficacy 
data may not be submitted and do not conflict with the cited provisions 
of the Public Health Service Act.

    Question. Expanding biologic exclusivities: The new NAFTA also has 
the potential to conflict with the way FDA has interpreted the 
transition rules under the BPCIA governing biologics approved as NDAs. 
Footnote 46 of the agreement includes its own transition rules for 
biologic products, which allows biologic applicants to seek approval on 
or before March 23, 2020 under the procedures set forth in Article 
20.F.13.1 (and thus be eligible for, or subject to, 5-year and 3-year 
exclusivity) under certain circumstances. But footnote 46 does not 
state whether new biologic applications submitted during this period 
will be eligible upon approval for 5-year exclusivity under Article 
20.F.13 only, or if they will also be eligible for 3-year exclusivity 
under Article 20.F.13, or if they will also be eligible for 10-year 
exclusivity under Article 20.F.14. Therefore, there is a concern that 
the revised NAFTA could conflict with the way FDA interprets the 
transition rules under section 7002(e) of the BPCIA if footnote 46 were 
interpreted such that a new biologic sponsor may be eligible for 
exclusivities available under both Article 20.F.13 and Article 20.F.14, 
and thus entitled to both 5-year exclusivity under one pathway and at 
least 10 years of exclusivity under another (though these would likely 
overlap), and also to 3-year exclusivity for each new indication, 
formulation change, or method of administration.

    Please explain the inconsistency between the transitions rules as 
described in the BPCIA and in the revised NAFTA text.

    Answer. U.S. law is fully consistent with the USMCA IP Chapter 
provisions, and nothing in the newly negotiated USMCA will require 
changing U.S. laws on pharmaceutical intellectual property rights. We 
have a robust interagency process, including with the Department of 
Health and Human Services, with respect to developing and negotiating 
FTA provisions. In particular, the USMCA IP Chapter is consistent with 
the Biologics Price Competition and Innovation Act, as well as FDA's 
interpretation of that act.

    Question. Last week, President Trump met with President Bolsonaro 
of Brazil at the White House. According to a joint statement, President 
Trump noted his ``support for Brazil initiating the accession procedure 
to become a full member of the OECD,'' and President Bolsonaro agreed 
that ``Brazil will begin to forgo special and differential treatment in 
World Trade Organization negotiations.'' Brazil currently maintains 
high tariffs and restrictive trade policies. Previously, the United 
States withheld support for Colombia's OECD accession until Colombia 
agreed to remove certain trade irritants subject to enforceable dispute 
resolution under our bilateral free trade agreement.

    Please describe any specific commitments that the United States 
made to Brazil with regard to Brazil's OECD accession.

    Please describe what specific commitments Brazil has made to 
address key barriers to trade with the United States.

    Answer. When President Trump and President Bolsonaro of Brazil met 
on March 19, 2019, President Trump welcomed Brazil's ongoing efforts 
regarding economic reforms, best practices, and a regulatory framework 
in line with the standards of the Organization for Economic Cooperation 
and Development (OECD). President Trump noted his support for Brazil 
initiating the accession process to become a full member of the OECD. 
Any decision by the OECD on its enlargement, including on which 
countries will next be invited to begin the OECD accession process, 
requires consensus of all 36 OECD members.

    The United States has high expectations for any country seeking 
OECD membership. We intend to bilaterally deepen our engagement with 
Brazil, including through our bilateral dialogue mechanism and look 
forward to Brazil demonstrating in action its commitment to open its 
market to U.S. goods. Importantly, it should be noted that Brazil 
agreed to forgo seeking special and differential treatment in current 
and future trade negotiations, which we would expect of any aspiring 
OECD member.

    Question. The Trade Enforcement Trust Fund (TETF) was established 
by Congress specifically to provide resources needed to support trade 
enforcement efforts. USTR's FY 2020 Budget Justification Summary notes 
that ``USTR collaborated with OMB to propose language in the FY 2020 
Budget that will fix ongoing technical issues with the TETF that 
prevent the Fund from functioning as intended.''

    Describe the challenges you face with the current approach to 
funding the TETF.

    Answer. The proposed language fixes a minor technical issue with 
the TETF's execution. Congress appropriates funding from the TETF each 
year. As it currently operates, any unspent funding cannot be used 
after the year of its appropriation, but continues to count against the 
TETF's $30 million cap for 5 years. While the presence of unspent 
funding does not prevent USTR from using its FY19 appropriation, there 
are implementation challenges in obligating the appropriation without 
hitting the cap.

    Describe the technical issues, as well as the proposed fixes, 
referenced in the Budget Justification Summary.

    Answer. As noted, USTR continues to have discussions with 
congressional staff and OMB as to how to improve the TETF. The FY 2020 
budget recommends removing investment authority from the TETF. This 
will allow unused funding in the account to expire preventing prior 
year unobligated funds from counting against the $30 million cap.

                                 ______
                                 
                 Question Submitted by Hon. Pat Roberts
    Question. As we have discussed previously, agriculture faces a 
number of non-
tariff barriers to trade. Often, sanitary and phytosanitary (SPS) 
measures are used by other countries to conceal protectionist trade 
policies, ultimately, discriminating against U.S. agriculture products 
and hindering market access. The WTO is one mechanism the United States 
has successfully used to further its SPS goals.

    At this time, against the backdrop of largely dormant WTO activity 
on multi-
lateral market access, how can USTR advance the United States' SPS 
agenda at the WTO? Is our current best option largely limited to 
bringing SPS cases against certain trading partners, such as the EU, 
when they fail to abide by sound science on issues such as pesticides 
and biotechnology?

    Answer. The administration is pursuing an active agenda to advance 
U.S. interests on SPS in the WTO. In many countries, regulatory 
barriers lacking scientific justification block farmers' access to safe 
tools and technologies. We have initiated a series of joint activities 
with other WTO members on the safe use of biotechnology and pesticides 
as a means to support all farmers, including small holders. In 2018, 13 
countries supported an international statement on agricultural 
applications of precision biotechnology to foster the use of the new 
tools, including genome editing. We joined with five African and Latin 
American countries on a WTO initiative regarding regulatory responses 
to the destructive pest fall armyworm. In recent years, we have built a 
coalition of over 30 countries to raise concerns with the EU's 
hazard-based approach to pesticides. We are also working with other 
countries to advance implementation by WTO members of regionalization 
measures for animal and plant health. We will continue to use the WTO 
in new and creative ways to advance U.S. interests on SPS.

                                 ______
                                 
               Questions Submitted by Hon. Johnny Isakson
    Question. Mr. Ambassador, during the hearing, you heard me discuss 
my unease with the current status of the section 232 tariffs on steel 
and aluminum as well as my concern that the 232 tariffs will be removed 
in name only and replaced with a quota system. In response to my 
comments, you mentioned that it was your hope to remove the steel and 
aluminum tariffs on Canada and Mexico and replace them with a different 
mechanism that will protect the integrity of the program without 
hurting American companies downstream. I believe that import quotas 
often lack transparency and may run counter to the administration's 
monumental effort to re-establish free trade between the U.S., Canada, 
and Mexico.

    Can you offer more details on what this future program will look 
like? What will USTR do beforehand to ensure that Americans aren't 
unduly hurt by this program?

    Answer. As I noted during the hearing, our objective in discussions 
with Canada and Mexico is to find an alternative to the section 232 
tariffs that addresses the threatened impairment of U.S. national 
security caused by imports of steel and aluminum. The types of issues 
we are considering in these discussions include the need to avoid 
import surges and prevent transshipment; the need to reduce excess 
production and capacity in overseas markets; and possible mechanisms 
for contributing to increased capacity utilization in the United 
States. From the outset, the section 232 steel and aluminum measures 
have been constructed in a manner that is mindful of the needs of 
consumers of these products. At the time he imposed the section 232 
tariffs, the President authorized the Secretary of Commerce to provide 
exclusions from the tariffs for articles for which there is a lack of 
sufficient U.S. production; in August of last year, the President 
extended this authority to enable the Secretary to provide exclusions 
from steel and aluminum quotas imposed under section 232. These 
considerations will continue to guide the administration's approach to 
the program.

    Question. Similarly, I have serious concerns over the 
administration's potential move to use section 232 to impose tariffs on 
U.S. automobile imports. Recently, the President was asked whether 
autos and auto parts pose a national security risk, and his response 
was simple: ``Well, no.''

    Do you agree with that answer? If so, would you agree with me that 
section 232 is not an appropriate tool for imposing tariffs on autos?

    Answer. The Secretary of Commerce, who helps administer section 
232, has submitted his section 232 report on the national security 
implications of automotive imports to the President. The President is 
reviewing the analysis and will determine any appropriate course of 
action.

    Question. I remain concerned that USMCA does not address an 
important issue affecting a large portion of Georgia's agriculture 
economy. Georgia's fruit and vegetable growers, as well as other 
seasonal growers, are constantly dealing with targeted subsidized 
imports of fruits, vegetables, and other perishables from Mexico. Due 
to the seasonal nature of these businesses as well as the very short 
window in which they are able to sell their products, Georgia's fruit 
and vegetable farmers don't qualify for U.S. AD/CVD mechanisms since 
they're unable to demonstrate adequate injury as defined by current 
U.S. law. In turn, our trade deficit in fruits and vegetables with 
Mexico continues to widen as more and more Georgia producers are forced 
to shut down their operations. I have heard from growers in my State 
who oppose moving forward with USMCA without an effective mechanism to 
contest these unfair practices.

    Can we count on you and the administration to address this issue in 
the coming months?

    Answer. This issue is not addressed in existing U.S. law or the 
current NAFTA. However, the administration is exploring ways to assist 
the fresh fruit and vegetable industry and address the challenges it is 
facing from Mexican imports.

    Question. Georgia is the second largest cotton-producing State in 
the country. Like many other members of the U.S. agriculture community, 
the Chinese government has targeted the cotton industry with 
retaliatory tariffs and Georgia's farmers and Georgia companies using 
their products are suffering the consequences. I'm happy to hear that 
market access for U.S. agriculture products is at the forefront of your 
negotiations with the Chinese Government, and I applaud your efforts to 
prioritize such an important sector in Georgia's economy.

    To what extent has cotton been discussed in these meetings?

    Answer. The U.S.-China economic relationship is very important, and 
the Trump administration is committed to reaching meaningful, fully-
enforceable commitments to resolve structural issues and addressing our 
persistent trade deficit to improve trade between our countries. China 
has committed to resolving outstanding issues in our agricultural trade 
relationship, including through immediate purchases of a wide variety 
of U.S. agricultural products, such as cotton. The U.S. cotton industry 
has longstanding relationships in the Chinese market, and we are 
optimistic the proposed Agreement, if reached, would help maintain and 
strengthen these relationships for the long term.

    Question. As the number one forestry State in the country, Georgia 
depends on fair market access for timber products and the 25-percent 
tariff on exports of U.S. southern yellow pine imposed by China is 
causing unnecessary strain for my State's foresters and the markets 
they supply. In the absence of a fair trade agreement, my constituents 
are losing market share to foreign competitors on a daily basis.

    Will immediate removal of this tariff, along with other tariffs on 
U.S. timber exports, be part of any agreement you strike with the 
Chinese?

    Answer. The goal of the section 301 investigation is to change 
China's unfair and market-distorting behavior. China should have 
responded to the findings in the section 301 investigation and the U.S. 
tariff actions by undertaking the necessary economic and policy reforms 
needed to end its trade-distortive practices. Instead, China retaliated 
with tariffs on U.S. products. The administration is pressing China to 
remove those retaliatory tariffs entirely.

                                 ______
                                 
                Questions Submitted by Hon. Rob Portman
    Question. At the hearing you noted your concerns about moving away 
from consensus at the World Trade Organization (WTO) because doing so 
could come back to haunt the United States in the future. To get 
philosophical for a moment:

    When you think about reform how do you balance the conflicting 
desire for progress with the need to preserve sovereignty? What 
heuristics should be used to evaluate whether the present need to 
accomplish something outweighs the need to mitigate against future 
blowback?

    Answer. We cannot conceive of any form of sustainable progress that 
would require us to relinquish sovereignty. Any attempt to identify 
U.S. priorities must begin with a thorough understanding of U.S. 
national interests and an articulated strategy to advance them, 
particularly where competing objectives are in play. On that 
foundation, the value of consensus-based or joint action can be 
evaluated in terms of their efficacy in advancing U.S. interests and 
their likelihood of success.

    Question. Some provisions of the Uruguay Round commitments are very 
obvious. Yet, the meaning of some Uruguay Round commitments has drifted 
from the commitment's original--or even plain--meaning towards 
judicially created meaning.

    Do you believe that this is because of some inherent flaw in the 
drafting of the Uruguay Round documents? Or is it because of human 
error-either intentional or not-that new meaning has been imbued to 
what was agreed to in the Uruguay Round? What does this mean for the 
ability of WTO reformers to secure new written commitments to which 
parties textually adhere? How do you propose Uruguay Round parties 
develop, or write, new commitments that are impervious to judicial 
drift?

    Answer. Negotiating and drafting international trade agreements is 
certainly a difficult task that must be undertaken with great care. 
Reliance on certain long-standing principles can be helpful, but new 
commitments must be written with great precision and clarity, bearing 
in mind the principles of treaty interpretation that may be 
subsequently employed. We must also ensure, however, that those called 
upon to interpret written text must not add to or diminish the rights 
and obligations as agreed upon by the negotiating parties. 
Additionally, we must ensure that relevant international institutions 
are not empowered in a way that infringes on U.S. sovereignty.

    Question. The Information Technology Agreement (ITA) provided that 
it would only enter into force when participants whose economy totaled 
90 percent of world trade in covered products joined the agreement. 
Critical mass requirements that are this high can give countries like 
China a de facto veto over the creation of future plurilateral 
agreements.

    Should plurilateral agreements have lower critical mass 
requirements? Are there other critical mass requirements--other than 
just a percentage of global trade--that should be considered?

    Answer. As part of our effort to improve the functioning of the 
WTO, we are thinking carefully about a number of pertinent issues, 
including the requirements for plurilateral negotiations. We are 
interested in exploring options for WTO members that want to advance 
negotiated outcomes to do so. A current example of this is the WTO 
digital trade initiative, in which we are exploring options for moving 
forward in this important area on a plurilateral basis.

    We note that ``critical mass'' requirements are often features of 
so-called ``open'' plurilateral agreements, and they are negotiated 
among the parties with the objective of minimizing the risk of free 
ridership that is inherent to such agreements.

    Question. Although expired, provisions related to dark amber 
subsidies contained a rebuttal presumption that such subsidies caused 
serious prejudice.

    Do you believe that the resuscitation of rules for dark amber 
subsidies are still relevant at today's WTO?

    Answer. Bringing back the dark amber category of subsidies is an 
interesting idea. While a rebuttable presumption may not be a panacea, 
it may be helpful in identifying some of the more egregious subsidy 
types and providing for a more easily obtainable remedy.

    Question. To be effective, any commitments reached as part of 
current negotiations with China must be enforceable. Now expired, 
section 421 was a China-
specific safeguard that was created--pursuant to China's World Trade 
Organization (WTO) Accession Protocol--as an extraordinary trade 
enforcement tool designed to guard against increased imports from 
China. While not a panacea for enforcement, the resuscitation of 
section 421 may have a useful place back in our trade enforcement 
toolkit.

    Do you believe that section 421 should be revived? Do you believe 
that, in order to be WTO-compliant, the revival of section 421 must be 
accompanied by China's consent? Do you believe section 421 can be 
revived unilaterally under U.S. law and without China's consent? Is 
section 421 currently part of the scope of talks with China?

    Answer. Section 421 of the Trade Act of 1974, as amended, was 
created specifically to implement the anti-surge mechanism established 
under the Protocol of Accession of the People's Republic of China to 
the WTO. According to the terms of the Protocol, the anti-surge 
mechanism expired on December 10, 2013--12 years after the date of 
entry into force of the Protocol for China. Section 421 has not been 
part of our current discussions with China on the enforcement 
mechanism. I am always interested in discussions with Congress 
regarding additional enforcement tools.

    Question. As you know, the President has received the report 
pursuant to the section 232 investigation into the national security 
threat posed by imports of autos and auto parts.

    Have you seen the report? Do you concur in its findings? Do you 
concur in its potential recommendations for import restrictions?

    Answer. The Secretary of Commerce, who helps administer section 
232, has submitted his section 232 report on the national security 
implications of automotive imports to the President and the President 
is reviewing the analysis and will determine the appropriate course of 
action. I am not in a position to comment on its findings and 
recommendations. As you know, at the time we signed the USMCA, we also 
had an exchange of letters with Mexico and Canada regarding 
automobiles.

    Question. The 301 exclusion process is helpful for some companies 
to seek a refund of the duties paid on tariffed imports from China.

    Will USTR continue to operate the exclusion process during 
negotiation and successful implementation of any agreement with China 
in order to give U.S. companies using the exclusion process a chance 
for retroactive relief?

    Answer. We are working on exclusions for the products on the $34 
billion and $16 billion tariff lists and will continue to do so. We 
will consult with your office if there are any new developments.

    Question. China was the third largest export market for the U.S. 
dairy industry in 2017. However, current counter-retaliatory tariffs 
are squeezing dairy market access. Dairy is roughly a $10 billion 
market in China with most of that access going to the European Union 
and New Zealand because of the new tariffs faced by U.S. dairy 
exporters.

    In current negotiations with China, is market access for dairy part 
of the talks, either in terms of expanding market access through 
reduction of tariffs and nontariff barriers, or increasing Chinese 
purchases of U.S. dairy exports?

    Answer. We continue to negotiate with China to achieve greater 
market access for U.S. exports and fair and reciprocal treatment for 
U.S. farmers, and businesses. We seek substantial and immediate 
purchases of a wide variety of U.S. agricultural products, such as 
dairy, as well as the removal of technical and regulatory barriers that 
impede such purchases.

    Question. USTR proposed a welcome and bold agenda in terms of new 
trade negotiations, and USMCA contains a high-quality digital trade 
chapter. Provisions like those in USMCA are all the more important as 
digital protectionism increases around the world.

    Is USTR prepared include digital trade within stage one talks with 
Japan, should negotiations with Japan take a staged approach? Do you 
agree that the early negotiation of high-quality digital trade 
provisions in a U.S.-Japan agreement would help set a needed example 
for subsequent WTO talks potentially commencing later in 2019, and for 
other discussions?

    Answer. In USTR's detailed negotiating objectives for a U.S.-Japan 
Trade Agreement, released December 21, 2018, several digital trade 
objectives were included, on issues such as customs duties, data flows, 
and forced data localization. USTR's intention is to work with Japan to 
develop high-standard digital trade provisions in the U.S.-Japan Trade 
Agreement outcomes. Along with the USMCA digital trade provisions, 
negotiations with Japan offer another opportunity to set high standards 
on these important issues going into WTO talks and other trade 
discussions.

                                 ______
                                 
             Questions Submitted by Hon. Patrick J. Toomey
    Question. In your written testimony, you stated, ``if we did not 
have the WTO, we would need to invent it.'' As you know, one of the 
primary reasons why the United States championed the WTO as a successor 
to the GATT was because the GATT lacked an enforceable dispute 
settlement system. As a result, GATT member countries--notably the 
U.S.--resorted to unilateral trade actions, including liberal use of 
section 301 tariffs, to pry open markets and enforce global trade 
rules.

    The Uruguay Round addressed this flaw in the GATT system by 
establishing a binding dispute settlement function, including the WTO 
Appellate Body. I am concerned that the WTO's dispute settlement 
mechanism will soon fail to function if the administration continues to 
block the appointment of judges to the WTO's appellate panel.

    The Appellate Body currently has just the bare minimum of three 
judges required to hear an appeal. The terms for two of these judges 
expire on December 10, 2019. If these terms are permitted to expire 
without any new judges installed, any country that loses a WTO dispute 
settlement case could block the ruling against them by appealing to the 
Appellate Body. And because the winning country may not retaliate under 
WTO rules until after the Appellate Body has completed its review of an 
appeal, the entire ruling would be effectively blocked. This result 
would functionally take us back to the days of the GATT, when dispute 
settlement compliance was essentially voluntary.

    Do you believe that the WTO can continue to function effectively 
without a binding dispute settlement system? If so, why?

    I understand your concerns about Appellate Body overreach and 
jurisprudence. Hypothetically, if we were to eliminate all WTO judicial 
precedent and return to the rules as written in 1995, how would this be 
implemented? Would every single dispute settlement decision that has 
already been rendered, including for countries that have fully 
complied, be unwound? What happens to those rulings that have been 
favorable to U.S. interests?

    Answer. Our position is that the WTO dispute settlement system 
should operate as specified in the WTO Understanding on Rules and 
Procedures Governing the Settlement of Disputes (DSU). These are the 
rules agreed to by WTO members in the Uruguay Round, and the rules 
which were approved by Congress in the Uruguay Round Agreements Act.

    The DSU states that that panels and the Appellate Body must apply 
customary rules of interpretation of public international law in 
interpreting the WTO Agreement. Those customary rules start with the 
text of an agreement, and do not provide for reliance on any 
interpretations made by an adjudicator in a prior dispute. Furthermore, 
the WTO Agreement explicitly reserves authoritative interpretations to 
the WTO Ministerial Conference or WTO General Council. And the DSU 
explicitly notes that the dispute settlement system operates without 
prejudice to this interpretative authority.

    The DSU makes clear that the dispute settlement system was created 
not to adopt binding interpretations, but rather to assist in resolving 
specific disputes between members. As envisioned by WTO members, the 
dispute settlement system can usefully serve this role, without any 
sort of binding precedent. Rather, in each dispute, a panel must make 
an objective assessment of the matter before it, based on the facts and 
arguments presented by the WTO members involved in the dispute. Of 
course, it is important to note that even if the United States wins a 
case at the WTO, countries frequently do not comply with the results.

    Question. Prior to the WTO, the U.S. regularly used section 301 to 
enforce GATT rulings. However, as part of the ``grand bargain'' to set 
up the WTO, which included the WTO's binding dispute settlement system, 
the U.S. agreed not to use section 301 to address trade violations that 
fell within the scope of WTO commitments. In other words, the U.S. 
must--not may--address violations of WTO commitments through the WTO's 
Dispute Settlement Understanding (DSU).

    This legally binding commitment is codified in the Statement of 
Administrative Action (SAA) that accompanied the Uruguay Round 
implementing legislation. The SAA states that in such cases ``that 
involve an alleged violation of a Uruguay Round agreement or the 
impairment of U.S. benefits under such an agreement,'' the U.S. Trade 
Representative will ``invoke DSU settlement procedures.''

    You have asserted that the WTO is not equipped to deal with Chinese 
trade policy practices. While this may be true in some cases, there are 
other problematic Chinese practices identified in your agency's section 
301 report that do, in fact, appear to be explicitly covered by WTO 
disciplines.

    Has USTR determined that China's IP abuse falls outside the scope 
of the WTO's Trade-related Aspects of Intellectual Property Rights 
(TRIPs) Agreement? If so, how did USTR reach this conclusion? Has USTR 
determined that China's practice of technology transfer falls outside 
the scope of its commitments in China's Accession Protocol and the 
Binding Working Party Report? If so, how did USTR reach this 
conclusion?

    Is your agency concerned about a possible domestic legal challenge 
to the administration's use of section 301 on the basis that 301 
tariffs are being used to enforce trade commitments already covered by 
the WTO?

    Has USTR prepared any legal memoranda to justify its unilateral use 
of section 301 against China's trade practices? If so, please explain 
how USTR justified its current use of Section 301 in such documents.

    Answer. When we initiated the 301 investigation in August 2017, we 
had not yet determined which of the issues could be addressed through 
WTO dispute settlement, or rather would be addressed bilaterally under 
section 301 procedures.

    In the course of the investigation, we received extensive public 
input, including in a public hearing at which U.S. stakeholders and 
Chinese representatives appeared. No stakeholder suggested any concrete 
means to address the issues under investigation through WTO 
proceedings. We also conducted our own research, drawing on the 
expertise of a wide range of government agencies.

    After careful review, I determined that three of the four issues 
under investigation involved Chinese Government-directed conduct that 
could not be addressed through application of WTO rules, and thus would 
be addressed bilaterally. Those three issues are China's use of 
multiple types of government approval processes to require or pressure 
foreign investors to transfer technology to Chinese partners; China's 
government-directed or government-financed investments in U.S. firms 
for the purpose of obtaining cutting edge technology; and China's 
government-directed or government-supported cyber-theft of technology 
from U.S. computer networks and U.S. firms. It should not be surprising 
that these types of issues are not directly addressed by WTO rules. The 
WTO Agreement--unlike, for example, the USMCA--does not have extensive 
investment obligations. And with regard to cybertheft, the WTO 
Agreement was negotiated before the Internet era.

    The fourth issue under investigation is that the Government of 
China interferes in the ability of U.S. firms to set market-based terms 
for licensing technology and intellectual property. For this issue, we 
identified a set of technology regulations (TIER) that apply to private 
parties, and discriminate against foreign owners of intellectual 
property. After careful review, we determined that we could address 
these aspects of China's TIER regulations through a WTO challenge under 
the TRIPs Agreement. Accordingly, we launched a WTO dispute challenging 
the TIER regulations in March 2018 before taking any bilateral action 
under section 301.

    Question. Enshrined at Article 1 of the GATT is the ``most-favored 
nation'' (MFN) principle, which was also adopted by Congress in 1922 as 
official U.S. trade policy. MFN is a simple principle stating that WTO 
member countries cannot charge different countries different tariff 
rates for the same product. This principle helps guarantee non-
discrimination against U.S. exports, has facilitated a long-term 
reduction in global trade barriers since the 1940s, and has promoted 
efficiency across the global trading system.

    The administration is currently supporting legislation, the United 
States Reciprocal Trade Act (H.R. 764), that would upend this basic 
principle. Although I recognize that the ultimate goal of this 
legislation is to reduce tariff barriers, I have concerns that it would 
simply amount to ``dumping rocks in our harbors because other nations 
have rocky coasts.'' In addition, it is misleading to criticize other 
nations for imposing high, protectionist tariffs on specific products, 
when the U.S. engages in the same exact practice.

    Please provide some examples of specific products for which the 
U.S. has a ``reciprocally'' higher tariff than those of many of our 
trading partners.

    Answer. We clearly do not enjoy reciprocal tariff treatment among 
our trading partners. The United States has more than 11,000 tariff 
lines in its Harmonized Tariff Schedule, and in relation to any other 
trading partner, it is likely that there are some U.S. tariff rates 
that are higher. For example, the U.S. most favored nation (MFN) duty 
rate for tungsten powders (HS 8101.10) is 7 percent; China's duty rate 
is 6 percent; the EU and India rates are both 5 percent. The U.S. duty 
rate for bovine carcasses (HS 0201.10) is 26.4 percent; Kenya's duty 
rate is 25 percent; and China's is 20 percent.

    However, thanks to FTAs and preference programs such as the 
Generalized System of Preferences (GSP) and the African Growth and 
Opportunity Act (AGOA), not all U.S. imports of these products are 
actually subject to MFN tariffs. In addition, some higher duty rates 
are on tariff lines for goods that do not necessarily have a high 
demand in the United States, such as cornbrooms with a duty rate of 32 
percent and cathode-ray television tubes at 15 percent.

    Finally, U.S. tariffs are applied at the rates the United States 
bound at the World Trade Organization (WTO) as a result of the Uruguay 
Round in 1994, and our overall average bound and applied tariff rates 
are both 3.4 percent. Many of our trading partners apply tariff rates 
that are lower than their bound rates, which means that they can raise 
those tariff rates at any time and remain within their WTO commitments. 
For example, Brazil's average bound rate is 31.4 percent, China's is 10 
percent, India's is 48.5 percent, and South Africa's is 19.2 percent. 
Unlike other trading partners, the United States has maintained 
consistent MFN tariff rates since the Uruguay Round, resulting in more 
predictability for traders and importers.

    Question. If the United States were to enact H.R. 764 and suddenly 
stop ignoring its MFN commitments, what kind of retaliation would U.S. 
exporters face from our trading partners? Would such retaliation be 
justified or not on the basis of our WTO commitments under Article 1 of 
the GATT?

    Answer. The United States Reciprocal Trade Act would provide an 
important tool to bring foreign countries to the negotiating table and 
to reduce their tariffs and non-tariff barriers on U.S. products. While 
the United States has one of the most open economies in the world, 
other countries impose high tariffs and other trade barriers that drive 
up our trade deficit and make it difficult for our farmers and 
manufacturers to do business. We would not consider retaliation for 
seeking fair trade deals to be justified.

    Question. I have been clear in my view that the President does not 
have the unilateral power to terminate NAFTA without the consent of 
Congress. As you know, Article I, Section 8 of the Constitution 
explicitly vests Congress with trade responsibilities, and there is no 
explicit language anywhere in U.S. statute that delegates to the 
executive the ability to unilaterally withdraw from trade agreements.

    If Congress fails to ratify USMCA, will you recommend to the 
President that he unilaterally withdraw from NAFTA?

    If so, has your agency developed any internal legal documents to 
justify such a withdrawal attempt? Please provide a copy of any such 
memoranda.

    Answer. I am optimistic that, working together with the 
administration, Congress will approve the USMCA, as it represents a 
significant improvement over the current situation. Therefore, I prefer 
not to speculate about what could happen under a different scenario.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. I want to flag an emerging concern in Canada that 
directly impacts our U.S. insurers and reinsurers. Despite strong 
concerns from the U.S. insurance industry and the Canadian insurance 
industry, I understand that Canada's financial regulator is moving 
forward with plans to severely restrict cross-border reinsurance trade. 
This would only make it more difficult for U.S. insurers to do business 
in Canada.

    Not only would those measures harm the U.S. insurance industry and 
reduce our insurance trade surplus with Canada, it would raise concerns 
about inconsistency with Canada's commitment under the WTO General 
Agreement on Trade in Services (GATS) and best practices for insurance 
regulation.

    Has USTR been in touch with the Canadian authorities to protest the 
direction Canada is headed?

    Do you see a path forward for working with the Canadian authorities 
to make sure that insurance trade flows between the U.S. and Canada 
aren't adversely effected by these measures?

    Answer. The administration is aware of industry concerns with 
respect to proposals to change aspects of insurance regulation in 
Canada. We are continuing to monitor the situation and for potential 
market access consequences for U.S. firms, and look forward to staying 
in touch with members of Congress on this issue.

    Question. While we wait to see an outcome from the proposed 
President's summit with President Xi later this month, constituents in 
South Carolina continue to face not only tariffs imposed by this 
administration, but our farmers face Chinese retaliatory tariffs on 
cotton and soybeans, just to name a few.

    So as South Carolinians wait to see if there's a resolution, this 
brings me to another concern. The U.S. has two pending WTO disputes 
against China on ag products.

    As you pursue these cases, what assurances can you give us that the 
U.S. will find a favorable outcome?

    Because, if you are successful, China would have to vastly reduce 
subsidies and reform its TRQ regime to comply, in both cases creating 
new opportunities for U.S. farmers to export to China.

    How do you expect them to comply?

    Answer. On February 28, 2019, a WTO panel issued a report in favor 
of the United States, finding that China provided trade-distorting 
domestic support to its wheat and rice producers well in excess of its 
commitments under WTO rules. On April 18, 2019 a WTO panel issued 
another report in favor of the United States challenge to China's 
administration of its tariff-rate quotas (TRQs) for wheat, corn, and 
rice, finding that China is acting inconsistently with its obligations 
to administer TRQs on a transparent, predictable, and fair basis, using 
clearly specified procedures that will not inhibit the quotas from 
filling. In both cases, we will work bilaterally and multilaterally to 
ensure China respects WTO rules so that China's domestic support and 
TRQ administration measures no longer impede imports of U.S. 
commodities.

                                 ______
                                 
              Questions Submitted by Hon. Debbie Stabenow
    Question. In the hearing, you testified that China has requested 
that we make some additional concessions aside from addressing the 301 
tariffs, including specific market access provisions.

    Can you specify what sectors or products are being considered for 
this additional market access?

    Answer. The goal of the section 301 investigation is to change 
China's unfair and market-distorting behavior. The focus of our 
negotiations from China's perspective is dealing with the 301 tariffs. 
As I noted in the hearing, China has raised other market access 
requests, but from the U.S. perspective, our overarching focus in the 
negotiations is assuring that China undertakes the necessary economic 
and policy reforms needed to end its trade-distortive practices.

    Question. Thank you for your ongoing efforts to address the 
challenges Michigan's cherry industry is facing with imports from 
Turkey. My understanding is that USTR has been pressing Turkey 
specifically on their export subsidies for processed agricultural 
products, including processed fruit.

    Is USTR aware of export subsidies for processed specialty crops in 
other countries? Will you consider including a review of such programs 
in the next National Trade Estimate Report?

    Answer. We are aware of four countries, which have notified to the 
WTO export subsidies for certain processed specialty crops: Norway, 
Turkey, Switzerland, and Colombia. As a result of the WTO Ministerial 
meeting in 2015, WTO members agreed to eliminate export subsidies for 
agricultural products. Developed country members were to have 
eliminated export subsidies in December 2015, developing country 
members were to have done so by December 31, 2018. That WTO decision 
had certain exceptions for certain countries, including for processed 
products where a country had a notified export subsidy for a specified 
period prior to 2015. Developed country members, including Norway and 
Switzerland, with those programs have until 2020 to eliminate the 
export subsidy, and developing country members, including Turkey and 
Colombia, have until 2022 to eliminate export subsidies for products or 
groups of products for which they have notified export subsidies for a 
specified period. USTR will carefully monitor implementation of these 
commitments, and will be sure to take appropriate steps to address any 
concerns. We welcome any specific information that the Senator or 
stakeholders may have as well for further investigation.

    Question. As you are aware, the administration recently entered 
into an agreement with Qatar, where in addition to being more 
transparent, they also agreed they had no plans for additional 5th 
freedom flights. However, Qatar purchased a 49-percent stake in Air 
Italy to perform 5th freedom flights into the United States using 
aircraft leased from Qatar Airways. I have long been concerned about 
unfair competition U.S. aviation workers face from carriers like Qatar 
Airways.

    What action has the administration taken and what further action is 
the administration considering in order to make sure that Qatar abides 
by the agreement?

    Answer. The administration takes seriously concerns regarding the 
Gulf carriers and state-support for airlines. We continue to be 
committed to ensuring fair competition for U.S. airlines in 
international markets. Last year, the Department of Transportation 
concluded understandings with both Qatar and the United Arab Emirates 
(UAE) that committed their governments to improve financial 
transparency of their airlines, move to arms-length dealing between 
state-owned enterprises, and ensure that subsidies were not providing 
their airlines the ability to launch new services that would not 
otherwise be financially viable. To follow up on those understandings, 
an interagency delegation led by the Department of State met with 
Qatari counterparts on January 10, 2019. Similar follow-up meetings 
with the UAE are now being scheduled to take place in June. The 
administration is aware of the concerns raised about Air Italy and is 
scrutinizing this issue.

    Question. Thank you for your engagement on polysilicon market 
access issues with China. I want to reiterate the grave situation our 
U.S. polysilicon industry faces because of this long-standing issue. It 
is critical, for jobs in Michigan and across the country, that a 
resolution be reached that reopens market access for U.S. polysilicon 
producers.

    Can you provide an update on your discussions with Chinese 
officials on the issue of polysilicon market access?

    Answer. When President Trump announced section 201 safeguard relief 
for U.S. manufacturers of solar cells and modules in 2018, he committed 
that ``[t]he U.S. Trade Representative will engage in discussions among 
interested parties that could lead to positive resolution of the 
separate antidumping and countervailing duty measures currently imposed 
on Chinese solar products and U.S. polysilicon. The goal of those 
discussions must be fair and sustainable trade throughout the whole 
solar energy value chain, which would benefit U.S. producers, workers, 
and consumers.'' USTR has been engaged in discussions with U.S. 
stakeholders in an effort to find a solution that is beneficial to both 
the U.S. solar industry and the U.S. polysilicon industry, and which 
would be acceptable to China. USTR also is pressing our concerns 
specifically about China's duties on U.S. polysilicon as part of the 
negotiations launched by Presidents Trump and Xi on December 1, 2018.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Ambassador Lighthizer, during the hearing you stated that 
USTR is hoping to obtain an enforcement mechanism that would require 
periodic meetings at the Office Director level, Vice-Minister level, 
and Minister level to work through specific problems that companies 
bring to USTR's attention that may be in violation of the agreement. 
You further stated that if the two sides cannot agree on a resolution, 
it is your view that the U.S. should retain the right to act 
unilaterally to encourage China to address the issue.

    If you do reach a final agreement with the enforcement mechanism 
you described, how will USTR prioritize which issues to solve in a 
situation where multiple U.S. firms are asking the administration to 
address multiple different problems?

    In instances where a problem cannot be resolved through these 
meetings, how would you decide how and when to pursue unilateral 
action?

    How do you intend to keep Congress apprised of potential violations 
and enforcement actions?

    How does this enforcement mechanism differ from past dialogues, 
such as the Joint Commission on Commerce and Trade, the Strategic and 
Economic Dialogue, and the Comprehensive Economic Dialogue, that also 
provided periodic opportunities for U.S. officials to seek resolution 
of troubling Chinese practices raised by U.S. firms?

    Answer. If an agreement were to be reached between the United 
States and China, it will have to be one that is enforceable. In my 
testimony, I described a mechanism in which there would be monthly, 
quarterly, and semiannual meetings with counterparts at China, 
including at the vice-premier level to address issues. To the extent 
that there are issues that cannot be resolved at the vice-premier 
level, then the United States would have the right to act unilaterally 
to enforce. This mechanism I described did not exist in past dialogues. 
I and my staff will continue to consult with Congress, as we always 
have, on issues related to potential violations and enforcement 
actions. We will prioritize issues on a case-by-case basis. We intend 
to monitor compliance closely and take strong enforcement measures when 
necessary.

    Question. Ambassador Lighthizer, a key component of the U.S.-China 
trade talks is to have the Chinese government and Chinese firms respect 
the intellectual property (IP) that's been developed and patented by 
U.S.-based companies. And with this comes a desire from many U.S.-based 
companies who are engaged in the research and development of standard 
essential patents (SEPs) related to advanced wireless technology to 
have their IP properly licensed by Chinese original equipment 
manufacturers (OEMs) who use this American technology in the devices 
they sell in the U.S. and around the world. Ambassador, I'm sure you'd 
agree that by not paying proper license fees, Chinese OEMs are taking 
advantage of the work done by U.S. companies. By implementing this 
technology into the devices they sell to make billions of dollars of 
profits, these Chinese OEMs are effectively stealing U.S. technology.

    What specific language are you seeking to secure in this potential 
trade agreement with China to protect these US-based companies and to 
ultimately require Chinese OEMs to sign and abide by proper license 
agreements for American wireless SEP technology?

    If a Chinese OEM does not sign a proper license agreement with an 
American owner of SEP technology, how will USTR use your proposed 
enforcement mechanism to hold the Chinese firm accountable and to 
ensure that such a Chinese OEM is not allowed to sell infringing 
product in the U.S.?

    Answer. The talks thus far have covered a wide range of issues, 
including the need for stronger protection and enforcement of 
intellectual property rights in China. For a constructive process, we 
will not discuss specifics or negotiate publicly. For these 
negotiations to be successful, China must demonstrate real structural 
changes across the range of unfair policies and practices that yield 
actual, verifiable, and enforceable results. This includes in the area 
of IP rights. We are encouraged by our negotiations with China and will 
continue to work with them in good faith. However, we will not 
compromise on achieving greater market access for U.S. exports and fair 
and reciprocal treatment for U.S. businesses.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
    Question. Mongolia describes the United States as its most 
important ``third neighbor,'' but United States-Mongolia trade is 
substantially lower than many other bilateral trading relationships, 
and trade has declined in recent years. Agriculture is Mongolia's 
second most important sector, with its livestock sector accounting for 
87 percent of the country's agricultural production and roughly one-
third of the working population; however this sector has been heavily 
impacted by challenges associated with climate change.

    Since the 1940s, the annual mean air temperature in Mongolia has 
risen at three times the global rate. Average precipitation is 
declining and extreme weather disasters are more frequent, posing acute 
challenges for livestock herding in the country. In 2017, an estimated 
700,000 of the country's livestock population were killed due to the 
post-drought extreme winter phenomenon known as ``dzud.'' This 
phenomenon is unique to Mongolia and has increased in frequency and 
severity in recent years, causing a rise in livestock mortality and 
diminishing livelihoods for herders, which has led to widespread rural 
poverty and a contraction in the national economy.

    Mongolia would greatly benefit from preferential treatment for 
United States imports of certain Mongolian products--particularly 
cashmere--to help address some of the economic impacts of the dzuds. 
Currently, the U.S. buys nearly all of its cashmere products from 
China, which imports the majority of its raw cashmere from Mongolia.

    Do you see an opportunity to extend to Mongolia a WTO waiver that 
would help address some of these impacts, similar to the waiver 
extended to Nepal in the wake of the April 2015 earthquake and 
aftershocks?

    Answer. Single-country preference programs contravene rules at the 
WTO requiring non-discriminatory treatment of countries benefiting from 
preferences. As a result, with regard to Mongolian cashmere, the United 
States would be required to seek a waiver from its existing WTO treaty 
commitments. Securing approval for a WTO waiver would be challenging, 
as it requires consensus from the full WTO membership (164 economies). 
Following passage of the Nepal program, an increasing number of 
countries have approached USTR requesting their own single-country 
preference programs, based on arguments that their countries also face 
unique circumstances and are strategic partners of the United States.

    Question. If yes, do you see an opportunity to offer trade 
preferences specific to Mongolia's livestock industry? To its cashmere 
industry in particular? If no, will you please elaborate on why you 
don't think Mongolia should be eligible for certain trade preferences?

    Answer. As we understand it, Mongolia is not seeking trade 
preferences for its livestock, but rather for textile products, such as 
sweaters and jackets, that are made of the cashmere wool harvested from 
its livestock.

    Mongolia is currently designated as a beneficiary developing 
country under the U.S. Generalized System of Preference (GSP) program, 
and it therefore has the right to export about 3,500 products duty-
free, in addition to the 4,000 tariff lines already duty-free on a 
most-favored-nation basis. In 2018, Mongolia exported to the United 
States only 10 of the 3,500 GSP lines, with 97 percent of the $3.2 
million value coming in a single product (tungsten concentrate). It 
would be useful to explore the reasons for Mongolia's limited current 
use of the GSP program and attempt to address them.

    Question. How else can USTR help mitigate impacts of climate change 
on Mongolia's agricultural sector?

    Answer. USTR does not have responsibility for climate policy. The 
question on climate policy more appropriately should be directed to 
other administration officials.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
    Question. You and I share concerns about the WTO and its failure to 
discipline China's unfair trade practices. I am particularly troubled 
that the WTO has tolerated China's market-distorting state-owned 
enterprises.

    As part of the U.S.-China trade negotiations, is the U.S. seeking 
commitments from China to convert its state-owned enterprises into 
private companies? If so, over what time frame?

    Answer. Under President Trump's leadership, the United States is 
committed to working toward a more fair and reciprocal trade 
relationship with China. In the current negotiations with China, we are 
seeking to address a wide range of unfair trade practices, including 
those involving state-owned enterprises. I am committed to working with 
you and other members of Congress to discuss the policy tools available 
to address these important issues, including section 301 of the Trade 
Act of 1974.

    Question. I'd like to know the extent to which China's WTO 
commitments are part of the negotiations.

    Is the U.S. seeking commitments from China to drop it non-market 
economy case against the U.S. and the EU (DS515 and DS516)? Is the U.S. 
asking China to self-designate as a developed country under the WTO as 
part of the negotiations? Is the U.S. asking China to provide a 
comprehensive list of subsidy programs as part of their concessions in 
any agreement? Additionally, are you seeking any commitments from China 
to stop bringing WTO cases against our legitimate use of trade remedy 
laws? If the answer to any of these questions is no, why not?

    Answer. Under President Trump's leadership, the United States is 
committed to working toward a more fair and reciprocal trade 
relationship with China. In the current negotiations with China, we are 
seeking to address a wide range of unfair trade practices, including 
those that create or support non-market forces. I am committed to 
working with you and other members of Congress to discuss the policy 
tools available to address these important issues, including section 
301 of the Trade Act of 1974.

    Question. I am concerned that there has been an emphasis on the 
one-time purchases of agriculture commodities in the U.S.-China trade 
negotiations. I want the Chinese to buy American soybeans, preferably 
from Ohio, but the connection between one-time agricultural purchases 
and ongoing intellectual property violations or unfair trade practices 
is unclear to me.

    How did one-time agriculture purchases come to be part of the 
negotiations? Did the U.S. ask China to make the purchases or did China 
offer them as a concession? Do you believe negotiations on agricultural 
purchases have come at the expense of negotiations on other, more long-
term changes China could make?

    Answer. As President Trump and President Xi agreed in Buenos Aires 
on December 1, 2018 the United States and China are engaged in high-
level discussions to work toward a fair and reciprocal trade 
relationship between our two countries. Our current discussions focus 
on numerous, critical structural, regulatory and technical issues, 
embedded in many sectors in China, including in agriculture. The 
discussions seek to address the tremendous imbalance in our trade 
relationship, which results in part from these structural issues.

    Question. I understand that the Chinese government stopped using 
the term Made in China 2025 after criticism from the U.S., perhaps to 
garner good will in the talks.

    Does the administration believe the Chinese government has 
abandoned its plans to become globally dominant in the Made in China 
2025 sectors?

    Answer. We see no evidence that China has abandoned the substance 
of the Made in China 2025 industrial plan. Addressing the market-
distorting and harmful forces created by industrial plans like Made in 
China 2025 is a key component of our ongoing bilateral negotiations 
with China.

    Question. China's lax labor and environmental standards amount to 
subsidies for any corporation who does business there. USTR's most 
recent report on China's WTO compliance discusses the fact that the 
Chinese government denies workers the right to organize and 
collectively bargain and, in doing so, places significant 
``institutional restraints,'' as you call them, on wage rates.

    Given that China's denial of worker rights is in effect a subsidy, 
what commitments are you seeking from the Chinese government in the 
trade talks to protect workers' right to collectively bargain and to 
stop suppressing workers' wages?

    Answer. Under President Trump's leadership, the United States is 
committed to working toward a more fair and reciprocal trade 
relationship with China. In the current negotiations with China, we are 
seeking to address a wide range of unfair trade practices. Although we 
are not currently directly addressing labor standards, I am committed 
to working with you and other members of Congress to discuss options 
and policy tools for addressing these important issues.

    Question. I know you have said that you do not think an agreement 
between the U.S. and China will need congressional approval because it 
will be an Executive Agreement; however, the scope of the potential 
agreement you described during the hearing seems very broad.

    Are you of the belief that any agreement with the Chinese will be 
considered an Executive Agreement, regardless of its scope? Further, 
will you commit to giving the members of this committee, and their 
staffs, the opportunity to read and review it before the U.S. enters 
into it?

    Answer. Consultation with Congress is an important part of 
addressing the challenge from China. My staff and I have frequently 
sought input from members of both the House and the Senate during the 
course of the section 301 investigation and during this phase of 
negotiation with China. Any resulting agreement would reflect that 
input. The current negotiations with China are an attempt to reach an 
executive agreement that would be entered into under the existing 
authority of the President and USTR.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
    Question. Ambassador, the United States is not alone in concerns 
about China's practices, such as forced technology transfer and 
outright theft of intellectual property.

    Can you discuss how you are engaging with our allies at the WTO and 
more broadly to address China's behavior?

    Answer. The administration works extensively with our allies and 
trading partners to confront shared challenges with China at the WTO. 
As I noted in the hearing, I think the way forward for the WTO is to 
take small groups of countries that have something in common and work 
together. For example, I meet regularly with my counterparts in the 
European Union and Japan to address nonmarket-oriented policies and 
practices of third countries that lead to severe overcapacity, create 
unfair competitive conditions for their workers and businesses, hinder 
the development and use of innovative technologies, and undermine the 
proper functioning of international trade, including where existing 
rules are not effective.

    Question. Mexico has a long history of intimidation of democratic 
unions and union organizers. In January, 2019 Jose Luis Solorio Alcala, 
the former General Secretary of the Union of Workers of Honda of 
Mexico, was arrested, as I understand, without due process. Given 
Mexico's long history of union intimidation, I am concerned by that 
these recent actions may portend Mexico's level of commitment and 
adherence, in spirit and in law, to labor law reforms and practices.

    I would appreciate your providing any relevant information 
pertaining to your engagement with Mexico on their practices following 
this arrest.

    Answer. The administration has been monitoring the case of Mr. 
Solorio Alcala and the U.S. Embassy in Mexico City has informed us that 
he was freed on bail in March, and is currently appealing the charges 
against him with the support of the Union of Workers of Honda. USTR 
will continue to monitor the situation along with the U.S. Department 
of Labor, and my staff and I would be happy to keep you updated on this 
matter as we receive more information. We are also encouraged by the 
progress of labor reform through the Mexican Congress.

                                 ______
                                 
               Questions Submitted by Hon. Mark R. Warner
    Question. A key pillar of the rules-based global trading system is 
transparency so that trading partners and their firms have 
predictability and certainty in another country's legal and regulatory 
system. Unfortunately, China's opaque and often vague regulatory system 
is a maze to navigate, with ambiguous legal provisions often providing 
a pretextual basis for sweeping enforcement measures meant to protect 
domestic firms or force technology transfer from U.S. firms. China's 
poor record of adhering to its transparency obligations as a WTO member 
has only exacerbated this problem.

    How is China failing to obey its transparency obligations under the 
WTO and what are the impacts on U.S. firms and investors? Does the U.S. 
have a concerted strategy to respond to China invoking their anti-
monopoly laws on a pretextual basis to force U.S. technology firms into 
unfair licensing or technology transfer agreements?

    In the digital economy, China's regulatory regime is even more non-
transparent--with multiple agencies with overlapping jurisdiction 
regulating Internet commerce and U.S. firms subject to dynamically 
changing edicts.

    What is the effect of China's opaque and often arbitrary 
implementation of Internet regulations on western firms' ability to 
compete?

    Answer. China's systematic lack of transparency continues to have 
wide-ranging effects on U.S. business in China. In the current 
negotiations with China, the United States is committed to addressing 
this and other structural issues and unfair trade policies and 
practices, including the many ways in which U.S. companies are 
pressured to transfer technology to Chinese companies. U.S. suppliers 
of Internet-based services do not receive fair and reciprocal access to 
China's market. China's Internet regulatory regime is restrictive and 
non-transparent and adversely affects a broad range of commercial 
services activities conducted via the Internet, including retail 
websites, search engines, audio-visual and computer gaming services, 
and electronic mail and text. Complicating matters further, this regime 
is overseen by multiple agencies without clear lines of jurisdiction. 
U.S. suppliers continue to encounter major difficulties in attempting 
to offer Internet-based services, both through a commercial presence 
and on a cross-border basis.

    Question. China's trade practices threaten the U.S., our allies, 
and the global trading system. The administration has been trying to 
deal with China's unfair trade practices through section 301 tariffs 
and unilateral negotiations. You have been critical of WTO as an avenue 
to address our problems with China. A recent USTR report stated, ``It 
is unrealistic to expect success in any negotiation of new WTO rules 
that would restrict China's current approach to the economy and trade 
in a meaningful way.'' However, diplomats and trade officials say that 
the U.S.'s unilateral actions are also violating WTO rules because it 
is imposing tariffs without first adjudicating its grievances. China 
has consistently violated WTO rules, and its retaliation to the U.S.'s 
section 301 tariffs continues this trend. However, if the globe also 
perceives the U.S. as violating WTO rules, the WTO's value and 
relevance come into question.

    Do you believe that negotiating with China to deal with its unfair 
trade practices--such as forced technology transfer--is more effective 
unilaterally or in concert with our allies?

    Answer. I believe that combating China's unfair trade practices is 
something we need to do both unilaterally and in concert with our 
allies and trading partners. We are using section 301 enforcement tools 
where Chinese practices are problematic but not covered by the WTO 
agreements. In other instances, we have used the WTO dispute settlement 
system where appropriate. In addition, the administration works 
extensively with our allies and trading partners to confront shared 
challenges with China. For example, I meet regularly with my 
counterparts in the European Union and Japan to address non market-
oriented policies and practices of third countries that lead to severe 
overcapacity, create unfair competitive conditions for their workers 
and businesses, hinder the development and use of innovative 
technologies, and undermine the proper functioning of international 
trade, including where existing rules are not effective. Additionally, 
within the USMCA, the United States, Mexico, and Canada set forth high 
standards aimed at combating non-market practices such as currency 
manipulation and state-sponsored subsidies. The administration will 
continue to actively engage with our allies and trading partners on 
these shared challenges.

    Question. In your testimony before the committee, you outlined your 
problems with the WTO and countries' ability to flout the rules, 
stating that the administration is currently ``shedding light'' on the 
WTO's issues such as those countries that self-designate as developing 
nations. You suggested some countries are coming around to the U.S. 
view that WTO reforms are needed. You also highlighted the trilateral 
partnership with the EU and Japan as a successful example of a 
multilateral approach that is dealing with China's forced technology 
transfer and other trade abuses.

    What changes are needed to WTO rules to address the myriad ways in 
which China provides subsidies to its companies (whether through non-
market energy sources, cheap financing, or official practices that 
discriminate against foreign competition)?

    Can you provide an update on the status of the trilateral 
partnership with the EU and Japan and elaborate more specifically on 
actions that may have resulted from the five meetings?

    Answer. It is our view that the WTO rules need to be significantly 
strengthened by clearly identifying particularly egregious subsidy 
types and establishing much tougher rules for such subsidies that will 
act as a deterrent and make obtaining a remedy in dispute settlement 
far less burdensome.

    In the most recent meeting of the trilateral partnership, Ministers 
confirmed that market-oriented conditions are fundamental to a fair, 
mutually advantageous global trading system; instructed their staff to 
finalize trilateral text-based work in industrial subsidies; and, in 
the area of force technology transfer, confirmed their agreement to 
cooperate on enforcement, on the development of new rules, on 
investment review for national security purposes and on export 
controls.

    Question. The administration has declared that ``strategic 
engagement with like-minded trading partners'' is a central part of the 
U.S. strategy on China. This administration has imposed section 232 
steel and aluminum tariffs on our closest allies and frequently 
criticized them. The administration is threatening further action under 
section 232 on autos and auto parts, an issue of grave concern to the 
EU and Japan. Further, last year the President stated the EU is perhaps 
``as bad as China'' when it comes to upholding the rules-based trading 
system. Our allies, including EU Trade Commissioner Cecilia Malmstrom, 
have criticized the U.S.'s steel and aluminum tariffs and warned action 
on autos could undermine U.S.-EU cooperation. Meanwhile, last week, 
Italy became the first G7 nation to sign up for China's Belt and Road 
Initiative, signaling that some EU nations are moving closer to China.

    Does the imposition or threat of tariffs on our allies under 
section 232 affect their willingness to work with the U.S. on China 
issues?

    Answer. The President's actions under section 232 of the Trade 
Expansion Act of 1962 to address the threat to national security 
presented by certain imports are not preventing our allies from working 
with us in any area where our interests align. This includes allies 
working with us in various configurations on the fundamental challenges 
posed by China's array of non-market industrial policies and other 
unfair competitive practices aimed at promoting and supporting its 
domestic industries while simultaneously restricting, taking advantage 
of, discriminating against, or otherwise creating disadvantages for 
foreign companies and their goods and services.

    Can you speak to the threat that China's Belt and Road Initiative 
poses to the U.S.'s alliances and our ability to address China's unfair 
trade practices?

    Answer. In recent years, China also has been exporting its non-
market economic model to other countries through its Belt and Road 
Initiative. As is now well known, China invokes this initiative and 
offers to build large infrastructure projects in countries throughout 
Asia and other parts of the world, especially in strategically located 
or developing countries. China claims that the Belt and Road Initiative 
is open to all, but virtually all projects are financed by Chinese 
banks, run by Chinese state-owned enterprises, and built by Chinese 
workers. The Belt and Road Initiative is especially important to the 
Chinese Communist Party, which has incorporated the Belt and Road 
Initiative into its Constitution and has called for using this 
initiative to develop relations with surrounding countries through 
discussion, collaboration, and unity. However, Belt and Road Initiative 
projects are often opaque, one-sided, and divisive. These projects 
generally ignore market principles and fail to adhere to 
internationally accepted best practices in financing, infrastructure 
development and government procurement. Too often, these projects also 
create unsustainable debt burdens for the recipient countries. For 
these reasons, the Belt and Road Initiative threatens to have a 
chilling effect on other countries' ability to speak out and challenge 
China's unfair trade practices.

    Do you agree with the President that the EU is ``as bad as China'' 
when it comes to upholding the rules-based trading system?

    Answer. Despite this significant trade volume, U.S. exporters in 
key sectors have been challenged by multiple tariff and non-tariff 
barriers for decades, leading to chronic U.S. trade imbalances with the 
EU. For example, in 2018, the U.S. trade deficit in goods with the EU 
was $169.3 billion. Further, the EU has been slow to comply with 
certain WTO cases where the U.S. prevailed. Following the joint 
statement issued by President Trump and European Commission President 
Jean-Claude Juncker following their July 25, 2018 meeting, the United 
States and the EU have been working on ways to reduce barriers, 
increase trade, and strengthen their trade relationship to the benefit 
of all American and European citizens. In its discussions with the EU, 
the United States seeks to support higher-paying jobs in the United 
States and to grow the U.S. economy by improving U.S. opportunities for 
trade and investment with the EU.

    Question. On March 4, 2019, the administration notified Congress of 
their intent to terminate GSP (Generalized System of Preferences) for 
India and Turkey. These changes will not take effect until at last 60 
days after the notification. The administration stated that India and 
Turkey no longer comply with the statutory eligibility criteria. The 
U.S. launched an eligibility review of India's compliance with the GSP 
market access criterion in April 2018. According to USTR, ``India has 
implemented a wide array of trade barriers that create serious negative 
effects on U.S. commerce.'' The withdrawal of these duty concessions 
will mean Indian exports of eligible products to the U.S. will become 
more expensive. According to the Confederation of Indian Industry, U.S. 
importers saved $894 million in 2017 under the GSP benefits from India.

    Can you explain the timing of this announcement so close to India's 
national election and how the administration is using the suspension of 
GSP preferences as leverage in our trade negotiations? Given the U.S. 
designation of India as a major defense partner, how does the 
revocation of GSP impact our larger strategic partnership with India 
and will this decision have repercussions for our defense partnership?

    Answer. Based on a thorough United States government review of 
India's compliance with the GSP market access criterion, the President 
determined that India is not meeting the statutory criteria for GSP 
eligibility. Despite intensive engagement with the Government of India 
since April 2018, India has not assured the United States that it will 
provide U.S. exporters with equitable and reasonable access to its 
market. Nevertheless, USTR continues to press India to resolve an array 
of trade barriers so that it can meet the GSP eligibility criteria.

    On March 4, 2019, the President notified Congress and the 
Government of India of his intent to terminate GSP benefits for India. 
By statute, India's removal from the GSP program may not take effect 
until at least 60 days after the notifications to Congress and the 
Government of India. Once the 60-day period is over, the President can 
implement his decision by issuing a presidential proclamation or 
executive order. The exact timing of India's removal from the GSP 
program, therefore, is for the President to determine.

    As you mentioned, the United States has a strategic and defense 
partnership with India. I encourage you to discuss these aspects of the 
relationship with the Secretaries of State and Defense. In my view, it 
is important that we do not give trade preferences to countries that do 
not meet the statutory criteria set out by Congress, including the 
criterion to provide equitable and reasonable market access. That is 
unfair to U.S. workers, farmers, ranchers, and businesses.

    Question. The digital economy is increasingly inseparable from the 
wider global economy. In the last 2 decades, there has been an 
exponential growth in U.S. and global e-commerce. E-commerce is one 
area in particular where American innovation has flourished. In 2018, 
the U.S. joined a group of 76 countries--including China--to announce 
negotiations on a set of e-commerce rules to establish a multilateral 
legal framework to make it easier and safer to buy, sell, and do 
business online.

    Can you provide a status on the negotiations and the U.S.'s 
objectives for them? Can you also give an update of Chinese commitments 
to observe intellectual property protections--including against 
counterfeit goods sold online?

    Answer. Throughout 2018, the United States participated in 
exploratory work at the WTO on the possibility of a plurilateral 
digital trade negotiation. In January 2019, the United States joined 75 
other economies in confirming our intention to launch negotiations. We 
are now preparing for these negotiations, working closely with allies 
to gain support for high-standard outcomes based upon the USMCA Digital 
Trade chapter, which we view as a model for this negotiation and future 
agreements.

    We are encouraged by our negotiations with China and will continue 
to work with them in good faith. The President promised to fix the 
broken trading relationship and end the theft of American innovation, 
and he is committed to seeing that through. We need to see China 
implement their commitments and create conditions for fair competition, 
including through structural reforms.

    The state of intellectual property (IP) protection and enforcement 
in China, and market access for U.S. persons that rely on IP 
protection, reflect China's failure to implement promises to strengthen 
IP protection. China has failed to take decisive action to curb the 
widespread manufacture, domestic sale, and export of counterfeit and 
pirated goods. While the proportion of counterfeit and pirated goods 
and services is difficult to assess precisely, a Chinese government 
agency has reported that more than 40 percent of goods that were 
purchased online during a survey were ``not genuine.'' Although some 
leading online sales platforms claim to have streamlined procedures to 
remove offerings of infringing articles, right holders report that the 
procedures are still burdensome and that penalties do not deter repeat 
infringers, including those selling compromised log-in credentials 
online. Given the scale, IP infringement in China's massive online 
markets causes deep losses for U.S. right holders involved in the 
distribution of a wide array of trademarked products.

    Question. Fintech represents one of the most dynamic and innovative 
areas in the U.S. with traditional and emerging companies, alike, 
developing innovative new solutions to make payments faster, easier, 
and more mobile. China made commitments to open its electronic payments 
market in 2006, a commitment that was remade following a WTO ruling in 
2012. However, no foreign electronic payment providers are able to 
operate in China to this day. At the same time, one of the largest 
pharmacy chains in the U.S. has just announced a deal to roll out 
Alipay at thousands of pharmacies across the United States.

    Do you believe the U.S. is operating on a level playing field when 
Chinese electronic payments platforms are rolling out across the U.S. 
at the same time that U.S. firms are still barred from the Chinese 
market? Fintech innovation depends on network effects and scale. If 
U.S. companies cannot enter China, the world's largest market for 
digital payments, does this give Chinese electronic payment incumbents 
an advantage globally?

    Answer. I agree that U.S. companies do not enjoy a level playing 
field in China with respect to electronic payments. The United States 
is fully engaged on this issue and has been working closely with 
relevant stakeholders to ensure a level-playing field for retail 
electronic payment services suppliers in China, as well as other 
foreign markets. It is a priority for this administration that China 
complies with and implements its obligations, including its WTO 
obligations, in the electronic payment services sector. We welcome the 
opportunity to stay in touch with members of Congress on this important 
issue.

    Question. Throughout its history, U.S. strategy has involved 
developing closer relationships with like-minded trading partners. This 
approach must be part of an effort to counter China's mercantilist 
economic policies. With regards to the Internet, there are increasingly 
two versions that are being promoted. The first, led by China, centers 
on harnessing technology for surveillance and social control. The 
second model, long championed by the U.S., is based on a free and open 
Internet, with user trust and security included as important 
objectives. China's model poses significant risks for the future of the 
Internet. If data cannot flow freely, 21st-century commerce cannot 
occur.

    A perceived failure to maintain sufficient data protection 
standards has jeopardized transatlantic data flows in the past. As we 
see our allies harmonize around a set of data security and privacy 
principles, is having consistent privacy and data security rules in the 
U.S. helpful in digital trade?

    Might adopting a common, pragmatic set of data security and privacy 
commitments--the kind that free and open societies and market economies 
can comply with but that closed and state-driven economies would have a 
hard time abiding by--offer a useful basis for countering China's 
control of digital technologies?

    Answer. The administration supports continued work with like-minded 
trading partners in support of high-standard rules on digital trade 
that facilitate the expansion of an open digital economy that serves as 
a key driver of U.S. and global economic growth, while also ensuring 
flexibility to address evolving challenges in areas such as data 
privacy and security. The USMCA Digital Trade Chapter serves as the 
strongest template to date for such rules in the WTO and in future 
agreements. In addition, the United States has long supported 
frameworks such as the NIST Cyber Security Framework and the APEC 
Cross-Border Privacy Rules System that offer effective approaches to 
ensure security and privacy in conjunction with the movement of data 
across national borders.

    Question. Increasingly, countries are considering opportunities to 
enhance data protection and privacy regulations worldwide. For example, 
the EU recently moved forward with the General Data Protection 
Regulation. However, approaches like data localization requirements--
while pretextually based on privacy concerns--can pose major barriers 
to trade.

    Do you agree that countries can promote data security and privacy 
without imposing onerous data localization requirements?

    Answer. Data localization is in no way essential to the protection 
of data and, in fact, onerous data localization requirements can add 
additional points of attack to a network, thereby reducing the level of 
security around data. The United States has long supported frameworks 
such as the NIST Cyber Security Framework and the APEC Cross-Border 
Privacy Rules System, which offer effective approaches to ensure 
security and privacy in conjunction with the movement of data across 
national borders.

    Question. Reports suggest the WTO is expected to issue a ruling 
this month on the invocation of Article 21's ``national security'' 
justification relating to a Russia-Ukraine border dispute case. The 
U.S. position is that in a WTO dispute a claim of national security 
cannot be challenged. If the U.S. position wins out, it is essential to 
the basic functioning of the WTO that each country restrain itself in 
what it deems vital to its national security interest. National 
security cannot simply mean ``the economic well-being'' of the country, 
otherwise, the exception will swallow the rule and undermine the 
international framework for trade.

    Do you agree that it is important for countries to demonstrate 
restraint in what they term vital to their national security? Do you 
believe that domestically, Congress should pass legislation that 
provides a definition for ``national security''--that extends beyond 
simply the economic well-being of the country--so that U.S. tariffs 
imposed in the name of national security are not flouting international 
rules?

    Answer. Across multiple administrations, the United States has made 
clear that it and other WTO members each have the right to determine 
what it considers in its own essential national security interests. 
This has been the understanding of the United States for over 70 years, 
since the negotiation of the General Agreement on Tariffs and Trade 
(GATT). That understanding has been shared by every WTO member whose 
national security action was the subject of complaint. Despite this 
understanding, certain WTO members are urging the WTO to review a 
member's determination of its own national security interests. Such a 
decision by the WTO to second-guess a member's national security 
determinations would threaten serious damage to the multilateral 
trading system.

    Question. There is broad consensus that rules shielding Internet 
platforms from liability for user-generated content were pivotal in 
facilitating the innovative digital economy we now enjoy. At the same 
time, the speed with which these products have grown and come to 
dominate nearly every aspect of our social, political, and economic 
lives has obscured the shortcomings of their creators in anticipating 
the harmful effects of their use. Such protections can, in fact, limit 
our ability to make platforms internalize many of the negative 
externalities currently borne by users and society stemming from their 
exploitation and misuse.

    At a time when there are increasingly domestic concerns with the 
moral hazard of broad safe harbors, is it appropriate to include 
similarly broad safe harbors in our trade agreements? Will you work 
with me and other members on the committee to ensure our trade rules 
balance the competing priorities of enabling innovation while at the 
same time ensuring platform accountability protections? Would it be 
possible to address concerns with the consequences of a sweeping safe 
harbor on platform accountability through a side letter?

    Answer. The administration is committed to working with you and 
other members of Congress to ensure that efforts to address online 
harms are not constrained by trade rules. We believe that there is an 
important role for a (non-IP) safe harbor as part of a comprehensive 
set of rules on digital trade, as demonstrated by the outcome of the 
USMCA negotiations. But we agree that any such rules should allow for 
the development of domestic measures promoting platform accountability 
and USMCA reflects this. We would be pleased to work with you and other 
members of Congress as you develop ideas in this area to ensure that 
our trade agreement proposals are consistent with and complement your 
goals.

    Question. In your opening statement, you highlighted the ``surge in 
U.S. trade'' under this administration, noting that total exports and 
imports have grown by 12.8 percent and 14.8 percent, respectively. The 
President has focused heavily on trade deficits as a measure to gauge 
our trade relationships with other countries and on shrinking U.S. 
trade deficits with other countries. Despite this focus, the U.S. trade 
deficit in goods hit an all-time record in 2018, growing by 10 percent 
according to recent Commerce Department data.

    Can you explain why the trade deficit has grown despite the 
administration's efforts to decrease it? If other factors such as the 
U.S.'s economic growth have contributed to the growth of the trade 
deficit rather than the administration's trade policies, do you 
continue to believe that trade deficits are one of the most important 
metrics in measuring whether other countries' trade relationships with 
the U.S. are beneficial?

    Answer. Trade deficits remain an important metric because in trying 
to shrink the deficit, we are working to ensure that American farmers 
and workers have places to sell their products or services, 
competitively. Trade rules are an important factor in our trade 
balance, along with issues such as currency, foreign tax regimes, and 
others. The administration's trade policies are contributing to the 
strong economy, along with other factors such as tax reform and rolling 
back of burdensome regulations.

                                 ______
                                 
           Questions Submitted by Hon. Catherine Cortez Masto
                      intellectual property theft
    Question. Finance Committee staff relayed to our team that the 
enforcement component of the U.S.-China trade negotiations is still 
poorly developed. In addition, recent public comments from Chinese 
government officials indicate that they are not willing to fully police 
IP theft issues in China.

    In the current trade talks with China, what do the enforcement and 
verification mechanisms look like? Would you condition removing section 
301 tariffs on seeing verifiable progress on IP theft?

    Answer. I am happy to discuss the enforcement component in the 
U.S.-China negotiations as well as conditions for removing tariffs with 
you privately in more detail. As a general matter, enforcement of U.S. 
interests under a potential U.S.-China agreement will be done through 
intense consultations and, where necessary, unilateral action by the 
United States. The theft of American IP is something that needs to be 
addressed, and as I've indicated, we are making progress in 
negotiations on this and other structural issues.
                section 232, steel and aluminum tariffs
    Question. As you know, there are a number of legislative proposals 
about the President's power to impose tariffs for national security 
reasons, including from a number of my colleagues on this committee. 
Chairman Grassley even called for the section 232 steel and aluminum 
tariffs on Canada and Mexico to be removed before Congress considers 
passage of the new NAFTA. Both Canada and Mexico have retaliated 
against the U.S. tariffs by slapping duties on U.S. farm goods and 
other exports. Even while calling the steel and aluminum tariffs 
necessary to protect national security, the President has touted them 
as leverage in negotiating a new NAFTA. The same could be said about 
using threats of 232 tariffs on autos as leverage in trade discussions 
with the EU and Japan.

    How do you think that the President's use of section 232 tariffs 
has affected your negotiations with like-minded countries on WTO reform 
proposals?

    Answer. As I testified, USTR is actively engaged at all levels of 
the WTO and is working with other member states to address what we see 
as systemic issues, such as concerns with the Appellate Body. These 
issues have resulted in an organization that works very differently 
from how it was intended to work. USTR sees the Department of 
Commerce's and the President's section 232 national security 
investigations as a separate issue and independent of our goals at the 
WTO.
  301 tariffs with china impact on small and medium-sized enterprises
    Question. In Nevada, a significant proportion of previous foreign 
direct investment has come in the areas of renewable energy. I am 
concerned that the President's rhetoric, and decisions like pulling the 
United States out of the Paris Climate Agreement, have signaled to 
companies that the United States is less friendly to foreign direct 
investment, directly affecting our State economy.

    Does the administration commit to continue efforts to increase 
foreign direct investment, including in the renewable energy sectors 
and small enterprises?

    Answer. The administration recognizes the importance of foreign 
direct investment in supporting economic growth in Nevada and across 
the United States. The administration supports efforts to increase 
foreign direct investment that benefits the U.S. economy and U.S. 
workers, including investment in small and medium-sized enterprises and 
the renewable energy sectors. The Paris Climate Agreement is not 
related to our investment climate. Indeed, the U.S. economy is growing 
and many economic indicators are at all-time highs.

    Question. In Nevada, 87 percent of our exports are by small and 
medium-sized enterprises. Can you provide greater detail of USTR's role 
in opening foreign markets to small and medium sized enterprises, like 
those in Nevada or those impacted by the 301 tariffs? Will the 
administration commit to continue efforts to increase foreign direct 
investment, including in the renewable energy sectors and small 
enterprises?

    Answer. Small businesses are the backbone of the U.S. economy. 
Tariff and non-tariff barriers in foreign markets can 
disproportionately burden the over 280,000 U.S. small businesses 
exporting from across the 50 States. Across our policy activities, we 
are continuing to better integrate small and medium-sized enterprise 
(SME) issues and priorities into U.S. trade policy activities, increase 
our agency outreach to small businesses, and improve coordination 
across U.S. trade policy and promotion activities relating to SMEs. 
Issues of particular interest to U.S. SMEs include SME chapters in new 
and modernized trade agreements such as USCMA, to help ensure that SMEs 
have the online tools and resources they need to navigate foreign 
markets, and an ongoing SME Dialogue, open to participation by SMEs to 
provide views and information to government officials on the 
implementation the agreement to help ensure that SMEs continue to 
benefit. USTR is also working to address SME priorities such as digital 
trade issues, customs and trade facilitation measures, reduction of 
regulatory barriers, and protection of intellectual property rights 
abroad with trading partners around the world. USTR also supports 
efforts to increase U.S. foreign direct investment that benefits the 
U.S. economy and U.S. workers, including investment by SMEs in the 
renewable energy sectors.
              chinese internet censorship as trade barrier
    Question. In the USTR's 2016 annual report, the office listed 
Chinese government Internet censorship as a trade barrier for the first 
time. The report argued that ``China's filtering of cross-border 
Internet traffic has posed a significant burden to foreign suppliers, 
hurting both Internet sites themselves, and users who often depend on 
them for their business.'' Technology companies have complained about 
censorship, but it is unclear whether the Trump administration is 
including the issue in the current trade talks with China.

    Is the administration discussing Chinese Internet censorship, and 
the challenges it poses for U.S. businesses operating in China, as a 
part of the current trade talks?

    Answer. The administration continues to be concerned about China's 
Internet-
related restrictions, such as restrictions on cross-border transfers of 
information and restrictions on access to certain websites, among other 
restrictions, as is explained in USTR's 2019 National Trade Estimates 
Report. The administration is seeking to address many of China's 
Internet-related restrictions as part of the current negotiations with 
China.
             u.s. technology companies operations in china
    Question. In your conversation with Ely Ratner, he indicated U.S. 
technology companies have historically been resistant to incorporating 
``American values'' of freedom of information into their operations in 
China.

    In your trade talks with China, are you looking at how we can 
support American companies that seek to operate in China, but still 
uphold American values like freedom of speech and privacy in their 
global operations? Do you agree that American companies that rely on 
the U.S. government to enforce trade rules and protect their 
intellectual property should support American values like freedom of 
speech and privacy in their operations abroad?

    Answer. Under President Trump's leadership, the United States is 
committed to working toward a fair and reciprocal trade relationship 
with China. In the current negotiations with China, we are seeking to 
address a wide range of unfair trade practices. The benefits of a 
successful agreement will ideally accrue to all U.S. companies. I would 
be pleased to work with you and other members of Congress to discuss 
how we can best promote American values in our trade agenda.
        non-binding agreements on section 232 country exemptions
    Question. Last spring, the administration announced agreements with 
Australia, Argentina, and Brazil that would exempt those countries from 
section 232 tariffs on steel and/or aluminum. As you know, under the 
Case-Zablocki Act, the Department of State must send Congress the text 
of any international agreement--including an oral agreement--to which 
the United States is a party no later than 60 days after the agreement 
enters into force. When my colleagues on this committee wrote to the 
State Department to request the text of these agreements, State 
responded that these agreements are not legally binding international 
agreements. Instead, they are ``political or personal'' agreements, and 
therefore the administration does not have to share the text with 
Congress.

    Why did USTR not pursue binding agreements with these countries?

    Do you anticipate that future agreements to lift section 232 
tariffs on imports from specific countries will be concluded as legally 
binding international agreements?

    If not, would you still commit to send the text of these agreements 
to Congress?

    Answer. By statute, the Secretary of Commerce helps administer 
section 232. The administration will continue to act consistent with 
the Case-Zablocki Act in respect of any agreements concluded with 
foreign countries that fall within its scope.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon

    This morning, the Finance Committee is going to take a hard look at 
one of the big issues facing this country with respect to jobs and 
trade. It is long past time to fix what's wrong with the World Trade 
Organization.

    In my view, that process begins with China. China became a member 
of the World Trade Organization in December 2001. Based on nearly 2 
decades of evidence, it's clear that the agreements that allowed China 
to join fell far short.

    The rules that underpin the WTO were crafted more than 2 decades 
ago, when China was an economic middleweight. At that time, multiple 
States within the United States had economies larger than China's. 
During the debate on China entering the WTO, many predicted membership 
would drive China further away from one-party control of government and 
economics. And China made specific commitments dealing with economic 
reforms as a precondition of WTO membership. That was the basis on 
which the Congress granted China normalized trade relations with the 
U.S. legislation I supported.

    Today, China is an economic heavyweight, second only to the United 
States and continuing to grow rapidly. Much of that growth has come at 
our direct expense--and in violation of WTO rules and the commitments 
it made in 2001. Subsidized state-owned enterprises. Intellectual 
property theft. Forced tech transfers. The Great Internet Firewall. 
Government-led shakedowns of foreign investors. China uses those 
schemes and entities to strong-arm American businesses, steal American 
innovations, and rip off American jobs. And particularly under 
President Xi, the government has tightened its grip on power. For our 
purposes in today's hearing, the Chinese government identifies 
weaknesses in the WTO system, and it seizes on them to further its 
economy's explosive growth.

    The United States and our economic allies have not done enough to 
crack down on those abuses. As I said a moment ago, WTO rules date back 
to a time before the Internet was the center of gravity for 
international commerce and when smartphones were still science fiction. 
It shouldn't be any surprise that those rules can't keep up with 
China's modern-day trade rip-offs.

    There is bipartisan interest in addressing that problem, and 
today's hearing needs to advance real solutions. I'm hopeful that the 
talks currently happening with respect to digital trade rules will 
finally drag the WTO into this century. I know Ambassador Lighthizer 
shares that perspective.

    On another topic, I'm also hopeful about reaching an agreement with 
respect to unfair fishing subsidies. This is a long-running battle at 
the WTO. Senator Crapo and I held a subcommittee hearing on the issue 
all the way back in 2010. The bottom line is that an agreement that 
curbs fishing subsidies will protect jobs in our fisheries and promote 
sustainable oceans, and accomplishing both of those priorities is 
vital.

    I'll close on this. Workers in Oregon and around the United States 
are justifiably fed up with cheating by China and other countries. And 
when the WTO proves too slow to stop the cheats, or when it announces 
decisions that clash with its founding principles and goals, lawmakers 
aren't just going to grin and bear it.

    At the same time, it's important for the United States to fight for 
the economic system that we helped create after World War II--one that 
built strong democratic alliances, faced down the Soviet Union, and 
helped reduce violent conflict around the world. Sometimes the Trump 
administration, and particularly the President himself, signals to our 
allies that they're not interested in defending that system from 
attackers and cheats.

    That's why updating the WTO is an issue where the administration 
cannot fall short after a lot of tough talk, which has too often been 
the pattern on trade policy. An effective, fair, and enforceable trade 
system is our best defense against China's often underhanded economic 
tactics. And there are members on both sides of this committee who are 
eager to make progress on this issue, so today's hearing is an 
opportunity to find common ground.

    I want to thank Ambassador Lighthizer for being here today. I look 
forward to working with him on this and more.

                                 ______
                                 

                             Communications

                              ----------                              


                        Center for Fiscal Equity

                    Statement of Michael G. Bindner

Chairman Grassley and Ranking Member Wyden, thank you for the 
opportunity to submit these comments for the record to the Committee on 
Finance. Attachment One repeats selected comments from the Ways and 
Means Committee's hearing on U.S. China Trade from February 27, 2019 
and from this Committee's hearing on the U.S. Trade Policy Agenda from 
March 2018. As usual, we will preface our comments with our 
comprehensive four-part approach, which will provide context for our 
comments.

      A Value-Added Tax (VAT) to fund domestic military spending and 
domestic discretionary spending with a rate between 10% and 13%, which 
makes sure very American pays something, including Carbon and Asset 
Sale VATs.
      Personal income surtaxes on joint and widowed filers with net 
annual incomes of $100,000 and single filers earning $50,000 per year 
to fund net interest payments, debt retirement and overseas and 
strategic military spending and other international spending, with 
graduated rates between 5% and 25%.
      Employee contributions to Old-Age and Survivors Insurance (OASI) 
with a lower income cap, which allows for lower payment levels to 
wealthier retirees without making bend points more progressive.
      A VAT-like Net Business Receipts Tax (NBRT), which is 
essentially a subtraction VAT with additional tax expenditures for 
family support, health care and the private delivery of governmental 
services, to fund entitlement spending and replace income tax filing 
for most people (including people who file without paying), the 
corporate income tax, business tax filing through individual income 
taxes and the employer contribution to OASI, all payroll taxes for 
hospital insurance, disability insurance, unemployment insurance and 
survivors under age 60.

Regulatory capture theory is essential to explain how international 
trade associations work, from NAFTA to the WTO. Capture theory, which 
is part of the Public Choice School of economics, is associated with 
George Stigler and others. While it is usually associated with national 
and state regulation, such as the Food and Drug Administration and the 
late, great Interstate Commerce Commission, it is equally applicable 
here. It is similar to what we all learned as Iron Triangles or Issue 
Networks.

The gist of the theory is that, while regulation is initially 
promulgated for the public good, relationships between government and 
regulated industries grow symbiotic. This occurs because professional 
expertise is often industry specific. This expertise is interchangeable 
in regulated industries, regulatory staff, on K Street, the academy and 
congressional staff. Campaign contributions often grease the skids of 
communication. Regulation always begins with private sector resistance 
until relationships are established. Eventually, regulatory agencies 
are co-opted by industry and the resistance stops. While there is still 
an oppositional dynamic, by and large capture helps steer the 
regulatory ship.

Capture is so complete in trade that industrial panels are often the 
most important part of modern trade agreements. In NAFTA, these take 
the form of Chapter 19 Panels. These panels wield super-national 
authority, allowing them to over-ride governmental actions which are 
seen as contrary to free trade as the industry sees it. Such industrial 
favoritism is likely the glue that gets trade agreements past 
congressional approval. While treaties are part of federal supremacy in 
Article IV of the Constitution, ceding this authority to industry is 
likely beyond what the framers would have expected--and they were often 
mercantilists. Of course, the U.S. Constitution may itself be an 
instance of regulatory capture.

The impact of capture is very real barriers to entry, both for 
professionals and for newer companies. Larger firms dominate small 
ones, who must find a link to an existing larger company in order to 
even function. While regulations favoring small businesses attempt to 
steer such relationships, especially by introducing affirmative action 
into such decisions, these actions are also captured by industry.

There is no need to drain the swamp. The swamp seems just fine where it 
is. Indeed, calls to do so under the banner of populism are likely to 
give temporary advantage to industry, but it will later adjust (if it 
is even really changed), with changes in Administration and the 
benching of its team of rookies.

Many would say that the status quo is unsustainable, others like it 
perfectly well. Progressives and Democratic Socialists call for bigger 
and better regulations. The far-left simply considers this an 
improvement of the same cage. The social democracies of northern Europe 
have developed a cozy relationship with their capitalists, but have no 
idea how to transition to true employee sovereignty, which is the 
ultimate goal of socialism. The answer is that you cannot do deep 
reform through the deep state. The obstacles are too great.

The only alternative to regulatory capture and industrial domination is 
not to better regulate capitalism, but to overcome it--not through 
revolution (which simply turns the party bureaucrats into capitalists), 
but to occupy capitalism from within. This starts with transforming 
employee-owned firms. The answer is not change to employee culture over 
a monthly dinner and pep rally or training line workers to read 
financial statements. This is also a creating a better cage.

Real change will come from matching corporate governance to corporate 
ownership. Hierarchical management structures from capitalism are 
discordant. They do not deliver on the promise of ownership. Employee 
ownership, to work, must embrace true democracy in both management and 
the decision to expand the scope of the enterprise from better 
production to matching production to consumption, also by democratic 
decision-making. This will start with how leadership is consumed as a 
good (leading to open auction for executive jobs with the final choice 
between the low bidders determined by election).

Employee ownership will continue from decisions on the cafeteria menu 
to local sourcing and farm ownership, building or buying apartments for 
younger workers, as well as single family units and abandoning outside 
finance for retirement and home mortgages with no interest loans. Such 
features will attract workers and firms to this model to something more 
than the monthly chicken dinner.

Currently, employee ownership is undertaken with smaller companies 
rather than major industries. It will not remain there when ownership 
is transformed. Larger enterprises will convert franchisees to managers 
and absorb their employees, extending union membership and board 
representation. Consultants paid through 1099 employment with only one 
client also be added to the employing firm.

The NBRT/SVAT reforms can facilitate the expansion of ownership on a 
fairly rapid basis, with rates set high enough to pay for obligations 
to current retirees and the transition to ownership. While the employee 
contribution to Old-Age and Survivors insurance will continue to be 
linked to income, the employer contribution will become part of the 
SVAT, with employer contributions credited to each employee without 
regard to wage.

Ownership rights and benefits can also be extended to overseas 
employees, both subsidiaries and in the supply chain, preventing 
international trade from being used to arbitrage wages in a race to the 
bottom, raising the standard of living for overseas workers and ending 
the need for international trade agreements. Industrial and workers 
interests will be identical to each other and to the national interest 
of all parties. International organizations could be an honest broker 
to estimate wages at an equivalent standard of living rather than based 
on currency trading. See Attachment One for more detail.

It can go even faster if employers can reduce such taxation by making 
current employees, former employees and retirees whole as if they had 
worked under the proposed system from the start. If our proposed high 
income and inheritance surtax is adopted (where cash from inheritances 
and estate asset sales are considered normal income), some of the 
proceeds can be used to distribute the Trust Fund to speed employee 
ownership, as well as ESOP loans. Note that heirs, sole proprietors and 
stock holders who share to a broad-based ESOP will avoid taxation on 
that income, including our proposed 25% VAT on asset sales.

Expediting ownership with the assistance of tax reform will end the 
need for NAFTA and the WTO (unless national governments balk at 
allowing international employee ownership). Even then, the need for 
such organizations, and for government in general, will eventually fade 
away.

Thank you for the opportunity to address the committee. We are, of 
course, available for direct testimony or to answer questions by 
members and staff.

Attachment One: Value-Added Taxes (March 2018), Employee Ownership and 
Trade (February 2019)

The most immediate impact on trade is our proposed goods and services 
tax, which will finance domestic military and civil spending. Exported 
products would shed the tax, i.e., the tax would be zero rated, at 
export. Whatever VAT congress sets is an export subsidy. Seen another 
way, to not put as much taxation into VAT as possible is to enact an 
unconstitutional export tax.

The NBRT/Subtraction VAT could be made either border adjustable, like 
the VAT, or be included in the price. This tax is designed to benefit 
the families of workers, either through government services or services 
provided by employers in lieu of tax. As such, it is really part of 
compensation. While we could run all compensation through the public 
sector and make it all border adjustable, that would be a mockery of 
the concept. The tax is designed to pay for needed services. Not 
including the tax at the border means that services provided to 
employees, such as a much-needed expanded child tax credit--would be 
forgone. To this we respond, absolutely not--Heaven forbid--over our 
dead bodies. Just no.

The NBRT can have a huge long-term impact on trade policy, probably 
much more than trade treaties, if one of the deductions from the tax is 
purchase of employer voting stock (in equal dollar amounts for each 
worker).

For too long the mere mention of Personal Retirement Accounts has been 
like holding a lightning rod in a thunderstorm. Democrats forget that 
the attack on George W. Bush for doing so had no impact on the 2004 
election. Turnout was juice by support for the war in Iraq, the defense 
of traditional marriage and the non-existence of the response to the 
Swift Boat Veterans for Truth-speak (the continuation of the Birther/
Tea Party/MAGA/Russia right-wing conspiracy). The 2006 win was because 
of the bad management of the Iraq War and rampant Majority corruption.

Engaging in real debate rather than obstruction could have given us 
insured accounts holding employer voting stock voted by union proxies 
with equal employer tax credits funded on an uncapped payroll or 
consumption tax, such as the NBRT.

Personal Accounts would not be used for speculative investments or even 
for unaccountable index fund investments where fund managers ignore the 
interests of workers. Accounts invested in index funds do not have that 
feature, although they do serve to support American retirees who 
because of them have a financial interest in firms utilizing foreign 
labor, particularly low-wage Chinese labor.

The USA accounts proposed by President Clinton had the same feature, 
although as a supplement to the Social Security benefit rather than a 
partial replacement, although this feature would be muted by enactment 
of value added taxes. The flaw in using foreign investment to make up 
for lost worker revenue is that eventually foreign workers either 
radicalize or become consumers and demand their own union rights.

The tendency for consumerism to follow industrialization is why 
globalization is a poor substitute for expanding the domestic 
population, as the Center proposes with its expanded Child Tax Credit, 
which we propose as an offset to the NBRT.

It would be better for all concerned if American workers were already 
in an ownership position due to repeal of the Taft-Hartley Act 
prohibitions on concentrated pension fund ownership and the enactment 
of personal retirement accounts. We can turn the tide for workers and 
encourage employee-ownership (aka cooperative socialism) now through 
Democratic means as part of a Green New Deal.

Over a fairly short period of time, much of American industry, if not 
employee-owned outright (and there are other policies to accelerate 
this, like ESOP conversion) will give workers enough of a share to 
greatly impact wages, management hiring and compensation and dealing 
with overseas subsidiaries and the supply chain--as well as impacting 
certain legal provisions that limit the fiduciary impact of management 
decision to improving short-term profitability (at least that is the 
excuse managers give for not privileging job retention).

Employee-owners will find it in their own interest to give their 
overseas subsidiaries and their supply chain's employees the same deal 
that they get as far as employee-ownership plus an equivalent standard 
of living. The same pay is not necessary, currency markets will adjust 
once worker standards of living rise.

Over time, this will change the economies of the nations we trade with, 
as working in employee owned companies will become the market 
preference and force other firms to adopt similar policies (in much the 
same way that, even without a tax benefit for purchasing stock, 
employee owned companies that become more democratic or even more 
socialistic, will force all other employers to adopt similar measures 
to compete for the best workers and professionals).

Eventually, trade will no longer be an issue. Internal company dynamics 
will replace the need for trade agreements as capitalists lose the 
ability to pit the interest of one nation's workers against the 
others'. This approach is also the most effective way to deal with the 
advance of robotics. If the workers own the robots, wages are swapped 
for profits with the profits going where they will enhance consumption 
without such devices as a guaranteed income.

                                 ______
                                 
               Statement Submitted by Terence P. Stewart

                   Law Offices of Stewart and Stewart

                      2100 M Street, NW, Suite 200

                          Washington, DC 20037

                             (202) 785-4185

                        [email protected]

                              Introduction

The World Trade Organization came into existence in January 1995 amidst 
much hope with a greatly broadened membership, a significantly 
broadened mandate, including services, trade-related aspects of 
intellectual property, the reintegration of textiles, and the start of 
reform in the agricultural sector, and a more binding dispute 
settlement system.

As of March 2019, the WTO has grown to 164 members with an additional 
22 countries or customs territories undergoing a lengthy accession 
process. However, the WTO is now, and has been for at least a decade, 
in serious trouble.

In a world of rapid technological change, the WTO can be characterized 
as operating on rules developed in the last century where the ability 
to change has proven very elusive with an ever expanding membership of 
countries and territories with very different economic systems and 
various levels of development and a decision system premised on 
consensus.

Admittedly, there have been some successes in the 24-year history of 
the WTO in terms of completed negotiations, such as some sectoral 
successes on liberalization (e.g., the Information Technology Agreement 
and its expansion), the creation of one new agreement (Trade 
Facilitation Agreement), and an agreement to the phase out of 
agricultural export subsidies. Yet, the organization has not been able 
to (1) advance broad-based liberalization, (2) address developments in 
technology and commercial realities over the last 24 years, (3) update 
the rules of the organization, (4) complete a review of the dispute 
settlement understanding that has been underway for more than two 
decades, or (5) adequately address the challenges posed by important 
members such as China with state directed economic systems and massive 
domestic subsidy programs.

While many countries have sought some forward movement through an 
expanding web of bilateral and regional agreements, most view the WTO's 
multilateral negotiating function as seriously challenged if not 
largely dysfunctional. The center of the system has not been able to 
effectively function because the negotiating arm of the WTO has been 
largely broken due to a changing power structure within the WTO 
membership and a continued lack of agreement amongst the major players 
on relative responsibilities to move the trading system forward.

Members have shown a relatively poor record of complying with 
notification requirements and providing complete information for those 
notifications that are made, seriously undermining the core need of 
transparency for members to understand the actions of others and 
weakening the committee work programs.

Many members view the dispute settlement system as the ``jewel'' of the 
WTO, but it is in a present crisis flowing from an inability to address 
long-standing concerns about the functioning of the panels and the 
Appellate Body (AB) versus the Dispute Settlement Understanding (DSU) 
and how to address concerns that the Appellate Body has created rights 
and obligations not agreed to by the members.

While the concerns in the dispute settlement area are long-standing for 
the United States and have been voiced by many others over the years, 
the crisis has been brought to a head by the United States over the 
past two years through use of the WTO's consensus requirements--the 
same consensus requirement that has effectively blocked reform in the 
past is now blocking the launch of a process to replace Appellate Body 
members whose terms have expired. With a DSU requirement that appeals 
be heard by three AB members, with the AB membership down to three at 
the present time, and with two of the remaining three AB members having 
terms that expire on December 10, 2019, the crisis is here with a 
clearly defined time frame to keep the dispute settlement system 
functioning.

The question on the table now is whether the WTO members can reform and 
renew the WTO rule book to address current realities.

With the current U.S. Administration determined to right what it views 
as a flawed system, WTO members find themselves under increased 
pressure to address (1) long-standing concerns with the dispute 
settlement system, (2) the balance and current relevance of existing 
bilateral and plurilateral agreements to which the U.S. is a party, and 
(3) the long-running concerns with the lack of progress in China's 
reforms and the distortions its policies are creating for the global 
trading system. The Trump Administration has made it clear that it will 
shake up the system to obtain focus and action on matters viewed as 
important to the United States. While this approach has upset many 
trading partners and much of the business community, the reality is 
that many pressing problems have been festering for long periods--in 
some cases, decades--and prior approaches have not actually achieved a 
change in structure or behavior.

To apply pressure on trading partners and the system, the 
Administration has utilized laws that have been on the books for long 
periods of time but seen little use or, where used, very limited 
application (e.g., Section 232 of the Trade Expansion Act of 1962, as 
amended) or pursued long-standing business concerns through a detailed 
examination of the practices of China under Section 301 of the Trade 
Act of 1974, as amended. Finally, the U.S. has used one of the few 
levers available in the WTO to obtain the attention of other members--
holding up the start of a replacement process for Appellate Body seats 
following the end of terms for existing AB members to get focus on the 
myriad problems the U.S. (and other WTO members) have raised over time 
about the operation of the Dispute Settlement System and, in 
particular, the Appellate Body.

Much has been written on the ongoing impasse in the WTO on the 
Appellate Body selection process and U.S. issues. The U.S. 
Administration has made clear that its concerns involve both procedural 
and substantive issues and that it wants those issues addressed before 
a return to starting the selection process. The U.S. has repeatedly 
outlined, in its 2018 and 2019 Trade Policy Agendas, the nature of its 
concerns and has provided detailed statements in various DSB meetings 
that review the serious concerns the U.S. has and its determination to 
see them addressed. While many members have had grievances about the 
system over time and some undoubtedly agree with some or all of the 
U.S. concerns, most WTO members have been pressing for the filling of 
AB vacancies first and addressing U.S. concerns (and other concerns) 
over time.

             U.S. Concerns Regarding WTO Dispute Settlement

For more than a year, the United States has blocked the initiation of a 
process to replace Appellate Body members whose terms have expired. The 
U.S. has blocked AB appointments to focus WTO members on the need to 
negotiate new rules that address U.S. concerns about the AB's 
operations and limit the scope for judicial overreach, which the U.S. 
characterizes as systemic issues. The U.S. has blocked the AB 
appointment process until members address these systemic issues. In the 
most recent DSB meeting, the U.S. again said that its concerns had not 
yet been addressed:

        As the United States has explained at recent DSB meetings, for 
        more than 15 years and across multiple U.S. Administrations, 
        the United States has been raising serious concerns with the 
        Appellate Body's disregard for the rules set by WTO Members.

        Through persistent overreaching, the WTO Appellate Body has 
        been adding obligations that were never agreed by the United 
        States and other WTO Members.

                                 * * *

        The United States has raised repeated concerns that appellate 
        reports have gone far beyond the text setting out WTO rules in 
        varied areas, such as subsidies, antidumping duties, anti-
        subsidy duties, standards and technical barriers to trade, and 
        safeguards, all restricting the ability of the United States to 
        regulate in the public interest or protect U.S. workers and 
        businesses against unfair trading practices.

        And as we explained in recent meetings of the DSB, the 
        Appellate Body has issued advisory opinions on issues not 
        necessary to resolve a dispute and reviewed panel fact-finding 
        despite appeals being limited to legal issues. Furthermore, the 
        Appellate Body has asserted that panels must follow its reports 
        although Members have not agreed to a system of precedent in 
        the WTO, and continuously disregarded the 90-day mandatory 
        deadline for appeals--all contrary to the WTO's agreed dispute 
        settlement rules.

        And for more than a year, the United States has been calling 
        for WTO Members to correct the situation where the Appellate 
        Body acts as if it has the power to permit ex-Appellate Body 
        members to continue to decide appeals even after their term of 
        office--as set by the WTO Members--has expired. This so-called 
        ``Rule 15'' is, on its face, another example of the Appellate 
        Body's disregard for the WTO's rules.\1\
---------------------------------------------------------------------------
    \1\ See statements by the United States at the meeting of the WTO 
Dispute Settlement Body, February 25, 2019, at 12; https://
geneva.usmission.gov/wp-content/uploads/sites/290/Feb25.
DSB_.Stmt_.as-deliv.fin_.public.pdf.

Thus, there currently is no consensus to even begin a process to fill 
---------------------------------------------------------------------------
the vacant AB posts.

In its 2019 Trade Agenda, the U.S. Trade Representative (USTR) states:

        Throughout 2018, USTR representatives repeatedly made clear 
        that the dispute settlement process at the WTO has strayed far 
        from the system agreed to by WTO Members, and has appropriated 
        to itself powers that WTO Members never intended to give it. . 
        . .

        The key point is that the WTO Appellate Body has repeatedly 
        sought to create new obligations not covered in the WTO 
        agreements. . . . The United States cannot be held responsible 
        for obligations to which its elected officials never agreed. 
        Thus, efforts by the Appellate Body to create new obligations 
        are not legitimate.

        These concerns are not new. For many years, and in multiple 
        Administrations, the United States has repeatedly expressed 
        concerns with the WTO Appellate Body's activist approach and 
        overreaching on procedural issues, interpretative approach, and 
        substantive interpretations. This approach fails to apply the 
        WTO rules as written and agreed to by the United States and 
        other WTO Members.\2\
---------------------------------------------------------------------------
    \2\ See Office of the U.S. Trade Representative, 2019 Trade Policy 
Agenda at 25-26 (emphasis added); https://ustr.gov/sites/default/files/
2019_Trade_Policy_Agenda_and_2018_Annual_
Report.pdf.

In addition to these substantive concerns with the interpretation of 
WTO agreements by panels and the Appellate Body and their failure to 
strictly apply and adhere to the text of WTO agreements as negotiated 
and agreed to by members, the U.S. has raised, over many years, 
procedural concerns with the AB' s apparent disregard of DSU rules. The 
2018 Trade Policy Agenda summarized five particular areas of concern 
where the U.S. believes the AB has disregarded the applicable rules.\3\
---------------------------------------------------------------------------
    \3\ See Office of the U.S. Trade Representative, 2018 Trade Policy 
Agenda at 24-28; https://ustr.gov/sites/default/files/files/Press/
Reports/2018/AR/2018%20Annual%20Report%20I.pdf.

    1.  90-day deadline for completing appeals: Since at least 2011, 
the U.S. and other members have been concerned about the AB's 
increasing disregard of the mandatory 90-day deadline for deciding 
appeals. Article 17.5 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes (DSU) requires the Appellate Body 
to circulate its report within 90 days of the notice of appeal. Despite 
the 90-day deadline, the AB has assumed the authority to take whatever 
time it considers appropriate. Since 2011, the AB has exceeded the 90-
---------------------------------------------------------------------------
day limit in about 80 percent of appeals.

    2.  AB members continuing to serve after their terms have expired: 
The AB has taken actions to ``authorize'' a person who is no longer an 
AB member to continue hearing appeals. The U.S. contends that the AB 
lacks the authority to deem someone who is not an AB member to be a 
member. The AB has claimed that Rule 15 of its Working Procedures 
authorizes it to ``deem'' as an AB member one of its own members whose 
term has expired. The U.S. argues that Rule 15 is inconsistent with the 
requirements of the DSU.

    3.  Advisory opinions on issues not necessary to resolve a dispute: 
The dispute settlement system is intended to achieve a ``prompt 
settlement'' of disputes between WTO members. The U.S.'s concern is 
with the tendency of WTO reports to make findings that are unnecessary 
to resolve a dispute or on issues not presented by the parties in the 
dispute. Such unnecessary statements have been described as in the 
nature of ``obiter dicta.'' Panels and the AB have, on numerous 
occasions, made unnecessary findings or rendered ``advisory opinions'' 
which have contributed to delays in concluding an appeal.

    4.  AB review of facts and domestic law: The U.S. is concerned 
about the AB's approach to reviewing facts. DSU Article 17.6 limits an 
appeal to ``issues of law covered in the panel report and legal 
interpretations developed by the panel.'' The AB, however, has 
consistently reviewed panel fact-finding under different legal 
standards, and has reached conclusions not based on a panel's fact 
findings or on undisputed facts. The U.S. also objects to the AB 
undertaking to review, as a matter of law rather than fact, the meaning 
of a member's domestic (municipal) law.

    5.  AB reports as precedent: The U.S. objects to assertions that AB 
reports effectively serve as precedent and that panels must follow 
prior AB decisions absent ``cogent reasons.'' The U.S. believes that 
this assertion has no foundation in the DSU and is not consistent with 
WTO rules. Under the WTO agreements, there is one and only one means 
for adopting binding interpretations of the obligations which members 
agreed to--WTO Agreement Article IX: 2.

                           WTO Reform Efforts

In addition to the U.S., a number of other countries have begun to 
discuss the need for WTO reform. Some seek to address the challenges of 
consensus decision-making in such a large group. Others are more 
focused on addressing new issues that have arisen over the last 24 
years. Some note the need to update the WTO's rule book. And many 
question the need for reform at all.

Some notable initiatives aimed at reforming WTO rules include:
            Trilateral Initiative by U.S., EU, and Japan
The United States, the European Union, and Japan have initiated 
trilateral discussions concerning the development of new trade and 
investment rules to deal with the economic impact of countries with 
state driven economic policies, such as China's. In December 2017, the 
U.S., EU, and Japan began a joint initiative at the Buenos Aires 
Ministerial. At that time, the three WTO members issued a joint 
statement in which they agreed to strengthen their commitment to ensure 
a global level playing field.\4\ Their joint statement said that 
``severe excess capacity in key sectors exacerbated by government-
financed and supported capacity expansion, unfair competitive 
conditions caused by large market-distorting subsidies and state owned 
enterprises, forced technology transfer, and local content requirements 
and preferences are serious concerns for the proper functioning of 
international trade, the creation of innovative technologies and the 
sustainable growth of the global economy.'' To address these critical 
concerns, the three countries ``agreed to enhance trilateral 
cooperation in the WTO and in other forums, as appropriate, to 
eliminate these and other unfair market distorting and protectionist 
practices by third countries.''
---------------------------------------------------------------------------
    \4\ See Joint Statement by the United States, European Union, and 
Japan at MCI 1, December 12, 2017; https://ustr.gov/about-us/policy-
offices/press-office/press-releases/2017/december/joint-statement-
united-states.

In a follow-up to their initial joint statement, on September 25, 2018, 
the U.S., EU, and Japan released a trilateral statement \5\ addressing 
a range of issues, including (1) Concerns with Non-Market-Oriented 
Policies and Practices of Third Countries; (2) Industrial Subsidies and 
State Owned Enterprises; (3) Concerns with Forced Technology Transfer 
Policies and Practices of Third Countries; (4) Discussions on WTO 
Reform (e.g., sponsoring transparency and notification proposals, 
strengthening regular committee work, and urging advanced WTO members 
claiming developing country status to undertake full commitments); (5) 
Digital Trade and E-Commerce; and (6) Cooperation on Other Issues.
---------------------------------------------------------------------------
    \5\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2018/september/joint-statementtrilateral.
---------------------------------------------------------------------------
            EU Proposals for WTO Modernization
In September 2018, the European Commission (EC) released a concept 
paper \6\ presenting the European Union's (EU) proposals on a 
comprehensive approach for WTO modernization and reform, in pursuit of 
making the WTO more relevant, adaptive, and effective. The EU paper 
focuses on three subjects: (1) rulemaking and development; (2) regular 
work and transparency; and (3) dispute settlement.
---------------------------------------------------------------------------
    \6\ Press release: European Commission presents comprehensive 
approach for the modernisation of the World Trade Organisation, 
September 18, 2018; http://europa.eu/rapid/press-release_IP-18-
5786_en.htm. EU Concept Paper: http://trade.ec.europa.eu/doclib/docs/
2018/september/tradoc_157331.pdf.

With respect to rulemaking and development, the EU paper states that 
the overall objective for modernization is to update the rules and to 
---------------------------------------------------------------------------
create the conditions for the rules to be updated.

Regarding the WTO's regular work, the EU paper's goal is to ensure 
transparency in member notifications, resolve specific trade matters 
without litigation, and incrementally adjust the WTO rulebook, where 
necessary.

With respect to dispute settlement, the EU paper proposes that dispute 
settlement reform be addressed in two stages: procedural issues first 
and substantive issues second. Thus, the EU proposes to first address 
the concerns the U.S. has raised at DSB meetings in which it has 
blocked Appellate Body appointments (i.e., 90-day requirement; Rule 15; 
advisory opinions; municipal law; precedent; term of AB member), and 
only after that address substantive issues such as AB overreach.
            Canada Discussion Paper and Ottawa Meeting
On September 25, 2018, Canada circulated a blueprint for reform titled 
``Strengthening and Modernizing the WTO: Discussion Paper,''\7\ with 
the goal of seeking an alliance of like-minded countries to restore 
confidence in the multilateral trading system and discourage 
protectionist measures and countermeasures. The Canadian paper focused 
on three specific areas for reforming the WTO: (1) to improve the 
efficiency and effectiveness of the monitoring function by, for 
example, improving the notification and transparency of domestic 
measures; (2) to safeguard and strengthen the dispute settlement system 
by diverting some issues from adjudication, streamlining adjudicative 
proceedings, and updating appellate review; and (3) to modernize the 
trade rules for the twenty-first century by addressing such trade 
practices as digital trade, international investment, domestic 
regulations, state-owned enterprises, industrial subsidies and trade 
secrets, and considering the development dimension of reform.
---------------------------------------------------------------------------
    \7\ See Communication from Canada, JOB/GC/201 (September 24, 2018); 
http://international.gc.ca/gac-amc/campaign-campagne/wto-omc/
discussion_paper-document_travail.aspx?
lang=eng.

In October 2018, trade ministers from Canada and 12 other ``like-
minded'' WTO members met in Ottawa to discuss the issue of WTO reform 
and ways to strengthen and modernize the WTO, in particular the papers 
issued by the EU and Canada regarding WTO modernization and reform. The 
countries represented in Ottawa were Canada, EU, Japan, Switzerland, 
Norway, Australia, New Zealand, Singapore, Korea, Brazil, Chile, 
Mexico, and Kenya. Neither the U.S. nor China was invited to the Ottawa 
meeting. The meeting focused on the EU and Canadian discussion papers 
and addressed three issues: dispute settlement reform, the WTO's 
negotiating function, and WTO monitoring and transparency. Although 
neither the U.S. nor China was invited to the Ottawa meeting, it was 
noted that it will be impossible to achieve WTO renewal without support 
from China and the U.S.
            Proposals to Improve Transparency and Strengthen 
                    Notification Requirements
In October 2017, the U.S. proposed reformed procedures to improve 
compliance with notification obligations by WTO members.\8\ The U.S. 
proposed that members reaffirm existing notification obligations and 
recommit to providing complete and timely notifications under the WTO 
Agreements. On November 1, 2018, the U.S., together with Argentina, 
Costa Rica, the EU, and Japan, circulated a similar proposal.\9\ Noting 
the chronic low level of compliance with notification requirements, the 
proposal urged members to reaffirm existing notification obligations 
and recommit to providing complete and timely notifications under the 
WTO Agreements, encouraged members to file counter-notifications in 
response to delinquent members, and proposed consideration of various 
degrees of sanctions for failing to notify according to the level of 
delinquency. The proposed penalties for noncompliance would range from 
increased financial contribution requirements, non-qualification for 
WTO bodies, additional reporting requirements at General Council 
meetings, and disregard of the member's questions at trade policy 
reviews. A member's severest penalty would be a designation of inactive 
status applied after failing to file notifications by more than two, 
but less than three, years. The proposal also provides for exemptions 
from penalties for developing members that lack the capacity to fulfill 
notification requirements if they request assistance and support for 
capacity building from the Secretariat.
---------------------------------------------------------------------------
    \8\ See Procedures to Enhance Transparency and Strengthen 
Notification Requirements Under WTO Agreements, communication from the 
United States, JOB/GC/148, JOB/CTG/10 (October 30, 2017).
    \9\ See Procedures to Enhance Transparency and Strengthen 
Notification Requirements Under WTO Agreements, communication from 
Argentina, Costa Rica, the European Union, Japan, and the United 
States, JOB/GC/204, JOB/CTG/14 (November 1, 2018).
---------------------------------------------------------------------------
            Proposals to the General Council Meeting of December 12, 
                    2018
On November 23, 2018, two documents were circulated to WTO members for 
consideration at the December 12, 2018 General Council meeting 
proposing amendments to the WTO's DSU with the intention of addressing 
the concerns raised by other WTO members about the functioning of the 
WTO's dispute settlement system.

The first document (WT/GC/W/752) was submitted by the EU, China, 
Canada, India, Norway, New Zealand, Switzerland, Australia, Korea, 
Iceland, Singapore and Mexico and addresses a number of issues that the 
U.S. has raised in DSB meetings as deviating from existing WTO DSU 
obligations. It addressed 5 issues: (1) transitional rules for outgoing 
Appellate Body (AB) members; (2) the 90-day deadline for AB reports; 
(3) the meaning of municipal law as an issue of fact; (4) findings 
unnecessary for the resolution of the dispute; and (5) the issue of 
precedent.

The second document (WT/GC/W/753), filed by the EU, China and India 
addresses other issues that the EU has raised on the operation of the 
AB. The proposal addresses 4 procedural or institutional issues: (1) 
the independence of AB members (proposing to set the term of an AB 
member to one term of 6/8 years); (2) the AB's efficiency and capacity 
to deliver (proposes to increase the number of AB members from 7 to 9); 
(3) transitional rules for outgoing AB members (proposing to permit an 
expired AB member to continue up to 2 years or until replacement); and 
(4) the launch of the AB selection process (proposing an automatic 
launch).

The U.S. has rejected these proposals. U.S. Ambassador Shea noted that 
although these proposals to some extent acknowledged U.S. concerns, 
they did not effectively address them, but rather appeared to endorse 
changing the rules to accommodate and authorize the very approaches 
that have given rise to members' concerns.\10\
---------------------------------------------------------------------------
    \10\ Statements by the United States at the meeting of the WTO 
General Council, December 12, 2018, at 1; https://geneva.usmission.gov/
wp-content/uploads/sites/290/Dec12.GC_.Stmt_.
items_.7.and_.8.as_.delivered.clean_.pdf.
---------------------------------------------------------------------------
            Proposals by Honduras and Taiwan to Break AB Impasse
Honduras recently circulated four communications for discussion a 
number of proposals to address various U.S. concerns about AB 
practices. One submission proposed various alternatives to the 90-day 
deadline for AB reports, limiting the length of written submissions, 
and permitting remand to the original panel.\11\ A second submission 
addresses Rule 15, that is, the criteria for determining when AB 
members may continue serve beyond their terms and who makes that 
determination.\12\ The third submission addresses the following AB 
issues: advisory opinions; obiter dicta in decisions; addressing 
questions that are not necessary to settle a dispute; addressing 
arguments that have not been raised by the parties; adopting an 
erroneous standard of review; and interpreting the covered agreements 
so as to add or diminish the rights and obligations of members under 
the DSU and other WTO agreements.\13\ The fourth submission addresses 
possible approaches to the issue of precedent, or ``stare decisis'' in 
AB decisions.\14\
---------------------------------------------------------------------------
    \11\ Fostering a Discussion on the Functioning of the Appellate 
Body, communication from Honduras, WT/GC/W/758 (January 21, 2019).
    \12\ Fostering a Discussion on the Functioning of the Appellate 
Body, communication from Honduras, WT/GC/W/759 (January 21, 2019).
    \13\ Fostering a Discussion on the Functioning of the Appellate 
Body: Addressing the Issue of Alleged Judicial Activism by the 
Appellate Body, communication from Honduras, WT/GC/W/760 (January 29, 
2019).
    \14\ Fostering a Discussion on the Functioning of the Appellate 
Body: Addressing the Issue of Precedent, communication from Honduras, 
WT/GC/W/760 (February 4, 2019).

In February 2019, Taiwan submitted a communication \15\ in which it 
identified a ``gap'' between what the members had intended the AB to be 
and what it actually is today. Taiwan proposed that members begin 
discussions immediately to develop guidelines for the AB's future 
functioning. These guidelines should clarify DSU provisions and any 
``explicit or implicit boundaries'' that members intended to impose on 
the AB, as well as ``harmonize'' any potential conflicts among DSU 
provisions. Taiwan also proposed that, should the consensus on the 
guidelines be reached, members should immediately agree to initiate the 
AB selection processes to fill the current vacancies.
---------------------------------------------------------------------------
    \15\ Guideline Development Discussion, communication from the 
Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu to the 
General Council, WT/GC/W/763 (February 13, 2019).
---------------------------------------------------------------------------
            U.S. Proposal Regarding Developing Country Status
On February 15, 2019, the U.S. submitted a proposal regarding 
developing country status.\16\ The submission proposed criteria for 
determining whether a member was entitled to claim developing country 
status. The proposal states that a WTO member ``will not avail [itself] 
of special and differential treatment in current and future WTO 
negotiations'' if: (1) it is a member of the Organization for Economic 
Cooperation and Development (OECD), or has begun the accession process 
to the OECD; (2) it is a member of the Group of 20 (G20); (3) it is 
classified as a ``high income'' country by the World Bank; or (4) it 
accounts for no less than 0.5 per cent of global merchandise trade 
(imports and exports). In an earlier submission, the U.S. argued that 
``self-declaration has severely damaged the negotiating arm of the WTO 
by making differentiation among Members near impossible. By demanding 
the same flexibilities as much smaller, poorer Members, export 
powerhouses and other relatively advanced Members . . . create 
asymmetries that ensure that ambition levels in WTO negotiations remain 
far too weak to sustain viable outcomes.''\17\
---------------------------------------------------------------------------
    \16\ Draft General Council Decision--Procedures to Strengthen the 
Negotiating Function of the WTO, WT/GC/W/764 (February 15, 2019).
    \17\ An Undifferentiated WTO: Self-Declared Development Status 
Risks Institutional Irrelevance, communication from the United States, 
WT/GC/W/757/Rev. 1 (February 14, 2019) at para. 4.5.
---------------------------------------------------------------------------

                     U.S. Priorities in WTO Reform

In the 2019 Trade Policy Agenda, USTR identifies the U.S.'s priorities, 
noting that ``WTO reform must include the following components'':\18\
---------------------------------------------------------------------------
    \18\ See Office of the U.S. Trade Representative, 2018 Annual 
Report at 101-102; https://ustr.gov/sites/default/files/
2019_Trade_Policy_Agenda_and_2018_Annual_Report.pdf.

      The WTO must address the unanticipated challenges of non-market 
economies. The United States is working with the European Union and 
Japan under a trilateral process to address these challenges through 
the development of new multilateral rules and the use of other 
---------------------------------------------------------------------------
measures.

      WTO dispute settlement must fully respect Members' sovereign 
policy choices. The WTO's dispute settlement system, particularly the 
AB, has strayed extensively from original understandings; the U.S. has 
consistently urged the dispute settlement system to adhere to these 
original understandings.

      WTO Members must be compelled to adhere to notification 
obligations. Poor adherence to notification obligations has starved the 
WTO of vital information on the implementation of existing obligations 
and has contributed measurably to a lack of progress in negotiations. 
The United States has presented a proposal to impose consequences for 
failure to meet notification obligations and has been joined by a 
number of co-sponsors in support of this work.

      The WTO's treatment of development must be revamped to reflect 
current global trade realities. While ``least-developed countries'' 
(LDCs) are defined in the WTO using the United Nations criteria, there 
are no WTO criteria for what constitutes a ``developing country.'' Some 
more advanced developing countries have ``self-declared'' as developing 
countries, thus availing themselves of all ``special and differential'' 
treatment afforded to developing countries. The United States submitted 
a paper in January 2019 outlining the challenges this situation 
presents for the WTO.

Thus, USTR states that:

        If the WTO is to reclaim its credibility as a vibrant 
        negotiating and implementing forum, Members must begin to 
        seriously tackle these structural reform issues facing the 
        institution. In looking ahead to the period before the Twelfth 
        Ministerial Conference in 2020, the United States believes that 
        Members should begin the process of identifying opportunities 
        to achieve accomplishments, even if incremental ones, and avoid 
        buying into the predictable, and often risky, formula of 
        leaving everything to a package of results for Ministerial 
        action. The United States is working through various WTO 
        standing committees to advance reform ideas. Whether the issue 
        is notifications, agriculture, or the digital economy, the WTO 
        will impress capitals and stakeholders most by simply doing 
        rather than posturing for the next Ministerial Conference (MC).

        To remain a viable institution that can fulfill all facets of 
        its work, the WTO must focus its work on structural reform, 
        find a means of achieving trade liberalization between 
        Ministerial Conferences, and must adapt to address the 
        challenges faced by traders today.\19\
---------------------------------------------------------------------------
    \19\ See Office of the U.S. Trade Representative, 2018 Annual 
Report at 102; https://ustr.gov/sites/default/files/
2019_Trade_Policy_Agenda_and_2018_Annual_Report.pdf.
---------------------------------------------------------------------------

                               Conclusion

As reviewed above, there is increasing discussion by various WTO 
members that after nearly twenty-four years of existence reform is 
needed if the WTO is to remain relevant to the needs of a growing 
membership and a rapidly changing business environment. Many 
substantive and procedural issues will need to be addressed to make the 
organization responsive to 21st century needs of the membership and to 
keep the dispute settlement system functioning but in the manner agreed 
to by members when the WTO was created. Any serious efforts to achieve 
a consensus on the need for reform is a positive development, and 
proposals put forward by any member should be viewed as an important 
contribution to frame the debate.

Thus, the hopeful news is that many WTO members have moved into a mode 
of looking for potential solutions that will permit the WTO to regain 
relevance, address the past quarter century of changes, renew utility 
of the committee process through improved transparency and restore the 
dispute settlement system to one that respects the balance between the 
rights of members and the limited role of panels and the Appellate 
Body.

But there are many uncertainties that could doom any reform efforts. 
The likelihood that the WTO membership will succeed in agreeing to any 
meaningful reforms is not great outside of a real crisis as consensus 
is required. Most agree that there is a crisis in the WTO with the 
possible reduction of the Appellate Body below the minimum number 
needed to hear appeals. Whether even that type of crisis will result in 
the reforms being discussed by Washington, Brussels, Ottawa and other 
capitals is an unknown. The large WTO membership and complexity of many 
issues among countries of significantly varied sizes and economic 
development has made forward movement at the minimum extraordinarily 
time consuming, if possible at all. The position staked out by China, 
India, South Africa, and Venezuela to the U.S. proposal to revamp 
developing country selection--immediate rejection--argues that the WTO 
will not succeed in broad reform in the short term. The potential 
collapse of the Appellate Body may result in a more limited resolution 
of the dispute settlement system challenges, although correcting for 
the series of WTO AB overreach issues that have created obligations 
never agreed to will be the most difficult challenge there. Moreover, 
many of the problems that have developed with the Dispute Settlement 
system reflect an ineffective system of checks and balances. With the 
WTO unable to use the tools that do exist to correct problematic 
actions of the Appellate Body, the Appellate Body has locked in 
erroneous actions versus having the legislative or executive functions 
of the WTO to rebalance the system.

In short, 2019 will be a critical year in the multilateral trading 
system, with an, at best, clouded outlook for success. The U.S. 
deserves credit for fleshing out longstanding concerns and for helping 
lay out important reform initiatives to update the rulebook. Time will 
tell whether there is a collective desire for reform in fact to keep 
the WTO relevant to the world's businesses, workers and communities.

                                 ______
                                 
            United States Council for International Business

                      1400 K Street, NW, Suite 525

                          Washington, DC 20005

                            202-371-1316 tel

                            202-371-8249 fax

                             www.uscib.org

                                                     March 12, 2019

The Honorable Charles Grassley      The Honorable Ron Wyden
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
219 Dirksen Senate Office           219 Dirksen Senate Office Building
Building Washington, DC 21510       Washington, DC 20510

Re:  ``Approaching 25: The Road Ahead for the World Trade 
Organization,'' hearing of the Senate Finance Committee on March 12, 
2019

Dear Chairman Grassley,
Dear Ranking Member Wyden,

As World Trade Organization (WTO) member governments move forward this 
year with efforts to reform the WTO, the United States Council for 
International Business (USCIB) has issued recommendations on how 
business can support the WTO and its efforts to improve the 
organization. The WTO is a cornerstone of the global rules-based 
trading system and has helped spread growth and development for 
decades. The WTO's existing agreements, such as those on intellectual 
property rights, sanitary and phytosanitary measures, and technical 
barriers to trade, provide practical commercial benefits for business 
because they establish global frameworks of rules designed to 
facilitate international trade.

The continued existence and effectiveness of the WTO is vital to U.S. 
business. USCIB recommendations focus on addressing subsidies and other 
market-distorting support provided to state-owned enterprises (SOEs), 
the establishment of new rules for current issues such as digital trade 
and customs processes on electronic transmissions, and ensuring a 
properly functioning appellate body, among others.

Please find enclosed our submission for the record on this important 
issue of the future of the WTO. If you have any questions or wish to 
discuss the matter further, please do not hesitate to reach out.

Sincerely,

Peter Robinson                      Charles R. Johnston
President and CEO                   Managing Director, Citi Global 
                                    Government Affairs
U.S. Council for International 
Business                            USCIB Board Member and Chair, Trade 
                                    and Investment Committee

                                 ______
                                 

                        Statement for the Record

The World Trade Organization (WTO) is a cornerstone of the global 
rules-based trading system and has helped spread growth and development 
for decades. The WTO's existing agreements, such as those on 
intellectual property rights, sanitary and phytosanitary measures, and 
technical barriers to trade, provide practical commercial benefits for 
business because they establish global frameworks of rules designed to 
facilitate international trade.

The WTO's continued existence and modernization, including an effective 
dispute settlement system, are necessary for American and global 
stability and prosperity. There are valid concerns about the adequacy 
of WTO rules to deal with 21st century issues, and about the need for 
improvements to the WTO's dispute settlement system. These concerns 
should be addressed through agreements/clarifications/modifications 
that enhance the credibility of the WTO and strengthen it as an 
institution.

USCIB members strongly support the WTO and its activities that have 
contributed to the dynamic growth of global trade by opening markets, 
combatting protectionist measures, driving new agreements such as the 
Trade Facilitation Agreement, assisting developing countries with 
capacity building to better benefit from open trade, and enabling 
business to pursue new avenues for driving global economic growth.

Our recommendations for modernizing the WTO should not in any way be 
read as questioning the business support for WTO. Instead, they are 
intended to highlight areas for action that would strengthen the 
ability of the organization to more effectively meet the demands of a 
changing world as it deals with the rapid evolution of technology that 
can quickly reshape the way companies do business and operate globally.

USCIB believes that effective WTO dispute settlement is a critical part 
of the global rules-based trading system. And, the U.S. has been a 
major beneficiary--bringing and winning more cases than any other WTO 
member. In fact, the U.S. has prevailed in over 90% of the complaints 
it filed. As noted above, a first principle is that the outcome of 
discussions to modernize the WTO must be focused on enhancing the 
effectiveness of the WTO dispute settlement system, not undermining it.

USCIB urges the Member States, as they continue to discuss 
modernization and improvements of the WTO and its underlying 
agreements, to be mindful that among the WTO Member States, private 
entities conduct the transactions that constitute trade and investment. 
Therefore, the private sector has a direct stake in the rules that will 
be the outcome of the government-to-government discussions and, 
accordingly, private sector comments and recommendations should be 
actively solicited and given careful consideration by the Member 
States. With this in mind, below are USCIB recommendations for reforms 
and/or new negotiations at the WTO that we believe would modernize the 
WTO and enhance the effectiveness of the WTO rules and institution. 
USCIB looks forward to a continuing dialogue with the Member States, in 
greater detail, as the process unfolds.

More Effectively Addressing Subsidies and State-Owned Enterprises

      Improve transparency and compliance with requirements for 
notification of subsidies by creating incentives for Member governments 
to fully comply.

      Establish new rules to more effectively address subsidies and 
other market-
distorting support provided to and through state-owned enterprises 
(SOEs). Examples of other market distorting support that should be 
covered include government waivers of permits such as for environment, 
construction, and labor.

      Clarify what constitutes a ``public body'' and how to assess 
whether a Member government exercises meaningful control over an 
enterprise. Restrict government support to SOEs used to enhance SOE 
economic performance.

      Make the most harmful types of subsidies that are currently 
permissible subject to stricter rules by expanding the list of 
prohibited subsidies.

      Ensure that rules for dispute actions related to subsidies and 
other market-
distorting support provided to SOEs allow for clear and effective 
remedies.

Pursuing New Rules for Current Issues

      Establish new rules covering digital trade, including data flows 
and data localization policies, as well as a permanent ban on applying 
customs duties and other customs processes on electronic transmissions.

      Promote further integration of services and investment into the 
international trading system.

      Demonstrate leadership on emerging areas of trade practice such 
as regulatory cooperation.

      Address behind the border discriminatory practices by 
reinforcing national treatment obligations (that do not unreasonably 
burden foreign direct investment) and developing strong domestic 
regulation disciplines ensuring non-discriminatory and transparent 
regulatory and enforcement processes in the services and non-services 
sectors.

      Refocus efforts on advancing cross-border movement of people and 
the rules needed to maximize measures that promote an inclusive and 
efficient labor market.

      SOEs often get special permitting and other benefits not 
available to privately-owned competitors. This practice should be 
disciplined as a non-tariff barrier to both entry and like services.

Modernizing WTO Rules and Implementation

      Increase negotiating flexibility at the WTO by making it easier 
for Members to pursue plurilateral agreements. The WTO Secretariat 
should be given more authority to support various negotiating processes 
and implementation of such agreements.

      Improve transparency and notification by creating incentives for 
Members to provide required notifications and applying sanctions for 
willful and repeated noncompliance with notification rules.

      Improve effectiveness of pre-litigation problem resolution by 
developing rules that require Members to give substantive replies 
within set timeframes to written questions from other Members or trade 
concerns raised in a WTO Committee meeting.

      Revise rules for special and differential flexibilities to 
better reflect development realities while ensuring they are available 
to those Member countries that actually need them.

      Reach agreement on measures to ensure that the national security 
exception is not applied in ways that undermine the key WTO provisions 
for opening trade.

      Commit greater resources to the work of the most effective WTO 
committees while also deactivating those committees that are no longer 
needed or are inactive.

      Treat forced localization as a WTO-illegal performance 
requirement.

Ensuring Properly Functioning Appellate Body

      While the dispute settlement system has been effective, 
improvements are needed to ensure its continued effectiveness and 
support among members. Steps should be taken to improve the operation 
of the WTO dispute settlement process and address the member 
differences over the activities of the Appellate Body (AB).

      The WTO members should review and agree on rules dealing with 
the scope of what can be decided by the Appellate Body, the timing of 
cases, and the limits of actions by judges after their term has 
expired.

      Members should ensure that the AB has the resources, staff and 
financial, needed to deal with a growing number of cases being brought 
by member countries.

                                 ______
                                 
                   U.S. Global Value Chain Coalition
These comments are being filed on behalf of the U.S. Global Value Chain 
Coalition--a coalition of U.S. companies and associations--that is on a 
mission to educate policymakers and the public about the American jobs 
and the domestic economic growth our companies generate through their 
global value chains.

Global value chains include those jobs we traditionally associate with 
creation of a product--such as those in a factory or on a farm--as well 
as those positions involved in the conceiving of and delivery of those 
products--such as design, marketing, research and development, 
logistics, compliance, and sales. Simply put, the global value chain 
accounts for all the jobs that add value to the good or service sold in 
the global marketplace. These positions are essential to the creation 
or sale of a good or ser vice. Moreover, these jobs are primarily here 
in the United States and are usually high-paying, accounting for much 
of the value that is paid at the register.

Thank you for holding this important hearing on the World Trade 
Organization (WTO).

As the organization that helps set and enforce global trading rules, 
the WTO has emerged as an important enabler of international trade 
during the past quarter century. Building on the work of the General 
Agreements on Tariffs and Trade (GATT), the WTO ushered in an 
unparalleled period of widespread prosperity at home and abroad as 
trade liberalization fostered U.S. and global job creation. Now, more 
than ever before, Americans reap the benefits of global trade--either 
through the jobs that are directly supported by these trade links or 
through access to the goods and services that those links now enable. 
Global value chains--which employ tens of millions of Americans--
underpin these benefits.

Not surprisingly, the WTO (sometimes in partnership with the 
Organization of Economic Cooperation and Development (OECD)), has 
focused on global value chains to understand how they operate. As it 
notes:

        Today, companies divide their operations across the world, from 
        the design of the product and manufacturing of components to 
        assembly and marketing, creating international production 
        chains. More and more products are ``Made in the World'' rather 
        than ``Made in the UK'' or ``Made in France.'' The statistical 
        bias created by attributing the full commercial value to the 
        last country of origin can pervert the political debate on the 
        origin of the imbalances and lead to misguided, and hence 
        counter-productive, decisions . The challenge is to find the 
        right statistical bridges between the different statistical 
        frameworks and national accounting systems to ensure that 
        international interactions resulting from globalization are 
        properly reflected and to facilitate cross border dialogue 
        between national decision makers.

Through its Global Value Chain portal, the WTO now publishes a wide 
array of reports and a wealth of statistical resources on the positive 
impact of global value chains. Through these rich data and analytical 
tools, including the global value chain statistical profiles for each 
country, the OECD/WTO Trade in Global Value Added data base, and the 
GVC indicator data base, policy makers in the United States and 
throughout the world can now better understand the positive economic 
contributions of global value chains. For example, we now know that 
nearly two-thirds of traded goods are made with components from at 
least two different countries. In the United States, our ability to 
export is increasingly dependent on our ability to import and our 
ability to partner with other countries, including intermediate 
markets. Such realizations hold important ramifications to the trade 
policy debate we are now conducting in the United States.

The WTO's contributions are qualitative as well. Last October, WTO 
Director General Azevedo led a workshop on women in global value 
chains. Among other things, the workshop noted that women and woman-
owned businesses face many barriers in accessing and participating in 
global value chains. Lowering those barriers and bringing about great 
participation by woman--through information, technology, and access to 
finance--would provide tremendous gains to individuals, to communities, 
to nations, and the global economy.

As we build the work plan for the WTO for the next quarter century, we 
need to ensure that continued research into global value chains is a 
core element. As we become increasingly dependent upon utilization of 
such global value chains for our own prosperity, and look for ways to 
increase participation in them, it is vital that the WTO further its 
capacity to help us increase our own understanding.

                                   [all]