[Senate Hearing 116-436]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-436

                       THE PRESIDENT'S 2019 TRADE
                      POLICY AGENDA AND THE UNITED
                     STATES-MEXICO-CANADA AGREEMENT

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             JUNE 18, 2019
                               __________


                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                     
                                     

            Printed for the use of the Committee on Finance
                              ___________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
44-362-PDF                WASHINGTON : 2021  



                          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

Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement...........................................    39
Lighthizer, Hon. Robert E.:
    Testimony....................................................     5
    Prepared statement...........................................    40
    Responses to questions from committee members................    42
Wyden, Hon. Ron:
    Opening statement............................................     3
    Prepared statement...........................................    86

                             Communications

American Farm Bureau Federation..................................    89
Center for Fiscal Equity.........................................    91
Electronic Transactions Association..............................    96
Flexible Packaging Association...................................    97
TechNet..........................................................    98

                                 (iii)

 
                       THE PRESIDENT'S 2019 TRADE
                      POLICY AGENDA AND THE UNITED
                     STATES-MEXICO-CANADA AGREEMENT

                              ----------                              


                         TUESDAY, JUNE 18, 2019

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:15 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. 
Chuck Grassley (chairman of the committee) presiding.
    Present: Senators Crapo, Cornyn, Thune, Isakson, Portman, 
Cassidy, Lankford, Daines, Young, Wyden, Stabenow, Cantwell, 
Menendez, Carper, Cardin, Brown, Bennet, Casey, Warner, 
Whitehouse, Hassan, and Cortez Masto.
    Also present: Republican staff: Nasim Fussell, Chief 
International Trade Counsel; and Mayur Patel, International 
Trade Counsel. Democratic staff: Greta Peisch, Senior 
International Trade Counsel; and Jayme White, Chief Advisor for 
International Competiveness and Innovation.

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

    The Chairman. I am pleased to welcome our witness, 
Ambassador Lighthizer. Thank you for coming. We have been eager 
to have you before the committee for a very important annual 
hearing to discuss the President's trade agenda.
    The laws that delegate Congress's constitutional trade 
authority to the executive also require close consultation with 
Congress. This hearing is an important part of that 
consultation, and it provides an opportunity to explain the 
President's ambitious trade agenda to the Congress and all 
Americans. Members of this committee are looking forward to 
this very important discussion.
    A critical component of the trade agenda that I would like 
to discuss is the U.S.-Mexico-Canada Agreement, USMCA for 
short. Farmers, workers, and businesses stand to benefit 
greatly from that agreement. More market access for 
agriculture, new commitments to critical areas such as Customs, 
digital trade, intellectual property, labor, environment, 
currency, and the lowering of non-tariff barriers all translate 
into higher wages, greater productivity, and more jobs. In 
fact, the U.S. International Trade Commission's economic 
analysis found that USMCA will create 176,000 new jobs. We 
should not squander this opportunity to update NAFTA, which is 
now a quarter of a century old but has been critical to the 
success of farmers and businesses.
    Since NAFTA's implementation in 1994, our agricultural 
exports to these two countries have more than quadrupled. Corn 
exports increased sevenfold. A 2019 Business Roundtable study 
found that international trade supports 39 million jobs across 
America and 12 million jobs from trade with Mexico and Canada.
    I am a family farmer, as you know. I can tell you that 
NAFTA has been critical to the success of Iowa farmers and 
businesses. The same Business Roundtable study found that 
130,000 Iowa jobs were supported by trade with Canada and 
Mexico in 2017 and $6.6 billion in Iowa goods and services were 
exported to Canada and Mexico the same year. According to the 
National Association of Manufacturers, Canada and Mexico 
purchase nearly half of Iowa's total manufacturing exports.
    President Trump and you, Ambassador Lighthizer, delivered a 
solid deal to enhance this critical relationship with our good 
neighbors. Now Congress must act on implementing it. As Mr. 
Lighthizer said earlier this year, doing so will enhance the 
credibility of our global trade agenda, and it provides some 
much-needed certainty to American farmers and businesses.
    For agriculture, international trade is critical to 
reaching the 95 percent of the world's consumers living outside 
the United States. In Iowa, we export every third row of 
soybeans. This is why I strongly support the administration's 
plan to pursue new trade deals, with Japan particularly, the 
European Union, and even the United Kingdom when it is ready. 
So we should move quickly.
    Japan and the EU have not been sitting still. They have 
been closing trade deals with other countries over the last 2 
years. As a result, our farmers and businesses are losing 
market share to competitors with preferential access. We need 
to secure strong agreements so that we can restore a level 
playing field. And in order to get a deal with the United 
States, the EU has to include and negotiate agriculture. I have 
said this before: any deal with the EU that does not include 
agriculture will not get through the United States Congress.
    President Trump has rightly pointed out that trade must be 
fairer for workers, and this is central to his commitment to 
confront China's unfair trade practices and their mercantilist 
policies. When American companies get access to China's market, 
they often have to sacrifice valuable intellectual property or 
enter into joint ventures with Chinese companies. China's 
massive subsidies also create global distortions. This has to 
stop. And President Xi must recognize that making these changes 
are in China's best interest as well.
    I applaud President Trump for confronting China decisively. 
And I urge him and President Xi to reach a deal that results in 
structural changes to China's discriminatory policies and 
practices and the elimination of the 301 tariffs.
    Ambassador Lighthizer, I share the administration's desire 
to ensure that hard work and innovation are rewarded, while 
unfair trade practices and illegal government subsidies are 
punished. I agree that we must have strong and enforceable 
trade agreements. I believe that you are right to seek reforms 
at the World Trade Organization. And I share your views that 
strong and effective enforcement of the U.S. trade laws 
prevents other countries from taking advantage of us.
    But I do not agree that tariffs should be the tool we use 
in every instance to achieve every trade policy goal. I fear 
that continuing to use tariffs in this way will undermine our 
credibility with our current and potential trading partners and 
actually undo the benefits of our historic tax reform.
    Since March 2018, U.S. Customs and Border Protection has 
assessed over $15 billion in section 301 tariffs, and over $6.5 
billion in section 232 steel and aluminum tariffs. So, to be 
clear, American importers and consumers are paying for these 
tariffs. Twenty-two billion dollars out of the pockets of 
hardworking Americans is not in our national interest.
    I urge the administration to do everything it can to use 
tariffs as a last resort option, and to maintain timely and 
efficient exclusion processes for those that are already in 
effect. Ambassador, I want to thank you on that note for your 
commitment to instituting an exclusion process for the section 
301 tariffs on imports from China.
    Before leaving the issue of tariffs, I want to highlight an 
example of a successful alternative option. Specifically, 
Ambassador Lighthizer's team deserves a lot of credit for 
recently winning two very large WTO cases against China's 
distortive agricultural policies. While I support the 
administration's efforts to reform the WTO, we should continue 
to use WTO mechanisms that can hold China and others 
accountable to the greatest possible extent.
    So in closing, I am glad to have you here today. 
Ambassador, I want to recognize the critically important and 
difficult tasks before you. Congress and the administration 
must work together to ensure that our trade policy benefits all 
Americans, and I encourage you to work with us to make that 
happen.
    As chairman, I pledge my support to the President's agenda, 
starting with the implementation of the USMCA.
    [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. Let me 
begin, Mr. Chairman, by saying I very much share your view with 
respect to consultation with this committee. That was actually 
embedded in the law. Consultation, more consultation and more 
transparency, was actually embedded in the law in 2015. So I 
want to make it clear I share the chairman's view on that 
point.
    The committee meets this morning to discuss the 
administration's trade agenda. First, China. The President 
likes to say, and I quote here, ``Trade wars are good and easy 
to win.'' The situation on the battlefield says otherwise.
    China's market is now more closed off to American goods and 
American agriculture than before the trade war began. The 
President's next escalation will directly raise the cost of 
everyday goods in America, and the President is signaling that 
he will betray our national security and let Huawei off the 
hook if China helps him save face.
    Now there is no question that confronting the Chinese trade 
ripoffs was long overdue. The Chinese Government and state-
owned enterprises have gotten away with strong-arming American 
businesses, stealing our intellectual property, and 
undercutting American jobs for way too long. It has to be 
handled differently.
    Rather than chaos, what is needed is a well-coordinated 
international effort led by the United States to crack down on 
the Chinese abuses. Instead, the President has driven away our 
allies, and it is not clear there is a discernable strategy 
going forward.
    Now some have attempted to focus our efforts directly where 
China is coming after our strengths--highly technical 
manufacturing and innovation. The Ambassador, Ambassador 
Lighthizer, deserves credit for laying out this type of 
approach to the committee in the past. Unfortunately, those 
plans get knocked off course all too often by hail storms of 
tweets sent while the President is watching television in the 
morning. As a result of this mismanagement on trade, the 
American people are faced with the prospect that everyday life 
in our country will be more expensive and less secure.
    The next round of tariffs the President is considering 
would drive up the cost of consumer goods sitting on shelves 
around the Nation by as much as 25 percent. Millions and 
millions of American families are going to begin back-to-school 
shopping in a matter of weeks: school uniforms, gym clothes, 
sneakers, book bags, pencils, notebooks--you name it. With new 
tariffs in place, mom and dad might discover what they budgeted 
only goes 80 percent as far as they expected.
    And then there is the issue of Huawei. Huawei poses a 
genuine spying risk to the United States and our allies. 
Allowing its equipment to be used in our telecommunications 
infrastructure would compromise our security. That is the 
opinion of national security experts outside the government and 
in key Federal agencies.
    Even the President seemed to get it. At a recent White 
House event, he said of Huawei, and I quote, ``You look at what 
they've done from a security standpoint, from a military 
standpoint, it's very dangerous.'' But in the President's next 
sentence he says, and I quote, ``It's possible that Huawei even 
would be included in some kind of a trade deal.''
    So basically, right out in the open--we have members of the 
Intelligence Committee here--right out in the open the 
President is telling China's spymasters that he is willing to 
give away America's national security for a face-saving trade 
deal. This is not some academic concern; it is a real threat. 
But rather than holding our national security interests 
paramount, the President seems most interested in the splashy 
trade headlines.
    I am going to close with a couple of quick comments about 
the Western Hemisphere. I have long said that NAFTA was a 
product of a different economic era, and it is time for an 
overhaul. The President campaigned on ripping up existing trade 
deals. But the new NAFTA sure resembles the old one.
    That said, there are areas of meaningful progress. It goes 
further than before on digital trade and state-owned 
enterprises. It takes a modernized approach to Customs and 
duty-evasion. And again I would like to commend Ambassador 
Lighthizer for obtaining some strong outcomes in the labor and 
environmental chapters.
    Yet, when it comes to trade enforcement, the enforcement of 
our trade laws, there is surely some heavy lifting left to be 
done. Commitments from other countries are not any good if 
there is no way of holding those countries to them. The new 
NAFTA retains a weak enforcement system from the old NAFTA, 
which too often gave a free ride to the trade cheats. That is a 
bad deal for our workers, particularly the enforcement of labor 
obligations.
    Now Senator Brown, our colleague from Ohio, and I have 
offered some solutions. I am hopeful and optimistic that with 
some bipartisan work and that kind of blueprint, those are 
issues that can be resolved. In the meantime, there is no way 
to justify pulling out of the current NAFTA since doing so 
would accomplish nothing except economic pain here at home.
    So I look forward to discussing these issues and more with 
the Ambassador this morning. I thank him for joining the 
committee. This is an important hearing, Mr. Chairman, and I 
appreciate your scheduling it.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. Thank you. We have the pleasure of having 
Ambassador Lighthizer with us, sworn in as the 18th United 
States Trade Representative May the 15th, 2 years ago. Members 
of this committee have gotten to know Bob well over the past 
couple of years. I have had the opportunity of knowing him for 
at least 39 years. And because we have a lot to talk about 
today, I am going to dispense with all your credentials.
    So, please proceed with your statement.

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

    Ambassador Lighthizer. Thank you very much, Mr. Chairman, 
Ranking Member Wyden, and members of the committee. It is a 
pleasure to appear before you today to testify on the 
President's trade agenda and the newly renegotiated United 
States-Mexico-Canada Agreement. I should note, before 
continuing, that there are some parts of Senator Wyden's 
comments that I do not entirely endorse, but I do entirely 
endorse Senator Wyden. [Laughter.]
    So I would like to begin by noting that the United States 
economy has added 5.8 million jobs since the 2016 election. 
Notably, nearly 500,000 have been manufacturing jobs. The real 
GDP rose at an annual rate of 3.1 percent in the first quarter 
of 2019. The past four quarters have seen the fastest growth 
rate in GDP since 2015. The unemployment rate at 3.6 percent is 
the lowest rate in nearly half a century and has been at or 
below 4 percent for 15 consecutive months. Wages are up. Hourly 
wages were up some 3.1 percent over the last 12 months.
    I commend this report right here to the committee. It is 
the trade policy agenda and the 2018 annual report to the 
committee. It is one of the subjects of this hearing. The 
document, which USTR put out recently, outlines the 
administration's trade priorities and catalogs recent 
accomplishments.
    As most of you know, the President is troubled by huge and 
persistent trade deficits which the United States has with many 
countries. These deficits are the result of many factors: 
faster economic growth, currency valuations, and to some extent 
tax policy, but they are also partially the result of trade 
rules that oftentimes are unfair and lock in non-economic 
advantages for our trading partners. We at USTR are very much 
focused on changing these rules where they are unfair to 
American farmers, ranchers, workers, and businesses. This has 
included renegotiating KORUS, of which you are aware, and 
NAFTA, which we have just discussed and will discuss further. 
We also have been reviewing GSP eligibility, actively engaging 
in TIFA talks with many, many countries--and we can talk about 
that--and reviewing the rules and functions of the WTO.
    The USTR has also been active in enforcing the existing 
obligations of our trading partners. We brought many WTO cases. 
We have filed counter-notifications to the WTO and worked with 
other WTO members on a proposal to improve compliance with the 
existing WTO notification obligations. We are also engaged 
directly with trading partners under existing agreements. For 
example, we have successfully resolved concerns with Peru after 
requesting the first-ever environmental consultations in the 
U.S.-Peru Trade Promotion Agreement. In addition, we have used 
section 301 to investigate unfair trade practices in China. We 
believe our economic relationship with China has been 
unbalanced and grossly unfair to American workers, farmers, 
ranchers, and businesses for decades. As many members know, 
after an exhaustive process, we put tariffs on certain Chinese 
products and are preparing to do more if certain issues cannot 
be resolved satisfactorily.
    Finally, I am pleased to be able to testify here today on 
the newly renegotiated USMCA. We have worked very closely with 
members throughout this process, and many of the improvements 
in this agreement reflect Republican and Democratic members' 
ideas and thoughts. In short, I believe the USMCA is the 
strongest, most momentous trade agreement in U.S. history. It 
is the gold standard for rules on the digital economy, 
financial services, intellectual property, et cetera. It will 
help stop the outflow of manufacturing jobs and return many to 
the United States. Its labor and environmental provisions are 
the most far-reaching ever in a trade agreement. The 
agricultural chapter will lead to increased market access and 
eliminate unfair trading practices by our trading partners.
    This is a truly great agreement, and I look forward to 
working with members to make it even better, and to write 
implementing legislation which will earn large bipartisan 
support. And that is my objective. I said from the beginning 
that my objective was to get a very large number of Democrats 
and Republicans to support this.
    With that, Mr. Chairman, I will stop. Thank you again for 
the courtesy you and the other members have shown towards me 
during this 2-plus years as USTR, and I look forward to your 
questions.
    [The prepared statement of Ambassador Lighthizer appears in 
the appendix.]
    The Chairman. Before my 5 minutes starts--and I thank you 
for your opening statement--I would like to take a minute to 
briefly touch on something of great importance to the ranking 
member and me. Congressional support is key to a successful 
trade policy agenda. To further this support, we need to have a 
good grasp on what the administration is doing. This means 
members, as well as our staffs, receiving timely information, 
including negotiating proposals and texts, to allow us to 
support the administration in discussions with our trading 
partners. In short, the U.S. Constitution calls for a strong 
partnership between Congress and the administration on trade 
policy, and I hope that we can strengthen the partnership and 
further our trade agenda going forward with a consistent two-
way dialogue.
    Senator Wyden. Mr. Chairman, without imposing on your time, 
not only are you right, it is embedded in the 2015 new 
requirements, and I agree completely.
    The Chairman. Now my time starts. As I stressed in my 
opening statement, congressional implementation of the U.S.-
Mexico-
Canada Agreement will provide some much-needed certainty and, 
consequently, something that is important for farmers and 
businesses. We cannot afford delay. When Congress implements a 
trade agreement, it becomes U.S. law, giving Americans and our 
trade agreement partners certainty in relationships and the 
benefits that come with it.
    This means not having to question whether this relationship 
or associated benefits will be threatened or jeopardized as a 
means to an unrelated end. So my question: what assurances can 
you provide us that implementation of the USMCA will deliver 
that certainty that Congress, Americans, and our trading 
partners expect from bringing the agreement into U.S. law?
    Ambassador Lighthizer. Well, thank you, Mr. Chairman. As 
you say, people enter into trade negotiations to get that 
certainty, largely for their businesses and for their farmers.
    From the United States' point of view, we have negotiated 
very closely with both parties. We have covered all of these 
items. Everyone--people have made concessions. We have what is 
now an enforceable agreement, significantly more enforceable 
than past agreements, and I expect to work with the members of 
the committee to make it even more enforceable. So the 
certainty one can get is that Mexico and Canada, as far as we 
are concerned, have to live up to the actual letter of the 
agreement. I think they understand that, and we certainly 
expect to do the same thing.
    The Chairman. You have indicated using section 301 to 
enforce labor and environment commitments under USMCA. I want 
to ensure that all USMCA commitments will be enforceable, and 
through methods that do not raise taxes on Americans.
    Could you please identify other ways that we can ensure 
that USMCA will deliver the benefits that we are promising 
Americans throughout all chapters of the USMCA?
    Ambassador Lighthizer. So let me say first of all, the 
agreement is completely enforceable. We have a process of panel 
decisions like you have in most trade agreements. The USMCA and 
NAFTA before it had a provision that said, in certain 
circumstances, a country can opt out of the panel decision if 
they want to.
    We did not change that. We left that in place, largely 
because we did not want to be in a position where someone could 
challenge U.S. trade laws. That is something that some members 
support and some other members are critical of. But we expect 
99 percent of the time, maybe even 100 percent of the time, you 
are going to end up with panel discussions and panel decisions 
the same way we have had them in the past and can have them 
going forward.
    It certainly is not the United States' position that we 
would block panels. And I think it is clear that the Mexicans 
and the Canadians feel the same way. So there are a series of 
dispute settlement processes, but also what we did in this 
agreement--which I think is far more helpful--is we made the 
obligations very, very specific. The more general the 
obligations are, the harder they are really to enforce.
    So if you take, for example, the annex on labor in Mexico, 
it is very precise about what Mexico has to do. And Mexico did 
follow that in their own law when they implemented their labor 
law.
    So I would say, number one, we have a viable dispute 
settlement process, one that I am willing to work with members 
on. And I will follow the basic instincts of members to the 
extent they want to plus it up, because there is room to do 
that, and I am certainly happy to do that. Secondly, we were 
far more specific than a lot of these agreements in the past, 
so that we can precisely say whether or not someone is 
following it.
    So I am comfortable that we will get the benefits of this 
agreement, and I certainly endorse your suggestion--people talk 
about 180,000 jobs. If you look at the top of the ITC number--
and in their text they said there is reason to believe we would 
be close to the top--``close to the top'' is 1 percent of GDP 
and 550,000 jobs. So there really never has been a trade 
agreement that has had this much potential for this much impact 
on the economy, on workers, just right across the economy.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman.
    Mr. Ambassador, welcome again. And the next round of trade 
war tariffs could come soon. And I talked earlier about the 
impact on a family shopping for school and school equipment, 
but I wanted to ask you about college students now, because 
they are going to be out buying laptops and smartphones and 
tablets, as well as books and shoes and other essentials. A lot 
of these college students are already up to their eyeballs in 
debt. And it seems to me the next round of the trade war 
tariffs may require college students to borrow even more to pay 
for the Trump trade war.
    Now these college students cannot make it very easily to 
Washington, DC. They do not have the wherewithal to make these 
trips. So start, if you would, by telling me how you are taking 
into account these kinds of widespread impacts on the general 
public such as students, college students I just asked about, 
whose comments may not be reflected in the public comments that 
you have asked for.
    Ambassador Lighthizer. Well, thank you, Senator, for that 
comment. First of all, I would just note that in terms of the 
last traunch, we have hearings going on right now. We have some 
300--I saw yesterday we have some 325 witnesses, and we have 
had more than 2,000 submissions, and so we are in the process 
of going through that. And I certainly do not want to prejudge 
all of that, but we have our professional staff going, and 
ultimately the political staff will look at that. And in this 
last traunch, as you say, there are issues. There are products 
like cellphones and laptops and the like which have been 
avoided until now.
    I would take a step back, because when you refer to it as 
the ``Trump trade war,'' I would say that, as you and I have 
spoken many times, none of this makes any sense unless you 
think we have a problem with China stealing our intellectual 
property. And I would say to those college students, ``If China 
steals your intellectual property, you are not going to have 
jobs in the future. And what is worse, your children are not 
going to have jobs in the future.''
    So to me, the first question we have to establish is, is 
China a problem? Is a $450-billion trade deficit with China a 
problem?
    If you think not, then none of this makes any sense. If you 
think it does, then you have to do it as cleverly as you can, I 
would confess. And it is not easy. If you think China is not 
stealing our intellectual property, then we should not do this. 
If you think they are not forcing technology transfer, you 
should not do this. If you think they are not grossly 
subsidizing and taking over our markets, then we should not do 
these things.
    But to us, we believe that is the case. We think we had an 
untenable situation with China, one that should have been 
addressed, frankly, a couple of decades ago. It is a long 
history of them violating the norms of intellectual property 
and similar norms, moving forward and making promises and not 
keeping the promises.
    So we are in a position where we view ourselves as having 
the most serious problem you can face in the trade space with 
nothing less than the jobs of our children on the line. And if 
you face that, then there are going to be issues.
    Now it is fair for you to say----
    Senator Wyden. Mr. Ambassador, because time is short--I do 
not take a back seat to anybody in terms of fighting China 
cheating. The question is how you do it.
    Let me get my next question in, if I could. With respect to 
the Western Hemisphere, Mexico changed its labor laws. That was 
a good thing. But the key, obviously, is enforcement. And as 
you know, Senator Brown and I developed a framework that we 
believe can finally get us enforcement with real teeth that 
provides resources, technical assistance--and basically it is a 
cooperative effort to fight against losing out on real 
enforcement.
    And I want to get this right. You and I have talked about 
it, and we want to do it on labor, we want to do it on 
environment, and enforcement more broadly. It has been more 
than 6 months since the President signed the agreement, but the 
bottom line is, the heavy lifting on enforcement is still 
ahead.
    So my question to you is, for those of us who really want 
to see a new day in terms of tough trade enforcement, will you 
commit to working with members of Congress to do whatever it 
takes--and I want to emphasize ``whatever it takes''--to 
address these core concerns so that we can say we turned the 
page and now finally we have trade enforcement with teeth in 
it?
    Ambassador Lighthizer. Yes.
    Senator Wyden. All right. I will quit while I am ahead. I 
want to emphasize, colleagues, I said ``whatever it takes'' to 
get that new day. Thank you, Mr. Chairman.
    The Chairman. Senator Stabenow?
    Senator Stabenow. Thank you very much, Mr. Chairman and 
Ranking Member, and welcome, Ambassador Lighthizer.
    Let me first say--and I want to speak specifically first on 
the new NAFTA, however we call it. There is a lot of work that 
has been done, but we are not there yet--and specifically on 
enforcement and labor and environment, and also the access to 
medicines and the cost of medicine that I want to ask you 
about.
    But I want to just reinforce and hope that you are very 
serious in response to our ranking member's question about 
working with everyone moving forward to be able to fix the 
things that there are concerns about, specifically Senator 
Wyden's and Senator Brown's efforts around enforcement--which I 
think are very important--and put forward a good faith effort 
to be able to finally do something beyond just language, but to 
actually have enforcement.
    I want to ask you though, specifically, about another 
provision that has not been focused on as much. And that is the 
provision that relates to the pharmaceutical industry. Because 
I am very concerned that, while we are debating lowering the 
cost of prescription drugs--and the President has talked about 
that--there is an effort going on in this committee and in the 
House. We know that the cost of medicine has skyrocketed. We 
pay far more than others around the world for prescription 
drugs.
    What I am worried about is, in the middle of this 
negotiation--and this is deja vu all over again--we have a 
situation where, like Medicare Part D negotiations which were 
meant to bring down prices, the pharmaceutical industry used 
their heft to be able to put a ban on negotiation in the middle 
of that bill.
    And so now in the middle of this effort, we see the brand 
name drug companies, one of the biggest vocal supporters of 
this agreement, and then we look more closely and we see what I 
certainly view as a giveaway to the drug companies in the 
middle of this agreement. These provisions stop competitors 
from getting cheaper generic drugs onto the market.
    I have seen the argument about how we should--this language 
is supposed to reduce so-called ``foreign freeloaders'' from 
other countries, in other words, other countries that have a 
patent that is shorter supposedly freeloading off of us. But I 
would say in Canada, where they have an 8-year timeline rather 
than the 10-year in this bill, the cost of their medicine is 
about 40 percent less than ours for the same medication.
    So I think if, in order to protect the industry, we are 
actually making it harder and higher cost than Canada, that is 
not in the best interests of Americans who want very much to 
have the opportunity to lower prices and have more generic 
competition.
    So is any of the language in this bill going to get us to a 
point of lower prices, number one? And secondly, are you 
planning to request the same language as part of your 
negotiations with the European Union, Japan, the UK? Are we 
going to see this effort going on all over the world to protect 
the patents and the prices for these drug companies?
    Ambassador Lighthizer. So, thank you, Senator. I think that 
is a really excellent question. So let me take a step back and 
say, so where are we? Since the beginning of having trade 
negotiations, one of our objectives has been to have other 
countries adopt--I may have to run over just a second, Mr. 
Chairman--have other countries adopt our intellectual property 
laws. That has been the objective in every fast-track or Trade 
Promotion Authority agreement. It goes back to at least 1888 
when the United States joined the Paris Convention. This has 
been our objective. It is the negotiating objective that this 
Congress passed when they set it out for us.
    So what we do then is, we go around and we try to have 
other countries adopt our rules. In Obamacare, the Congress 
passed a 12-year data protection for biologics, right? Twelve 
years--that is what you passed. That is what was signed into 
law, and that is what we have in the United States.
    We went out and said, ``Okay, we should have the same 
standards like we do in everything else, right?'' That is what 
we do. That is what our objective is. That is what the Congress 
told us to do. What we compromised on was 10 years, okay? So 
what we have in here is 10 years. It is 2 years less than in 
the United States. And this is really an important point, 
Senator.
    There are no provisions in this agreement that will change 
U.S. laws with respect to pharmaceutical companies. There is no 
way----
    Senator Stabenow. Let me--excuse me--but just in the 
interests of time, when you are saying it will not change it, 
it also will stop us changing it in the future. You are putting 
it into a trade agreement, and I cannot imagine this will not 
be used as a reason coming back to say that we cannot address 
lowering prices. We have had a lot of discussions, this 
committee and the Judiciary Committee, important discussions 
about patent law and what is happening, and reforms that need 
to be made. And you are locking in something that I believe is 
going to stop us from doing what could be done to lower prices.
    Ambassador Lighthizer. So on that point, I completely agree 
with you. What we did is follow our law. We did not change U.S. 
law at all. And to the extent a member thinks anything in here 
will stop you or slow you up from changing laws, these laws, 
then we have to correct that.
    I do not believe it does, but I will correct it in a way 
that you, Senator, say, ``You have corrected that problem.'' We 
cannot be in a position where, if the U.S. Congress decides on 
changing these rules in some way because you think it is good 
for drug prices, or for any other reason--if you change those, 
we should not be in a position where that is more difficult or 
precluded by this agreement.
    I completely agree with you, and I think I have to satisfy 
you on that point, and I believe I will.
    The Chairman. Senator Cornyn?
    Senator Cornyn. Mr. Ambassador, how are your negotiations 
going with the House and the Speaker on USMCA? And when do you 
expect the administration will send us that agreement to begin 
voting on?
    Ambassador Lighthizer. Well, thank you, Senator. So I have 
dealt, as members here know, from the beginning with Democrats 
as much as Republicans, and I have dealt with the leadership in 
the Congress consistently during the course of this Congress 
and before. And the Speaker has been completely fair and 
aboveboard, and I think constructive in the way we have done 
it. She has put together a group of people.
    My point was, I know generally what people want, and I know 
what we can do. I just need to get somebody who can sit down 
there on the other side who will say, ``Yes, this is enough.'' 
And that is precisely what it is. And the Speaker is 
sympathetic to that, and she has facilitated that, and I think 
we are making progress in that. And my hope is that, over the 
course of the next couple of weeks, we can make substantial 
progress.
    So I believe we are on track. I think we are making 
progress, and I am hopeful on that score. And the Speaker has 
been absolutely, as far as I am concerned, exactly as you would 
hope she would be.
    Senator Cornyn. Well, I am optimistic that we will be able 
to vote on that, both in the House and the Senate, and get it 
done and behind us. I think that would provide a lot of 
reassurance to the U.S. economy, and I think it would be 
something very much in our national interest.
    Thinking about China now, I know the administration's 
position, and I think our conversations privately, about TPP 
and multilateral trade agreements--you and the President have 
both indicated your preference for unilateral agreements.
    But as I think about the challenge of China, it seems to me 
that we need our friends and allies to work with us to counter 
China and to get China in a better place. I frankly am going to 
be amazed if you are able to get them to make structural 
changes. I hope you are, but obviously their biggest concern as 
an authoritarian country is about maintaining power. And their 
economy seems to be slipping and some of the supply chain 
moving out of China into other countries like Taiwan and 
Vietnam, and I have to think they must be a little bit 
concerned about that and want some resolution.
    But can you tell me whether you think it is appropriate at 
some point to revisit the TPP as a way to counterbalance China? 
It is certainly such a large country with such a large 
population, it seems to me that we would do better working with 
our friends and allies than in a unilateral agreement.
    Ambassador Lighthizer. Thank you, Senator. I would say, 
first of all, I certainly agree that we are better off working 
with our allies, and we have. We have a group we call the 
Trilateral Group, which is my counterparts in Japan and Europe 
as well as the United States. Three of us get together. We have 
had eight meetings already. We put out communiques, and we work 
together very closely on exactly this notion, on exactly this 
problem. And the whole purpose of it is to figure out rules and 
the like, to coordinate with respect to dealing with China.
    So that is something that is going on. I totally agree with 
you. I do not know quite why we do not get the attention to 
this group. It gets attention when we have the meeting, and 
then everybody sort of says, ``Ah, you are not dealing with 
your allies.'' And the fact is, I deal with my allies very 
closely on this.
    And there also are state-owned enterprises and nonmarket 
economy provisions in the USMCA for the first time, serious 
provisions in there to deal with this issue of China. So I 
think we are doing a lot with our allies. So that is number 
one. Number two, on the issue of the TPP, you have heard me say 
before, number one, I think it is a bad agreement. You 
literally could have a car that was made 45 percent in Vietnam 
and 55 percent in China, sold in the United States with no 
duties. It would qualify.
    To me it would be crazy. It would be--and that is just an 
example. It would be the end of a lot of our manufacturing. I 
think it was a very bad agreement. It did not deal with 
currency properly. It did not deal with a lot of things. I 
think it was a mistake.
    I also do not buy the idea that we were going to somehow 
encircle China in this, what would have been a 12-person group 
if we had joined it, because China would have joined it. So it 
would have been like the WTO. So the geopolitical logic did not 
make sense. It was not a good agreement. And then the final 
thing I would like to say is, really there are 11 countries in 
this group. We have FTAs right now, which we will modernize 
more, but we have FTAs with 6 of them. That leaves just 5. Of 
the 5 that are not covered, 95 percent of the GDP is Japan. And 
we are trying to do a deal with Japan.
    With respect to the others, the next biggest ones are like 
Vietnam, which has $300 billion worth of GDP, as opposed to $5 
trillion in Japan. Now you could say, should you make a deal 
with these other ones? And the answer is, probably yes. And we 
probably will get to that.
    But I do not think it matters, for example, whether we do a 
deal with Brunei, or places like that. So I think the 
President's strategy of dealing individually with these people 
is a far better approach, and it is one that leaves you the 
flexibility of being able to, number one, keep China out of 
that agreement; and number two, enforce it with respect to that 
country. So I like where we are, and I think joining the TPP 
would be a mistake.
    The Chairman. Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman. I actually want 
to agree with my colleague from Texas on this one point, and 
the notion that--I want to ask you about wheat. I want to ask 
you about intellectual property. I want to ask you about 
enforcement. But I will say that my colleague is pointing out 
that when you can get everybody else to join you in a rejoinder 
on something like intellectual property, that could be very 
helpful to us. And so I think--I hope we can do more of that.
    If I could--you know Washington is one of the most trade-
dependent States in the Nation. I think we had $77 billion in 
exports in 2017, and we helped support over 300,000 jobs in and 
outside of our State for trade. So it is very important, and I 
appreciate your hard work on all of this.
    My colleagues have brought up the enforcement issue. We 
worked on getting money into the Customs bill to do more trade 
enforcement. So what do we have to do? I support my colleagues 
Senator Wyden and Brown. What do we have to do to get you more 
support to build robust capacity with Mexico as it relates to 
enforcement?
    Ambassador Lighthizer. So thank you, Senator.
    First of all, we appreciate the budget, the $15 million 
that are such an important part for us. I would say we are 
going to spend a fair amount of money that we do not 
necessarily have budgeted on exclusion. So at some point we 
ought to talk about that. The exclusions are going to cost me a 
lot of money. But it is something the members want, and it is 
something I think that we have to do in any event.
    I think in the area of enforcement generally, I would make 
two points. One, we have brought more cases--and have had more 
brought against us, in fairness. We have had more litigation in 
the WTO than anyone, and we have won some major cases, as has 
been pointed out, including by the chairman, in these two very, 
very big cases with China. So we are very, very enforcement-
oriented.
    Also, I would say I brought the only case that has been 
brought under the Peru Environmental Logging Agreements. I 
brought a case there. We got a good result in that. So, number 
one, we need the money. Hopefully, we use it judiciously. I 
think we do. Two, we enforce across the board. And three, we 
have to come to agreement with members on plussing up USMCA on 
the enforcement side, particularly with respect, I would say, 
to labor and environment.
    And I am happy to do that. These agreements are best not 
only when they have substantial bipartisan support, but also 
when they have substantial individual member buy-in, right?--
when members actually participate in the process.
    There has been, as I alluded in my opening statement, a lot 
of member participation during the course of negotiation. I 
dealt with the ranking member a lot on that, and I am sure he 
will acknowledge that. And there are a lot of provisions in 
there that are there, but I do not want to go across----
    Senator Cantwell. Thank you. Thank you. I appreciate that, 
and I think the success of the $15 million should bolster us to 
want to do more, and I believe there is so much outside our 
markets, outside the U.S., where we need to support more 
activities.
    I wanted to ask you--obviously, with the region moving 
ahead on a comprehensive, progressive Trans-Pacific 
Partnership, Japan doing a deal with the Canadian and 
Australian markets puts us at a disadvantage. So how are we 
going to level the playing field there?
    And I do want to point out that protecting intellectual 
property is a bipartisan issue. We firmly believe that China 
needs to do better on this, that we have to work harder on 
this. We appreciate the work that is being done on cloud 
computing. As I said, I would wish that there would be a world 
rejoinder on this. I think the United States has done best when 
we have a really bright message that everybody supports around 
the globe to put pressure on China, but maybe you can update us 
on what is happening with that.
    Ambassador Lighthizer. I would say, number one, the TPP is 
being implemented. It is in that process. The biggest single 
issue that is troubling to me on that front, in the short run 
particularly, is the hit to our farmers, because we are in a 
position where the Japanese have made agreements with--you know 
TPP, and you articulated, you are right, it is Canada and 
Australia (and probably New Zealand) will be the two biggest 
farm countries that would affect us. They also made an 
agreement with Europe, which gave away additional agricultural 
access to Japan.
    We are in a position thus where we are treated worse than 
we were before relative to our strongest competition. And that 
is an unacceptable situation from the United States' point of 
view. And we are in negotiations, and I think we are making 
headway on that score, so I do not want to say much more than 
that. But I am happy to sit down and go through the details 
with you privately.
    Senator Cantwell. Thank you. Thank you, Mr. Chairman.
    The Chairman. Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman.
    Let me just, Ambassador, start with an example that 
confirms your consultation with us and results. I had brought 
up with you the TPA provisions that deal with good governance 
and transparency, anti-corruption, and I want to congratulate 
you on chapter 27 of the USMCA, and chapter 28 which is 
patterned after the negotiations we made in TPP on good 
governance. And I am just very pleased that we had separate 
chapters in this agreement dealing with good governance and 
transparency.
    And I would just urge you to use this model in any future 
FTA that we have to make sure that you are complying with the 
principal trade objectives that we had in good governance. So, 
thank you. That is an example of consultation with us, and I 
just appreciate that.
    Ambassador Lighthizer. Could I just briefly say ``thank 
you'' for your leadership in this? You brought this up at my 
confirmation hearing. You brought it up at the meeting before 
the confirmation hearing, and you brought it up many times, but 
this idea of transparency, good governance, anti-corruption, 
best regulatory practices, this is a very, very important part 
of this agreement--and I believe as long as we are here, of 
every agreement. And it is something that will be enforced as 
we move forward. So I appreciate your leadership on that, 
Senator.
    Senator Cardin. Secondly, I want to thank you for opening 
markets in regards to the poultry industry. Delmarva is a 
principal poultry community, with Senator Carper and Senator 
Warner and myself. The provisions here on opening markets in 
Maryland--the chicken industry was $1 billion in 2017, and 
Maryland is 9th in the broiler chicken market. We are looking 
forward to the provisions of the USMCA opening up additional 
opportunities for our poultry industry here in our State. So I 
also want to thank you in regards to that issue.
    So let me just underscore the point that Senator Wyden made 
in regards to enforcement. Yes, we are pleased to see Mexico 
changing their labor laws and moving towards environmental 
changes. Our observation is that they do not really have the 
capacity to make this a reality without additional support from 
the United States. And that is why we look at the Wyden-Brown 
effort as an effort to make sure that we have meaningful 
enforcement.
    So as you have set up with Speaker Pelosi a mechanism to 
deal with the concerns that have been expressed by members of 
the House, recognize that for those of us who really want to 
support the USMCA, this issue of enforcement is a major issue 
that needs to be dealt with as we move forward on this process.
    Ambassador Lighthizer. Well, thank you. First of all, I 
appreciate your comments on poultry, and I completely agree 
with this point. We have to make an effort on capacity building 
with respect to Mexico. Canada also, I should say, has 
announced that they are going to do capacity building there.
    What I think Mexico does not get enough credit for that 
they actually did--there are very few examples in history of a 
country doing what they did, the kind of labor reform. It is 
really quite amazing when you look at it, an example of which 
is that they have agreed to have secret ballot votes on their 
collective bargaining agreements, of which they have 700,000.
    Now they took a period of time to do that, but that is an 
amazing commitment by Mexico, and it is something that we all 
have a stake in, all of us, in seeing that, number one, we will 
have enforceable provisions to make sure they do it, and that 
is what members want. And we will work on plussing those up. 
And number two, I think you are completely right. We have to 
have provisions in here where we help them build their capacity 
to do it.
    I certainly have no interest, and I know the President does 
not--of entering into this agreement which we consider to be 
historic and having it just peter out in nonenforcement in the 
future years when we are not here anymore.
    So I completely agree with that. I view it as part of our 
legacy to actually be in a position that this will go on as 
automatic enforcement.
    Having said that, enforcement, as I said before, is about 
people, right? If you had a bad cop on your street, your law is 
not going to be enforced. But I certainly----
    Senator Cardin. And recognize that this is the most recent 
trade agreement we will enter into. It will be used as the 
model for the next. So therefore, the fact that we have the 
governance provisions in this agreement will help us, whether 
it is Japan or EU or Vietnam, to make sure we also have the 
provisions in regards to enforcement and capacity to enforce as 
we look at the next country that we would be looking at for an 
FTA.
    The Chairman. Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman. I just want to 
echo the comments of the ranking member on the USMCA. We need 
to have stronger enforcement across the board, particularly on 
labor and the environment, and I hope we can get there at the 
end of the day, at least to get this member's support.
    But I would like to move to another question. At the 
beginning of the month, Americans watched as the President 
fabricated a diplomatic standoff with Mexico, and then reached 
an agreement that is a slightly modified version of the status 
quo. If this is the best win the President can get, then he is 
right about one thing: I am tired of winning. For an entire 
week, we had the President throw a high-stakes temper tantrum 
and put tens of thousands of jobs at risk by threatening 
tariffs that would raise costs for American consumers and 
businesses.
    And I think, Ambassador, you and I both know that tariffs 
are just a tool. They can be the right tool in some cases, but 
they definitely can be the wrong one in many cases. And in my 
mind, imposing tariffs on Mexico because the President felt 
they were not doing enough on immigration was clearly--would 
be--wrong.
    So I am trying to understand where we draw the line here. 
Do you believe it was appropriate for the President to threaten 
tariffs on Americans because he does not believe Mexico was 
doing enough on immigration?
    Ambassador Lighthizer. Absolutely.
    Senator Menendez. Absolutely?
    Ambassador Lighthizer. As you know, this is not my area. I 
do not get into immigration. And that is another department on 
tariffs.
    Senator Menendez. But you do deal with----
    Ambassador Lighthizer. But I do--in some cases, I deal with 
tariffs. But I think from the President's point of view, he had 
a crisis. It was a crisis. It was building at a very fast pace. 
Something had to be done. Mexico was not agreeing to do what 
needed to be done.
    I think that----
    Senator Menendez. So you believe that absolutely the use of 
tariffs for a non-trade issue is an appropriate use?
    Ambassador Lighthizer. I think if you--if you get to the 
point where you think it is a national crisis, a national 
security problem, you do what you have to do, absolutely. And I 
would suggest any member would do that.
    Senator Menendez. Let me ask you this. Would it be 
appropriate for the President to threaten tariffs on NATO 
countries if he thinks they are not spending enough on defense? 
If he thinks that is a national security challenge?
    Ambassador Lighthizer. Well, I mean, that is up to the 
President. I have not given that a second's worth of thought.
    Senator Menendez. Would it be appropriate to threaten 
tariffs on a country that has not pulled out of the Iran deal?
    Ambassador Lighthizer. I have not given that 5 second's 
worth of thought.
    Senator Menendez. Would it be appropriate for the President 
to threaten tariffs if he feels a country is not doing enough 
to block Huawei from their markets?
    Ambassador Lighthizer. I have not given that 5 second's----
    Senator Menendez. Well, I know you have not given it 5 
seconds, but here is the point. We need to know what is the 
line in which tariffs, which affect markets as well as American 
jobs--because tariffs at the end of the day are taxes. And they 
are not taxes paid by the country; they are taxes paid by 
American consumers and businesses. I would wonder, would you 
think it is appropriate for Mexico to put tariffs on us because 
we are not doing enough to stop illegal guns and cash from 
going across the border?
    Ambassador Lighthizer. That is a decision that Mexico has 
to make. I do not know how big a problem that is. It is just 
not something I study. I am a trade person.
    Senator Menendez. But you had an opinion about tariffs as 
it relates to a non-trade issue.
    Ambassador Lighthizer. I have opinions about all kinds of 
things, and I try to keep them to myself and hope that----
    Senator Menendez. Well, it would be good, because, you 
know--I am afraid the President is at the point of, I am going 
to call him ``Tariffs Man.'' He thinks that tariffs are the 
end-all and be-all at the end of the day. And it is a dangerous 
economic game to play, especially when we are not talking about 
trade-related issues.
    And I hope that internally you will express that, because I 
know you do not want to express it here, but I could see the 
response.
    Let me ask you, do you think that this action with Mexico 
makes it more or less likely to get a comprehensive, lasting 
deal with China?
    Ambassador Lighthizer. I think it makes it more likely.
    Senator Menendez. More likely? Okay, so how is it that you 
make a deal like the USMCA, and then all of a sudden, for 
something that has absolutely nothing to do with trade, you get 
tariffs slapped on you? How does that make any potential 
trading partner more willing to engage with us if they do not 
understand actually what type of commitment we will keep?
    Ambassador Lighthizer. Well, in the first place, I think 
they do understand. In the second place, to the extent we end 
up with a secure border, that will make our relationships 
between the United States and Mexico far better, more 
prosperous for both of us. I think that is what Mexico wants. I 
think that is what the United States wants, and I----
    Senator Menendez. It is not a question of borders. It is a 
question of China, Japan, India--you took them off the GSP 
list. I hope we can work to solve our issues with India so they 
can be reinstated into the GSP list. But you have to know that 
if I am a trading partner, I want to have some predictability. 
And when I make a deal with you and then you start tariffs on 
me for something that has absolutely nothing to do with trade, 
then that is unpredictable.
    The Chairman. Senator Portman?
    Senator Portman. Thank you, Mr. Chairman. And, Ambassador, 
thank you for being before us today. There are so many things 
to talk about.
    First, I appreciated the President's tweet about an hour 
ago where he talked about meeting with President Xi in G20. And 
it seems to me he tasked you and your people to do some 
groundwork prior to that meeting that perhaps can result in 
getting the 301 negotiations back on track, which I think is 
very important.
    But USMCA is going to be my focus today, because it is so 
crucial that we get this thing moving. And you have done a good 
job negotiating an agreement. It makes some necessary updates 
to the North American Free Trade Agreement, NAFTA.
    By the way, the thing is 25 years old. In the last quarter 
century, a lot has changed in our economy. A lot has changed in 
terms of our trading relationships. And I think for the most 
part, the agreement that you negotiated reflects that. And so, 
although I do not agree with every aspect of it, nor do you, 
because you had to negotiate it, it is a good agreement. On 
balance, it is going to be great for the people I represent in 
Ohio. Mexico is our number two trading partner. Canada is 
number one.
    And so we very much want to have this agreement. The status 
quo is NAFTA. I mean, the alternative is, do we move forward 
with something that is better and improved, or do we stick with 
the status quo?
    The International Trade Commission has now said it will 
create 176,000 jobs. It will grow our economy. Although some 
have said, well, it is only going to grow the economy about a 
third of a point. That is substantial, particularly in a State 
like mine where these two countries are huge trading partners. 
And by the way, it is more than the projected GDP growth from 
the much-touted TPP agreement, as an example.
    So this is a big deal. And I think it is a high-quality, 
21st-
century agreement you brought home. Again, there are some 
things that you or I might have done a little differently, but 
that is not our choice. Our choice here is the status quo, 
which is NAFTA, or this new USMCA.
    Let me ask you a couple of questions, if I might. A ``yes'' 
or ``no'' answer would suffice. Are labor and environmental 
commitments enforceable under the status quo, under NAFTA?
    Ambassador Lighthizer. They are not.
    Senator Portman. They are not. Okay. Are they enforceable 
under the new USMCA?
    Ambassador Lighthizer. They are enforceable.
    Senator Portman. They are enforceable. Okay, that is a big 
difference. How would you describe these new environmental and 
labor standards?
    Ambassador Lighthizer. The environmental and labor 
standards are essentially nonexistent in the current NAFTA. And 
they are quite robust, the most robust we have ever had, in 
USMCA.
    Senator Portman. The most ever of any trade agreement?
    Ambassador Lighthizer. That is correct.
    Senator Portman. Let me ask you another question. Under the 
status quo, does the NAFTA contain any provisions related to 
digital trade or the Internet?
    Ambassador Lighthizer. No; there are no digital trade 
provisions in NAFTA.
    Senator Portman. None. None. Even though that is a big part 
of our trade today. Does the USMCA, the new agreement, contain 
provisions related to digital trade and the Internet?
    Ambassador Lighthizer. It does, Senator. It is absolutely 
the gold standard, the best--I do not think there is anyone who 
could point to an agreement that is better than this with 
respect to digital trade.
    Senator Portman. Okay. How about expansion of agricultural 
products? Because Senator Cardin talked earlier about the 
opportunities for exporting more poultry, and I am all for 
chickens. We also export them from Ohio. But how about beef, 
and how about pork, and how about commodities like wheat and 
corn and soybeans? Is it better for American farmers under the 
status quo NAFTA or better under the USMCA, the new agreement?
    Ambassador Lighthizer. No, the USMCA is substantially 
better. There are egg and poultry improvements. There are dairy 
improvements. There are wheat improvements. There are SPS 
improvements. There are a whole bunch of additional 
improvements.
    Senator Portman. Let's talk about auto jobs for a second. 
You come from Ohio originally. Auto jobs are really important 
to us, the number two State in the country on auto and supplier 
and OEM jobs. In the past 25 years under the status quo, have 
we lost or gained auto jobs to Mexico?
    Ambassador Lighthizer. We have lost a substantial amount of 
our auto industry to Mexico.
    Senator Portman. Will the new USMCA lead to more automotive 
production and therefore more auto jobs in the United States of 
America?
    Ambassador Lighthizer. Senator, it is our calculation that 
this agreement will lead to $33 billion in new investment over 
5 years, $32 billion worth of annual parts purchases in the 
United States, and over 80,000 new jobs just in autos and auto 
parts.
    Senator Portman. Over 80,000 new jobs just in the auto 
sector. Okay, so our choice is the new USMCA, which may not be 
perfect for everybody--and sometimes around here we make the 
perfect the enemy of the good--and the status quo. The status 
quo is the current NAFTA.
    So look, I hope you will continue to work with my 
colleagues on both sides of the aisle on this. But I could go 
on and on, from the steel content and labor content and autos, 
the chapters on intellectual property you talked about, 
cracking down on state-owned enterprises, currency 
manipulations--something a lot of us have pushed you on, 
frankly. And Democrats have been more front and center on that, 
working with me on that over the years, and I appreciate that, 
but that is also unprecedented, right, in a trade agreement?
    Ambassador Lighthizer. That is correct.
    Senator Portman. So there are a lot of things in here that, 
if you compare the status quo, which is NAFTA, to the USMCA, 
there are huge improvements. So I hope you continue to work 
with my colleagues who are undecided, because I think a lot of 
them are truly undecided. They are sincere about trying to get 
there, and I make this point: this is a choice we have to make 
here as a country. Do we want to move forward? Or do we want to 
continue with the status quo that is not going to work for us? 
Twenty-five years is a long time. Thank you.
    The Chairman. Senator Whitehouse?
    Senator Whitehouse. Thank you. Welcome, Ambassador. I am 
going to ask you about an issue that we have talked about 
before, which is the problem of the massive international 
dumping of plastic waste into the world's oceans.
    As you know, we are headed for oceans that have more 
plastic than fish in them in the next few decades if we do not 
get ahead of this. It has really terrific bipartisan work 
happening in Congress as an issue. I want to commend 
particularly Senator Dan Sullivan, who has been the Republican 
leader on this, not only in the Senate but also knocking on 
doors, including I believe yours, in the administration to say, 
``Hey, hey, hey, let's give this the attention it deserves.''
    I see Senator Portman across the way, who has been an 
advocate in this area as well. When our bipartisan bill got 
signed into law, the President went on to some fulsome length 
about how important this is. ``As President, I will continue to 
do everything I can to stop other nations from making our 
oceans into their landfills. It is a very unfair situation. It 
is also unbelievably bad for the oceans. All the time, we are 
being inundated by debris from other countries.''
    Those are all remarks the President made at the signing 
ceremony. So here we have a big problem, great bipartisan work 
in Congress, a President who said. ``Let's go,'' it seems, and 
then I read from Nairobi, from the Kenya Conference, ``U.S. 
accused of blocking ambitious global action against plastic 
pollution.''
    Then I went on a bipartisan codel to the Arctic and heard 
from governments in the Arctic that the U.S. is the slow 
dragger on their efforts to improve plastic and this problem--
the Arctic being a particularly vulnerable ocean.
    Then I read from the G20: ``Agreeing on a common approach 
to the problem has proved problematic with the United States 
blocking demands to set a global target to significantly reduce 
or phase out single-use plastics.'' I asked Secretary Pompeo 
about this just recently, and he said--it was at a hearing 
right in this room, no it was a different room, but a hearing 
of the Narcotics Caucus--``This is important,'' he said about 
getting the marine plastic debris problem solved. ``This is a 
priority. I hope my team is not dragging their feet. We ought 
not be doing that. And I will do more than discourage it, if in 
fact I find that is the case.''
    So I get these great statements from Trump administration 
leaders, including the President himself, about how this is a 
big priority. What more can I do to have this filter down to 
the people who are in the room in Nairobi dealing with the 
Arctic nations and showing up at the G20 who are dragging on 
progress in the name of the United States?
    I am at a loss as to where to go, when we have the 
Secretary of State and the President saying this is power-
forward on this issue, when I have a Congress all around me 
that is saying, ``This is important to us, this is 
bipartisan,'' and somewhere it all evaporates in these 
negotiations overseas. And where it comes into the USMCA is 
that it completely explodes the credibility of the language in 
the USMCA about a common effort with what the agreement calls 
``marine litter,'' when behind the comments that I have seen 
publicly there is such weak effort, where the people have to be 
dragged along instead of being the ones who are leading.
    So what more can I do? I am at a loss here.
    Ambassador Lighthizer. I would say first of all, like 
Secretary Pompeo, I completely agree with you. I think that 
USMCA is the first agreement that really has this in it. I will 
certainly ask Secretary Pompeo. I was not in the room in any of 
the Nairobi--I have never been to Nairobi. But I am very 
concerned about this issue. That is one of the reasons that it 
is in there. And I think there are other things that can be 
done outside of the realm of these international obligations, 
more in a unilateral way, and I would like to sit down and talk 
to you and Senator Sullivan about it.
    I think we--I am very focused on this. I think it is a 
travesty. It only comes in a few places, or at least----
    Senator Whitehouse. Five countries and nine rivers.
    Ambassador Lighthizer. Yes. The whole problem, though, 
notionally goes away certainly if you take care of eight or 
nine rivers, and I think that we ought to be thinking about 
whether or not there is some more novel trade remedy that we 
ought to at least try. And I have been trying to cook one up. 
And when it is to the point where it is only slightly 
underdone, I would like to sit down with you----
    Senator Whitehouse. My time has expired. Let's continue the 
conversation. I know you have asked for a meeting, and I have 
said ``yes.'' We will schedule that. We will see what we can 
do. It is intensely frustrating in our very politically divided 
country when we produce the kind of bipartisanship we have 
produced, bicameral bipartisanship that we have produced on 
cleaning up this mess, when we have the kind of positive 
statements we have out of the President, out of the Secretary 
of State, and now out of the Trade Representative, and at the 
same time every time this issue turns up, we are the ones who 
the rest of the world sees as dragging against progress instead 
of leading progress.
    So thank you.
    The Chairman. Senator Casey?
    Senator Casey. Mr. Chairman, thanks very much.
    Mr. Ambassador, good to see you and great to have you here. 
Thanks for the hard work you are doing and for staying in touch 
with us.
    You will not be surprised that I am going to be raising the 
issue of enforcement. I know you spoke to that, both in your 
testimony and I am sure otherwise today. I wanted to start, 
though, with a reiteration of my support for the labor and 
cooperation enforcement framework that two of our colleagues 
proposed, Senator Wyden and Senator Brown, Senator Wyden being 
the ranking member of the committee.
    Just by way of a quick summary: increasing the number and 
training of enforcement personnel; number two, U.S.-provided 
capacity building and joint initiatives to promote the 
enforcement of internationally recognized labor rights; and 
also working together to audit and inspect facilities, all of 
that which I know you are aware of. I just wanted to put that 
on the record, just for emphasis.
    I will start today, Mr. Ambassador, with an acronym and a 
description. The acronym is ILAB, known as the Bureau of 
International Labor Affairs, in our Department of Labor. Here 
is what their website says in terms of the mission of this 
bureau.
    In the general description of their work, they say, and I 
am quoting, ``ILAB's mission is to promote a fair global 
playing field for workers in the United States and around the 
world by enforcing trade commitments, strengthening labor 
standards,'' and then it goes on from there. Then there is a 
section entitled ``Our Role.'' It says: ``ILAB promotes a 
strong U.S. trade policy by''--the second bullet under that on 
the website is, quote, ``enforcing the labor provisions of U.S. 
free trade agreements and trade preference programs.''
    I mention that because last year, meaning the fiscal year 
2019 budget, that bureau had a budget of $86.1 million in 
funding. The President's budget proposal asks for only $18.5 
million. Even I can do the math. That is a $68-million cut, a 
78-percent cut.
    And I know you care about these issues. I know you care 
about enforcement. But when you see that kind of a cut based 
upon the mission and the work of that bureau, how can workers 
in my home State of Pennsylvania or any other State trust that 
the administration is serious about labor enforcement when the 
President's budget cuts that bureau by 78 percent just from one 
year to the next?
    Ambassador Lighthizer. Well, I would let you know that I do 
not know much about the Department of Labor's budget, although 
I have been in rooms where this particular issue was raised on 
a few occasions. And I guess the first thing I would say is 
that, as I understand it, the same thing was true last year, 
and the Congress put the money back in, and that is why you 
have the $86 million. And I cannot second-guess the budget. I 
do not know anything about how they put budgets together.
    One of the nice things about USTR is our budget is so 
small, substantially smaller than ILAB's budget for my entire 
operation, but that is probably another issue. It is my 
commitment, and the President's commitment, that we are going 
to enforce the labor provisions in this agreement and all the 
other agreements, but in this agreement specifically. And I 
think we will come to a way that we can do that by working with 
members and compromising on both sides.
    The actual ILAB budget, I just do not know much about it.
    Senator Casey. And I take you at your word. I would ask two 
things. One is that you raise this with the administration, 
that it is important that if they are going to talk about 
enforcement 
administration-wide, they've got to have the numbers and the 
budgetary support for that. Because dollars matter. I know a 
good bit about government at both the State and Federal level. 
Dollars matter when it comes to enforcement.
    And secondly, that you would make sure that this becomes a 
major issue, not just in the context of this budget in this 
particular department, but also to keep pushing forward with 
the proposal of Senator Wyden and Senator Brown. And I know you 
have considered that seriously.
    Just a last question. Maybe I will also submit it for the 
record so you can answer it more fully, but I did want to ask 
you a question--and I will submit it in writing, but just to 
give you a preview--about the engagement that you have 
undertaken in the context of China and 301 with regard to our 
European allies and other allies where we can build a strategic 
partnership in the context of the 301 investigation.
    I wanted to get your summary of what you have been doing on 
that, because I think one of the problems we are having now is, 
it does not seem like we have a multination or multistate 
strategy. But I will leave that for days when I have more time, 
and I will submit it in writing.
    Thank you, Mr. Chairman.
    The Chairman. Senator Cassidy?
    Senator Cassidy. Ambassador Lighthizer, thank you again. 
You have made yourself so available. We have talked about the 
ISDS, or the Investor State Dispute System, under a previous 
phone call. And I thank you for that, and I look forward to 
kind of pursuing that with you. You have made your views clear.
    I do want to ask one point of clarity. I have heard two 
different things. I have heard that if you contract with the 
Mexican Government, you do have access to ISDS. I have also 
heard that if you contract with a state-owned enterprise of 
Mexico, you have access to ISDS. Which of those is it?
    Ambassador Lighthizer. If the SOE is acting as an 
instrumentality of the government, then you would have ISDS. If 
it is not acting as an instrumentality of the government, then 
you would not. Then you would have what was otherwise worked 
out. That is to say, if there is an actual expropriation, if 
there is a denial of MFN, or a denial of national treatment, 
you would still have that access. But you would not have the 
old ISDS in that case unless the state-owned enterprise was 
acting in the place of the government.
    Senator Cassidy. Got it. And I assume that there is some 
way to differentiate that? That the contractual language would 
indicate that? Because it seems like that could be nebulous.
    Ambassador Lighthizer. Well, some of these things I suspect 
will be resolved in litigation, right? I mean that tends to be 
what happens in these narrow cases.
    Senator Cassidy. Okay.
    Fertilizer: EU has duties on our fertilizer. We kind of let 
them come in to the degree that they produce them. We let them 
come into our country pretty freely. One of my constituents 
recently submitted a 301 public comment requesting that 
nitrogen fertilizers be added to the list of EU imports subject 
to retaliatory duties.
    And I am told they impose a duty of 6.5 percent on our 
nitrogen fertilizers. They recently imposed an antidumping duty 
on imports of urea ammonium nitrate fertilizer, making a total 
import duty level of over 29 percent, obviously prohibitive, as 
you can imagine, prohibitive for U.S. urea ammonium nitrate 
exports.
    Any thoughts on that?
    Ambassador Lighthizer. Well, first of all, when an 
antidumping case is brought, we will challenge that at the WTO 
if we do not think it was properly brought and followed the 
international norms or their commitments.
    The issue of whether we can add to the list of items that 
we are going to retaliate on in the Airbus case is something 
that is under consideration. We have hearings on that. We 
cannot make a decision on that until we get a decision from the 
arbitrator on what the amount is. But I am aware of your 
interest in this area, and doing something in the area of 
fertilizer is certainly something that we will consider. But it 
will depend, one, on the extent to which we can retaliate--and 
that is up to an arbitrator at this point--and then, two, when 
we take the action.
    But it is one of the--there are a bunch of things under 
consideration, and certainly this is one of them, Senator.
    Senator Cassidy. Thank you. Last, I want to bring up 
counterfeits, and according to your office, imports of 
counterfeit and pirated products were valued at approximately 
half a trillion dollars, or 2.5 percent of imports around the 
globe. And many are sold online from seemingly reputable and 
well-rated third-party vendors and sold on well-known online 
sites. And yet, although difficult to spot, they can likewise 
have a lot of, aside from lost revenue for the company who owns 
the patent or intellectual property, there are other problems, 
for example, such as chemical burns, lead poisoning, breaking 
of products, and children swallowing them, et cetera.
    Knowing that you have taken an interest in this, can you 
kind of give us an update on what your efforts and policies 
have been regarding anti-counterfeiting?
    Ambassador Lighthizer. First of all, it is a huge problem. 
And I suspect that if we actually had better inspections, the 
number would be far bigger than even your figures indicate. 
Because when you see the few times when they have actually done 
studies of this, where they have kind of taken products apart 
during a brief period of time and saw what was inside, the 
numbers are generally higher than that.
    What we have in our arsenal, one, is we have a notorious 
markets list which we put out. But it is more in the nature of 
public shaming than it is anything else. Two, we have Special 
301 where we can take actions against countries. But certainly 
any time you can see a pattern in this area from a country that 
we can prove, we are interested to try any kind of a novel 
idea. It is a huge problem.
    The administration, I should say, also is looking at it--
not necessarily just my office, but looking at some other 
things like the postal regs and the like to see if there are 
ways we can actually start doing a better job of this. And it 
is, I would say also, in the USMCA. We have substantial 
improvements in this USMCA. And for someone who really cares 
about counterfeiting, this is even another reason to bring it. 
We have what is called ex officio authority given, which means 
that the Canadians and the Mexicans would then be required to 
stop the counterfeits that come in often from China, for 
example, in through them.
    So we have a very robust provision in this area in USMCA.
    Senator Cassidy. In my conversations with the Mexicans, 
they also like to have provisions. I yield back, thank you.
    The Chairman. Senator Lankford?
    Senator Lankford. Mr. Chairman, thank you very much.
    Bob, it is good to see you again. Thanks for the ongoing 
work. There is a great deal that needs to be done on the USMCA. 
This is a situation where we have NAFTA and we have USMCA, and 
those are the two options sitting in front of us. And we have 
to be able to determine which one is the better option.
    From every appearance that I have and what I have seen, the 
USMCA is a much better deal than what we have currently with 
NAFTA, but I am looking forward to the ongoing conversation 
with this.
    Help me understand one section of it. What do you see on 
the future of autos? I know there has been a lot of focus on 
trying to get auto manufacturing in North America, but I want 
to focus specifically on what the effect will be of the USMCA 
on auto exports outside of North America, for parts supplies, 
materials, finished products that we produce in North America 
and then ship in different countries that pick up. What do you 
think happens in that, based on this agreement?
    Ambassador Lighthizer. So I would say, first of all, thank 
you for your comments. Secondly, I think the auto sector is 
among the biggest beneficiaries of this agreement. By the way, 
it is one of the ones that has lost the most because of NAFTA. 
So this is just a huge--for people who care about autos and 
auto parts, this is a huge improvement.
    This agreement, in and of itself, will make it easier to 
export to Mexico and to Canada. The reality is, we do not 
export a huge amount to Mexico. We do export some.
    Senator Lankford. I am thinking about exports outside of 
North America.
    Ambassador Lighthizer. Outside of North America, the way it 
will principally affect this is, you are seeing substantial new 
investment in North America in a whole variety of States, some 
in the northern tier, but a lot of it in the souther tier of 
the country. All of those plants that will be meeting the new 
NAFTA requirements--that is to say, have higher U.S. content 
and more production in the United States--all of those plants 
will be able to export more easily just through their own 
efficiency.
    And I will give you an example of that. BMW is one. BMW is 
one of the biggest, forget auto--one of the biggest net 
exporters in the United States is BMW. And they are 
substantially increasing their plant for a lot of reasons of 
efficiency. And that will make them even a bigger exporter of 
automobiles.
    Senator Lankford. So let me ask this, because NAFTA has 
worked pretty well, on ag in particular. What does USMCA 
benefit the ag communiy on that is different than NAFTA? What 
is the greater benefit? Just give me one or two examples.
    Ambassador Lighthizer. So, well, I mean one would be in the 
wheat area. We corrected the bad wheat labeling there. Number 
two, they have up in Canada what is called ``Class 7'' and 
``Class 6,'' which are limitations on our exports. They have 
had a devastating effect on our dairy provisions, and I would 
say if you asked what I was most lobbied on by members, before 
we fixed it, I would say it was the way they treat our dairy.
    I mean, I had Senators from all across the country very, 
very concerned about that. So there is wheat, there is dairy, 
and----
    Senator Lankford. Both of those are Canada-related?
    Ambassador Lighthizer. Pardon me?
    Senator Lankford. Both of those are Canada-related, the 
wheat and dairy?
    Ambassador Lighthizer. Yes. They are both Canada. They also 
are--these are the best provisions on SPS. We have a provision 
that solves the discriminatory action against U.S. wine. We 
have limitations on how the geographic indications are used 
against the United States. We just--you know, there are rules 
for the first time, really, on biotechnology and approving new 
biotechnology. It is a remarkably better agreement. And I 
should say, that is even given the fact that agriculture did 
relatively well under the old NAFTA.
    Senator Lankford. So let me ask you one more question on 
USMCA, but before I run out of time, I want to mention to you 
again how important the 301 exclusion process is to me. I know 
you are working on this, and we talk about it often.
    But for those who have been through List 1 and 2, their 
exclusions are coming up. I would hope that there would be a 
way to be able to rapidly renew those exclusions that they 
already have from List 1 and 2, and for List 3 that that is 
happening to get to the exclusion process rapidly. Which again, 
the first time, the first round in going through List 1 and 2, 
took 8, 10 months on some products. This is a much larger list 
for List 3, and I would just hope they can--you and I have 
talked about it before; we can go from there.
    Let me ask you about the digital trade provisions, though, 
in the USMCA. The digital trade provisions--are they similar to 
what we are seeing in the Pacific Rim and the TPP and what they 
are already putting into place protecting Customs duties on 
electronic products, source code protections, and such? Are 
those similar to the TPP provisions, what we are putting in the 
USMCA just for digital trade?
    Ambassador Lighthizer. So I would say, in every respect 
they are plussed up over TPP. They are a better agreement than 
TPP. Obviously, there are no agreements in NAFTA, but under 
USMCA we plussed it up in every case.
    And the reason we could do that, in reality, was because we 
had the benefit of TPP. So we knew what was in there, and we 
plussed it up and used the leverage of these negotiations to 
get a better agreement.
    So source codes, for sure--data flow, data localization, 
all of these provisions. And Senator Wyden is like the world's 
leading expert on this, and he is going to endorse my comments. 
This is better than TPP in all of these respects.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman. Ambassador 
Lighthizer, it is good to have you here today. I want to tell 
you that I very much appreciate your leadership and the 
President's leadership on China and holding them accountable.
    I also want to thank you for your efforts to modernize and 
improve our trade agreements. As you know, our number one 
economic driver in Montana is agriculture. Opening these new 
markets for Montana agriculture, also energy, including coal 
exports--and I will talk about that in a minute--as well as our 
outdoor economy, are absolutely essential for our jobs and our 
State's economy.
    And advancing USMCA is critically important, and it needs 
to get done this year. But we are not operating in a vacuum, 
and we are losing ground against many of our competitors in 
critical markets like Japan. So I want to pivot over and talk 
about Japan here for a moment and ask some questions on it.
    You have previously highlighted your goal of quickly 
reaching an agreement with Japan, potentially in a two-stage 
process. A question is, where do negotiations stand? And what 
timeline are you looking at for a possible agreement with 
Japan?
    Ambassador Lighthizer. So thank you, Senator, first of all 
for your comments on the importance of USMCA. Secondly, with 
respect to Japan, one of the biggest beneficiaries of our 
actions with Japan will be of course the beef industry, but 
also pork and some others. And they are also the ones that are 
most at risk if we do not do something, because of the fact 
that Japan has entered into agreements with TPP.
    Senator Daines. We have about three cows per person in 
Montana. That is music to my ears.
    Ambassador Lighthizer. Right.
    Senator Daines. We would like to ship more of them over to 
Japan.
    Ambassador Lighthizer. We want to get more of them to 
Japan. So we have had a series of negotiations, including at 
the staff level and at my level, last week. We are going to 
meet again during the course of the G20, on the side of the 
G20.
    I will talk to you privately about who said what to whom so 
that you have full information. I will not say it here 
publicly. But I think that we are making headway. And we are in 
a situation where, if we do not make headway quickly, people 
will lose customers and never get that market share back.
    So it is a serious thing. The Japanese are fully engaged. 
They understand what needs to be done. We have been quite clear 
about it. And my hope is that, just in the next few months, we 
will have an agreement on it.
    Senator Daines. Thank you. And you are exactly right. Our 
ag folks, particularly, are concerned about losing share in 
this kind of zero-sum game.
    To follow up on that, do you intend to pursue negotiations 
with Japan consistent with TPA authority so that we would have 
a congressional approval as part of that process?
    Ambassador Lighthizer. So what I have proposed doing is to 
try to take care of a couple of the issues, particularly 
agriculture, early. Because if we do not, we do not want to 
wait the length of time for an entire negotiation. Beyond that, 
we want to negotiate across the board with the Japanese.
    Senator Daines. So regarding Japan and coal exports, Japan 
has expressed strong interest in more U.S. coal. In fact, 
according to the World Energy Outlook, Japan and Korea will 
remain 100-
percent reliant on foreign coal imports until 2040.
    Now a lot of their coal is coming from the south, Australia 
and Indonesia. It comes to the South China Sea. And I can tell 
you that the Japanese have voiced their concerns directly to me 
about the fact the coal is coming through the South China Sea, 
the concerns about the militarization of the South China Sea. 
We have very clear shipping lanes from our West Coast over to 
Japan. They want more Montana coal. They want more Powder River 
Basin coal. That is very good for our State. It is very good 
for jobs. It is very good for Montana's Crow Tribe, as well as 
overall energy security. However, our current export 
capabilities are at capacity, and we are struggling to get more 
out due to Washington State. The State of Washington is extreme 
in job-killing permitting processes.
    My question is this: as negotiations with Japan are 
ongoing, could you commit to ensure that coal and other U.S. 
energy exports are on the table and to work to increase coal 
and energy exports to the Asia Pacific region?
    Ambassador Lighthizer. Yes, I certainly will. And not just 
in the negotiations. I will raise it personally with my 
counterpart, but as you know, the President focuses a lot on 
coal sales and a lot of other sales too, but I will certainly 
remind the President about this as we head over.
    Senator Daines. Thank you. One quick question on 
polysilicon. The U.S. polysilicon industry has been targeted by 
China, and retaliatory tariffs are threatening manufacturing 
jobs at REC Silicon in Butte, MT.
    Ambassador Lighthizer, is removing these tariffs on U.S. 
polysilicon a priority? And will you work to address them as 
these negotiations with China continue?
    Ambassador Lighthizer. Yes. It is something we have raised 
on numerous occasions and will continue to raise. You know the 
background of it. There is what we think of as an unfair kind 
of retaliatory antidumping case that was brought against those 
products by the Chinese, and it is something that we have 
raised and will continue to raise. And if we find ourselves 
with an agreement, then we would expect this to be part of it.
    Senator Daines. Thank you.
    The Chairman. Senator Cortez Masto?
    Senator Cortez Masto. Thank you. Ambassador, it is good to 
see you. Thank you for being here.
    Let me just echo the comments of my Democratic colleagues 
when it comes to the USMCA. We want to work with you. We want 
to get to a positive outcome. But clearly more work needs to be 
done, as we have discussed here today. And it seems to me that 
both parties in both chambers very much want to reach this 
deal.
    I hope that you and the administration will work to 
incorporate the Brown-Wyden labor enforcement proposals and 
other changes to make the agreement as good as it needs to be 
for the American workers, and to ensure it gets broad 
bipartisan support.
    Ambassador Lighthizer. I mean, I am not endorsing any 
proposal specifically, but I will certainly work with Senator 
Wyden and Senator Brown and other members who have a particular 
interest in this area, and I have every expectation that we 
will come to a conclusion that will be satisfactory to you, 
Senator.
    Senator Cortez Masto. Thank you. I appreciate that.
    Let me jump to trade with China. Outdoor recreation is a 
critical part of Nevada's economy, supporting 87,000 direct 
jobs. It generates $12.6 billion in consumer spending, $4 
billion in wages and salaries, and $1.1 billion in State and 
local tax revenue.
    Many of the outdoor products used by Nevadans and outdoor 
enthusiasts have been hit by tariffs if they are sourced from 
China, such as backpacks, sports bags, leather ski gloves, camp 
chairs, camp stoves, and bikes. The next round will deal 
another blow to the outdoor recreation economy targeting 
apparel, footwear, tents, sleeping bags, skis, snow boards, and 
other sporting goods.
    These products have already faced import tariffs on average 
of about 14 percent, and as high as almost 40 percent. 
Additional tariffs significantly raise costs of our companies 
and consumers, putting jobs and new outdoor gear at risk and 
impeding the ability of more Americans to enjoy the great 
outdoors.
    Ambassador, what is your assessment of the impact of the 
China 301 tariffs on companies whose products already face 
significant import tariffs? And what opportunities do these 
companies have to seek relief?
    Ambassador Lighthizer. First of all, as you know, we have 
several traunches. The last traunch is the biggest traunch. My 
guess is that that is where most of the outdoor recreation 
equipment is, and we have hearings going on that started 
yesterday, and there are 7 days of hearings. They finish next 
Tuesday.
    So when you ask what opportunities they have, I am sure 
they are testifying and sending in statements and trying to 
make their case as well as they can on the impact. And number 
one, there has been no decision made as to whether to put 
tariffs in place with respect to that last traunch. The 
President will make that decision at some point maybe in the 
next few weeks, and I cannot of course prejudge that.
    I would say in every case we try to figure out ways to 
minimize the effect in the U.S., and I think part of it is the 
exclusion process that Senator Lankford talked about. But there 
are a lot of other things that we are trying to do to try to 
make this as painless as possible.
    But it is, in the final analysis, painful, and you have to 
start with the proposition that what we are facing with China 
is worth having some discomfort on the U.S. side of it.
    Senator Cortez Masto. So what do I tell these companies?
    Ambassador Lighthizer. I'm sorry?
    Senator Cortez Masto. What do I tell these companies?
    Ambassador Lighthizer. Well, hopefully they are testifying 
and they are making compelling arguments, number one. Number 
two, there is an exclusion process where presumably they go 
through the same sort of thing and they make their kinds of 
arguments. And that is looked at by our professional staff, and 
we have, I think, been fair in terms of granting exclusions in 
situations----
    Senator Cortez Masto. And I appreciate that, but my 
understanding is, and correct me if I am wrong, traunch 4 
included billions of dollars of goods that had been removed 
from earlier traunches following a comment and testimony by the 
public and detailed analysis by your staff. So companies who 
won these removals now are having to file comments all over 
again.
    And that is why I am getting the questions from the 
companies. At what time does it stop? What type of relief do 
they have? Is this something that is going to just continue on 
a whim? What type of policy should they be looking towards with 
respect to their companies?
    Ambassador Lighthizer. So we are involved in a very 
difficult trade struggle, which I think is extremely important 
to the U.S. economy, and that is whether or not we are going to 
protect intellectual property and the jobs of the future, and 
even our current jobs. And it is impossible to predict when 
that will be resolved.
    But I think it is such an important issue, it is one that 
not only do we have to engage in, but should have been engaged 
in for decades before. And it was to the shame of all the 
people who had these kinds of jobs, and I would say members, as 
well as us, that we have not focused on this issue enough. And 
there are issues that will come up with it, and we are trying 
to make them as small as possible.
    What we have seen in many cases is people moving the 
manufacture of these products out of China, in which case there 
is no problem. Another option, of course, is to move the 
manufacture of these products to the United States, in which 
case there are no tariffs and no threat of tariffs.
    So I would say in the long term, if I was in this 
business--I cannot predict what the United States is going to 
do, or whether we are going to be able to resolve this issue 
with China. My hope is that we can. But if we cannot, if I was 
in that industry, I would decide on other options down the 
road, and hopefully including bringing some of the production 
back to the United States.
    The Chairman. Senator Thune?
    Senator Thune. Thank you, Mr. Chairman.
    Ambassador, we have had many conversations about these 
subjects in the past, but I would reiterate what my colleague 
just said about an exclusion process that actually is workable 
and useable for some of these companies.
    We have companies in my State of South Dakota--I think you 
are probably familiar with Polaris--that are just getting 
hammered, that do not have opportunities to shift supply chains 
and are paying a dear, dear price in the form of impact, not 
only in their business but I think long-term on their future 
and the future for their employees.
    This has got a--you know, having an exclusion process in 
place that is useable for these manufacturers who are being 
harmed, and in some cases harmed greatly, needs to be 
addressed. And there are so many of these unintended 
consequences, I think, of some of the trade policies that are 
in place right now. I mean, I was in a small town in South 
Dakota on a main street, stopped into a meat locker, and the 
guy says, he says, ``Yes, you need to get this deal with China 
fixed.'' He said, ``I used to have somebody who would pay me 
$150 bucks a hide to haul my hides away.'' He said, ``China was 
buying them. There was a demand for them.'' Now, he says, ``I 
have to pay $600 to have somebody haul them away because that 
market closed off.'' And, he said, ``It is costing my business 
$40,000 a year,'' which in his business is probably the margin.
    So there I would just convey to you the sense of urgency 
associated with at least--as we continue this fight with 
China--putting in place a process that would be useable and 
navigable for our companies.
    Let me just ask too, because I know you have answered this 
question probably at some length from some of my colleagues, 
but on this issue of submitting the implementing legislation, I 
know that you are working with the House leadership to try to 
come up with something that would be, in the end, something 
they could agree to and that would be passable. But at what 
point, if you cannot reach that deal, might you submit 
implementing legislation so we can at least get the clock 
moving?
    I mean, I assume you are in those negotiations. Hopefully 
they are making progress. But I am concerned, and I think a lot 
of us are, that if we do not start making some headway on this 
deal, that we could end up getting into the fall or into next 
year where it gets increasingly complicated, I think, by 
election-year politics.
    Ambassador Lighthizer. Well, thank you, Senator. Yes, 
certainly, number one, we have a process that is ongoing, and I 
think we are making progress. And it is certainly my hope, as I 
have said many, many times since the very beginning of this, 
that this has been negotiated in a bipartisan way. Many members 
have many, many provisions in here that we have adopted that 
are in this agreement one way or another. So there are members 
who have a major stake in it on the Democratic as well as the 
Republican side.
    The Speaker has put in place a process that we are working 
our way through. We certainly agree with you that we want this 
to be dealt with as soon as possible. The benefits of the 
agreement are being delayed by delaying on this, and you are 
also putting in place this risk of, I call it sort of the 
accidental cause: if something happens that has nothing to do 
with anything anybody is contemplating and it has some impact 
on the passage of this, because this is really important to 
millions and millions of American jobs. It is not just a small 
FTA with some country that people have never been to. This is 
$1.3, $1.4 trillion worth of trade.
    So in terms of the deadline, and I do not want to set a 
deadline, there clearly is an urgency, which I completely share 
with you, that we have to get this done. And I would say I see 
no reason to believe that most of the people I am dealing with 
do not sense the same urgency. They want to get it done. It has 
been around for awhile. It was negotiated 9 months ago. People 
have had access to it for 9 months. And so it is important that 
we do it quickly.
    Senator Thune. And just to--again, one of the big concerns 
I would tell you from farmers in my State is that we risk 
permanently losing market share if we do not get some of these 
deals done. And I am speaking not just of Canada and Mexico, 
but of course China. And I know that you have indicated that 
you are working on other bilateral deals. I would urge you to 
continue to push hard to get a deal with Japan. That is a huge 
market for South Dakota agriculture.
    But I think that if we do not, other countries are going to 
leapfrog the United States and build on these free trade 
networks, and our producers in my State and across the country 
are going to continue to lose market share.
    So I know my time has expired, but please keep working 
urgently to get these deals done.
    The Chairman. I think if we can get the last three in, we 
can get everybody accommodated before the vote ends.
    So, Senator Carper?
    Senator Carper. Thanks.
    Ambassador Lighthizer, welcome. Thank you and your team for 
working so hard on this agreement, and I think there is a lot 
of eagerness on our side to work with you to improve the 
renegotiated NAFTA agreement and try to get to ``yes.'' There 
are a couple of areas where we still have some work to do. We 
talked about some of those today, and I want to mention them as 
well.
    I am the ranking member of the Environment and Public Works 
Committee in the United States Senate. And as a result, the 
environmental chapter, as you might imagine, is of special 
interest to me and to my colleagues on that committee.
    I want to thank you for the outcomes in the environment 
chapter that are an improvement over the current NAFTA. I will 
mention a couple of them, including the obligation to eliminate 
fishing subsidies. And also the cooperation framework between 
countries in the new agreement, we believe is also improved.
    Of course the goals of these obligations are not going to 
be met without sufficient monitoring, cooperation, and 
resources. And we do not want the enforcement of the 
environmental obligations to get short shrift. I suspect you do 
not either.
    I do not normally ask ``yes'' or ``no'' questions, but I am 
going to ask two of them. And you do not have to do much more 
than say ``yes'' or ``no.'' So here we go.
    Will you pledge to work with this committee, with me, to 
identify where there may be gaps in the resources that are 
currently available for monitoring and enforcement of the 
environmental obligations?
    Ambassador Lighthizer. Yes, Senator.
    Senator Carper. Thank you. And also would you pledge to 
work with us to determine ways in which domestic stakeholders 
can be partners with the government to monitor what is 
happening on the ground, and to ensure enforcement of the 
obligations in the environmental chapter?
    Ambassador Lighthizer. Yes.
    Senator Carper. Thanks so much.
    My second question revolves around USMCA dispute 
settlement. The state-to-state dispute settlement system in the 
new NAFTA continues to allow for panel blocking; that is, as I 
understand it, the main reason a dispute settlement panel has 
not been established since maybe the early 2000s. The Trans-
Pacific Partnership made changes, I believe, to fix panel 
blocking, but these improvements were not included in the new 
NAFTA.
    From the Statement of Administrative Action the 
administration sent to Congress, it appears that the White 
House plans to use section 301 tariffs to unilaterally enforce 
USMCA provisions when a dispute occurs. I would just ask if you 
could explain to us briefly why using section 301, which would 
very likely invite retaliation from Canada and Mexico, is 
preferable to a binding dispute system that does not allow 
panel blocking?
    Ambassador Lighthizer. Well, thank you, Senator. First of 
all, I would point out the obvious. And that is, that panel 
blocking is permitted under the current NAFTA as well as under 
USMCA. So anyone objectively looking at distinguishing between 
the two and deciding to vote against the second because there 
is no improvement from the first, could find that.
    So what we did is, we kept the current provision. Now, why 
did we keep--let me say first of all, you are right that there 
have not been any in a while in this context. The reason for 
that is, people have tended to go to the WTO to enforce those 
rights. And there have been a number of WTO cases.
    So second, why did we not make that change? Our view is 
that we can enforce our laws in the rare circumstance where 
there is a blockage by using our unilateral law under 301; 301 
says you should go to the international organization or the 
agreement for enforcement, if there is a violation of a trade 
agreement, or the WTO in this case If the other side blocks, 
the position you would take is that, thus, you have exhausted 
your remedies and therefore you could legally use 301. So that 
is like the nature of it.
    And why did we do that? Number one, we think it will be 
very rarely used. But in a situation where, for example, 
someone challenged the trade laws of the United States and made 
some argument about that, about the viability of the trade 
laws, you would want to be in a position where you could 
preserve your rights.
    But this is something I am perfectly happy to work with 
members on and see where members draw their line. It was 
clearly a U.S. ask. It was not an ask from the other side. The 
other side, since they had signed up in TPP, presumably would 
be willing to go along with it.
    Senator Carper. All right. And with respect to China 
tariffs, we have heard--I suspect all of us on this committee 
have heard from constituent companies in our own States who 
have spent a fair amount of time and money trying to navigate 
the process for securing a product exclusion from the 
President's tariffs.
    And members of this committee have tried repeatedly to get 
answers from your staff on how USTR defines, prioritizes, and 
weights the criteria for obtaining a product exclusion. I have 
not received answers that are deemed to be satisfactory. I just 
wanted to ask if you would commit to us today to consulting 
closely with this committee, its members, including my office, 
as USTR develops its process for excluding products from the 
$200-billion List 3 tariffs. In particular, I want to make sure 
that the USTR is transparent in how it defines, how it 
prioritizes, how it weights the criteria for getting the 
product exclusion, especially since, unlike earlier lists, very 
few, if any, products on List 3 are related to ``Made in 
China.''
    The Chairman. Senator Brown?
    Senator Carper. Could you say ``yes'' or ``no''?
    Ambassador Lighthizer. Yes, Senator.
    Senator Carper. That was a good answer. Thank you.
    The Chairman. Senator Brown?
    Senator Brown. Thank you, Mr. Chairman. Thank you, 
Ambassador; good to see you again.
    I want to focus my questions on China, but I want to make 
one comment on NAFTA. I have said it before. I will say it 
again publicly and privately to you. I want to get to ``yes,'' 
but it has to be good for American workers. We cannot just 
change the name of an agreement and expect it to stop jobs 
leaving Ashtabula and Mansfield and the industrial Midwest and 
going to Mexico. We need to make sure the agreement has strong 
anti-outsourcing provisions and that they are enforced better 
than before.
    Ranking Member Wyden and I have an enforcement proposal 
that many of you on this committee have mentioned that will do 
that. I look forward to working with you to get it 
incorporated. I know you said to Ranking Member Wyden that you 
would do whatever it takes, and that is good to hear. Thank you 
for that.
    China--I want to turn to China. I have been concerned about 
China's unfair trade practices for, frankly, 20 years, as a 
member of the House and Senate. We know the way China cheats: 
huge subsidies, state-owned companies that do not act like 
companies at all. Their industrial policies urge global 
domination. Their workers cannot join independent unions to 
fight for higher wages.
    We know the costs our economy has suffered. We know how 
many jobs have been lost in Ohio, the industrial Midwest, and 
all over the country. Our manufacturers of clothes have 
struggled to compete. So I am supportive of any and all efforts 
to get tough on China, but we need to see results. And I am 
worried we do not have a plan B.
    So my questions--if you can get as close as possible, 
because of the crunch of time, Mr. Ambassador, to a ``yes'' or 
``no'' on these.
    China's state-owned steel enterprises account for 8 of the 
10 biggest steel producers in that country and are a big part 
of the steel over-capacity problems. If the talks with China do 
not succeed, do you think tariffs by themselves will force 
these SOEs to stop cheating?
    Ambassador Lighthizer. You know, I cannot answer that 
``yes'' or ``no,'' so can I give a regular answer, or do you 
want me----
    Senator Brown. Sure.
    Ambassador Lighthizer. I could pass, if you would prefer. 
And given the shortness of time, I am prepared to pass. I do 
not know if it will get them to stop cheating, tariffs alone. I 
think you do not have any other option. I know one thing that 
will not work, and that is talking to them, because we have 
done that for 20 years. And I know you agree with me on that.
    So if we do not get an agreement, then we have to do 
something. And if there is a better idea than tariffs, I would 
like to hear it. I have not heard it. But I do know that you 
and I agree that just chatting with them in a dialogue is not 
going to get them to change, because that has been proven to be 
unsuccessful.
    Senator Brown. Well, and I know you care about that. I know 
you care about wages, wages for Chinese workers and the impact 
that has both on their country and what impact it has on our 
competitiveness with them. But I am just concerned that there 
is no plan B. Has the President really established a strong 
coalition of other countries that will work with us to force 
China to stop cheating if our bilateral efforts fail? Have we 
done that?
    Ambassador Lighthizer. Of course we have. We have a 
coalition. We have a coalition, which is called the Trilateral 
Group--not the Trilateral Commission, the Trilateral Group--and 
it is the United States, Europe, and Japan. And we have met a 
number of times to deal with exactly this issue.
    We have put out statements. We have had eight meetings. We 
will continue to have more. I think it has been very effective. 
So the criticism that we have not put together a group is an 
erroneous criticism.
    Senator Brown. Well, it did not exactly start out that way, 
but I do not want to argue----
    Ambassador Lighthizer. We had our first meeting on--do you 
remember when our first meeting was? It was at least 2 years 
ago. Yes, I think it was just short of 2 years ago. So we have 
been doing it for some time. It is something that we have given 
an enormous amount of effort to. And our last meeting was 
within the last 3 weeks.
    Senator Brown. I mean, I think that the criticism of this 
by many is that we do not play well with others when the 
others--and not counting ``others'' as North Korea and Russia 
and Orban and Duterte--we do not play well with others in terms 
of our allies, our economic and our democratic allies, in our 
efforts.
    So I guess I am looking for--if this does not work, this 
agreement, what is the plan B? I understand talking alone does 
not do it, but I am very concerned that there is no long-term 
relief in sight for Ohioans wondering whether they will get to 
compete on a level playing field with China. So I ask you to 
consider that.
    Ambassador Lighthizer. Well, thank you. I appreciate that. 
I also have to say that to suggest that the only difference 
between NAFTA and USMCA is a name change, I would take strong 
exception to that. But I guess you are aware of that too. I 
just do not want to let that pass.
    Senator Brown. Well, I understand there are differences. I 
did not say the name change is the only difference, but I am 
saying a repackage is not nearly sufficient on issues that 
Senator Stabenow talked about on access to medicines, and five 
or six of my colleagues who talked about Brown-Wyden. Those are 
essential to stop jobs from leaving our communities and going 
to Mexico.
    Ambassador Lighthizer. Well, sufficiency is a judgment that 
only a Senator can make. I cannot. But I would say it is 
massively different in rules of origin for automobiles, 
massively different in labor, massively different in currency, 
massively different in intellectual property. Digital trade 
does not even compare. Financial services--we have a sunset 
which you are very much aware of modified, not to exactly what 
you and I wanted, but a lot better than we have ever had in any 
other agreement.
    It has SOE deals. It has at least 20 provisions that we 
count that have an enormous amount of cooperation with my 
friend from Ohio.
    The Chairman. Senator Hassan?
    Senator Hassan. Thank you, Mr. Chair. And thank you for 
keeping the hearing going. Thank you, Ambassador, for being 
here.
    I will just start by echoing what you have heard from other 
colleagues. I am encouraged by the USMCA working groups that 
Speaker Pelosi has set up in the House. Many of my colleagues 
and I are encouraged by aspects of the agreement, but we need 
to find ways to improve the impact that the agreement would 
have on American workers and businesses. So I am hopeful that 
the process operating in the House will help us get there.
    I wanted to turn now to China as well. I visited China at 
the end of April as part of a codel with Senator Coons. While I 
was there, it seemed that both parties wanted a deal. Soon 
after I returned, the talks broke down.
    It was good to see an announcement this morning that 
President Trump and President Xi are in fact going to meet at 
the G20 in Japan later this month. What I would like to make 
sure of is that we can have, at both a member level and a staff 
level, a full briefing after that happens.
    I very much appreciated you coming to my office when I 
first became a member of the Finance Committee, but it would be 
very helpful to have more regular staff-to-staff briefings as 
well. Can you commit to that?
    Ambassador Lighthizer. Sure. I am happy to do that. But I 
would say, if you want actual candor, it will have to be member 
to Lighthizer.
    Senator Hassan. I am happy to do that too.
    Ambassador Lighthizer. Which I am prepared to do.
    Senator Hassan. Yes; thank you.
    Now I would like to turn as well to the exclusion process 
that we have been talking about for the third list of Chinese 
goods subject to section 301 tariffs. I have heard from 
companies like one called NEMO in Dover, NH, that are trying to 
make decisions that impact their growth, such as whether they 
will have the revenue to make new hires or not. And in order to 
make these decisions, they need to have answers on whether 
their products will be granted an exclusion.
    In the interim, they are being subjected to a 25-percent 
tariff on a line of products that represents 10 percent of 
their overall businesses. So can you let--do you have an 
understanding of the timeline for when the third list, the 
exclusion process for the third list, will be fully functional?
    Ambassador Lighthizer. So, yes, Senator. And this is 
something that I would suggest that your staff do: call my 
staff with respect to this company, for sure. But it has been a 
major process, as you can imagine. We do have experience, 
having done it on the first couple of traunches.
    The form that you can actually fill out is available, and 
it is online----
    Senator Hassan. And this is a company that has written to 
you. It has--I am sure it is doing its process. But I just want 
to be clear, because I think the businesses and the 
constituents that we all represent need us to say this. I 
understand that you are taking a big-picture look at this and 
saying that some, I think the word you used earlier today was, 
some discomfort may be necessary.
    For NEMO Equipment to reinvent their supply lines will take 
2 years. It is a 25-person company that was just about to 
launch a whole new sector of growth, and the instability of the 
tariffs themselves, as well as the lack of certainty in 
predictability, is really holding them back at this point and 
harming them, and may in fact mean not only that they cannot 
grow but that they may have to lay people off.
    So I understand what you are trying to balance here, but we 
need predictability. We will follow up with your staff, but 
there has been plenty of time to get this exclusion process in 
place. And it is really urgent that it be operating 
transparently and predictably. Is that fair?
    Ambassador Lighthizer. That is a fair comment.
    Senator Hassan. All right; thank you.
    Now let me just, because we have a vote--one of the most 
commonly relayed messages from my businesses in New Hampshire 
too is, again, the need for predictability and certainty. The 
manner in which the China negotiations have been starting, 
stopping, restarting by tweet, et cetera, has left businesses 
really guessing about what the administration will do next.
    Just last month, the President threatened to impose another 
round, List 4, of tariffs on China. This set would encompass 
virtually all goods coming into the United States from China. 
Businesses are nervous. These tariffs would directly impact the 
prices everyday Americans spend on the things that they need.
    I know that the USTR began a hearing about this list 
yesterday, and you have said today you will not comment on the 
status of those tariffs and the likelihood that the President 
implements them, but can you tell me that if he does announce 
tariffs for this List 4 that there will be an exclusion 
process?
    Ambassador Lighthizer. Yes.
    Senator Hassan. And can you tell us what the cost of these 
tariffs would be on middle-class Americans?
    Ambassador Lighthizer. I don't even know if we are going to 
have the tariffs. It is entirely up to the President.
    Senator Hassan. Well, just for the record here, it is going 
to cost middle-class Americans a lot in their quality of life 
and in their financial health. And so I hope that you and the 
administration and our President are taking that into account.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator. And thank you, Ambassador 
Lighthizer, for your willingness to appear. I hope you consider 
it your obligation to appear. You have a lot on your plate, and 
we know that you work hard at your job.
    I would request that Senators with questions for the record 
please submit them by the close of business July 2nd.
    Meeting adjourned. Thank you for coming.
    [Whereupon, at 12:30 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


              Prepared Statement of Hon. Chuck Grassley, 
                        a U.S. Senator From Iowa
    I am pleased to welcome our witness, Ambassador Lighthizer, and 
thank him for being here. We have been eager to have you before the 
committee for this very important annual hearing to discuss the 
President's trade agenda.

    The laws that delegate Congress's constitutional trade authority to 
the executive also require close consultation with Congress. This 
hearing is an important part of that consultation. And it provides an 
opportunity to explain the President's ambitious trade agenda to 
Congress and all Americans. Members of this committee are looking 
forward to this discussion.

    A critical component of the trade agenda that I'd like to discuss 
is the U.S.-
Mexico-Canada Agreement, or USMCA. American farmers, workers, and 
businesses stand to benefit greatly from USMCA. More market access for 
agriculture, new commitments in critical areas such as Customs, digital 
trade, intellectual property, labor, environment, currency, and the 
lowering of non-tariff barriers will translate into higher wages, 
greater productivity, and more jobs.

    In fact, the U.S. International Trade Commission's economic 
analysis found that USMCA will create 176,000 new American jobs. We 
shouldn't squander this opportunity to update NAFTA, which is now a 
quarter-century old but has been critical to the success of American 
farmers and businesses.

    Since NAFTA's implementation in 1994, our agricultural exports to 
Canada and Mexico have more than quadrupled. Corn exports increased 
sevenfold. A 2019 Business Roundtable study found that international 
trade supports 39 million jobs across America and 12 million jobs from 
trade with Mexico and Canada.

    Being a family farmer, I can tell you that NAFTA has been critical 
to the success of Iowa farmers and businesses. The same Business 
Roundtable study found that 130,000 Iowa jobs were supported by trade 
with Canada and Mexico in 2017, and $6.6 billion in Iowa goods and 
services were exported to Canada and Mexico the same year. According to 
the National Association of Manufacturers, Canada and Mexico purchase 
nearly half of Iowa's total global manufacturing exports.

    President Trump and Ambassador Lighthizer delivered a solid deal to 
enhance this critical relationship with our good neighbors. Now 
Congress must act to implement USMCA. As Ambassador Lighthizer said 
earlier this year, doing so will enhance the credibility of our global 
trade agenda. And it provides some much-needed certainty to American 
farmers and businesses.

    For agriculture, international trade is critical to reaching the 95 
percent of the world's consumers living outside the United States. In 
Iowa, we export every third row of soybeans.

    This is why I strongly support the administration's plan to pursue 
new trade deals with Japan, the European Union, and even the United 
Kingdom when it is ready. We should move quickly.

    Japan and the EU haven't been sitting still. They've been closing 
trade deals with other countries over the last 2 years. As a result, 
our farmers and businesses are losing market share to competitors with 
preferential access. We need to secure strong agreements so we can 
restore a level playing field. And in order to get a deal with the 
United States, the EU has to negotiate agriculture. I've said this 
before: any deal with the EU that doesn't include agriculture will not 
get through the United States Congress.

    President Trump has rightly pointed out that trade must be fairer 
for workers across the country, and this is central to his commitment 
to confront China's unfair trade practices and mercantilist policies.

    When American companies get access to China's market, they often 
have to sacrifice valuable intellectual property or enter into joint 
ventures with Chinese firms. China's massive subsidies also create 
global distortions. This has to stop. And President Xi must recognize 
that making these changes are in China's best interest as well.

    I applaud President Trump for confronting China decisively. And I 
urge him and President Xi to reach a deal that results in structural 
changes to China's discriminatory policies and practices and the 
elimination of the section 301 tariffs.

    Ambassador Lighthizer, I share the administration's desire to 
ensure that hard work and innovation are rewarded, while unfair trade 
practices and illegal government subsidies are punished. I agree that 
we must have strong and enforceable trade agreements. I believe you are 
right to seek reforms at the World Trade Organization. And I share your 
view that strong and effective enforcement of U.S. trade laws prevent 
other countries from taking advantage of us.

    But I don't agree that tariffs should be the tool we use in every 
instance to achieve our trade policy goals. I fear that continuing to 
use tariffs in this way will undermine our credibility with our current 
and potential trading partners and undo the benefits of our historic 
tax reform. Since March 2018, U.S. Customs and Border Protection has 
assessed over $15.2 billion in section 301 tariffs and over $6.5 
billion in section 232 steel and aluminum tariffs. To be clear, 
American importers and consumers are paying for these tariffs--$22 
billion out of the pockets of hardworking Americans is not in our 
national best interest.

    I urge the administration to do everything it can to use tariffs as 
a last resort option and to maintain timely and efficient exclusion 
processes for those that are already in effect. Ambassador, I want to 
thank you on that note for your commitment to instituting an exclusion 
process for the section 301 tariffs on imports from China.

    Before leaving the issue of tariffs, I want to highlight an example 
of a successful alternative option. Specifically, Ambassador 
Lighthizer's team deserves a lot of credit for recently winning two 
very large WTO cases against China's distortive agricultural policies. 
While I support the administration's efforts to reform the WTO, we 
should continue to use WTO mechanisms that can hold China, and others, 
accountable to the greatest possible extent.

    In closing, I'm glad to have you here today, Ambassador. I want to 
recognize the critically important and difficult tasks before you. 
Congress and the administration must work together to ensure that our 
trade policy benefits all Americans, and I encourage you to work with 
us to make that happen. As chairman, I pledge my support for the 
President's agenda, starting with the implementation of USMCA.

                                 ______
                                 
    Prepared Statement of Hon. Robert E. Lighthizer, United States 
        Trade Representative, Executive Office of the President
                              introduction
    Last time I appeared in a hearing before this committee, I began by 
highlighting the economic success of the country under President Trump. 
I am happy to report that these trends have continued. The United 
States is growing faster than any other G7 economy. GDP grew at an 
annual rate of 3.1 percent in the first quarter of 2019 and at 3.2 
percent over the past 4 quarters. In 2018, the lowest earners 
experienced the fastest wage growth. Unemployment has hit its lowest 
rate since 1969. This trend has been particularly pronounced among 
groups such as women, Hispanics, African-Americans, veterans, and 
Americans with disabilities, all of which have seen record-low numbers 
of unemployment during this administration. Manufacturing jobs are up 
by nearly 500,000 since January 2017.

    Like the President, I remain concerned by large and persistent 
trade deficits, which can be affected by factors such as currency 
policy, taxation, economic growth rates, and my area of 
responsibility--trade rules. Despite this ongoing issue, U.S. exports 
are up significantly. From 2016 to 2018, 45 States saw their exports 
grow, while U.S. exports grew by $285 billion during that period. In 
2018, total goods and services exports exceeded $2.5 trillion for the 
first time. And of course I am here today to talk about how the 
President's trade agenda has put us on a better track for trade, 
including through the successful negotiation of the United States-
Mexico-Canada Agreement (USMCA).
                          trade policy agenda
    In March we issued the President's trade policy agenda. The agenda 
clearly sets out the trade situation facing the administration, our 
actions to improve the terms of trade for the benefit of Americans, and 
our plan to continue rebalancing U.S. trade relationships. This 
administration inherited a trade landscape characterized by outdated, 
imbalanced trade agreements, a failing multilateral approach to trade, 
and rampant unfair trading practices by some of our major trading 
partners. During the past year, the United States under President 
Trump's leadership renegotiated the disastrous NAFTA, amended the U.S.-
Korea trade agreement, and kicked off trade negotiations with Japan and 
the European Union. We also laid the groundwork to start trade 
negotiations with the United Kingdom as soon as it exits the EU. We 
have led the effort to improve the operation of the World Trade 
Organization (WTO) by promoting a recommitment to transparency and an 
overdue reassessment of the treatment of developing countries. We have 
spearheaded efforts to pursue ambitious, high-standard agreements on 
digital trade and fish subsidies at the WTO. We have secured new market 
access for our farmers in dozens of countries around the globe. And we 
have held trade violators accountable through robust enforcement 
actions under U.S. law and at the WTO.

    In opening this new chapter in American trade policy, we have 
coordinated with other countries where possible and taken unilateral 
actions where appropriate. But we should be clear-eyed and realistic 
about working with our allies. They agree with us on many important 
matters but do not always have the same level of ambition as the United 
States in securing a level playing field in international trade. I 
mention just as an example the European Union, which shares with us 
many concerns about non-market-oriented policies and practices, forced 
technology transfer, and the like. Together with my counterparts from 
the EU and Japan, we have engaged in a trilateral process that focuses 
on developing new rules for industrial subsidies, establishing criteria 
for truly market-based trading regimes, and exchanging information and 
coordinating action with respect to forced technology transfer. At the 
same time, the EU's tariff and non-tariff barriers pose significant 
obstacles to U.S. exports, particularly agricultural exports. So while 
we work closely with our allies on matters of common concern, we also 
stand up for the American worker and farmer as needed. We have shown 
that we will not be complacent while other countries, allies or 
otherwise, take advantage of American workers, farmers, ranchers, and 
businesses.
                                 usmca
    Without question, the USMCA is the strongest and most advanced 
trade agreement ever negotiated. The agreement rebalances our trading 
relationship with Mexico and Canada in a way that benefits American 
workers, and it modernizes the rules of trade among our countries to 
reflect the needs of our 21st-century economy. Based on estimates from 
the independent International Trade Commission, we anticipate that the 
USMCA will raise U.S. real GDP by up to 1.2 percent and increase U.S. 
employment by up to half a million jobs over time.

    As you know, this agreement was negotiated from the beginning and 
throughout with both Democrats and Republicans in Congress. My team and 
I spent countless hours consulting with members and your staffs on the 
negotiations. We also consulted with a broad range of stakeholders 
including business, labor, the agricultural community, and civil 
society. These stakeholders are largely unified in recognizing the 
benefits of the USMCA, and there is a chorus of supporters urging 
Congress to approve implementing legislation for the agreement. I 
continue to believe that the USMCA will win broad support in Congress, 
as it is designed to do.

    The USMCA contains the most ambitious labor chapter that has ever 
been negotiated. It is in the core of the agreement, and it is fully 
enforceable. It prohibits violence against workers and requires each 
country to respect internationally recognized labor rights. Mexico 
agreed to--and has approved--historic labor reform legislation that 
will eliminate so-called ``protection contracts'' by ensuring secret 
ballot votes on labor union representation and collective bargaining 
agreements. This is a watershed development for labor, and we 
anticipate it will reduce incentives to outsource American jobs and 
have a big impact on the ability of U.S. workers to compete on a level 
playing field with their Mexican counterparts.

    USMCA's stricter rules of origin for automobiles and other products 
are already creating incentives for businesses to increase jobs and 
production in the United States. We increased the regional value 
content threshold for automobiles well above NAFTA levels, we included 
a requirement for North American steel and aluminum in autos, and we 
established the first-ever ``labor value content'' rule to encourage 
production and assembly in the United States. Under this rule, 40 to 45 
percent of a vehicle must be manufactured in North American facilities 
with an average manufacturing wage of $16 an hour. This requirement 
will preserve and increase U.S. jobs in the sector. Indeed, based on 
data that USTR has received from auto producers, we estimate an 
increase of over 75,000 direct auto-sector jobs in the United States 
during the first 5 years of the USMCA's implementation. This is a 
result of over $30 billion in direct investments during that period and 
annual increases in U.S. auto parts sourcing of $23 billion a year.

    The United States has a strong competitive advantage in services, 
intellectual property, and the digital economy. The USMCA locks in 
rules that assure the free flow of data across borders and prohibits 
duties on digital products. It commits our trading partners to higher 
standards of intellectual property protection and enforcement, 
incentivizing our innovators as they create the products and technology 
that lead to greater prosperity for all Americans.

    The USMCA has provisions designed to combat unfair trade practices, 
including rules on currency manipulation, state-owned enterprises and 
subsidies, duty evasion, and transparency and accountability in trade 
relationships with non-market economies.

    Comprehensive and enforceable environmental standards are also 
central to the agreement and, unlike the NAFTA, have been included in 
the core text of the agreement. Additionally, there are a series of 
good governance chapters on technical barriers to trade, anti-
corruption, Customs procedures, good regulatory practices, among others 
designed to prevent trade-related barriers in North America.

    Finally, the USMCA has a new review and termination mechanism that 
ensures that the United States will never again be in a position where 
it has permanently given away its economic leverage or become hostage 
to outdated rules. I believe this mechanism will encourage thoughtful, 
periodic assessment of whether the agreement is working as intended and 
ultimately create more domestic support for trade.

    I will continue to work with the committee and other members of 
Congress as we draft implementing legislation for the USMCA. I am aware 
of specific areas where members have ideas to strengthen the agreement, 
and we are having constructive discussions on how to make improvements. 
Timely passage of the implementing legislation for the USMCA will 
benefit American workers, farmers, ranchers, and businesses throughout 
the country. My hope is that working with members, we can submit 
implementing legislation that Congress can approve very soon.

                                 ______
                                 
    Questions Submitted for the Record to Hon. Robert E. Lighthizer
               Questions Submitted by Hon. Chuck Grassley
                            usmca de minimis
    Question. USMCA raises Canada and Mexico's de minimis threshold. 
While these respective increases are not as high as we would have 
liked, it is a move in the right direction. I am concerned by rumors 
that the administration is seeking the ability to reduce our own de 
minimis threshold, which has been a great boon to American small 
businesses, manufacturers, and ecommerce companies. There is no 
appetite for that in Congress.

    Will you commit that the administration will not seek to reduce our 
de minimis threshold as part of the USMCA ratification process, or 
through any other vehicle?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. These consultations 
are underway, and I look forward to working with you and other members 
on this important issue.
                               biologics
    Question. The Bipartisan Congressional Trade Priorities and 
Accountability Act of 2015 (TPA) directed the President to achieve 
intellectual property commitments that would ensure standards of 
protection that are similar to those set forth in U.S. law. With 
respect to regulatory data protection (RDP) for biologics, that 
standard of protection as set forth in the Biologics Price Competition 
and Innovation Act (BCPIA) is 12 years. That 12-year term had broad 
bipartisan support. You achieved 10 years of RDP in the United States-
Mexico-Canada Agreement (USMCA).

    Wasn't this outcome necessary in order to reflect, as TPA calls 
for, a standard of protection that is similar to that found in U.S. 
law?

    Answer. In the USMCA negotiations, we followed the objectives set 
forth in the Bipartisan Congressional Trade Priorities and 
Accountability Act of 2015, including seeking a standard of protection 
similar to that found in U.S. law. As you know, the 12-year data 
protection term was passed as part of the Affordable Care Act during 
the Obama administration. The 10-year standard in the USMCA for data 
protection for biologics is the closest that we have ever come in a 
free trade agreement to reflecting U.S. law. Notably, nothing in USMCA 
prevents Congress from modifying the term of data protection in the 
future.
               china negotiations/tariffs as enforcement
    Answer. If a deal is reached with China, I understand that tariffs 
may be used as an enforcement tool. My own preference is that once a 
deal is reached, all tariffs are suspended.

    If tariffs are used as an enforcement tool, will you commit that 
there will be congressional consultations, hearings and public comment 
before deciding which tariff lines will be used for enforcement?

    Answer. Tariffs have been an effective tool in our negotiations, 
and USTR has implemented them consistent with Congress's delegation in 
section 301 of the Trade Act. USTR will continue to follow all 
procedural requirements for tariff remedies with respect to 
consultations, hearings, and public comment as set forth in the section 
301 statute.
                     china negotiations/rare earths
    Question. There have been rumors that China may try to leverage its 
control over the rare earths market to obtain leverage in our 
negotiations. The United States previously won a major case along with 
the EU and Japan that saw China remove its prior restrictions on rare 
earth exports.

    What steps are you taking or prepared to take in the event China 
tries to use its control over rare earths to improve its bargaining 
position?

    Answer. The administration continues to closely monitor China's 
trade policies and practices. Where China engages in unfair or trade 
restrictive conduct, we will take necessary action to address that 
conduct. At the same time, the administration is taking steps to 
protect against the disruption of critical supply chains as a result of 
foreign government action or other events. In this regard, the 
administration recently released a Federal Strategy to Ensure a 
Reliable Supply of Critical Minerals, including rare earth elements. 
Developed at the direction of the President, the Strategy outlines a 
coordinated approach by the Federal Government to reduce the Nation's 
vulnerability to disruptions in the supply of critical minerals.
                  china/section 301 exclusion process
    Question. Americans working in businesses of all sizes have 
expressed concerns to me about the exclusion process for section 301 
duties. In particular, they note they have to wait months to get a 
decision, and struggle to understand how USTR is applying the 
discretionary exclusion criteria. In fact, there are exclusion requests 
still pending from the first tranche of duties.

    What additional support does USTR need to ensure a timely and 
effective exclusion process, and what resources are currently focused 
on the exclusion process? In particular, please provide: (a) the number 
of employees (full-time equivalent) dedicated to the section 301 
exclusion process; (b) an approximation of the number of hours they 
have spent to date establishing and administering the section 301 
exclusion process; and (c) if USTR has used any funds from the Trade 
Enforcement Trust Fund to improve the exclusion process and, if so, the 
amount of such funds.

    Answer. Approximately 35 USTR attorneys, paralegals, trade 
analysts, and contractors with experiences in law, industrial sectors, 
tariff classifications, and data analysis work on the exclusion 
process. Additional staff, including analysts on detail from the 
Departments of Treasury, Commerce, and Agriculture, are assisting on 
the exclusions process, particularly for List 3. The majority of these 
personnel work on the exclusion process on a full-time basis. 
Furthermore, we intend to use a staffing contract that is in 
development to hire additional contract analysts to ensure that we can 
be timely and responsive to applications for exclusions.

    USTR presently intends to carry out its section 301 exclusion 
process at our current level of funding, including resources from the 
Trade Enforcement Trust Fund. Given the substantial level of resources 
necessary to implement the List 3 exclusion process, USTR will closely 
monitor the exclusion process to assess whether additional funding is 
necessary.
                  china/section 301 exclusion process
    Question. Stakeholders have informed me that they are not receiving 
guidance from USTR as to what precisely satisfies the exclusion 
criteria. For example, what is ``severe economic harm''? For a small 
business with limited resources, a burden of a few thousand dollars 
could force a difficult decision to lay off workers or shut down.

    Will USTR provide additional guidance on the exclusion criteria? 
What does USTR consider to be ``severe economic harm'' when evaluating 
a section 301 exclusion request?

    Answer. USTR has published its guidance on the factors it considers 
in 84 FR 29576.

    With respect to analyzing severe economic harm, we first consider 
the information that each requester has submitted about the effect of 
the additional tariffs. If appropriate, we may conduct additional 
research about the requestor's size, revenues, number of employees, 
base of operations, and other market information.
                     agriculture trade with the eu
    Question. American farmers have long suffered from a number of 
trade barriers in the EU. Yet the EU thinks it can negotiate a deal 
with the United States without reaching any agreement on agriculture.

    Will you vigorously pursue a deal with the European Union that 
addresses the many tariff and non-tariffs barriers to American 
agriculture exports?

    Answer. EU Trade Commissioner Cecelia Malmstrom and I have 
discussed the scope and timing of potential trade discussions, but the 
EU Commission's current negotiating mandate specifically excludes 
agriculture from any market access negotiations. I have been very clear 
with the Commissioner that a broad-based U.S.-EU trade deal must 
include agriculture.
                         wto dispute settlement
    Question. I appreciate that we have challenges with the WTO dispute 
settlement system. In particular, we recognize that the Appellate Body 
has overreached in some instances, particularly with respect to trade 
remedy laws. But we've also had some important wins that have opened up 
markets.

    The administration to date has not filed many WTO disputes, and it 
seems WTO enforcement to open new markets has fallen short.

    Additionally, there are a number of problematic barriers to U.S. 
agriculture exports that we need to act on, including those identified 
in USTR's National Trade Estimate.

    Will you seriously consider launching new offensive WTO cases, 
including cases against barriers faced by our farmers?

    Answer. The administration is committed to vigorous enforcement 
action to ensure our workers, farmers, ranchers, and businesses can 
compete on a level playing field and obtain all the market access to 
which they're entitled under our trade agreements. The WTO is one tool 
the administration uses to achieve this. At the WTO, USTR raises issues 
in relevant WTO committees and, if necessary, through the dispute 
settlement process in order to remove barriers to agricultural trade. 
For example, we have submitted counter notifications in the Committee 
on Agriculture on India's domestic support for rice, wheat, cotton and 
pulses. The administration had WTO panels established to consider 
China's excess agricultural domestic support and its failure to 
administer its tariff-rate quotas (TRQs) for wheat, rice, and corn 
consistent with WTO rules. USTR recently prevailed in both disputes, 
and we will closely monitor China's implementation to ensure it brings 
its measures into full compliance with WTO rules. The administration 
also initiated a process to reinstate section 301 tariffs and was able 
to obtain agreement with the European Union on a country-specific beef 
TRQ allocation to the benefit of U.S. ranchers. USTR is continuously 
assessing agricultural issues to determine the most effective ways to 
advance U.S. economic interests, including those of U.S. workers, 
farmers, ranchers, and businesses.
                           wto appellate body
    Question. The Appellate Body will no longer have a quorum by mid-
December 2019. I support the administration in seeking WTO reform. 
However, many of our trading partners are now suggesting we have not 
presented actual demands for reform. They allege we simply want the 
system to shut down.

    Please identify what actions you have taken to date to secure 
meaningful reforms to the WTO Appellate Body, what you are seeking from 
other WTO members, and how you would like those actions to be executed.

    Answer. The administration's steadfast 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.

    For over 15 years, and through multiple administrations, the United 
States has repeatedly expressed concerns with the WTO Appellate Body's 
activist approach, which has involved overreaching on procedural 
issues, its interpretative approach and its 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.

    In 2018 and 2019, the United States made a series of statements at 
DSB meetings detailing the Appellate Body's disregard for the rules 
agreed to by the 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,\1\ allowing persons to serve on 
appeals after their Appellate Body term has ended,\2\ the Appellate 
Body's unauthorized review of panel factual findings (including on 
domestic law),\3\ the Appellate Body's issuance of advisory opinions on 
issues not necessary to resolve a dispute,\4\ and the treatment of 
prior Appellate Body reports as precedent.\5\
---------------------------------------------------------------------------
    \1\ DSU Article 17.5. Statement by the United States Concerning 
Article 17.5 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes, Meeting of the DSB on June 22, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/
Jun22.DSB_.Stmt_.as-delivered.fin_.public.rev_.pdf.
    \2\ DSU Articles 17.1, 17.2. U.S. Statement at the August 31, 2017, 
Meeting of the DSB, available at: https://geneva.usmission.gov/wp-
content/uploads/sites/290/Aug31.DSB_.Stmt_.as-
delivered.fin_.public.pdf; and U.S. Statement at the February 28, 2018, 
Meeting of the DSB, available at: https://geneva.usmission.gov/wp-
content/uploads/sites/290/Feb28.DSB_.Stmt_.as-delivered.fin_.public-
1.pdf.
    \3\ DSU Article 17.6. Statement by the United States Concerning 
Article 17.6 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes and Appellate Review of Panel Findings of Fact, 
Including Domestic Law, Meeting of the DSB on August 27, 2018, 
available at: https://geneva.usmission.gov/wp-content/uploads/sites/
290/Aug27.DSB_.Stmt_.as
-delivered.fin_.rev_.public.pdf.
    \4\ DSU Articles 7.1, 11, 17.6. Statement by the United States 
Concerning the Issuance of Advisory Opinions on Issues not Necessary to 
Resolve a Dispute, Meeting of the DSB on October 29, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/Oct29.DSB
_.Stmt_.as-delivered.fin_.rev_.public.pdf.
    \5\ DSU Article 3.9, WTO Agreement Article IX:2.

    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.

    To identify a solution, it is important that WTO members understand 
how it is that we have come to this point where the Appellate Body, a 
body established by members to serve the members, is disregarding the 
clear rules that were set by those same members. In other words, 
members need to engage in a deeper discussion of why the Appellate Body 
has felt free to depart from what members agreed to. We must have that 
understanding in order to know how we can prevent this from happening 
again in the future. If WTO members believe in a rules-based trading 
system, then they bear a collective responsibility to ensure that the 
WTO dispute settlement system, including the Appellate Body, abides by 
and respects those rules.
                wto agriculture subsidies notifications
    Question. For many years now, many of our trading partners have 
failed to properly notify their subsidies, including agricultural 
market support. USTR has rightly identified this as a serious problem.

    Please tell me what actions you are taking or intend to take to 
address this problem.

    Answer. USTR is working hard to address market-distorting and 
unfair trade practices of certain trading partners that adversely 
affect U.S. farmers and ranchers. We continue to press WTO members to 
submit their domestic support notifications. Recently, the United 
States has submitted counter notifications in the WTO Committee on 
Agriculture showing that India provided significant market price 
support, far in excess of India's self-reported levels, for certain 
commodities. Due to the leadership of the United States, other WTO 
members have joined our efforts to promote compliance by trading 
partners with WTO commitments on domestic support. We will continue to 
press WTO members to abide by their WTO obligations with respect to 
domestic support.
                      wto: e-commerce negotiations
    Question. In order for a WTO agreement on e-commerce to be most 
impactful to American businesses, it needs to be ambitious and improve 
the entire e-commerce ecosystem that enables U.S. companies to access 
to global markets. This ecosystem includes services, data flows, 
transparency in regulations, and customs and trade facilitation. 
Impediments at the border can be a significant barrier to trade, 
especially for American small and medium-sized enterprises (SMEs) that 
rely heavily on the Internet to reach customers around the world.

    How do you intend to make the outcomes of the e-commerce 
negotiations benefit all American businesses, including SMEs?

    Will you focus on achieving meaningful commitments on physical 
trade barriers at the border as well as barriers to digital trade as 
the WTO negotiations unfold?

    Answer. The WTO digital trade initiative will only be successful if 
it can deliver commercially significant outcomes for a broad range of 
firms and consumers in the digital sphere. SMEs would be a key 
beneficiary of such outcomes. We are working closely with like-minded 
partners to gain support for high-standard outcomes based on the USMCA 
Digital Trade Chapter, which we view as a model for core digital trade 
rules in this negotiation and in future agreements. This approach would 
provide significant benefits both to firms engaged in trade in physical 
products as well as those engaged in trade in digital products and 
services.
       wto: moratorium on customs duties on digital transmission
    Question. Foreign governments are considering imposing tariffs on 
digital products and other electronic transmissions as the WTO 
moratorium on imposing such duties is set to expire at the end of this 
year.

    What steps have you taken ensure that the moratorium is continued 
at the WTO, and that countries like Indonesia don't move forward on 
imposing customs duties on streaming content, digital downloads, and 
other content from the United States?

    Answer. The WTO moratorium on Customs duties on electronic 
transmissions has supported the growth of the digital economy for over 
20 years and has been replicated in numerous bilateral and regional 
trade agreements. The administration is working with a broad group of 
like-minded countries that are committed to pursuing a consensus for 
the continuation of the moratorium and to addressing the potential 
challenges within the WTO membership. Such a moratorium is also part of 
our negotiating position in the ongoing plurilateral WTO digital trade 
negotiations.
                     section 232 exclusion process
    Question. Stakeholders have raised with us a significant problem 
with the quota arrangements that USTR has negotiated in response to the 
232 steel and aluminum tariffs. Specifically, even those products that 
the administration has determined warrant an exclusion can count 
against the quota, and U.S. business therefore are delaying those 
imports until the quota is full. This makes little sense. The exclusion 
was granted because an American person demonstrated insufficient 
domestic supply or national security interests justified the exclusion.

    Will you be negotiating a resolution with the exporting countries 
so that it's clear that products that have been granted exclusions will 
not count against any quota?

    Answer. The quota regime established in the proclamations issued by 
the President imposes no constraint on when U.S. businesses can import 
steel and aluminum products for which the Department of Commerce has 
granted an exclusion. U.S. businesses can import these products at any 
time, whether or not the quota for the products in question has been 
filled.
                          digital services tax
    Question. I am deeply concerned by attempts around the world to 
impose discriminatory taxes on digital services provided by American 
companies. This is a significant 21st-century barrier to trade. The 
President's agenda correctly notes that Americans are leaders in this 
sphere, and that many current international rules are outdated. 
However, I was disappointed to see nothing mentioned about what USTR 
will do to tackle some of the most potent threats like discriminatory 
taxation that targets American companies.

    Please tell me what you intend to do to combat attempts by our 
trading partners to tax digital trade.

    Answer. The administration shares your concern that proposals by 
several countries to impose unilateral measures on revenues from 
certain digital services are deeply flawed as a matter of policy and 
may be designed to target U.S. companies. USTR flagged concerns with 
these digital services taxes (DST) in the National Trade Estimate 
report and continues to look seriously at all of the tools available to 
address such potential trade barriers. Specifically, in response to the 
passage of legislation by the French legislature to adopt a unilateral 
DST, the United States Trade Representative has initiated an 
investigation under Section 301 of the Trade Act of 1974 to determine 
whether the French DST is actionable under that provision.
                      ustr role in oecd accessions
    Question. The administration has pledged to support the candidacy 
of certain countries to accede to the Organisation for Economic Co-
operation and Development (OECD). The OECD accession process includes 
reviews of the compliance of each candidate country's policies with 
OECD standards and best practices in the areas of international trade 
and investment. USTR has led executive branch efforts to use the OECD 
accession process to encourage candidate countries to improve their 
international trade and investment policies to comply with 
international standards and obligations, such as your recent efforts in 
the context of Colombia's accession to the OECD.

    What will be USTR's role in U.S. participation in the processes by 
which ``prospective members'' pursue accession to the OECD? By what 
means will USTR consult with Congress and U.S. stakeholders regarding 
USTR's involvement in OECD accession processes? What are USTR's 
positions on international trade and investment with regard to the 
candidacy of each current ``prospective member'' of the OECD 
(Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania)?

    Answer. While USTR is the lead for the OECD Trade Committee, the 
Department of State is responsible for the overall U.S. position on 
OECD enlargement. 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. Through 
the OECD Trade Committee, USTR will engage closely with Congress and 
U.S. stakeholders regarding trade-related aspects of OECD accessions as 
prospective members are invited to begin the accession process.

    USTR, in conjunction with the Department of State and other U.S. 
agencies, supports the OECD's high standards for accession. These 
standards--including like-mindedness, commitment to democracy, and 
economic openness and governance--ensure that the United States, its 
workers, and its businesses benefit from principles and practices that 
make markets fairer and more efficient. USTR is committed to ensuring 
that accession countries meet these standards before they join the OECD 
in order to ensure equal opportunities and fair treatment for American 
workers and businesses.
                           brazil ethanol trq
    Question. U.S. ethanol exports to Brazil are currently subject to a 
tariff of 20 percent after exports surpass 150 million liters per 
quarter. There is some speculation that when this tariff rate quota 
(TRQ) expires in early August, Brazil may change from a TRQ to a 
straight tariff of 20 percent on all U.S. ethanol exports.

    What has USTR done to date and what can USTR do going forward to 
engage Brazil on ITS treatment of U.S. ethanol to ensure equal 
opportunity of exports between our two countries?

    Answer. USTR and USDA have engaged extensively with Brazil since 
the temporary, 24-month TRQ was implemented in September 2017, 
including two high-level delegations to Brasilia led by USTR Ambassador 
Doud and USDA Under Secretary McKinney to express strong U.S. 
opposition to the measure. Although the 20-percent above-quota tariff 
is within Brazil's WTO bound rate of 35 percent on ethanol imports, the 
United States will continue pressing Brazil to allow the measure to 
expire after 24 months, as originally announced by Brazil in September 
2017, and return to the free trade of ethanol between Brazil and the 
United States. USTR continues to engage in discussions within the 
administration about the viability of the candidacies for the 
prospective members you noted above.
                    china market access for ethanol
    Question. China has an E10, or a 10-percent ethanol policy for 
gasoline, that is scheduled to be fully implemented by 2020. Since 
China is the second largest gasoline market in the world, the E10 
market there represents a great opportunity for U.S. ethanol producers 
and corn farmers.

    Has USTR raised ethanol in the ongoing trade negotiations with 
China to ensure the U.S. ethanol industry will have access to China's 
market in the future?

    Answer. The United States has been negotiating with China to 
resolve a large number of unwarranted and longstanding trade barriers 
to U.S. agricultural exports. We are encouraging China to demonstrate 
real structural changes across a wide range of unfair policies and 
practices that will yield actual, verifiable, and enforceable results 
for American farmers, ranchers, workers, and businesses.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
    Question. We have heard from this administration that the purpose 
of the various tariffs is to open markets and create a level playing 
field for U.S. exports. And yet, markets are more closed to U.S. 
exporters than they have been in decades, due to retaliatory tariffs 
from China to the European Union to India. Further retaliation hangs 
over our heads if the administration makes good on its threat to slap 
tariffs on Mexico over immigration, or Japan and the EU over the so-
called national security threat that their U.S.-made autos inexplicably 
pose.

    When President Trump pulled out of the TPP he promised that he 
would get better deals by bilaterally negotiating them. I appreciate 
that he renegotiated NAFTA, but the Mexican and Canadian markets were 
already open. Japan is willing to talk with us, but only about tariffs. 
And the EU will only discuss tariffs on industrial goods.

    What is the timeline for the completion of comprehensive agreements 
with the TPP partners, including Japan, as well as the EU?

    Answer. Regarding Japan, this negotiation is a high priority for 
the administration, and we are working to achieve results on an initial 
agreement soon. At the same time, the administration seeks to pursue 
other, much broader objectives for a comprehensive trade agreement with 
Japan, as outlined in the U.S.-Japan Trade Agreement Negotiating 
Objectives published in December 2018.

    Members of the committee are aware that we have not begun 
comprehensive tariff negotiations with the EU because the EU has not 
agreed to negotiate reductions in tariffs on agricultural goods. It 
would not be acceptable to Congress, the administration, or our 
stakeholders to conclude a tariff agreement limited to industrial 
trade. Despite this impasse, we continue to work constructively with 
the EU on non-tariff barriers that impede U.S. exports to the EU. We 
have made some progress in these discussions, but we are not in a 
position to predict when we might reach any agreements. We have also 
intensified our collaboration with the EU on Chinese trading practices 
that have adversely impacted U.S. and EU firms and workers.

    Question. While we have reviewed USTR's detailed negotiating 
objectives for a U.S.-Japan Trade Agreement, there also appears to have 
been some discussion of a tariff-only agreement which would avoid 
congressional approval.

    Have the United States and Japan agreed to the scope of the U.S.-
Japan Trade Agreement (or a preliminary U.S.-Japan Trade Agreement)?

    Answer. Discussions regarding the precise scope remain ongoing. The 
administration is seeking an early outcome from the negotiations to 
ensure, among other things, that U.S. agricultural exporters have a 
level playing field in terms of access to Japan's market.

    Question. Do you intend to reach an agreement that does not require 
Congress's approval?

    Answer. As reflected in my October 16, 2018, notification of the 
President's intent to initiate negotiations of a United States-Japan 
Trade Agreement, and the U.S.-Japan Trade Agreement Negotiating 
Objectives published in December 2018, we are committed to working 
closely with Congress and to following the requirements of the Trade 
Priorities and Accountability Act. We may seek to pursue negotiations 
with Japan in stages, as appropriate, including to ensure that U.S. 
agricultural exporters can compete on a level playing field in Japan.

    Question. Can you explain the value of such an agreement, if it 
doesn't address trade barriers, such as TBT or SPS measures that 
exclude or restrict U.S. agricultural products, cars, and other 
products from the Japanese market regardless of the applicable tariffs?

    Answer. As suggested in the September 2018 Joint Statement by 
President Trump and Prime Minister Abe, the administration has 
envisioned the possibility of a staged negotiation, with an initial, 
limited outcome designed, in part, to help U.S. exporters put at a 
disadvantage by Japan's other trade agreements. At the same time, the 
administration seeks to pursue other, much broader objectives for a 
comprehensive trade agreement with Japan, as outlined in the U.S.-Japan 
Trade Agreement Negotiating Objectives published in December 2018.

    Question. Additionally, in your view, will a tariff only agreement 
include obligations on TRQ administration?

    Answer. We plan to achieve market access in Japan for U.S. 
exporters in line with the U.S.-Japan Trade Agreement Negotiating 
Objectives published in December 2018.

    Question. As you know, I don't think tariffs are an appropriate 
tool for addressing concerns with immigration--so I was pleased when 
President Trump found a reason not to impose tariffs earlier this 
month. However, Trump's deal with Mexico appears to call for revisiting 
the immigration situation in 45 days with a possible revisit to the 
tariff threat.

    Does this mean the tariffs could be re-imposed around the time that 
you may be asking Congress to consider the renegotiated NAFTA?

    Can you clarify what specific action or inaction may trigger the 
imposition of tariffs under the immigration agreement?

    Answer. I am focused on getting the USMCA through Congress, and of 
course continue to fully support the President as he uses the tools 
available to him to address the border emergency. I recommend directing 
specific questions on addressing the emergency at the southern border 
to the White House.

    Question. House and Senate Democrats have outlined concerns about 
new NAFTA's dispute settlement, labor, environment, and pharmaceuticals 
provisions. You have recognized these concerns and in our most recent 
hearing affirmed your willingness to do whatever it takes to address 
key concerns. House Democrats are leading the effort to find solutions 
through their working group process which has gained momentum in recent 
weeks.

    Will you commit to work constructively with Congress to resolve 
concerns and not prematurely submit the implementing bill cutting short 
discussions on how to address common concerns?

    Answer. As I have done throughout the negotiation of USMCA, I will 
consult with Congress on content and process. In particular, I am 
working closely with leadership in the House to ensure that we are 
ready with an implementing bill when the Speaker is ready to move 
forward.

    Question. Mexico has now passed a significant labor law required by 
the new agreement and in line with constitutional reforms made during 
the negotiations of TPP. As you recognize, this is not the end of the 
story, these reforms must be meaningfully implemented and enforced. 
Unfortunately, given the poor track record of labor enforcement in past 
agreements, many members are skeptical that the Mexican reforms will 
bring meaningful change.

    Do you agree that labor obligations in U.S. trade agreements have 
not been adequately enforced in the past, and that additional 
enforcement tools should be brought to bear to make ensure that 
American workers are not undercut by the oppression of labor rights in 
Mexico?

    Answer. I agree completely. I am committed to vigorously enforcing 
our trade agreements, including the labor obligations, and agree that 
lower labor standards in Mexico affect American workers and businesses. 
I also believe that the USMCA and other trade agreements must 
strengthen our trading partners' labor standards and ensure a level 
playing field for U.S. workers. The administration worked very closely 
with the Government of Mexico to ensure that Mexico's labor reforms met 
the obligations of the USMCA Labor Chapter and Annex on Collective 
Bargaining. On May 1, 2019, Mexico's Congress passed legislation that 
complies with its USMCA labor commitments, and I will continue to work 
with you and other members of Congress to discuss options and policy 
tools for monitoring the implementation of these important reforms and 
enforcing Mexico's obligations under the USMCA.

    Question. At the hearing, you signaled a willingness to address 
concerns regarding the functioning of the new agreement's dispute 
settlement mechanism. Due to flaws in the existing agreement, no panel 
has been formed since the United States blocked the formation of a 
panel in 2001.

    Can you confirm that you are willing to discuss solutions with 
Mexico and Canada to prevent the blocking of panels and the resolution 
of disputes through the dispute settlement?

    Answer. Yes. I believe there is room for plus-ups, and I am happy 
to work with members to define what those should be, in order for me 
and my team to then engage with Mexico and Canada on this issue.

    Question. I know that you share my concerns about a number of 
European countries' proposals to implement a tax on digital services. 
These taxes appear to be designed specifically to target American 
companies. France is the closest to adopting a version of the digital 
services tax, and could implement as soon as this summer.

    We need a strong response to France in order to show other 
countries that we are serious about these discriminatory policies. At 
the March hearing, you told me that you were looking at actions that 
might be available under our trade agreements to address this trade 
barrier.

    Since then, have you identified trade agreements under which we 
could bring a case?

    If so, will you commit to bringing a timely case to enforce our 
rights and send a message to the other countries considering a similar 
tax?

    Answer. The administration is very concerned about the French 
Digital Services Tax (DST) bill. On July 10th, I initiated an 
investigation under section 301 of the Trade Act of 1974 of the French 
DST, as set out in the bill agreed to by the joint committee of the 
French National Assembly and Senate. There will be a public hearing on 
August 19th. The investigation will determine whether the DST is 
actionable under section 301. Actionable matters include where the 
rights of the United States under any trade agreement are being denied 
or where an act, policy, or practice of a foreign country is 
unreasonable or discriminatory and burdens or restricts U.S. commerce. 
The outcome of the investigation will determine what, if any, action we 
will take vis-a-vis the French measure.

    Question. The President recently returned from a state visit to the 
UK, where he promised that the U.S. and UK will reach a ``phenomenal 
trade deal'' after Brexit.

    As you know, the UK government has announced that it will introduce 
a new digital services tax in April 2020. This is a tax designed to 
erect a new barrier to trade and to discriminate against American 
companies. It seems to me that we have a lot of leverage with the UK, 
which is eager to enter into negotiations after Brexit to shore up its 
trade relations.

    Would you agree that we should not start trade talks until the UK 
agrees to drop their digital services tax?

    Answer. The UK government recently published the 2019-2020 draft 
Finance Bill, which includes draft Digital Service Tax (DST) 
legislation. The UK draft DST legislation would apply a 2-percent tax 
on revenue to businesses with at least $625 million of worldwide 
digital revenue and over $31 million of UK digital sales. The draft DST 
legislation is subject to a public consultation period until September.

    I am concerned about the potential for the UK tax proposal to 
unfairly target U.S. services providers, many of which are global 
leaders. This proposed tax will certainly be a topic of discussion with 
the United Kingdom.

    On a related note, as you know, France will soon enact DST 
legislation, and I have initiated an investigation under section 301 of 
the Trade Act of 1974 of the French legislation. Section 301 and 
related provisions of the Trade Act (codified as amended in 19 U.S.C. 
Sec. Sec. 2411-2417) give the USTR broad authority to investigate and 
respond to a foreign country's unfair trade practices. The United 
States will continue its efforts with other countries at the OECD to 
reach a multilateral agreement to address the challenges to the 
international tax system posed by an increasingly digitized global 
economy.

    Question. In response to legitimate concerns regarding IP theft and 
tech transfer, the Trump administration imposed three rounds of tariffs 
on $250 billion of Chinese goods (with corresponding rounds of 
retaliatory tariffs placed on U.S. goods by the Chinese). Although 
currently on hold, tariffs on an additional $300 billion of Chinese 
goods may be imposed if talks with China break down.

    Tariffs have also been imposed on steel and aluminum imports from 
China and our allies in response to a perceived national security 
threat. These too have invited retaliatory tariffs on U.S. exports of 
agricultural and other goods by China, the EU, Russia, and Turkey and 
until recently by Mexico and Canada.

    Recently, India announced retaliatory tariffs on U.S. products, 
including apples, walnuts, lentils, and almonds.

    This administration has further threatened to place tariffs on cars 
and car parts due to a perceived national security threat from foreign-
owned car brands, and most recently, all imports from Mexico based on a 
manufactured national emergency. Trump truly is a ``tariff man.''

    What are the concrete market openings or changes in foreign country 
behavior on trade-related matters that have resulted from the 
imposition of tariffs to date with respect to China and the EU?

    If talks with China break down again, how long would the 
administration maintain tariffs on the full range of imports from 
China?

    Answer. With regard to China, the administration 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 
support non-market forces in order to create conditions for fair 
competition, including through structural reforms. 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. Currently, the administration's use of 
tariffs under section 301 of the Trade Act of 1974 is providing the 
United States with an important source of leverage to bring China to 
the table to negotiate an enforceable agreement that will address 
China's unfair trade practices. The administration does not have a 
predetermined timetable for how long it will be necessary to leave 
these tariffs in place.

    With regard to the EU, the tariffs imposed by the President on 
imports of steel and aluminum under section 232 of the Trade Expansion 
Act of 1962, as amended, are based on a finding by the Secretary of 
Commerce that the quantity and circumstances of these imports threaten 
to impair our national security. We have urged partners such as the EU 
to work with us to address the common problem of excess capacity in the 
global steel and aluminum sectors, rather than engage in unjustified 
retaliation designed to punish American farmers and workers.

    The President's imposition of tariffs on steel and aluminum imports 
has spurred several of our trading partners, including the EU, to take 
more aggressive action to inoculate their own markets from the 
pernicious effects of global excess capacity, thereby enhancing 
international focus on the root cause of the problem.

    Question. Last year, when tariffs were first put in place on 
Chinese imports, we were told that you were imposing tariffs in such a 
way as to have maximum impact on China and minimal harm to U.S. 
purchasers and consumers. Although the new tariffs are currently 
delayed while talks with China resume, if those talks break down again, 
additional tariffs may be back on the table.

    With tariffs now proposed to cover the vast majority of U.S.-China 
trade, do you have any room to minimize negative effects on U.S. 
consumers?

    How are you weighing the potential impact on consumers, schools, 
hospitals, and other entities who might not have submitted comments to 
USTR?

    Answer. There has been no decision with respect to the proposed 
additional tariffs. The President will provide his direction at the 
appropriate time based on the state of the negotiations with China. Any 
changes in the rate of duties may affect some businesses more than 
others. We have tried to mitigate potential negative effects, including 
by undertaking a fair and transparent process through which we receive 
comments from as many stakeholders as we can. We have heard from over 
300 witnesses during seven days of public hearing and received close to 
3,000 comments regarding the proposed additional duties. We also 
received recommendations from interagency subject-matter experts 
through the Trade Policy and Staff Committee and confidential advice 
from the various trade advisory committees.

    I will consider all these comments, recommendations, and advice 
before taking action on the proposed additional tariffs.

    Question. I agree with the administration that tough action is 
required to address China's practices related to forced technology 
transfer and intellectual property protection. That said, the 
significant tariffs imposed by the President have yet to yield any 
meaningful agreement regarding reform of China's treatment of U.S. 
business and IPR. Further, the proposed $300 billion in additional 
tariffs will put a severe burden on U.S. families and businesses, 
including in Oregon.

    For tranche 3 exclusion requests and comments to tranche 4, is USTR 
considering any of the following factors, if not please explain the 
reasoning: (a) whether a business has attempted to source outside 
China, including in the United States, and has been unable to do so; 
(b) whether a business is already paying tariffs under section 301 and/
or section 232 and the impact of those tariffs; (c) whether a business 
has taken appropriate steps to protect their IPR in China; and (d) 
whether a business competes in downstream product lines with third 
country and Chinese producers.

    Answer. USTR is considering these four issues in the context of the 
factors set forth in 84 FR 22564 and 84 FR 29576.

    Question. News reports indicate that China has been developing an 
``unreliable entities'' list of U.S. companies to blacklist from doing 
business in China.

    Please provide any information that USTR has about that list and 
whether China has agreed to refrain from any actions against U.S. 
companies pending further negotiations.

    Answer. On May 31, 2019, China's Ministry of Commerce announced 
that China would be creating an ``unreliable entities list'' that would 
include foreign companies and individuals that ``fail to comply with 
market rules, deviate from the spirit of a contract, block supplies to 
Chinese companies for non-commercial purposes, or discriminate against 
Chinese enterprises.'' To date, China has not issued a measure 
implementing an ``unreliable entities list.''

    Question. The President has said on numerous occasions that 
businesses and consumers can avoid the impact of the tariffs by 
purchasing goods made in the United States. They may also avoid tariffs 
by purchasing goods manufactured in third countries.

    Has USTR analyzed whether the tariffs are benefiting third-country 
producers and what steps are you taking to avoid harm to U.S. producers 
who manufacture in China where the primary beneficiary of increased 
tariffs on Chinese products is third-party markets?

    Answer. The imposition of tariffs can have many effects, including 
modifications to supply chains. I have closely followed reports of 
manufacturing coming back to the United States from China or going to 
third countries in some instances.

    Question. In written responses to this committee, you indicated 
that the aim of an agreement on currency with China is to ``refrain 
from competitive devaluations in currency and to agree to a certain 
level of transparency that would be enforceable under the agreement.''

    Can you clarify whether the obligations would apply to the United 
States, as well as China, and which obligations would be enforceable?

    Answer. Ensuring that China implements its commitments in any 
agreement is crucial, and we are therefore determined to include an 
enforcement mechanism that makes China's commitments fully enforceable 
and subject to responsive action by the United States in the event of 
non-compliance. I am happy to discuss with you any potential U.S. 
obligations under an eventual agreement.

    Question. Some news reports suggest that in your talks with China 
you are negotiating provisions on a range of topics that will be 
binding on the United States. I understand you believe your authority 
for these negotiations is section 301 and the agreement is intended to 
settle a dispute over China's trade action. For this reason, I am 
concerned about the United States taking on any substantive 
obligations. Even if the United States is already subject to identical 
obligations, we have to think through the implications of giving new 
potential tools to China to break into our market.

    Please confirm whether the United States is conditioning the 
lifting of tariffs on China on issues outside of the 301 report?

    Given that negotiations are based on the findings of the 301 
report, what authority are you using to negotiate a broader based 
agreement? Are there any limitations on this authority?

    Why is it appropriate to provide this quid pro quo where the United 
States takes on binding commitments in an agreement that is supposedly 
settling complaints against China?

    Answer. 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. Any agreement will not require 
changes to U.S. law. The President will provide direction at the 
appropriate time on whether and if any current tariffs on China should 
be removed.

    Question. This administration has touted--often with few 
specifics--that as part of its trade agreements, China, the EU, Mexico 
and others have agreed to purchase large quantities of U.S. 
agricultural products. Our farmers want less state direct and state-
owned enterprise involvement in trade in agricultural products; these 
farmers want to fairly compete on quality and price for consistent 
foreign customers--not be sustained from year to year by temporary 
government purchases.

    How do foreign government commitments to purchase U.S. ag products 
support open and free trade in agricultural goods in the long run, 
particularly if our trade deals with China, Japan, or the EU are not 
addressing SPS, TRQ administration, or other market access restrictions 
that our farmers face?

    Answer. Regarding China, the United States has been negotiating to 
resolve a large number of unwarranted and longstanding trade barriers 
to U.S. agricultural exports. While in an ideal world Chinese buyers 
would use market mechanisms, China has historically purchased many 
agricultural goods from U.S. producers through state-owned trading 
companies, including before our negotiations ever started. We are 
encouraging China to demonstrate real structural changes across a wide 
range of unfair policies and practices that will yield actual, 
verifiable, and enforceable results for American farmers, ranchers, 
workers, and businesses.

    Negotiating and passing high-standard trade agreements like the 
USMCA is the best way to ensure our farmers have continued and expanded 
access to foreign markets. The USMCA is the most comprehensive and 
high-standard trade agreement ever negotiated, and includes a 
modernized SPS chapter and strong TRQ administration rules.

    In addition, USTR's negotiating objectives for a U.S.-Japan Trade 
Agreement, released December 21, 2018, include administration 
priorities in areas such as SPS and TRQ administration, and USTR 
remains committed to achieving those objectives with Japan.

    Question. Last month the Department of Commerce announced it would 
place Huawei on its Entity List effectively banning U.S. companies from 
selling components to Huawei without a license and separately, an 
executive order was issued to bar Huawei from accessing the U.S. 
telecom market. By all accounts, these actions are based on a 
legitimate national security risk created by Huawei and not just an 
attempt to create leverage in an ongoing trade negotiation.

    Nonetheless, the administration reversed course last week after 
meeting with President Xi at the G20. President Trump tweeted that 
China will begin purchasing large amounts of agricultural products, 
while the United States would remove the Entity List restrictions from 
Huawei as negotiations continue.

    The administration appears ready to give up our national security 
for literal peanuts.

    Is it appropriate to involve matters of national security in trade 
negotiations? Can you cite past examples of national security matters 
being a subject of such negotiations?

    Has the intelligence assessment or national security needs of the 
United States changed since May 21 so as to justify the reversal in 
position on Huawei?

    Answer. As you know, Huawei is currently on the Entity List. I 
recommend directing any questions regarding Huawei to the Department of 
Commerce.

    Question. It is my view that even if national security was on the 
table in the negotiations with China, trading U.S. safety for status 
quo exports in hardly the ``art of the deal.'' In 2018, China purchased 
$9.2 billion in U.S. agricultural products and was the number 5 export 
market for U.S. agricultural products, according to USDA. This was down 
from $21.4 billion in 2016, when China was the number one agricultural 
export market for the United States.

    When the President touts China's proposed purchases of agricultural 
products, does the administration anticipate returning to the volume of 
agricultural product exports maintained prior to the imposition of 
tariffs and retaliatory tariffs ($21.4 billion), or does the 
administration expect the trading of U.S. national security to garner 
greater agricultural access to China's market? If so, how much?

    Answer. The United States has been negotiating with China to 
resolve a large number of unwarranted and longstanding trade barriers 
to U.S. agricultural exports. We are encouraging China to demonstrate 
real structural changes across a wide range of unfair policies and 
practices that will yield actual, verifiable, and enforceable results. 
The administration has been clear in demanding that China make 
substantial purchases of U.S. agricultural products and remove 
technical and regulatory barriers that impede U.S. agricultural exports 
to China.

    Question. Please indicate the agricultural products which China has 
agreed to begin purchasing. Has China agreed to purchase products other 
than soybeans, such as wheat, corn, rice, tree fruit, nuts, or other 
specialty crops?

    Answer. The United States continues to engage in conversations with 
China concerning purchases of agricultural products. As you know, the 
United States is demanding that China make substantial purchases of 
U.S. agricultural products, in addition to making structural changes 
across a wide range of unfair policies and practices.

    Question. We understand that you have been working on a trilateral 
basis with Japan and the EU in undertaking measures to combat the non-
market oriented policies and practices of countries such as China. The 
trilateral discussions also were intended to explore ways to prevent 
forced technology transfer and possible new rules on industrial 
subsidies and state-owned enterprises.

    What concrete progress has been made in the trilateral discussions 
with the EU and Japan?

    How close are you to having text to share with Congress?

    What next steps are expected for the trilateral group?

    Answer. The trilateral process has been useful to reconfirm our 
shared understanding that market-oriented conditions are fundamental to 
a fair, mutually advantageous global trading system. Non-market 
oriented policies and practices, forced technology transfer, state-
owned enterprises, and industrial subsidies are critical concerns in 
light of China's overall non-market economic system. On each element of 
the trilateral discussions, the focus has been to analyze the nature of 
the problems in China to identify effective means to address our shared 
concerns. This may include individual, coordinated, or joint 
enforcement actions, developing shared norms on fair trade, and 
exploring possible new rules in those areas. Any new rules must be 
ambitious, high standard, and effective in curbing China's unfair 
practices. We will continue to work with our partners and engage with 
other key WTO members with the aim of taking the work forward more 
broadly.

    Question. I have long said that it is important to bring our allies 
along to help address China issues--particularly issues related to 
overcapacity--that is why I am glad the administration has reached a 
deal to drop the tariffs against Mexican and Canadian steel and 
aluminum. However, according to some reports, Chinese steel production 
has actually increased since the tariffs have gone into place.

    What is your assessment of the success of the tariffs on addressing 
China's overcapacity?

    Answer. The tariffs imposed by the President under section 232 of 
the Trade Expansion Act of 1962, as amended, are based on a finding by 
the Secretary of Commerce that the quantity and circumstances of steel 
and aluminum imports threaten to impair the national security. The 
purpose of the tariffs is to address this threat. At the same time, 
USTR is actively engaged with like-minded trading partners in an effort 
to address persistent excess capacity in China. This includes an effort 
to address subsidies and other non-market-oriented policies and 
practices that are the root cause of the problem. The tariffs have been 
very successful as we have seen new investment in these industries in 
the United States, which has resulted in the preservation and creation 
of jobs in these sectors.

    Question. It is hard for me to see the national security threat 
created by a Camry manufactured in Kentucky or a Honda Accord 
manufactured in Ohio. Nonetheless, Trump's May 17th proclamation 
provides you 180 days to negotiate limits on the importation of autos 
and auto parts into the United States on the basis of the supposed 
threat created by foreign-owned auto producers.

    What import limits are you considering and how will you make sure 
these limits do not affect the ability of foreign-owned manufacturers 
to continue to manufacture cars here?

    When does the administration intend to make the 232 report on autos 
and auto parts public as required under the statute?

    Answer. The President's proclamation addresses imports of 
automobiles and certain automobile parts that are important for 
maintaining America's technological leadership in automotive research 
and development that supports national security. The President has 
directed me to pursue negotiation of agreements with countries that I 
deem appropriate to address the threated impairment to our national 
security. The administration has a longstanding policy of not 
negotiating in public and, at this time, we cannot comment further on 
the scope of these negotiations. I of course am happy to discuss this 
matter with you in more detail

    Question. For more than a year this administration has been 
blocking the approval for new Appellate Body members in an effort to 
draw attention to concerns regarding the WTO dispute resolution system. 
I share your concerns, and I want to see them addressed. While your 
prior written responses to us claim that the ``United States is at the 
forefront of the reform effort in Geneva,'' the United States to date 
does not appear to have put forward a written proposal on AB reform.

    Does the United States have a reform proposal to address the 
concerns outlined by the United States regarding the Appellate Body?

    Have you shared a plan with other members regarding how to ensure 
AB members follow the procedural rules set forth in the DSU?

    The United States recently appealed findings in the Turkey Tubes 
dispute (DS 523). Where will a non-functioning dispute settlement 
system leave that case?

    What are the next steps in addressing the problems at the WTO?

    Answer. The administration's steadfast 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.

    For over 15 years, and through multiple administrations, the United 
States has repeatedly expressed concerns with the WTO Appellate Body's 
activist approach, which has involved overreaching on procedural 
issues, its interpretative approach and its 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.

    In 2018 and 2019, 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,\6\ allowing persons to serve on appeals after 
their Appellate Body term has ended,\7\ the Appellate Body's 
unauthorized review of panel factual findings (including on domestic 
law),\8\ the Appellate Body's issuance of advisory opinions on issues 
not necessary to resolve a dispute,\9\ and the treatment of prior 
Appellate Body reports as precedent.\10\
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    \6\ DSU Article 17.5. Statement by the United States Concerning 
Article 17.5 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes, Meeting of the DSB on June 22, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/
Jun22.DSB_.Stmt_.as-delivered.fin_.public.rev_.pdf.
    \7\ DSU Articles 17.1, 17.2. U.S. Statement at the August 31, 2017, 
Meeting of the DSB, available at: https://geneva.usmission.gov/wp-
content/uploads/sites/290/Aug31.DSB_.Stmt_.as-
delivered.fin_.public.pdf; and U.S. Statement at the February 28, 2018, 
Meeting of the DSB, available at: https://geneva.usmission.gov/wp-
content/uploads/sites/290/Feb28.DSB_.Stmt_.as-
delivered.fin_.public-1.pdf.
    \8\ DSU Article 17.6. Statement by the United States Concerning 
Article 17.6 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes and Appellate Review of Panel Findings of Fact, 
Including Domestic Law, Meeting of the DSB on August 27, 2018, 
available at: https://geneva.usmission.gov/wp-content/uploads/sites/
290/Aug27.DSB_.Stmt_.as
-delivered.fin_.rev_.public.pdf.
    \9\ DSU Articles 7.1, 11, 17.6. Statement by the United States 
Concerning the Issuance of Advisory Opinions on Issues not Necessary to 
Resolve a Dispute, Meeting of the DSB on October 29, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/
Oct29.DSB_
.Stmt_.as-delivered.fin_.rev_.public.pdf.
    \10\ DSU Article 3.9, WTO Agreement Article IX:2.

    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.

    To identify a solution, it is important that WTO members understand 
how it is that we have come to this point where the Appellate Body, a 
body established by members to serve the members, is disregarding the 
clear rules that were set by those same members. In other words, 
members need to engage in a deeper discussion of why the Appellate Body 
has felt free to depart from what members agreed to. We must have that 
understanding in order to know how we can prevent this from happening 
again in the future. If WTO members believe in a rules-based trading 
system, then they bear a collective responsibility to ensure that the 
WTO dispute settlement system, including the Appellate Body, abides by 
and respects those rules.

    Question. I am encouraged by the ongoing discussion at the WTO 
regarding the e-commerce initiative and support the strong proposal of 
the United States and your leadership on this issue.

    In your view, what are the next steps in building broad support for 
an ambitious outcome and what challenges must be overcome?

    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 view as a model for core digital trade rules in 
this negotiation and in future agreements. The large number of 
participants, including China, adds challenges and complexity. We must 
ensure that broad participation does not lower the initiative's level 
of ambition. Our intent is to achieve a high-standard, high-quality 
agreement, even if that objective ultimately results in the 
participation of a smaller number of like-minded countries committed to 
high standards.

    Question. European cheesemakers can sell their asiago, parmesan, 
and feta in the United States, but U.S. cheesemakers are not allowed to 
sell their cheeses using these common cheese names in Europe because of 
the EU's geographical indication (GI) rules. Industry estimates that 
we're running a $1.4 billion dairy trade deficit with the EU; the EU's 
GI rules are one of the key barriers helping drive this deficit. Adding 
insult to injury, the EU is taking steps to impose those same types of 
product bans on cheese names and wine terms in other markets around the 
world as well.

    What steps are you currently taking to stop the spread of this 
practice with trading partners?

    Are GIs part of your discussions with Japan?

    What are you going to do to address this with the EU directly in 
talks with them?

    What are you going to do to address this with the EU directly in 
talks with them?

    Answer. The United States and the EU have longstanding differences 
over the scope and level of intellectual property rights protection for 
geographical indications (GIs). This is an important concern, and USTR 
is pressing the EU both bilaterally and in multilateral fora to expand 
market access for U.S. producers into the EU. The EU's actions are also 
concerning where there are existing international Codex Alimentarius 
standards, such as for certain cheeses. USTR is working to safeguard 
third country markets, including removing barriers such as over-broad 
GI protection for EU products that serve to block U.S. producers and 
traders using common food names or who have prior trademark rights. As 
for Japan, the administration's U.S.-Japan Trade Agreement Negotiating 
Objectives, published in December 2018, include a negotiating objective 
related to GIs that aim to achieve a level playing field for our dairy 
and cheese producers.

    Question. The trade relationship with India appears to continue to 
deteriorate. The United States is imposing tariffs on India's steel and 
aluminum exports, and has removed India from the GSP program. India has 
imposed retaliatory tariffs on U.S. apples, walnuts, and other 
products. Further non-tariff issues related to dairy imports, medical 
devices, and other products continue to impact U.S. exports.

    What are the next steps in addressing ongoing trade concerns with 
India and opening up that market for U.S. exports?

    Answer. We remain engaged with India and are committed to address 
outstanding trade concerns. I have already spoken to the new Indian 
Commerce Minister, and a USTR team recently visited New Delhi to meet 
with a variety of Indian government officials in an attempt to make 
progress on the broad range of trade barriers we have highlighted. Our 
objective is for the Indian government to finally move toward pulling 
down many trade barriers that have historically stifled market access 
there for U.S. goods and services.

    Question. China has long claimed that its Protocol of Accession to 
the WTO requires all countries to treat it as a market economy in 
antidumping investigations. China initiated disputes against the EU and 
the United States at the WTO contesting the continuing treatment of 
China as a non-market economy in our anti-dumping and countervailing 
duty proceedings. China has since withdrawn the dispute against the EU.

    What is the status of this dispute? What steps will you take to 
ensure our major trading partners continue to take appropriate action 
against dumped Chinese product--and where appropriate use a non-market 
economy methodology?

    Answer. As you know, China recently requested the panel to suspend 
its work in the proceeding against the EU, and on June 14, 2019, the 
panel informed the WTO Dispute Settlement Body (DSB) of its decision to 
grant China's request and suspend its work. China has not moved forward 
with a request for panel establishment against the United States. As we 
have done throughout the non-market economy dispute, the United States 
continues to work closely with the EU and other trading partners to 
confront shared challenges with China. The administration is committed 
to ensuring the vigorous enforcement of U.S. trade remedies laws, 
including the use of appropriate methodologies to address distortions 
caused by non-market economic conditions. 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. This is particularly true with respect to the trilateral 
process, where we are coordinating with the EU and Japan on non-market 
economy issues.

    Question. As part of the new NAFTA signed on November 30, 2018, the 
United States and Canada signed a letter stating that ``no later than 
November 1, 2019,'' ``[British Columbia] shall eliminate the measures 
which allow only BC wine to be sold on regular grocery store shelves 
while allowing imported wine only to be sold in grocery stores through 
a so-called `store within a store,' and those contested measures shall 
not be replicated.'' This letter entered into force ``on the date of 
[Canada's] reply.''

    Can you confirm that this letter is in force and provide an update 
on British Columbia's efforts to remove its measures discriminating 
against Oregon and other U.S. wine?

    Answer. On July 8, 2019, British Columbia amended its Liquor 
Control and Licensing Regulation governing the sale of wine in grocery 
stores. USTR is continuing to review the amendments to assess whether 
British Columbia has implemented changes necessary to carry out the 
commitments in the USMCA side letter.

    Question. It has been widely reported that USDA is moving the 
Economic Research Service (ERS) to Kansas City, MO. Public reports 
suggest that the staffing levels at ERS had already declined by one 
third over those during the Obama administration.

    Has USTR or USDA evaluated the impact of further declines in ERS 
staff levels attributable to the proposed relocation on the ability of 
this administration to investigate and enforce violations of WTO or FTA 
obligations? What effect does USTR anticipate from these declines?

    Answer. Over the years, USTR has worked with USDA to perform 
economic analysis for various agricultural trade issues and 
negotiations, including in support of enforcement actions related to 
obligations under WTO and FTA agreements. USTR expects to continue 
receiving this type of support from USDA regardless of the location of 
USDA employees. We do not believe the proposed relocation of ERS 
employees to Kansas City will have any effect on our ability to 
continue this interagency cooperation.

    Question. I am very concerned with the lack of timely and detailed 
briefings by the administration on its trade initiatives. Broad 
descriptions of the President's trade goals and quick calls with 
members are not a substitute for briefing staff, especially staff of 
committee members, on the details of negotiations and providing text of 
proposed deals when shared with the appropriate safeguards.

    Will you commit to having your staff brief staff of members of the 
committee before and after each round of meetings with China, Japan, 
the EU, and the UK?

    Answer. I and my staff have dedicated thousands of hours during the 
course of this administration to briefing members and staff on trade 
agreements, negotiations, and other initiatives. I am happy to report 
that we regularly receive positive feedback from members of both 
parties acknowledging our transparency and candor with respect to the 
development and execution of trade policy. I will continue to have USTR 
staff brief committee staff as new developments arise in ongoing trade 
matters.

                                 ______
                                 
                 Questions Submitted by Hon. Mike Crapo
    Question. Many U.S. companies rely on access to customers and 
markets across the globe, especially so in China. Unfortunately, 
however, there are U.S. firms that have been caught in the crossfire 
between the U.S. and China, and those companies--and industries--are 
suffering as a result. Ultimately, we must reach a meaningful and 
enforceable agreement with China to allow American businesses to once 
again compete and thrive in the global marketplace.

    What steps is the administration taking to ensure American 
companies are protected against any retaliatory actions or increased 
pressures they may face while negotiations with China continue?

    Answer. Through our ongoing negotiations with China, we are seeking 
structural changes in China that will help level the playing field for 
U.S. companies. 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. Currently, the administration's use of tariffs under section 
301 of the Trade Act of 1974 is providing the United States with an 
important source of leverage to bring China to the table to negotiate 
an enforceable agreement that will address China's unfair trade 
practices. In our negotiations with China, we are pressing China to 
remove its retaliatory tariffs entirely.

    Question. The dairy industry needs greater access to export 
markets, including China. The U.S. is well positioned to provide China 
the dairy products their consumers will demand in the future. However, 
to successfully compete for this business, the U.S. dairy industry must 
be able to compete on a level playing field. In order to do so, duty-
free access for U.S. dairy, along with the removal of retaliatory 
tariffs, are needed as part of any deal struck with China.

    Will the U.S. dairy industry be considered a priority in future 
negotiations with China?

    Answer. U.S. dairy producers face a great number of structural 
issues that limit their access to China's dairy market, including 
complicated registration, import licensing, and labeling requirements. 
We have discussed dairy extensively with China over the course of our 
conversations this year. We are committed to addressing issues that 
impede market access in China for U.S. dairy producers.

    Question. A free trade agreement (FTA) with Japan is critical for 
the U.S. dairy industry. Not only would a Japan FTA provide American 
firms with new market opportunities in Japan, but it would help to 
avoid losing current sales. Due to Japan's agreements with the EU and 
with Comprehensive and Progressive Agreement for Trans-Pacific 
Partnership (CPTPP) countries, U.S. producers are beginning to fall 
behind in terms of exports and market access. As negotiations with 
Japan continue, drawing upon the best terms from both agreements will 
be critical to ensuring that the U.S. is able to secure a strong, 
competitive position in what would be a key market.

    Will you prioritize both the need for a timely agreement and the 
inclusion of provisions that will allow U.S. dairy to compete with 
global competitors in the Japanese market?

    Answer. It is a top priority of the Trump administration to 
negotiate a trade agreement with Japan to advance the interests of our 
farmers, ranchers, and food processors in this important market. I have 
met several times with my Japanese negotiating counterpart in recent 
months to advance these discussions, including at the G20 meetings in 
Osaka in late June. A top objective of these negotiations is to ensure 
that U.S. agricultural exporters, including U.S. dairy suppliers, are 
not disadvantaged by Japan's other trade agreements.

    Question. The sportfishing industry has been negatively affected by 
the section 301 tariffs on China. Recreational fishing is enjoyed by 
over 600,000 Idahoans each year, which contributes $1.1 billion to the 
State's economy and supports roughly 8,400 jobs. Much of the fishing 
equipment used by Americans is made in China, with few alternative 
sources produced outside of China. Shifting supply chains cannot be 
done quickly or without cost. Moreover, fishing equipment purchases are 
subject to a 10-percent excise tax, the revenues of which fund fish and 
wildlife agencies through grants distributed via the Sport Fish 
Restoration and Boating Trust Fund. Tariffs on fishing equipment are 
borne not only by recreational anglers but by the State wildlife 
agencies that manage fishery projects, boating access and aquatic 
education.

    Has USTR examined the impact that Section 301 tariffs may have on 
the sportfishing industry? If not, will USTR do so in the future?

    Answer. USTR has received comments and heard witness testimonies 
from the sportfishing industry during the notice and comment process. I 
will consider these comments and testimonies before taking action on 
any additional tariffs.

                                 ______
                                 
                Questions Submitted by Hon. Pat Roberts
    Question. From 2017 to 2018, the value of agricultural exports from 
the U.S. to China decreased 53 percent from $19.5 billion to $9.2 
billion. For nearly a decade, China has consistently been ranked either 
the first or second export destination for U.S. agricultural products. 
However, in 2018, they fell to fourth. Given the need to feed a large 
population in China, the lost value in agricultural exports from the 
U.S. to China has to be sourced somewhere from within the global 
marketplace.

    If the trade war with China continues to drag on, and as China 
continues to work more closely with other countries in the global 
marketplace to source their agricultural products, how can we ensure 
that the U.S. does not lose long-term market share to a country that 
U.S. farmers have relied on?

    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 address our 
persistent trade deficit. This of course includes removing impediments 
to trade in agriculture with China. U.S. agricultural producers face a 
great number of barriers that limit their access to China's 
agricultural markets. We are encouraging China to make real structural 
changes, across a wide range of unfair policies and practices that will 
yield actual, verifiable, and enforceable results.

    Question. At the end of last year, the countries that ratified the 
Comprehensive and Progressive Agreement for Trans-Pacific Partnership 
(CPTPP) began to utilize its market access. Each day this agreement is 
in effect, is another day the U.S. is trailing behind our competitors 
that are taking advantage of this agreement.

    I'm aware you cannot share specific details about ongoing trade 
negotiations--such as those with Japan, the UK, and the EU, but I am 
interested in hearing how USTR is ensuring the United States continues 
to be competitive and achieve a level playing field with countries that 
are utilizing new trade agreements forged around the globe.

    Answer. The administration's aim in negotiations with Japan is to 
address both tariff and non-tariff barriers and to achieve fairer, more 
balanced trade. As suggested in the September 2018 Joint Statement by 
President Trump and Prime Minister Abe, the administration has 
envisioned the possibility of a staged negotiation, with an initial, 
limited outcome designed, in part, to help U.S. exporters put at a 
disadvantage by Japan's other trade agreements. At the same time, the 
administration seeks to pursue other, much broader objectives for a 
comprehensive trade agreement with Japan, as outlined in the U.S.-Japan 
Trade Agreement Negotiating Objectives published in December 2018. 
Eliminating any disadvantage with competing agriculture exporters is a 
key goal and is the primary objective of any early outcome with Japan.

    At this stage, we are focusing with the EU on several key 
impediments to U.S. exports in the EU market. The EU protects its 
market with high tariffs on a wide range of agricultural products and 
on selected industrial products. These tariffs limit U.S. exports in 
sectors where U.S. producers and firms are globally competitive or 
dominant. Members of the committee are aware that we have not begun 
comprehensive tariff negotiations with the EU because the EU has not 
agreed to negotiate reductions in tariffs on agricultural goods, and it 
would not be acceptable to Congress, the administration, or our 
stakeholders to conclude a tariff agreement limited to industrial 
trade.

    Despite this impasse, we continue to work constructively with the 
EU on non-
tariff barriers that impede U.S. exports to the EU.

    As the UK prepares to leave the EU, we intend to negotiate a 
comprehensive agreement that provides a high level of access to the UK 
market and a level playing field for U.S. exporters.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
    Question. USTR recently withdrew India's benefits under the 
Generalized System of Preferences (GSP) program over their failure to 
provide fair market access to U.S. products. I also understand that 
USTR is considering launching a Special 301 investigation that could 
result in additional tariffs on Indian goods.

    Have you been in contact with the new Indian Commerce Minister to 
discuss these matters?

    What is USTR's plan to reduce trade tensions with India and get 
back to the negotiating table?

    Answer. Yes, I have spoken to Minister Goyal. A USTR team also 
recently visited New Delhi to meet with a variety of Indian government 
officials in an attempt to make progress on the broad range of trade 
barriers we have highlighted. We remain committed to finding solutions 
to the myriad of trade concerns we have with India. I hope that the 
Government of India demonstrates a comparable commitment to resolving 
our concerns.

    Question. I strongly support the administration's effort to address 
China's predatory trade practices. It is clear that China is making 
every effort to vacuum up sensitive U.S. technology and erode the 
technological gap. However, I am also hearing from numerous Texas 
companies who are being forced to divert funds from other operating 
expenses--primarily R&D--in order to pay for the tariffs.

    Has USTR carefully considered the impact of tariffs on U.S. 
industry, particularly the impact that less R&D can have on our overall 
competitiveness?

    Answer. USTR has received comments and heard witness testimonies 
regarding the tariffs' effect on R&D during the notice and comment 
process for the tariff actions on Lists 1, 2, and 3 as well as the 
proposed tariff action for List 4. I will consider these comments and 
testimonies before taking action on any additional tariffs for List 4. 
In addition, with respect to Lists 1, 2, and 3, USTR is conducting an 
exclusion process that allows for a case-by-case assessment of tariff 
impacts based on factors laid out in Federal Register notices.

    Question. The U.S. dairy industry applauded USDA's announcement of 
up to $16 billion in relief to U.S. agriculture as retaliatory tariffs 
from trading partners continue to disrupt U.S. export activity 
especially USDA purchases of dairy products including fresh, nutritious 
milk to benefit food banks and food insecure Americans. However, dairy 
companies need better access to export markets including China. The 
U.S. is well positioned to provide China the dairy products their 
consumers will demand in the future. However, to successfully compete 
for this business, the U.S. dairy industry must have a level playing 
field which means any trade deal with China must include duty-free 
access for U.S. dairy products and the removal of China's retaliatory 
tariffs.

    Will dairy be included as a priority in the negotiations?

    Answer. U.S. dairy producers face a great number of structural 
issues that limit their access to China's dairy market, including 
complicated registration, import licensing, and labeling requirements. 
We have discussed dairy extensively with China over the course of our 
conversations this year. We are committed to addressing issues that 
impede market access in China for U.S. dairy producers.

    Question. Can you please elaborate on the extent to which the 
negotiations with China have focused on renewed access for U.S. cotton? 
Has there been any discussion to date about the possibility of greater 
purchases of cotton, even during the interim while tariffs are in 
place?

    Answer. The United States has been negotiating with China to 
resolve a large number of unwarranted and longstanding trade barriers 
to U.S. agricultural exports. We are encouraging China to make real 
structural changes across a wide range of unfair policies and practices 
that will yield actual, verifiable, and enforceable results. We intend 
to secure a result that provides real benefits to U.S. cotton 
producers.

    Question. Given the current trade dispute with China, the Asia-
Pacific continues to become an increasingly important market for U.S. 
goods and services.

    Can you please share some detail on the scope of the negotiations 
with Japan?

    Answer. As suggested in the September 2018 Joint Statement by 
President Trump and Prime Minister Abe, the administration has 
envisioned the possibility of a staged negotiation, with an initial, 
limited outcome designed, in part, to help U.S. exporters put at a 
disadvantage by Japan's other trade agreements. At the same time, the 
administration seeks to pursue other, much broader objectives for a 
comprehensive trade agreement with Japan, as outlined in the U.S.-Japan 
Trade Agreement Negotiating Objectives published in December 2018.

                                 ______
                                 
                 Question Submitted by Hon. John Thune
    Question. Page 22 of the May 30, 2019, Draft Statement of 
Administrative Action states: ``Between the submission of this draft 
SAA and the submission of the final implementation package, USTR 
intends to continue consultations with Congress on potential changes to 
section 901 of the Trade Facilitation and Trade Enforcement Act (19 
U.S.C. 1321) to implement Article 7.8.1 (Express Shipments) [of the 
United States-Mexico-Canada Agreement].'' While I appreciate your 
continued willingness to consult Congress on any potential changes to 
the current U.S. de minimis threshold, I believe Congress has already 
spoken conclusively on this matter. Beyond the unilateral de minimis 
threshold increase set forth in TFTEA, which Ranking Member Wyden and I 
helped spearhead, in the past year, you have received numerous letters 
from Congress urging you not to deviate from Congress's well-
established position on de minimis. In fact, since November 2018, you 
have explicitly heard from more than 10 Republican and Democrat members 
of this committee, including the chairman and ranking member, all of 
whom have asked you not to derogate from the current threshold.

    Based on your consultations with the House Ways and Means and 
Senate Finance Committees, do you agree that strong bipartisan 
majorities of the House and Senate oppose lowering the current U.S. de 
minimis threshold of $800, even if Canada and Mexico are unwilling to 
raise their de minimis thresholds to reciprocal levels? If so, what, if 
any, other changes to the current U.S. de minimis threshold are you 
contemplating?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. As you note, these 
consultations are underway, and I look forward to working with you and 
other members on this important issue.

                                 ______
                                 
                Question Submitted by Hon. Richard Burr
    Question. As you know, exports are critically important to 
agriculture. According to the most recent data from the North Carolina 
Department of Agriculture, North Carolina exported nearly $3.5 billion 
in agricultural products, supporting nearly 70,000 jobs. However, I 
continue to be concerned about the effects of retaliation across the 
globe, including most recently the EU's list of targeted U.S. exports 
that included sweet potatoes and tobacco.

    Can you describe your plans to ensure markets are open to American 
agriculture exports, including addressing potential retaliation, and 
also through negotiations on additional free trade agreements?

    Answer. I understand your concern about the impact of the 
retaliatory tariffs on U.S. exports of agricultural products. Countries 
have wrongly imposed retaliatory tariffs on a range of U.S. exports, 
including agricultural products, and we have initiated WTO disputes to 
defend the United States.

    With respect to negotiations on new trade agreements, we are 
engaged in active discussions with Japan and China, and hope to 
conclude these in the near future. In the case of the United Kingdom, 
we have completed the necessary steps under Trade Promotion Authority, 
including notification to the Congress of U.S. negotiating objectives. 
We are ready to start trade negotiations with the United Kingdom once 
it leaves the European Union. We have taken similar steps to prepare 
for negotiations with the European Union. However, the European Union 
has so far been unwilling engage in a negotiation that includes 
agriculture.

                                 ______
                                 
               Questions Submitted by Hon. Johnny Isakson
    Question. I'd like to first applaud you and the President for your 
efforts in renegotiating NAFTA and producing USMCA. I believe the new 
agreement will have an overall positive affect on U.S. agriculture. 
However, you've heard me discuss my concern that USMCA does not address 
the issue of Mexican producers engaging in targeted, seasonal dumping 
of fruits, vegetables, and other perishables into U.S. markets. 
Georgia's fruit and vegetable farmers already find themselves in 
fragile circumstances in the wake of Hurricane Michael. They will not 
be able to sustain indefinite market turmoil.

    In March, you said the Trump administration was exploring ways to 
assist the domestic fruit and vegetable industry. Can you provide me 
with an update on these efforts?

    Answer. We continue to consider the seasonality issue and explore 
possible solutions with members and stakeholders. We look forward to 
working with you and other members of Congress to address the 
seasonality issue in a way that properly considers the wide range of 
views and impacts across the U.S. fresh fruit and vegetable industry.

    Question. Strong foreign markets are essential for Georgia's 
agriculture economy. Commodities such as poultry, cotton, peanuts, and 
many others depend on access to markets abroad and, without these 
markets, I fear that the already vulnerable farm economy will continue 
to decline. As I've said before, I applaud the administration's efforts 
to level the playing field with bad actors like China. However, I'm 
wary of an ongoing trade war where farmers, consumers, and businesses 
owners in both countries lose.

    Can you provide an update on the progress of current negotiations 
as well as an update on how USTR is working to establish new 
agriculture markets in the near future?

    Answer. We are engaged in active trade negotiations with Japan, and 
hope to conclude these in the near future with a robust outcome on 
agriculture. In the case of the United Kingdom, we have completed the 
necessary steps under Trade Promotion Authority, including notification 
to the Congress of U.S. negotiating objectives. We are ready to start 
trade negotiations with the United Kingdom once it leaves the European 
Union. We have taken similar steps to prepare for negotiations with the 
European Union. However, the European Union has so far been unwilling 
engage in a broad-based trade negotiation that includes agriculture.

    Every day USTR and USDA work to resolve trade barriers to U.S. 
agricultural products, and have had success in many sectors and 
countries, such as poultry to Tunisia, or pork to Argentina. We 
currently have ongoing discussions with a number of countries on 
specific bilateral issues to address market access impediments 
affecting U.S. farm products. Examples of such bilateral work includes 
market access for poultry in India, wheat in Brazil, rice in Korea, and 
horticultural products in Indonesia.

    Question. Like you, I believe that all aspects of our trade 
relationship should be on the table when negotiating trade agreements 
with entities such as the European Union.

    What is USTR doing to ensure that previously ``off-the-table'' 
aspects of a productive trade agreement, such as agriculture, are up 
for negotiation? Has USTR considered engaging other non-EU countries in 
Europe, such as Switzerland, that have indicated interest in 
negotiations on all aspects of a trade relationship?

    Answer. We have made it abundantly clear to both the European 
Commission and to EU member states that we will not begin tariff 
negotiations with the EU until agriculture is on the table. In the 
meantime, we continue our joint efforts to address other matters of 
importance to the transatlantic trade relationship, including work on 
non-tariff barriers to trade and specific trade concerns.

    We continue to evaluate potential FTA discussions with a number of 
countries, including Switzerland. The decision on whether to launch any 
negotiations must be based on an assessment of whether we will have an 
end result in which more U.S. businesses are selling more of their 
goods to the country in question. Our end goal in any negotiation is 
always to make American workers and farmers better off than they were 
before. If we decide to start such negotiations, we would intend to 
follow the TPA process as appropriate.

    Question. I understand that USTR is preparing to open the exclusion 
process for products falling under List 3 of the China 301 tariffs. 
Furthermore, USTR recently ended public hearings on a 4th list of 
tariffed goods, which may go live in the near future.

    Are you confident that USTR will be able to handle the list 3 and 4 
exclusion processes considering the length of time exclusions were and 
currently are being processed for Lists 1 and 2?

    What is being done to ensure that American businesses are not left 
in limbo for months after submitting exclusion requests? Furthermore, 
does USTR plan to give expedited treatment for companies that wish to 
renew their granted exclusion past the first year?

    Answer. Approximately 35 USTR attorneys, paralegals, trade 
analysts, and contractors with experiences in law, industrial sectors, 
tariff classifications, and data analysis work on the exclusion 
process. In the coming weeks, we anticipate onboarding additional 
staff, including analysts on detail from the Departments of Treasury, 
Commerce, and Agriculture, that will assist on the exclusions process, 
particularly for List 3. The majority of these personnel work on the 
exclusion process on a full-time basis and collectively have spent 
thousands of hours reviewing and processing exclusion requests.

    USTR presently intends to carry out its section 301 exclusion 
process at our current level of funding. Given the substantial level of 
resources necessary to implement the List 3 exclusion process, USTR 
will closely monitor the exclusion process to assess whether additional 
funding is necessary.

    USTR is reviewing various courses of action with respect to whether 
and how to renew the exclusions granted for Lists 1 and 2.

    Question. The Caribbean Basin Trade Partnership Act (CBTPA) program 
is an important program for U.S. cotton growers and U.S. textile 
producers because CBTPA requires beneficiary countries to use U.S. made 
yarns. It supports U.S. manufacturing jobs and strengthens U.S. supply 
chains. Additionally, the program is critical to the garment industries 
in beneficiary countries, as it allows them to compete with Chinese and 
other major suppliers and develop local economies. However, CBTPA is 
currently set to expire on September 30, 2020. Current uncertainty 
about the program's continued existence is damaging both beneficiary 
countries and U.S. companies. Business decisions for late 2020 and 
beyond are being made now and certainty is necessary. A bipartisan bill 
to extend CBTPA through 2030--H.R. 991--has been introduced in the 
House, and I am working to introduce similar legislation in the Senate.

    Will you work with me and my colleagues in the House and Senate to 
support a swift extension of CBTPA?

    Answer. I look forward to working with you and other members of 
Congress as you consider legislation extending CBTPA.

                                 ______
                                 
                Questions Submitted by Hon. Rob Portman
    Question. USMCA proposes to raise the exclusivity for biologics 
protection in Canada and Mexico. Without getting into whether U.S. drug 
exclusivity law should be changed as a matter of policy, I wanted to 
ask about the effect such a change would have on U.S. obligations under 
USMCA.

    If USMCA were to be implemented and the United States were to 
change its own exclusivity--currently 12 years--to a different number 
of years, would the United States no longer be compliance with its 
USMCA obligations? Why or why not? And if the United States were to be 
out of compliance with its commitments, would the United States be 
obligated to take steps to remain in compliance, and if so, what would 
those steps be?

    Answer. The USMCA Intellectual Property chapter does not require 
any changes to current U.S. laws, including those regarding data 
protection for pharmaceutical products. Our free trade agreement 
obligations do not restrain Congress's authority to change U.S. law. 
Moreover, if Congress were to reduce the data exclusivity term, it is 
highly unlikely that Canada or Mexico would bring a challenge under the 
USMCA.

    Question. Some assert that the exclusivity provisions for biologics 
will increase drug prices in the United States.

    Can you outline the theoretical and empirical arguments for why 
these exclusivity provisions will actually reduce drug prices in the 
United States?

    Answer. The USMCA exclusivity provisions will not drive an increase 
in U.S. drug prices because it does not change any rules that influence 
the U.S. pharmaceutical market. The USMCA does not require any changes 
to U.S. laws on pharmaceutical intellectual property rights in order to 
comply with the IP Chapter, including with respect to data protection 
for new biologics products, and will not lead to higher prices on drugs 
for U.S. consumers. At the same time, the USMCA significantly increases 
the level of protection that U.S. biologics innovators receive in 
Mexico and Canada. Research and development into new pharmaceuticals is 
costly, time-
intensive, and risky, particularly for cutting-edge pharmaceutical 
technologies such as biologics. As the President noted in the May 2018 
Blueprint to Lower Drug Prices, unfairly low prices in foreign markets 
``places the burden of financing drug development largely on American 
patients and taxpayers, subsidizes foreign consumers, and reduces 
innovation and the development of new treatments.'' The USMCA raises 
the standards for data protection of new biologics in Mexico and 
Canada, while not affecting their protection in the United States.

    Question. Article 3.7 in the appendix entitled Provisions Related 
to the Product-Specific Rules of Origin for Automotive Goods requires 
that for a vehicle to be originating the core parts enumerated in 
column 1 of Table A.2 must be originating. However, Article 3.9 permits 
producers to bundle the parts under column 1 together as a ``super 
core'' part when calculating the value of non-originating material 
(VNM).

    What is the justification for allowing producer's to bundle column 
1 parts together when calculating the VNM? What are some scenarios in 
which a producer would elect calculate the VNM of column 1 parts as 
separate rather than together as a ``super core'' part? Can you 
describe how Article 3.9 strengthens, rather than weakens, the 
automotive rules of origin?

    Answer. Many vehicle producers do not segregate core parts when 
producing vehicles, but use or bundle them within different modules 
along the production line. The ``super core'' calculation allows such 
producers to meet the core parts requirement without having to 
segregate each of the parts and do separate, burdensome calculations. 
The super core calculation incentivizes U.S. producers to use more 
originating content and maintains their competitiveness without 
accruing any possible efficiency losses from having to segregate core 
parts.

    Question. The recent agreements with Canada and Mexico to lift the 
section 232 tariffs on steel and aluminum provide that the parties to 
these agreements will implement measures to prevent the importation of 
steel and aluminum that is unfairly subsidized or dumped, prevent the 
transshipment of steel and aluminum from outside Canada and Mexico, and 
monitor for surges of steel and aluminum imports from Canada and 
Mexico.

    What specific action does USTR intend to take to ensure effective 
and comprehensive implementation of these commitments?

    Answer. The administration will be vigorously enforcing the outcome 
of the understandings the United States arrived at with Canada and 
Mexico with respect to the tariffs on steel and aluminum imports. 
Working with interagency partners, USTR will be closely monitoring 
trade statistics to identify any problematic changes in trade patterns 
at an early stage. We will also be engaging regularly and often with 
stakeholders and with the Canadian and Mexican governments to ensure 
that we have the latest information on market developments, and to 
ensure ongoing compliance with the terms of the understandings.

    Question. In response to a question for the record that I submitted 
after the March 2019 hearing on World Trade Organization (WTO) reform 
(page 18), you noted that international trade agreements, and 
especially those involving new provisions lacking provenance, must be 
drafted with ``great precision and clarity.'' Furthermore, you noted 
that we must ensure that those ``called upon to interpret the text must 
not add to or diminish'' the agreed upon commitments. And yet 
operationalizing these goals in order to--as T.S. Elliot wrote in 
``Choruses From the Rock''--create ``a system so perfect that no one 
will need to be good'' has proven elusive.

    Assuming that semasiological drift is not intrinsic to 
international trade agreements and can be prevented through precise 
drafting and restrained interpretation, in the context of the World 
Trade Organization, what mechanisms should be created to ensure that 
those who interpret such agreements remain faithful to the text of the 
agreement and neither expand or diminish obligations created by the 
agreement?

    Answer. The administration's steadfast 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.

    For over 15 years, and through multiple administrations, the United 
States has repeatedly expressed concerns with the WTO Appellate Body's 
activist approach, which has involved overreaching on procedural 
issues, its interpretative approach and its 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.

    In 2018 and 2019, 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,\11\ and allowing persons to serve on appeals 
after their Appellate Body term has ended,\12\ the Appellate Body's 
unauthorized review of panel factual findings, including on domestic 
law,\13\ the Appellate Body's issuance of advisory opinions on issues 
not necessary to resolve a dispute,\14\ and the treatment of prior 
Appellate Body reports as precedent.\15\
---------------------------------------------------------------------------
    \11\ DSU Article 17.5. Statement by the United States Concerning 
Article 17.5 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes, Meeting of the DSB on June 22, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/
Jun22.DSB_.Stmt_.as-delivered.fin_.public.rev_.pdf.
    \12\ DSU Articles 17.1, 17.2. U.S. Statement at the August 31, 
2017, Meeting of the DSB, available at: https://geneva.usmission.gov/
wp-content/uploads/sites/290/Aug31.DSB_.Stmt_.as-
delivered.fin_.public.pdf; and U.S. Statement at the February 28, 2018, 
Meeting of the DSB, available at: https://geneva.usmission.gov/wp-
content/uploads/sites/290/Feb28.DSB_.Stmt_.as-delivered.fin_.public-
1.pdf.
    \13\ DSU Article 17.6. Statement by the United States Concerning 
Article 17.6 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes and Appellate Review of Panel Findings of Fact, 
Including Domestic Law, Meeting of the DSB on August 27, 2018, 
available at: https://geneva.usmission.gov/wp-content/uploads/sites/
290/Aug27.DSB_.Stmt_.as
-delivered.fin_.rev_.public.pdf.
    \14\ DSU Articles 7.1, 11, 17.6. Statement by the United States 
Concerning the Issuance of Advisory Opinions on Issues not Necessary to 
Resolve a Dispute, Meeting of the DSB on October 29, 2018, available 
at: https://geneva.usmission.gov/wp-content/uploads/sites/290/Oct29.DSB
_.Stmt_.as-delivered.fin_.rev_.public.pdf.
    \15\ DSU Article 3.9, WTO Agreement Article IX:2.

    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.

    To identify a solution, it is important that WTO members understand 
how it is that we have come to this point where the Appellate Body, a 
body established by members to serve the members, is disregarding the 
clear rules that were set by those same members. In other words, 
members need to engage in a deeper discussion of why the Appellate Body 
has felt free to depart from what members agreed to. We must have that 
understanding in order to know how we can prevent this from happening 
again in the future. If WTO members believe in a rules-based trading 
system, then they bear a collective responsibility to ensure that the 
WTO dispute settlement system, including the Appellate Body, abides by 
and respects those rules.

    Question. Foreign trade barriers can be very costly to U.S. 
exporters, increase the trade deficit, and make American workers and 
firms less competitive.

    Do you believe the National Trade Estimate (NTE) report should 
include estimates for the cost of identified foreign trade barriers as 
measured by potential lost U.S. exports? What resources would USTR need 
to include this information in the NTE?

    Answer. The NTE report, wherever possible, presents estimates of 
the impact of specified foreign trade barriers and other trade 
distorting practices on U.S. exports, foreign direct investment or U.S. 
electronic commerce. Quantitatively calculating estimates of the 
effects of particular barriers and practices is time and data 
intensive, involving analysis by many subject experts and economists 
from several U.S. government agencies. In certain cases where 
consultations related to specific foreign practices are proceeding at 
the time of the report's publication, estimates are omitted from the 
NTE to avoid prejudice to the consultations. The NTE's introduction 
describes this estimates process in more detail.

    Question. As I understand it, there is a USTR attache in China, but 
not a permanent negotiator.

    Do you agree that USTR should have a permanent negotiator at the 
U.S. Embassy in Beijing to quickly address emerging trade disputes and 
also to monitor enforcement with any concluded section 301 agreement 
with China?

    Answer. Currently, USTR officials in Washington work closely with 
the USTR officials and officials from other U.S. Government agencies 
resident at the U.S. embassy in Beijing to monitor Chinese trade 
policies and practices. USTR officials in Beijing also engage and, 
where needed, negotiate with Chinese Government officials in Beijing, 
subject to direction from USTR's leadership in Washington. I agree that 
ensuring that China implements its commitments in any agreement is 
crucial, and we are therefore determined to include an enforcement 
mechanism that makes China's commitments fully enforceable and subject 
to responsive action by the United States in the event of non-
compliance. We will continue to use all available U.S. Government 
resources, including USTR officials based at the U.S. embassy in 
Beijing, in these efforts.

    Question. Monopsony is a market condition where there is a single 
dominant buyer. In many sectors, China is the largest single purchaser 
of a particular good. For example, according to the International Trade 
Administration, China was the top market for semiconductors with 29 
percent of the global market in 2015. Such semiconductor consumption is 
almost entirely import-based; imports constituted 91 percent of China's 
semiconductor demand, with 56.2 percent of demand coming just from U.S. 
imports.

    Do you believe that China possesses monopsony power in certain 
sectors? If so, are you concerned about the impact such monopsony power 
would have for American exporters? What do you believe should be done 
to address China's potential monopsony power?

    Answer. The administration monitors China's policies and practices 
in key sectors, including with regard to whether China possesses or is 
using monopsony power in its purchasing of imports. In our negotiations 
with China, we are trying to address as many of China's non-market 
oriented policies and practices as possible.

    Question. China has taken a keen interest in the international 
standards setting process. For example, in 2018, China had eight of the 
39 available leadership positions, the most of any country, at the 
International Telecommunications Union (ITU) 5G-related bodies. The 
United States had only a single representative. At the International 
Standards Organization (ISO), last year China was in third place and 
the United States was tied for 16th place, with Finland, for the most 
participants.

    Do you agree that China's efforts to ``flood the zone'' on 
standards setting reduces American competitiveness and can create 
future barriers to American exports? Do you believe that the United 
States government should take a more active role when it comes to U.S. 
membership on international standards setting bodies? What ways do you 
believe USTR can be helpful to ensure standards setting bodies are not 
weaponized by foreign countries seeking to establish new trade 
barriers?

    Answer. China uses participation in standardization as a strategic 
part of its industrial policy, and it invests significant resources in 
participating in the development of international standards. These 
efforts can and do create barriers to American exports. Currently, the 
U.S. Government also takes an active role in standardization to the 
extent agency resources are available to participate. USTR does not 
participate directly in international standardization organizations, 
except Codex Alimentarius. USTR participates in the American National 
Standards Institute's (ANSI) policy council that develops U.S. 
positions in the International Organization for Standardization (ISO), 
and the committee that monitors foreign and regional policies on 
standardization. USTR also reviews trade concerns to make sure China 
and other countries follow the World Trade Organization's (WTO) 
Agreement on Technical Barriers to Trade's (TBT) Code of Good Practice 
during national adoptions of voluntary standards, and the WTO TBT 
committee decision on international standards when implementing a 
standard in a technical regulation or conformity assessment procedure. 
The U.S. standards-setting system consists of numerous private bodies, 
with some government involvement. This system has largely developed 
organically and haphazardly over many years without a coherent 
governing principle for dealing with current international challenges, 
and the system might benefit from a U.S. Government role to become more 
effective on the international stage. However, any such initiative 
should be careful to minimize increases in unnecessary regulations or 
bureaucracy.

    Question. In fall of 2018, the European Union (EU) considered a 
digital services tax that appeared to discriminate against U.S. 
technology companies.

    Do you believe that any country that implements a digital services 
tax that substantially resembles the EU proposal from fall 2018 would 
violate that country's World Trade Organization (WTO) commitments? If a 
country were to implement such a tax, would USTR consider using section 
301 to address the resulting inequities or discrimination? In such a 
scenario, what factors would USTR consider when deciding whether to 
take unilateral action under section 301 or to pursue dispute 
settlement at the WTO?

    Answer. On July 10th, I initiated an investigation under section 
301 of the Trade Act of 1974 of the French Digital Services Tax (DST), 
as set out in the bill agreed to by the joint committee of the French 
National Assembly and Senate. The French DST shares many elements of 
the EU proposal. The investigation will determine whether, and on what 
basis, the DST is actionable under section 301. Actionable matters 
include where the rights of the United States under any trade agreement 
are being denied or where an act, policy, or practice of a foreign 
country is unreasonable or discriminatory and burdens or restricts U.S. 
commerce. The outcome of the investigation will determine what action, 
if any, we will take vis-a-vis the French measure. If other EU 
countries enact DSTs, we will review them on a case-by-case basis and 
consider appropriate action to respond to them.

    Question. It is exciting it is to see talk of a U.S.-Switzerland 
trade agreement back in the news. As chair of the Senate Swiss Caucus, 
I believe a U.S.-Switzerland trade agreement would open up new 
agricultural markets and help ``test drive'' what a broader agreement 
with the EU might look like.

    Do you agree that a U.S.-Switzerland trade agreement should be a 
priority? What is USTR doing to prioritize a trade agreement between 
the United States and Switzerland?

    Answer. We continue to evaluate potential FTA discussions with a 
number of countries, including Switzerland. The decision on whether to 
launch any negotiations must be based on an assessment of whether we 
will have an end result in which more U.S. businesses are selling more 
of their goods to the country in question. Our end goal in any 
negotiation is always to make American workers and farmers better off 
than they were before. If we decide to start such negotiations, we 
would intend to follow the TPA process.

    Question. In response to a question for the record (QFRs) submitted 
after the March 2019 hearing on World Trade Organization (WTO) reform 
(page 17), you noted that the ``administration is pressing China to 
remove these retaliatory tariffs entirely.''

    Given that the administration has suggested that some U.S. 
retaliatory tariffs may remain in place even after an agreement has 
been reached, do you have confidence that China would withdraw its 
counter-retaliatory tariffs in such a scenario?

    Answer. In the prior response that you reference, I explained that 
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. In our negotiations with China, we are pressing China 
to remove its retaliatory tariffs entirely. As you know, the 
negotiations are ongoing and involve numerous issues. At this time, it 
is difficult to single out a particular issue and predict how the 
negotiations will ultimately deal with it, but I can assure you that we 
will continue to press China to remove its retaliatory tariffs 
entirely.

    Question. A number of products that were removed from the 
supplemental $200 billion trade action as a result of the comment 
period held by USTR, have reappeared on the proposed supplemental $300-
billion trade action.

    What is the justification for adding products to the proposed 
supplemental action that USTR has already determined to merit removal 
from the existing supplemental action?

    Answer. During the notice and comment period, USTR has received 
comments and heard testimonies regarding products that were previously 
removed from Lists 1, 2, or 3 but were included on the proposed list 
for the supplemental $300-billion trade action. I will consider these 
comments and testimonies before taking any action on the additional 
tariffs.

    Question. I have heard from many constituent companies who are 
frustrated with the slowness and uncertainty of the section 301 
exclusion process.

    What is the administration's proposal to ensure that existing and 
future section 301 exclusion processes provide timely relief to 
applicants? Will USTR consider exempting certain industries which can 
demonstrate that they will not be able to survive the burden of the 
China tariffs? Does USTR plan to devote additional resources to 
existing and future exclusion processes? Does USTR need additional 
funding and resources to be able to implement and conduct exclusions 
processes efficiently?

    Answer. Approximately 35 USTR attorneys, paralegals, trade 
analysts, and contractors with experiences in law, industrial sectors, 
tariff classifications, and data analysis work on the exclusion 
process. USTR is working expeditiously to process all product 
exclusions requests and will continue to issue determinations on 
pending requests on a rolling basis. USTR carefully considers each 
request under the product exclusion criteria set forth in the Federal 
Register notice. USTR takes into account all available information, 
including information submitted by the requester and by other 
interested parties that may comment on specific requests.

    In the coming weeks, we anticipate onboarding additional staff, 
including analysts on detail from the Departments of Treasury, 
Commerce, and Agriculture, that will assist on the exclusions process, 
particularly for List 3. The majority of these personnel work on the 
exclusion process on a full-time basis and collectively have spent 
thousands of hours reviewing and processing exclusion requests.

    USTR presently intends to carry out its section 301 exclusion 
process at our current level of funding. Given the substantial level of 
resources necessary to implement the List 3 exclusion process, USTR 
will closely monitor the exclusion process to assess whether additional 
funding is necessary.

    Question. As the Nation's number one producers of Swiss cheese, 
Ohio is a top dairy State.

    To that end, has market-access for dairy been included in the scope 
of current talks with China?

    Answer. U.S. dairy producers face a great number of structural 
issues that limit their access to China's dairy market, including 
complicated registration, import licensing, and labeling requirements. 
We have discussed dairy extensively with China over the course of our 
conversations this year. We are committed to addressing issues that 
impede market access in China for U.S. dairy producers.

    Question. The Aruna Project is an Ohio-based nonprofit that 
utilizes the Generalized System of Preferences (GSP) to import 
athleisure wear made by Indian women who are sex trafficking survivors. 
Loss of the GSP preference has had a critical impact on The Aruna 
Project and their ability to provide opportunities, financial security, 
and education for women transitioning out of slavery and into freedom. 
Imports from humanitarian organizations like The Aruna Project 
constitute a negligible amount of GSP-related trade with India.

    Will you commit to establishing a ``humanitarian exception'' to the 
termination of India's GSP privileges so as to allow the small portion 
of ``humanitarian'' GSP trade with India to continue to enter the 
United States duty free?

    Answer. President Trump decided to fully remove India from the GSP 
program following its failure to provide the United States with 
assurances that it will provide fair and adequate market access. 
Restoration of some or all of India's GSP benefits is only possible if 
it meets the eligibility criteria for the program as established by 
Congress.

    Question. On June 13, 2019, USTR granted an exclusion from the 
section 201 solar safeguard to bifacial solar panels that consist of 
bifacial solar cells.

    What was USTR's rationale for granting this bifacial exclusion, and 
what is the data behind that rationale? Does USTR anticipate that this 
bifacial exclusion will undermine the safeguard by increasing imports 
of low-cost, bifacial solar panels? How does USTR plan to address 
concerns about the circumvention risk posed by this exclusion, given 
that it is difficult to distinguish the physical appearance of bifacial 
solar panels from monofacial solar panels?

    Answer. As the U.S. International Trade Commission recognized 
during its investigation under section 201 of the Trade Act of 1974, 
bifacial solar products represent a small percentage of the global 
solar market, roughly less than 3 percent. We have been actively 
working with stakeholders to assess the effect of the exclusion. USTR 
will continue to monitor the effects of the safeguard measure, 
including the exclusions granted from its application, and will take 
action if necessary to prevent circumvention of the remedy.

    Question. Forced data localization poses a major trade barrier for 
many sectors of the economy. Language in USMCA tackling forced data 
localization for all sectors, including financial services, is a 
valuable part of the agreement and sets a helpful precedent for future 
agreements.

    Is it your intention to include similar language in future trade 
agreements?

    Answer. 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, 
including rules on cross-border data transfer and data localization in 
the financial services sector, served as a template for the U.S. 
negotiating position in the ongoing WTO digital trade initiative 
negotiations and will likewise serve as a model in future U.S. 
agreements.

    Question. Congress made clear in section 901 of the Trade 
Facilitation and Trade Enforcement Act of 2015 that higher de minimis 
thresholds have value for small businesses and manufacturers, and I 
support the good work you have done to secure increased de minimis 
thresholds in Canada and Mexico as part of the U.S.-Mexico-Canada 
Agreement (USMCA).

    Given that changes to section 901 are not necessary to implement 
Article 7.8.1 on Express Shipments in the USMCA, will you commit to not 
make changes to section 901?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. These consultations 
are underway, and I look forward to working with you and other members 
on this important issue.

    Question. Operated by the National Oceanic and Atmospheric 
administration (NOAA), the Fisheries Finance Program provides low-
interest long-term loans to the commercial fishing industry. Last fall, 
NOAA proposed to expand the Fisheries Finance Program to fund loans for 
the construction of new fishing vessels.

    Given that the United States has consistently held the position 
that overcapacity leads to overfishing, does the adoption of a capacity 
increasing policy by the United States undermine the U.S. negotiating 
position on fisheries subsidies both bilaterally with trading partners 
and multilaterally at the World Trade Organization? Did NOAA seek 
insight, expertise, or technical assistance from USTR as part of the 
development of their proposed rule? If so, did USTR provide insight, 
expertise, or technical assistance to NOAA?

    Answer. The Fisheries Finance Program has been barred from 
financing any project that could lead to increased harvesting capacity 
of any fishery. Congress authorized the modifications to allow the 
financing of new vessels in a limited access system, and USTR worked 
closely with NOAA on the proposed rule to ensure that the proposed 
change would continue this policy and be consistent with U.S. trade 
obligations.

    In particular, we note several aspects of the proposed rule to 
ensure the rule change does not increase harvesting capacity. 
Eligibility is restricted to limited access fisheries that are neither 
overfished nor subject to overfishing. In addition, the replaced 
vessels must be named at the time of application and must meet one of 
the following three conditions: (1) it must be scrapped; (2) it must 
continue to operate in a federally managed fishery under limited 
access, or (3) it must have its Federal fishery endorsement permanently 
canceled. In this instance, the vessel is permanently prohibited from 
fishing or providing support to fishing activities anywhere in the 
world, and the vessel's title is marked to prohibit the vessel's 
transfer to any foreign flag.

    NOAA sought insight, expertise and technical assistance from other 
U.S. agencies, including USTR, as well as the public, as part of its 
rulemaking. NOAA is currently reviewing all comments received and will 
continue to coordinate with USTR on the draft final rule.

    Question. USMCA includes prohibitions on harmful fisheries 
subsidies. Article 24.20, section 1 states: ``The Parties recognize 
that the implementation of a fisheries management system that is 
designed to prevent overfishing and overcapacity . . . must include the 
control, reduction, and eventual elimination of all subsidies that 
contribute to overfishing and overcapacity.''

    Given that the proposed change to the Fisheries Finance Program 
would constitute a capacity-enhancing subsidy, and assuming USMCA is 
ratified, is the proposed change to the Fisheries Finance Program 
consistent with U.S. obligations under USMCA?

    Answer. USTR has reviewed the eligibility requirements of the 
proposed rule and determined that they are consistent with U.S. 
obligations under the USMCA. Although it may be possible for a loan to 
be provided to build a fishing vessel that is capable of harvesting 
more seafood more efficiently, the fishery in which it participates 
must be limited access and not be overfished or subject to overfishing. 
The proposed rule also places constraints on the replaced vessels to 
ensure those vessels also do not contribute to overcapacity in a 
fishery.

                                 ______
                                 
             Questions Submitted by Hon. Patrick J. Toomey
    Question. The renegotiated NAFTA agreement contains a new mechanism 
called ``Review and Term Extension,'' i.e., a sunset provision, which 
is codified at Article 34.7 of USMCA. The sunset provision requires 
that USMCA's ``Free Trade Commission'' (as outlined in Chapter 30) meet 
to conduct a ``joint review'' of the agreement 6 years after entry into 
force. As part of the joint review, ``each party shall confirm, in 
writing, through its head of government, if it wishes to extend the 
term of the agreement for another 16-year period.'' If a party does not 
agree to extend the agreement at the 6-year review, the Commission must 
conduct joint reviews every year, until the agreement is extended or 
terminates.

    As you know, USTR's draft statement of administrative action (SAA), 
which outlines in part the administration's view on how the 
implementing legislation for the agreement will change or effect 
existing law, was transmitted to Congress on May 30, 2019. While the 
draft SAA details numerous changes to U.S. law that are ``strictly 
necessary or appropriate'' to implement the agreement, it does not 
include any changes to U.S. law in order to implement the sunset 
provision.

    Please explain why the administration feels that no changes to U.S. 
law are required to implement the agreement's sunset provision.

    Assuming that ``party'' refers to each USMCA country's government--
e.g., the Government of the United States of America--per the 
agreement's preamble, what should the internal process be for the 
United States to decide whether it wishes to stay in the agreement at 
the first 6-year review?

    Does the administration believe that Congress is included in 
USMCA's definition of ``party'' as ``the Government of the United 
States of America''? If not, why not? What role should Congress have in 
determining whether or not the U.S. chooses to extend its participation 
in the agreement at each joint review?

    Chapter 30 of USMCA states that the Free Trade Commission tasked 
with joint reviews shall be composed of ``government representatives of 
each party at the level of ministers or their designees.'' In the draft 
SAA, the administration states that the U.S. Trade Representative (or 
his or her designee) will represent the U.S. on the Commission. How 
will USTR ensure that the views of Congress are accurately represented 
at each joint review?

    Answer. The USMCA's review and term extension mechanism will help 
ensure that the agreement is working as intended and continues to serve 
the interests of the United States. I look forward to working with you 
and other members to ensure that Congress's views are appropriately 
accounted for as part of this review process.

    Question. USMCA significantly scales back NAFTA's Investor-State 
Dispute Settlement (ISDS) mechanism, which is designed to ensure that 
U.S. investors are treated fairly when they invest in Canada or Mexico. 
With respect to Mexico, full ISDS treatment is extended only to a 
handful of sectors (oil and gas, power generation, telecommunications, 
transportation, and some infrastructure). With respect to Canada, ISDS 
is completely eliminated within 6 years of entry into force.

    Please explain USTR's rationale for eliminating from ISDS NAFTA's 
Minimum Standard of Treatment (MST) obligation protections (Article 
1105) for most investors, particularly in light of the fact that 
American investors have filed 38 NAFTA ISDS cases claiming an MST 
violation.

    Please explain USTR's rationale for eliminating from ISDS NAFTA's 
protections against indirect expropriation (Article 1110) for most 
investors, particularly in light of the fact that American investors 
have filed 31 NAFTA ISDS cases claiming indirect expropriation.

    Please explain USTR's rationale for eliminating from ISDS NAFTA's 
protections against performance requirements (Article 1106) for most 
investors, particularly in light of the fact that American investors 
have filed 11 NAFTA ISDS cases involving a performance requirements 
claim.

    Trade Promotion Authority includes as a principal negotiating 
objective a directive that U.S. negotiators ``secure for investors 
important rights comparable to those that would be available under 
United States legal principles and practice,'' including fair and 
equitable treatment (covered by NAFTA's MST clause), the elimination of 
performance requirements, and compensation for expropriation. How does 
the explicit removal of these ISDS protections from the current NAFTA 
comply with TPA?

    Why was the term ``infrastructure'' removed from the list of 
covered sectors with full access to ISDS in Mexico during the legal 
scrub of USMCA?

    Has USTR assessed whether the weakening of NAFTA's investor 
protections in USMCA will result in a reduction in U.S. investment in 
Canada and Mexico? If so, how great does USTR estimate that reduction 
to be?

    Answer. USMCA's substantive investment rules accord with the 
highest international standards of investment protection, including 
prior U.S. international investment agreements, and provide rights 
consistent with key U.S. legal principles and practice. The more 
limited availability of ISDS under USMCA reflects the administration's 
broader efforts to ensure that our trade and investment rules respect 
our sovereignty and the right to regulate, reduce defensive litigation 
exposure, and reduce or eliminate incentives to outsource production 
and jobs. Under USMCA, U.S. investors in all sectors have the ability 
to bring ISDS claims against Mexico for violating the national 
treatment, most-favored nation treatment, and expropriation obligations 
after litigating in Mexican court. Because U.S. investors contracting 
with the Mexican government in sectors such as oil and gas, power 
generation, and telecommunications, may face unique political risks to 
long-term, capital-intensive projects, USMCA provides those investors 
access to ISDS for a broader scope of obligations, including MST, 
indirect expropriation, and performance requirement claims. Similarly, 
state-to-state dispute settlement procedures are available to bring 
claims relating to any obligation in the investment chapter.

    Question. On May 30, 2019, President Trump announced that he would 
impose blanket 5-percent tariffs on all goods imported into the United 
States from Mexico if Mexico did not take steps to address illegal 
immigration. While I was glad to see that the President ultimately did 
not impose these tariffs, it is concerning that U.S. FTA partners like 
Mexico have been threatened with unilateral tariffs as a tool for 
achieving non-trade related policy objectives.

    Should there be assurances to Mexico and Canada codified in U.S. 
law that prevent the unilateral imposition of tariffs on them and, 
thereby, guarantee that the U.S. will adhere to its tariff-free 
treatment obligations under the agreement?

    If Congress does not prohibit the unilateral imposition of tariffs 
on Canada and Mexico in the USMCA implementing legislation, how is 
tariff-free treatment among the three parties otherwise assured?

    Answer. The safety and security of the United States will always be 
a priority for the President. The President's authorities for 
responding to emergencies and national security issues are outside the 
scope of trade agreements.

    Question. On May 16, 2019, President Trump met with Swiss President 
Maurer to discuss a possible FTA with Switzerland. As you know, trade 
with Switzerland supports nearly 28,000 jobs in Pennsylvania, 
particularly in the chemicals industry.

    What are the prospects that USTR will open trade negotiations with 
Switzerland?

    If negotiations are opened with Switzerland, will you commit to 
following TPA procedures and submitting any agreement to Congress for 
ratification?

    Answer. We continue to evaluate potential FTA discussions with a 
number of countries, including Switzerland. The decision on whether to 
launch any negotiations must be based on an assessment of whether we 
will have an end result in which more U.S. businesses are selling more 
of their goods to the country in question. Our end goal in any 
negotiation is always to make American workers and farmers better off 
than they were before. If we decide to start such negotiations, we 
would intend to follow the TPA process.

    Question. As you know, USMCA includes a narrow exemption from 
Canada's cultural exceptions for broadcasting. Specifically, USMCA 
provides that ``Canada shall ensure that U.S. programming services 
specializing in home shopping, including modified versions of these 
U.S. programming services for the Canadian market, are authorized for 
distribution in Canada and may negotiate affiliation agreements with 
Canadian cable, satellite, and IPTV distributors.''

    How does Canada plan to implement this exemption?

    If USMCA enters into force, how long will it be before home 
shopping networks like QVC may broadcast into Canada?

    Answer. Canada has several options it can use to amend its regime 
to allow for the distribution of U.S. home shopping networks in Canada, 
including those with modified signals. We are closely monitoring 
developments in Canada, including its implementing legislation and its 
discussion with its stakeholders. Once USMCA enters into force, 
commitments will be fully enforceable. The U.S. certification process 
will ensure that Canada has completed implementation by entry into 
force, which will allow U.S. networks to take advantage of the new 
opening in the USMCA.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. South Carolina is home to rapidly expanding innovation 
and trade across multiple sectors, both commercial and small business 
oriented. While much of that trade occurs on the commercial level, 
increasing numbers of small businesses across the State utilize e-
commerce platforms and rely on de minimis threshold shipments. In 2016, 
Congress recognized the importance of raising the de minimis threshold 
to better facilitate these expanding and innovative industries and 
manufacturers that rely on low value inputs. The Trade Facilitation and 
Trade Enforcement Act of 2015 codified a new de minimis threshold of 
$800, a boon for many in our supply chain. However, I remain concerned 
with the de minimis footnote that was included in Article 7.8(1)(f) of 
the Customs and Trade Facilitation chapter of the U.S.-Mexico-Canada 
Agreement (USMCA), and potential circumvention of congressional intent. 
I would not support any changes to section 901 of the Trade 
Facilitation and Trade Enforcement Act of 2015 (19 USC 1321), and I 
would not agree that any such changes are necessary to implement 
Article 7.8.1 on express shipments.

    Will you commit that you will not make changes to section 901, 
having heard consistently from bipartisan members of both chambers that 
there is no support for such a change?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. As you note, these 
consultations are underway, and I look forward to working with you and 
other members on this important issue.

    Question. American innovation is a key driver of our robust 
economic growth. To that end, I commend the administration's efforts to 
safeguard American intellectual property from theft and forced 
technology transfers by the Chinese. Now is the time to strike a strong 
and enforceable deal with China. At the same time, we must ensure we 
are not punishing the good actors. To that effect, I am concerned by 
the efficiency of USTR's section 301 exclusion process as many 
companies struggle with delays on exclusion requests. We know certain 
companies and small businesses are enduring the added pressure, while 
they have waited several months to a year or more for an exclusion. 
Moreover, many businesses that secured exclusions for Lists 1 and 2 
face significant uncertainty about whether they will be renewed. Many 
of those businesses, not unreasonably, could not readjust supply chains 
in only a year.

    Do you commit to ensuring a timely exclusion process for list 3 
($200 billion) products, given the large volume of products included? 
Furthermore, do you intend to establish an expedited process for 
renewing exclusions granted for Lists 1 and 2?

    Answer. For Lists 1 and 2, USTR has granted over a thousand of 
exclusion requests. The exclusion process for List 3 products is well 
underway, and it is more efficient than our process for Lists 1 and 2 
given the establishment of a new online portal. I understand your view 
on extending exclusions granted for Lists 1 and 2. Our hope is that 
businesses have taken action during the period of their exclusion to 
adjust to the tariffs. At this time, USTR has not determined a course 
of action with respect to extension of the exclusions, all of which 
will have been available for a year (and longer in many cases).

    Question. South Carolina is one of the greatest exporting States in 
the country. To us exports equal jobs. The more we can export the more 
jobs that can be created. USMCA for the auto industry is mostly about 
localization since the agreement requires 75 percent North American 
content. My question, and my concern, is that these companies are the 
experts and so have determined the right formula based on their 
particular business case for exporting. Further localization likely 
means more expensive production costs. Higher costs make these 
companies less competitive globally and risks this incredible export 
growth we've been experiencing.

    Can you tell me how you see USMCA benefiting U.S. exports? Is there 
room in this agreement for high-volume exporters to get credit for 
their exports?

    What is the impact of the auto rules of origin in USMCA on new auto 
manufacturers? How are you handling new plants that just came online 
and sourced their suppliers based on the old NAFTA rules? Will there be 
a clear grandfather?

    Answer. There is no question that NAFTA drove auto and auto parts 
jobs and investment away from the United States and to Mexico. The 
USMCA rules of origin will benefit U.S. production and exports by 
incentivizing the production of more auto parts and other content in 
the United States. Based on auto producers' own information, we expect 
that the new rules will incentivize additional U.S. capital investments 
of $34 billion and U.S. automotive parts purchases of $23 billion, some 
of which will likely be exported. The rules make North American auto 
production more competitive as a region, and the United States in 
particular is poised to benefit by way of new jobs and investment. Many 
auto producers have already announced new investment here in the United 
States, which is particularly notable given the weakness of auto 
production in markets such as China, the EU, and South America.

    Under the USMCA rules of origin, new auto producers in North 
America will get incentives if they make investments and parts 
purchases in the United States. This is different from the incentive 
schemes for new producers under NAFTA, which largely incentivized 
additional investments in and outflow of jobs to Mexico and allowed 
increasing content from non-NAFTA countries. Producers who are sourcing 
content based on the old NAFTA rules will get an extended transition 
period to meet the USMCA rules if they provide a detailed and credible 
plan to ensure that their production meets the new rules.

                                 ______
                                 
                 Questions Submitted by Hon. Todd Young
    Question. First, let me reiterate my congratulations on your 
successful USMCA negotiations. Securing high pharmaceutical IPR 
standards through USMCA, including 10 years of regulatory data 
protection for biologics is important for the State of Indiana and 
serves as a strong foundation for future agreements with Japan, the 
European Union, and the United Kingdom.

    Furthermore, establishing 10 years as the global floor for 
protection is critical to maintaining the long-term viability of the 
innovative U.S. industry at a time when China looks to further develop 
its own competing industry. China has targeted the biopharmaceutical 
industry as a strategic growth sector. It wants to encourage domestic 
innovation through, for example, proposing a 12-year period of 
regulatory data protection for biologics, if those products are first 
developed and introduced into China.

    Can you reassure us that this will continue to be a priority for 
USTR in future negotiations?

    Answer. USTR is committed to following the intellectual property-
related negotiating objectives contained in Bipartisan Congressional 
Trade Priorities and Accountability Act of 2015.

    Question. Reports have suggested the United States is considering 
entering into limited trade negotiations with the likes of Japan or the 
European Union. My hope is that as a part of our trade dialogues with 
both the EU and Japan that we are pressing for comprehensive trade 
negotiations. Given the urgent need for the United States to open up 
new markets for Indiana manufacturers and farmers alike, I believe that 
anything less than a comprehensive trade agreement represents a missed 
opportunity.

    Can you ensure that any trade agreements with either Japan or the 
European Union will not be limited in their scope? That they will be 
comprehensive trade agreements?

    Answer. As suggested in the September 2018 Joint Statement by 
President Trump and Prime Minister Abe, the administration has 
envisioned the possibility of a staged negotiation, with an initial, 
limited outcome designed, in part, to help U.S. exporters put at a 
disadvantage by Japan's other trade agreements. At the same time, the 
administration maintains other, much broader objectives for a 
comprehensive trade agreement with Japan, as outlined in the U.S.-Japan 
Trade Agreement Negotiating Objectives published in December 2018.

    In our negotiations with the EU, we seek to reduce or eliminate 
both tariff and non-tariff barriers that are significant obstacles to 
U.S. exports. We will not enter into a trade agreement with the EU that 
does not achieve those goals. We seek comprehensive tariff negotiations 
with the EU, covering agricultural as well as industrial products. 
members of the committee are aware, however, that we have not begun 
tariff negotiations because the EU has not agreed to negotiate 
agricultural tariffs, and it would not be acceptable to Congress, the 
administration, or our stakeholders to conclude a tariff agreement 
limited to industrial products. Despite this impasse, we continue to 
work constructively with the EU on non-tariff barriers that impede U.S. 
manufactured exports to the EU.

    Question. Indiana is home to numerous RV manufacturers and their 
downstream supply chain. Their industry association resubmitted a 
Competitive Need Limitation waiver for lauan at the 10-digit level, and 
I hope that USTR will give this request due consideration. This waiver 
updates a request made in 2018 to a much narrower group of products 
that are essential to RV manufacturers located in Indiana.

    Since the removal of this product from GSP for Indonesia, imports 
have grown despite an 8-percent tariff, showing that there is no other 
viable source for this product. This costs RV manufacturers in Indiana 
and across the country almost $1 million each month.

    Will you promise to work with my office to review this issue, and 
direct your staff to work with the RV industry and the ITC to help this 
innovative and uniquely American sector remain competitive?

    Answer. I have requested that the USITC study the RV industry's GSP 
petition for a CNL waiver on lauan wood. Under the GSP statute, the 
USITC must do an independent analysis of the request, including whether 
a like or directly competitive product was produced in the United 
States within the last 3 years. The analysis will be complete by early 
September.

    Question. I have been informed that some tool manufacturers are 
facing tariff rates of more than 50 percent on tool sets that include 
items from List 1 and List 3 because Customs and Border Protection 
(CBP) stacked the section 301 tariffs from List 1 and List 3 together 
for some sets that include items from both lists. It is my 
understanding that CBP has interpreted USTR's 301 notifications to mean 
that toolsets from List 3 that contain a product from List 1 are 
subject to the 25-percent duty rate for the List 1 tariff, and 
additionally the List 3 tariff duty rate (CBP ruling HQ H299857). 
Stacked together, this is essentially a 50-percent duty rate, plus the 
ad valorem duty, rather than the normal duty rate of the product with 
the highest duty rate in the set, or 25 percent. I am told CBP 
suggested they believe they are interpreting the application of the 
section 301 tariffs appropriately, and would need guidance to change 
their current approach.

    With negotiations with China ongoing and the prospects of List 4 
being applied to a new set of goods, I am concerned that what is now an 
issue impacting one industry could impact other industries.

    Is USTR familiar with the CBP ruling and that some section 301 
tariffs are being applied in this manner? Does USTR agree with CBP's 
interpretation of its section 301 notifications and agree that section 
301 tariffs are to be stacked in this manner?

    Answer. USTR is aware of this issue with respect to applying 
section 301 tariffs to tool sets. We are currently reviewing this 
issue.

    Question. There seems to be some question as to whether vehicles 
that are produced in the U.S. only for the U.S. market will be subject 
to the qualifying rules of origin requirements in USMCA. In an April 
Politico story, a senior USTR official indicated that auto 
manufacturers have to qualify their entire North American fleet under 
the new auto rules of origin, which seems to imply that 100 percent of 
U.S. produced vehicles must meet USMCA rules of origin even if the 
vehicles are only sold in the U.S. and not traded.

    Is it USTR's intention that all vehicles produced in the United 
States meet this requirement even if they are not exported to Canada 
and Mexico? Can you explain how this process would work and USTR's 
authority to enforce such a requirement?

    Answer. This is a misunderstanding by Politico. Only vehicles 
traded among the United States, Canada, and Mexico may claim USMCA 
preferential treatment and are subject to the USMCA's rules of origin. 
In order for a producer to receive an extended transition period to 
meet the USMCA rules, a vehicle producer must provide a detailed and 
credible plan based on their entire North American production 
indicating how their production, with averaging, meets the new rules. 
However, only those vehicles for which companies make a claim of 
preferential tariff treatment would need to meet the rules.

    Question. One of the longstanding European Union trade barriers 
that concerns me is the EU's application of prohibitive duties on 
imports of U.S. fertilizers, which represent an important agriculture 
market in Indiana. The EU is an important market for American nitrogen 
exports, with our lower feedstock costs and transportation advantages 
over exports from other countries.

    However, the EU continues to impose a protectionist duty of 6.5 
percent on most U.S. nitrogen fertilizers. To make matters worse, the 
EU recently imposed an antidumping duty on imports of U.S. urea 
ammonium nitrate (UAN) fertilizer, making the total import duty level 
of over 29 percent prohibitive for U.S. UAN exports.

    As such, I ask if the U.S.-EU trade negotiations progress, will you 
make the reciprocal access for fertilizer trade between the United 
States and the European Union a priority in the negotiations?

    Answer. USTR staff have been consulting with U.S. fertilizer 
producers and monitoring developments in the EU tariffs on fertilizer 
inputs and products. Addressing fertilizer tariffs will be an important 
objective of any comprehensive U.S.-EU trade negotiation.

    Question. I continue to maintain concerns regarding the de minimis 
footnote that was included in Article 7.8(1)(f) of the Customs and 
Trade Facilitation chapter of the U.S.-Mexico-Canada Agreement. I 
continue to hear from Indiana stakeholders regarding the importance of 
maintaining a high de minimis threshold of $800, a congressional 
priority that I helped include within the confines of the Trade 
Facilitation and Trade Enforcement Act of 2015. In fact, the importance 
of the de minimis issue was raised with you in a letter from 25 
bipartisan Senators last November. Your subsequent January response to 
the letter did little to assuage the concerns of me or my Indiana 
stakeholders who support high a de minimis threshold.

    Will you pledge to work with our Mexican and Canadian counterparts 
to improve their de minimis rules further, rather than lowering levels 
as the footnote proposes doing?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. These consultations 
are underway, and I look forward to working with you and other members 
on this important issue.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. The administration and the Department of Commerce 
developed an exclusion process to hold harmless U.S. companies 
inadvertently affected by the section 232 steel quotas. As you and the 
Department of Commerce are aware, my constituent company, Micro 
Stamping Inc., was one of a few companies to receive favorable 
exclusion decisions under this order. However, during calendar year 
2019, Micro has not been able to use these exclusions to import much-
needed product.

    How will your office and the Department of Commerce expedite a 
resolution to this situation?

    What options are available to the Department of Commerce to 
immediately allow the company to exercise their exclusions to import 
the product they need to continue manufacturing critical medical 
devices?

    Have you discussed this company's specific situation directly with 
Korean trade officials?

    What is the status of those discussions?

    Answer. USTR staff, as well as officials of the Departments of 
Commerce and Homeland Security, have met on several occasions with 
Micro Stamping and its representatives to hear the company's concerns 
and answer its questions about the quota. The quota regime established 
in the proclamations issued by the President imposes no constraint on 
when U.S. businesses can import steel and aluminum products for which 
the Department of Commerce has granted an exclusion. U.S. businesses 
can import these products at any time, whether or not the quota for the 
products in question has been filled. We have relayed to Korean trade 
officials the concerns Micro Stamping has raised with respect to the 
commercial decisions of Korean exporters about whether to supply the 
company. We understand the company is in direct contact with Korean 
industry and government representatives.

    Question. We can both agree that India has a host of trade policies 
that discriminate against U.S. companies, especially for medical 
devices, which are a key industry in my home State of New Jersey. At 
the same time, we have dozens of small and medium-sized companies in 
New Jersey that import from India and are struggling to adapt to the 
sudden loss of trade preferences. Some of them that were hit hard by 
the China tariffs moved their sourcing to India, only to find out 
shortly thereafter that the administration is removing trade 
preferences there. In short, the status quo isn't an acceptable 
solution for any of my constituents.

    Can you commit to making it a priority to solve our issues with 
India so they can be reinstated into GSP?

    What are the criteria that India has to meet to be reinstated?

    Moving forward, what is your plan for getting a successful outcome?

    Answer. The decision to terminate India's GSP beneficiary status 
was not taken lightly and was in accordance with the congressionally 
mandated GSP eligibility criteria that govern the program. For many 
years, India has prevented effective access for many U.S. goods and 
services while simultaneously benefiting from largely open access to 
the U.S. market, including the extension of special preferences under 
GSP. India's failure to provide fair and adequate market access was 
harmful to U.S. interests and it was important that we enforce the 
statutory criteria for these benefits.

    Looking ahead, we remain engaged with India and are committed to 
address these issues. I have already spoken to Minister Goyal, and a 
USTR team recently visited New Delhi to meet with a variety of Indian 
government officials in an attempt to make progress on the broad range 
of trade barriers we have highlighted.

    Question. It is my understanding that books have long been able to 
be imported into the U.S. duty-free. This is largely because Americans 
understand that we all benefit from a free flow of knowledge and 
information.

    Given literature's ability to enrich our political, religious, and 
cultural discourse, and promote literacy and learning for children, do 
you believe imposing tariffs on books is consistent with American 
values?

    Do you believe tariffs on books are in America's self-interest?

    Do you believe tariffs on books will alter Chinese behavior in ways 
tariffs on other goods will not?

    Answer. There has been no decision with respect to the proposed 
additional tariffs. The President will provide his direction at the 
appropriate time based on the state of the negotiations with China.

    During the notice and comment period, USTR has received comments 
and heard testimonies regarding the potential effects of the proposed 
tariffs on books. I will consider these comments and testimonies before 
taking any action on the additional tariffs.

    Question. When President Trump moved to increase section 301 
tariffs to 25 percent on the third tranche of Chinese products on May 
10th, USTR clarified that shipments from China that had already been 
shipped would be excluded from this tariff rate increase. Later, 
Customs and Border Protection issued guidance indicating that this 
exception would only apply if the goods also entered the United States 
before June 1st. On May 31st, USTR revised its guidance, noting that 
covered products exported from China to the United States before May 
10th will remain subject to only the additional 10-percent tariff if 
they enter into the United States before June 15th. While I appreciate 
USTR's extension, I have heard from constituents that there were 
shipments containing covered products that were exported from China to 
the United States before May 10th that did not enter into the United 
States before June 15th, simply because they were headed to ports on 
the east coast and encountered transit delays.

    Why did USTR choose June 15th as the deadline for in-transit 
shipments to benefit from the old 10-percent tariff rate?

    Are you aware that there are some shipments containing covered 
products that were exported from China before May 10th that did not 
enter the United States before June 15th?

    Will USTR allow these shipments to benefit from the 10-percent 
tariff rate?

    Answer. USTR relied on U.S. Customs and Border Protection to 
identify an effective date that was consistent with historical shipping 
data from goods on the water between China and the United States. 
Covered products that were exported from China to the United States 
prior to May 10, 2019 will remain subject to an additional 10-percent 
tariff if they enter into the U.S. before June 15, 2019. As noted, 
originally, the deadline to enter the U.S. before the goods would be 
subject to an additional 25-percent tariff was June 1, 2019. This 
limited extension further accounted for Customs enforcement factors and 
the transit time between China and the United States by sea.

    Pursuant to 84 FR 20495 and 84 FR 26930, shipments that were 
shipped from China before May 10th and entered the United States after 
June 15th will be subject to the additional duty rate of 25 percent.

                                 ______
                                 
              Questions Submitted by Hon. Thomas R. Carper
    Question. When you testified at the Finance Committee's 2018 trade 
agenda hearing, I asked about USTR's position on restarting the Trade 
in Services Agreement negotiations, which stalled at the end of the 
Obama administration. You told me you were looking into it. I want to 
reiterate what I said last year, which is that the U.S., and my State 
of Delaware in particular, has a strong comparative advantage in 
service exports, and we should be doing everything we can to expand 
trade opportunities for our services.

    Now that a year has passed, can you share the administration's 
position on restarting the Trade in Services Agreement?

    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, for example, 
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, 
and will serve as a template for future agreements. We are also 
currently pursuing the negotiation of high standard digital trade rules 
that would significantly benefit U.S. services suppliers in 
plurilateral WTO digital trade initiative negotiations. We continue to 
evaluate other potential negotiations to further expand U.S. services 
exports.

    Question. I appreciate that USTR previously recognized the 
potential risks of section 301 China tariffs on medical products that 
are necessary to respond to manmade and natural disasters as they 
removed related products from prior tariff lists. I am concerned that 
List 4 includes the return of a number of key personal protective 
equipment items, including gloves and gowns, which had been removed 
from previous lists.

    Can you explain USTR's justification for re-including on List 4 
these and other goods that were dropped from previous lists?

    Has USTR fully considered the risk of imposing tariffs on personal 
protective equipment to ongoing patient treatment and care, as well as 
the impact possible shortages may have on the country's ability to 
respond to public health events such as the forthcoming flu season, 
hurricane season, and possible spread of Ebola to American shores?

    Answer. There has been no decision with respect to the proposed 
additional tariffs. The President will provide his direction at the 
appropriate time based on the state of the negotiations with China.

    During the notice and comment period, USTR has received comments 
and heard testimonies regarding the products that were previously 
removed from the previous lists and the potential effects of the 
proposed tariffs on personal protective equipment. I will consider 
these comments and testimonies before taking any action on the 
additional tariffs.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
    Question. You have mentioned that there are reformers in China that 
want to use the U.S.-China trade talks as an opportunity to push the 
country toward a market-oriented economy.

    Is China's complete transition to a market-oriented economy a U.S. 
objective in the talks? If so, what specific policy changes in China 
will be critical to achieving that objective?

    Answer. In our negotiations with China, we are trying to address as 
many of China's non-market oriented policies and practices as possible. 
Among other things, these policies and practices unfairly skew the 
playing field against U.S. companies and workers. For example, China's 
pervasive subsidization of its domestic industries is a key issue in 
our ongoing bilateral negotiations. These and other market-
distorting practices have caused unfair competitive disadvantages for 
U.S. manufacturers and workers for decades. This administration is 
determined to take action to address these issues.

    Question. As you know, China's steel state-owned enterprises 
account for eight of the 10 biggest steel producers in that country and 
are a big part of the steel overcapacity problem. Steel overcapacity--
and the corresponding threat to steel jobs in the U.S.--cannot be 
resolved if these SOEs continue to operate with business as usual.

    What specific policy changes must China enact in order for the 
steel SOEs to operate according to commercial consideration? How long 
do you think it would take to implement those policy changes?

    Answer. The United States, working with international partners, has 
identified a number of market-distorting measures, the elimination of 
which would help restore market functioning and reduce excess capacity 
in the global steel sector. These include a range of measures that 
implicate state-owned enterprises operating in China, such as 
preferential financing, debt forgiveness, and other financial support 
measures; the assumption of liabilities by the government or 
government-related entities; the provision of goods and services 
preferentially or a non-market rates; subsidies and tax rebates that 
favor domestic production for export; and the selective application and 
enforcement, or non-application and non-enforcement, of laws and 
regulations. The United States has pressed China to adopt these policy 
recommendations swiftly and in full.

    Question. In the course of the China trade talks, has the U.S. 
asked China to commit to reducing its net steel capacity? If so, has 
the U.S. developed a mechanism for monitoring China's compliance with 
that commitment?

    Answer. In our ongoing negotiations with China, we are seeking to 
address excess capacity in many different industries, including steel. 
We are determined to ensure that any commitments that we are able to 
secure from China will be subject to a strong enforcement mechanism.

    Question. In the hearing, I asked if you were building an 
international coalition to help apply pressure to China. You mentioned 
the U.S. is working with the EU and Japan. I know the U.S. is 
cooperating with the EU and Japan within the context of the WTO to 
combat non-market-oriented policies of third countries.

    Can you explain how that trilateral WTO collaboration is giving the 
U.S. leverage in the U.S.-China talks? Given that the WTO is a 
consensus organization, is it your belief that a trilateral coalition 
is sufficient to convince China it must transition to a market economy? 
Is the U.S. reaching out to any other countries to join this coalition? 
If so, which countries?

    Have the imposition of tariffs or the threats of tariffs on imports 
from Japan and the EU affected the two countries' willingness to 
collaborate with the U.S. on non-market-oriented policies?

    Answer. The trilateral process put the EU and Japan on record with 
a shared understanding that market-oriented conditions are fundamental 
to a fair, mutually advantageous global trading system. Non-market-
oriented policies and practices, forced technology transfer, state-
owned enterprises, and industrial subsidies are critical concerns in 
light of China's overall non-market economic system. On each element of 
the trilateral discussions, the focus has been to analyze the nature of 
the problems in China to identify effective means to address our shared 
concerns. This may include individual, coordinated, or joint 
enforcement actions, developing shared norms on fair trade, and 
exploring possible new rules in those areas. Any new rules--on 
subsidies, for example--must be ambitious, high standard, and effective 
in curbing China's unfair practices. We will continue to work with our 
partners and engage with other key WTO Members with the aim of taking 
the work forward more broadly.

    Question. As you know, I have long been concerned about the 
business model of U.S. companies moving production--and U.S. jobs--
overseas to countries like China only to ship goods back in the U.S. 
Low wages are a major driver of this business model. You previously 
stated that you are not addressing China's suppression of worker's 
rights in China in the trade talks.

    Does the administration view China's low wages as a contributing 
factor to U.S. job loss to China? If so, what is the administration's 
strategy for closing the U.S.-China wage gap?

    In the context of the U.S.-China trade relationship, what policies 
is the administration pursuing to stop this business model of off-
shoring production and shipping products back into the U.S.?

    Answer. As set forth in USTR's 2018 Report to Congress on China's 
WTO Compliance, the administration has a number of concerns regarding 
problematic Chinese labor laws and practices, including China's lack of 
adherence to certain internationally recognized labor standards. These 
shortcomings adversely affect American workers and businesses. I remain 
committed to working with members of Congress to discuss options and 
policies for addressing these important labor issues.

    Through our ongoing negotiations with China, we are seeking 
structural changes in China that will help level the playing field for 
U.S. companies and help remove artificial incentives and other unfair 
policies and practices that influence their decisions to establish 
production facilities in China rather than the United States. For 
example, addressing China's pervasive subsidization of its domestic 
industries is a key objective of our ongoing bilateral negotiations. 
These and other market distorting practices have caused unfair 
competitive disadvantages for U.S. manufacturers and workers for 
decades. This administration is determined to take action to address 
the issue.

    Question. Section 301 tariffs on imports from China have been in 
place for nearly a year.

    What changes, if any, has China made to its industrial policies 
since the section 301 tariffs took effect? Are there any other policy 
changes made by the Chinese government that can be attributed to the 
imposition of U.S. tariffs on Chinese imports?

    Answer. Currently, the administration's use of tariffs under 
section 301 of the Trade Act of 1974 is providing the United States 
with an important source of leverage to bring China to the table to 
negotiate an enforceable agreement that will address China's unfair 
trade practices, including in the area of industrial policies. Since 
the start of the negotiations, China has issued or revised a handful of 
relevant measures, such as a new foreign investment law and a revised 
trademark law. We continue to press China to add specificity to these 
measures to address our most important concerns.

    Question. Have there been significant shifts in global supply 
chains in any sectors as a result of the tariffs? If so, please 
identify the specific changes to global supply chains that involved the 
reshoring of jobs to the U.S. Is it your belief that changes to global 
supply chains as a result of section 301 tariffs are permanent changes?

    Answer. It appears that the tariffs imposed by the United States 
pursuant to section 301 of the Trade Act of 1974 have contributed to 
companies' decisions regarding their global supply chains. Over the 
past year, numerous companies that had invested in China have 
relocated, or have begun the process of re-locating, some or all of 
their manufacturing facilities to countries other than China. Some 
companies have moved production to the United States, and other 
companies appear to be moving production to countries in Southeast 
Asia. It appears that many companies are no longer comfortable with 
investing heavily in China and are making forward-
looking decisions to protect themselves against trade frictions that 
may emerge between China and its trading partners.

    Question. In the hearing, I asked you if the administration had a 
Plan B instead of the tariffs in case the U.S.-China talks do not 
result in an agreement. You stated that you are open to alternatives 
but have not heard of a better idea than tariffs. The president 
recently stated that his Plan B for China is more tariffs.

    Is USTR actively exploring alternative non-tariff-related ways to 
gain leverage with China?

    Answer. We believe that the additional tariffs currently in place 
on Chinese goods are helping to create leverage and have played a role 
in China's decision to engage in serious discussions with the United 
States. If we conclude that an agreement is not possible under these 
circumstances, we will consider other possible means for creating the 
leverage necessary for achieving a successful and meaningful agreement 
with China.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Nearly 2 years ago, you told me that the administration 
would do no harm to agriculture. You committed to maintaining markets 
that our farmers and ranchers already had access to, and expanding new 
export opportunities. One year after that, you admitted that farmers 
are getting the short end of the stick and offered your sympathies. And 
now the situation is worse.

    How much of the damage to American agriculture is irreparable?

    Is a return to ``status quo'' the best that our farmers and 
ranchers can hope for?

    How many new bilateral deals have been finalized since the start of 
this administration and how have farmers and ranchers benefitted?

    Answer. The administration has prioritized opening markets for 
agricultural and has had success across a range of sectors and in many 
countries, such as poultry in India and pork in Argentina. As you note, 
some of our trading partners have engaged in illegal retaliation on 
their imports of U.S. agricultural products in response to lawful U.S. 
initiatives to bring balance to our trading relationships. These 
countries can immediately rectify this situation by negotiating a 
solution rather than retaliating. Our trading relationships, including 
with respect to agricultural exports, have flourished with countries 
that have chosen to resolve these trade irritants.

    Question. Right now, American consumers are paying for the 
President's tariffs; farmers and ranchers are paying for retaliatory 
tariffs; and taxpayers are footing the bill for tens of billions of 
dollars of USDA trade aid. I've said it before: this trade war is not 
without consequence.

    How would you characterize the cost of your approach to farmers and 
ranchers?

    What steps are you taking to restore certainty into agricultural 
markets?

    Answer. As noted by several studies and news outlets, the impact of 
tariffs is widely dispersed and largely affects exporters seeking to 
maintain market share in the United States. This is particularly true 
with respect to China, where the state manages much of the economy and 
is not particularly responsive to market forces. Many countries around 
the world continue to use high tariffs and a multitude of non-tariff 
trade barriers to impede access to U.S. agricultural products. This 
status quo is not acceptable. The United States continues to explore 
and negotiate market opening agreements for agriculture with our trade 
partners. The International Trade Commission estimates our agreement 
with Canada and Mexico will increase U.S. agricultural exports by $2.2 
billion. Upon completion of the current negotiations with Japan, U.S. 
farmers and ranchers will experience significant new opportunities for 
U.S. agricultural exports. And resolving China's longstanding SPS 
issues with respect to agricultural will benefit farmers seeking to 
sell into that market.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
    Question. The administration's 301 actions were undertaken in 
response to China's long history of forced tech transfer, industrial 
espionage, and market restrictions. The threats and challenges that 
China poses as it relates to these issues are not unique to the United 
States.

    In the context of China and the 301, please provide a summary of 
your engagement with the EU and our other allies, as you were 
undertaking the 301 investigation.

    Answer. From the start of the administration, we worked closely 
with the EU and other partners that we know share our concerns about 
China's unfair trade practices, exploring strategies to respond to 
those practices. We had multiple engagements with the EU on China at 
the senior leadership and technical level during the 301 investigation. 
We have a trilateral group with the EU and Japan that meets quarterly 
and has been very vocal in taking a unified stand against forced 
technology transfer. Both the United States and the EU have brought 
cases at the WTO against Chinese practices in this area, and we 
continue to explore new rules on industrial subsidies with our 
partners. It should also be noted that in the USMCA we agreed with 
Canada and Mexico to provisions disciplining state-owned enterprises, 
currency manipulation, and other non-market practices.

    Question. In the context of China and the 301, please provide a 
summary of your engagement with the EU and our other allies in time 
since the conclusion of the 301 investigation, regarding to the ways in 
which we can work together to coordinate our efforts to address the 
challenges posed by China.

    Answer. Since the March 2018 section 301 report, USTR has continued 
our steadfast engagement with the EU and other allies to coordinate our 
efforts to address the challenges posed by China. We share similar 
views with the EU on the challenges that China poses to our economic 
and commercial interests.

    As part of the trilateral process, I met with the EU Commissioner 
and the Japanese Minister of Economy, Trade, and Industry on May 23rd 
in Paris, where we advanced our shared objectives to address non-
market-orientated policies and practices of third countries. The 
trilateral discussions have been constructive and throughout we have 
reviewed our concerns and ongoing work. Our discussions have focused on 
nonmarket policies and practices, market-orientated conditions, forced 
technology transfer policies and practices, industrial subsidies and 
state-owned enterprises, WTO reform and digital trade and e-commerce. 
The EU agreed to a joint statement effectively affirming the outcomes 
of the section 301 report, and as noted above, brought their own case 
at the WTO targeting these practices by China. We look forward to our 
ongoing cooperation with our like-minded partners.

    Question. The 232 is a critical tool to address overcapacity, but 
we must also ensure our domestic steel industry can compete on a level 
playing field globally. And global overcapacity of steel and aluminum 
remains an issue.

    Can you discuss how you are engaging with China and our allies to 
address global overcapacity head on?

    Answer. The administration is working with a broad range of 
partners in an effort to address the causes and challenges of massive 
and persistent excess capacity in the global steel and aluminum 
sectors. In the OECD and G20, for example, the United States is working 
with partner governments in an effort to bring greater transparency to 
capacity developments and government support measures in these sectors, 
and to articulate principles that governments should adhere to in order 
to ensure proper market functioning. We are also working with like-
minded partners such as Japan and the European Union to develop 
stronger international disciplines on industrial subsidies and state-
owned enterprises. The role of market-distorting forces, including 
subsidies and state-owned enterprises, in creating excess capacity has 
also been an element of the negotiations we have undertaken with China 
over our bilateral economic relationship.

    Question. In the context of overcapacity, please provide detail 
regarding the direction the President has given you and how he has 
empowered you to work with our allies to address global steel 
overcapacity.

    Answer. The United States has been an active and committed 
participant in international forums directed at addressing the 
challenge of global steel overcapacity, such as the Steel Committee of 
the OECD and the Global Forum on Steel Excess Capacity. President Trump 
and his fellow G20 Leaders have repeatedly called on members of the 
Global Forum to fulfill the commitments they have undertaken as part of 
that process. Unfortunately, we have not seen an equal commitment to 
that process from all forum members. Progress on this issue will only 
occur when those that have created the problem of massive excess 
capacity act to remove subsidies and other measures that distort 
markets and create serious global imbalances.

    Question. The 301 negotiations with China encompassed all manner of 
activity, going beyond the scope of the 301 investigation, including 
market access for agricultural goods.

    Did your negotiations with China ever include efforts to reach 
meaningful reform on steel and aluminum overcapacity?

    Answer. The negotiations with China over the trade relationship 
between our two countries have covered a wide range of issues, 
including how market-distorting forces in China, including subsidies 
and state-owned enterprises, can lead to excess capacity. In the 
context of these discussions and multilateral discussions, we have 
urged China to remove market-distorting measures that contribute to 
overcapacity.

                                 ______
                                 
               Questions Submitted by Hon. Mark R. Warner
    Question. In a recent briefing for congressional staff, USTR 
indicated that it was in the process of hiring additional employees to 
assist in the review of applications for exclusions to 301 tariffs. 
USTR has mostly finalized review of the first tranche of tariffs. It is 
nearing completion of review of applications related to the second 
tranche. But a process for the third tranche hasn't even been finalized 
yet. And the announcement of a fourth tranche in May foreshadows what 
will be yet another round of applications. Most troublingly, each of 
the 3rd and 4th tranches is more than an order of magnitude larger than 
either the 1st or 2nd tranche in terms of goods impacted. This does not 
bode well for the administration's ability to develop a coherent trade 
agenda.

    How can Virginia businesses have confidence that USTR will work 
expeditiously in developing a process for, and subsequently reviewing, 
deserving applications for exclusions?

    As USTR is only now hiring additional employees to meet the 
inevitable larger volume of exclusion requests, how expeditiously are 
you shaping the hiring and training process for new employees?

    How will the larger tranches impact the length of time USTR takes 
to grant an exclusion?

    Answer. Approximately 35 USTR attorneys, paralegals, trade 
analysts, and contractors with experiences in law, industrial sectors, 
tariff classifications, and data analysis work on the exclusion 
process. USTR is working expeditiously to process all product 
exclusions requests and will continue to issue determinations on 
pending requests on a rolling basis. USTR carefully considers each 
request under the product exclusion criteria set forth in the Federal 
Register notice. USTR takes into account all available information, 
including information submitted by the requester and by other 
interested parties that may comment on specific requests.

    In the coming weeks, we anticipate onboarding additional staff, 
including analysts on detail from the Departments of Treasury, 
Commerce, and Agriculture, that will assist on the exclusions process, 
particularly for List 3. The majority of these personnel work on the 
exclusion process on a full-time basis and collectively have spent 
thousands of hours reviewing and processing exclusion requests.

    USTR presently intends to carry out its section 301 exclusion 
process at our current level of funding. Given the substantial level of 
resources necessary to implement the List 3 exclusion process, USTR 
will closely monitor the exclusion process to assess whether additional 
funding is necessary.

    Question. Developing a coherent agenda to counter China's efforts 
to undermine the rules based trading system--and beyond that, on 
security issues--is something I have been calling for a number of years 
now. Crucially, this means working with allies--and particularly 
regional allies. However, I'm concerned that the administration is 
pursuing an ad hoc trade strategy that has the effect of isolating 
regional partners.

    Did the administration consider the impact of suspending India's 
participation in the GSP, in the midst of a major election cycle in 
India, on securing India's future cooperation with respect to China?

    Secretaries Ross and Pompeo are going to India to meet with new 
Government; will USTR be sending officials too?

    Do you agree with the President's assessment that Vietnam ``takes 
advantage of [the United States] even worse than China''?

    Answer. For years, U.S. exporters have faced significant barriers 
in India to their goods and services while India benefited from 
unilateral trade concessions by the United States. The administration's 
decision to enforce the GSP statutory criteria for market access was 
long overdue. The administration gave due consideration to timing of 
the decision on India's GSP benefits. The President made the final 
decision to withdraw GSP benefits for India well after the Indian 
elections were over and there was a decisive result.

    I have already spoken to Minister Goyal, and a USTR team recently 
visited New Delhi to meet with a variety of Indian government officials 
in an attempt to make progress on the broad range of trade barriers we 
have highlighted.

    Likewise, U.S. businesses face a host of unfair trade barriers in 
Vietnam. The United States has been clear with Vietnam that it has to 
take action to reduce the unsustainable trade deficit, including by 
expanding its imports of goods from the United States and by resolving 
market access restrictions related to goods, services, agricultural 
products, and intellectual property.

    Seeking resolution of trade issues with these partners does not 
preclude cooperation with them on other fronts, particularly in dealing 
with China. We continue to coordinate closely with the State Department 
and other relevant agencies as we seek to prioritize U.S. interests 
globally.

                                 ______
                                 
             Questions Submitted by Hon. Sheldon Whitehouse
    Question. The new environment chapter in the renegotiated NAFTA has 
some positive elements in it--the provisions on marine debris, fish 
subsidies, and combating IUU fishing in particular. But the words on 
paper are only as good as enforcement on the ground and on the water. 
I'm concerned about the enforceability of the agreement broadly, but 
particularly with respect to the environment. Mexico has a lot of work 
to do, and the United States can be a partner in this work. I'd like to 
be a partner with you to identify where enforcement is going to be a 
challenge and how the U.S. can close gaps in terms of monitoring and 
capacity building so that Mexico lives up to its obligations and we 
aren't left with trade disputes over whether Mexico is abiding by its 
commitments.

    Will you commit to working with Congress to determine how we and 
our Mexican partners can best allocate resources to ensuring these 
provisions of the agreement and fully enforced?

    Answer. Yes, I am committed to working with you and other members 
of Congress to ensure effective implementation and enforcement of the 
USMCA environment chapter.

    Question. The entry into force of increased section 301 tariffs on 
List 3 imports from China earlier this month has dramatically increased 
the number of U.S. companies whose products are implicated in the 
ongoing trade war. The Rhode Island Manufacturing Association and many 
RI companies are concerned about their ability to seek tariff relief, 
as well as the fairness and objectivity of the exclusion review 
process. As we wait for the exclusion review process for List 3 items 
to be published in the coming weeks, I'd like to understand why such a 
process should not already exist when new tariffs are announced.

    Will you commit to making public the application process for tariff 
exclusions at the same time that any future section 301 tariffs are 
announced?

    What have you learned from the tariff exclusion application and 
review process for List 1 and List 2 products? How can USTR improve the 
service it provides to U.S. companies when considering such exclusion 
requests?

    Answer. There has been no decision with respect to the proposed 
additional tariffs, including any exclusions process. The President 
will provide his direction at the appropriate time based on the state 
of the negotiations with China.

    The exclusion process for List 3 has started and is in full 
operation. USTR considered the feedback we've received with respect to 
the exclusion process for List 1 and List 2 in developing the exclusion 
process for List 3. As a result, USTR created a new, user-friendly 
online portal that makes the submission process easier and revised the 
request form. USTR is also improving its coordination with the ITC and 
CBP to ensure efficient decision-making. We look forward to continuing 
to consult with the committee on any future exclusion processes.

    Question. Many of the Rhode Island manufacturers that have 
contacted me about tariff exclusions are small businesses with limited 
resources, and are thus disadvantaged by comparison with large 
corporations when collecting information and filling out forms required 
to seek exclusions.

    What steps can USTR take to ensure a level playing field for U.S. 
companies of all sizes seeking relief from tariffs?

    Answer. My office has made considerable efforts to facilitate the 
access of small businesses to the product exclusion process. Those 
efforts include the following:

          Single point of contact and technical support: We designated 
        a single section 301 hotline to take inquiries from the public. 
        USTR trade specialists staff the hotline during business hours 
        and respond to all voicemail messages within 24 hours. We 
        provide a full spectrum of technical services to the public, 
        including helping interested persons submit their exclusion 
        requests, answering questions about the products subject to the 
        additional tariffs, and making referrals to other government 
        agencies on collateral issues. We receive, on average, 20 to 25 
        calls per day from interested persons. Furthermore, we have 
        worked individually with requesters (mostly small businesses) 
        to correct deficiencies in approximately 1,700 requests.

          Collaboration with the Small Business Administration (SBA): 
        We have worked extensively with the SBA throughout the section 
        301 investigation, including on the product exclusion process. 
        For example, we assisted the SBA Office of International Trade 
        on publishing a primer on the recent tariff actions: https://
        www.sba.gov/blogs/what-small-businesses-should-know-about-
        tariffs. We also conducted an agency-wide product exclusion 
        process briefing to SBA district officers from the field 
        offices and briefed State and local level trade officials. At 
        the request of SBA, USTR also created Frequently Asked 
        Questions to address small business concerns. Furthermore, we 
        have advised SBA on additional resources for small business 
        counselors.

          Notice and dissemination of information: We conducted an 
        extensive notice and comment process throughout the 
        investigation that included four public hearings, more than 500 
        witnesses, and approximately 10,000 comments. In addition, we 
        created information papers and a searchable database to 
        facilitate public access to information regarding the products 
        and requests. We published the information and tools on a 
        designated section 301 investigation page: https://ustr.gov/
        issue-areas/enforcement/section-301-investigations.

          Online portal: For List 3, USTR created a new, user-friendly 
        online portal that makes the submission process easier.

    We look forward to continuing to work closely with the committee on 
any future exclusion processes.

                                 ______
                                 
                Question Submitted by Hon. Maggie Hassan
    Question. As you know, in 2015, as part of an overwhelmingly 
bipartisan effort, Congress increased the United States de minimis 
threshold to $800 dollars, and American consumers and small businesses 
have greatly benefited from reducing this friction at our border.

    I am not looking to rehash the NAFTA renegotiations. Rather, I have 
a simple question for you regarding footnote 3 to Article 7.8(1)(f) of 
the Customs and trade facilitation chapter, which, as you know, implies 
that the U.S. could lower our thresholds to match the Canadian and 
Mexican levels.

    Will the implementing legislation the administration sends to 
Congress include language that lowers our threshold? If so, will this 
language apply only to Canadian and Mexican trade or will it have a 
global application?

    Answer. As noted in the administration's submission to Congress on 
changes to existing law required to bring the United States into 
compliance with the obligations of the USMCA, we identified this as an 
issue for consultation with the Committee on Ways and Means of the 
House and the Committee on Finance of the Senate. These consultations 
are underway, and I look forward to working with you and other members 
on this important issue.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    The Finance Committee meets this morning to discuss the 
administration's trade agenda.

    First, on China. The President likes to say that ``trade wars are 
good and easy to win.'' The situation on the battlefield says 
otherwise.

    China's market is more closed off to American-made goods than 
before the trade war began. The President's next escalation will 
directly raise the cost of everyday goods in America, and he's 
signaling that he'll betray our national security and let Huawei off 
the hook if China helps him save face.

    There's no question that confronting China's trade ripoffs was long 
overdue. The Chinese Government and state-owned enterprises have gotten 
away with strong-arming American businesses, stealing IP, and 
undercutting American jobs for too long. But this needs to be handled 
differently. Rather than chaos, what's needed is a well-coordinated, 
international effort led by the U.S. to crack down on China's abuses. 
Instead, the President's actions have driven away our allies, and there 
is no discernable strategy guiding the way forward.

    Some have attempted to focus our efforts directly where China is 
coming after our economic strengths--highly technical manufacturing and 
innovation. Ambassador Lighthizer has laid out that type of approach to 
this committee in the past. But those plans get knocked off course by 
hail storms of tweets sent while the President is watching his morning 
television.

    As a result of this mismanagement on trade, the American people are 
faced with the prospect that everyday life in this country will become 
more expensive and less secure.

    The next round of tariffs the President is considering would drive 
up the price of consumer goods sitting on shelves across the country by 
as much as 25 percent. Millions and millions of families will begin 
back-to-school shopping in a matter of weeks--school uniforms, gym 
clothes, sneakers, bookbags, pencils, notebooks, you name it. With new 
tariffs in place, Mom and Dad might discover the amount they budgeted 
only goes 80 percent as far as they expected.

    And then there's the issue of Huawei. Huawei poses a genuine spying 
risk to the United States and our allies. Allowing its equipment to be 
used in our telecom infrastructure would compromise our security. 
That's the opinion of national security experts outside the government 
and in key Federal agencies.

    Even the President seemed to get it. At a recent White House event, 
he said of Huawei, ``You look at what they've done from a security 
standpoint, from a military standpoint, it's very dangerous.'' But in 
his very next sentence the President said, ``It's possible that Huawei 
even would be included in some kind of a trade deal.''

    So right out in the open, the President is telling China's 
spymasters that he's willing to give away America's national security 
for a face-saving trade deal. This is not some academic concern. This 
is a real threat. But rather than holding our national security 
interests above all else, the President seems most interested in 
getting splashy trade headlines.

    Now I'll turn briefly to the Western Hemisphere. I've long said 
that NAFTA was a product of a different economic era, and it's past 
time for an overhaul. The President campaigned on ripping up existing 
trade deals, but the new NAFTA sure resembles the old one.

    That said, there are areas of meaningful progress. It goes further 
than before on digital trade and state-owned enterprises. It takes a 
modernized approach to Customs and duty evasion. I commend Ambassador 
Lighthizer for obtaining some strong outcomes in the labor and 
environment chapters.

    But particularly when it comes to enforcement, there's some hard 
work left to be done. Commitments from other countries aren't any good 
if there's no way of holding those countries to them. The new NAFTA 
retains a weak enforcement system from the old NAFTA, which was too 
easy on trade cheats. That's a bad deal for American workers, 
particularly the enforcement of labor obligations.

    Senator Brown and I have offered some solutions. I'm hopeful and 
optimistic that, with some bipartisan work, those are issues that can 
be resolved.

    In the meantime, there is no way to justify pulling out of the 
current NAFTA, since doing so would accomplish nothing except economic 
pain here at home.

    I'm looking forward to discussing these issues and more with 
Ambassador Lighthizer this morning, and I thank him for joining the 
committee.

                                 ______
                                 

                             Communications

                              ----------                              


                    American Farm Bureau Federation

                  600 Maryland Avenue, SW, Suite 1000W

                          Washington, DC 20024

                            p. 202-406-3600

                            f. 202-406-3606

                          https://www.fb.org/

U.S. Agriculture and Trade

There are deepening concerns for farmers and ranchers across the 
country due to the impacts of the multiple tariffs on agricultural 
exports and their negative impact on farm income and the future of 
farming and ranching.

America Farm Bureau urges the Administration and Congress to work to 
resolve trade imbalances through negotiations. Tariffs are not the 
answer and trade wars directly harm agricultural exports. We need to 
grow our export markets. At least 20 cents of every dollar in farm 
income comes from exports.

Our farmers are facing a difficult financial situation:

      Since 2014, farm income has fallen 52 percent. Now, farmers are 
dealing with depressed commodity markets because of the lack of free 
and open trade and the impact of tariffs.

      Throughout history, some farmers have survived by expanding 
their operations. Today, that option is nearly impossible for many 
because of the lack of qualified labor.

Agriculture needs consistent trade policies that will show the world 
that the U.S. can pass a trade agreement. Let's start with approving 
and ratifying the U.S.-
Mexico-Canada Agreement, which will bring real gains for agriculture in 
the North American market. The U.S. must also work quickly to complete 
a trade agreement with Japan and finish a deal with China.

Tariff Impacts

      Tariffs have depressed crop prices across the board, and some 
commodities, like soybeans, have been especially depressed due to lost 
sales to China.U.S. agricultural exports to China have declined 
dramatically from $23 billion in 2017 to $9 billion in 2018. The 
forecast for exports to China remains bleak for 2019 at $9 billion. 
China has very quickly dropped from being our number two export 
destination to our fifth largest destination.

      Agriculture has traditionally been a bright spot in our nation's 
overall balance of trade. In 2018 we exported more than $140 billion in 
farm products, which is $21 billion more than we imported. As it now 
stands, we are quickly losing our place as a leader in the global 
marketplace, and our policies are signaling that we cannot be trusted 
as a trading partner. Our farmers no longer have constant access to the 
markets they depend upon for survival.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


U.S. Agriculture and Retaliation

U.S. agriculture exported more than $140 billion of products world-wide 
in 2018. More than 20 percent of overall agricultural production goes 
to export markets, with many sectors, such as cotton and tree nuts, 
primarily dependent upon export markets.

Trade actions by the U.S. on steel and aluminum imports has resulted in 
retaliation against U.S. agricultural exports. On April 2, 2018, China 
began imposing 25-
percent tariffs on U.S. pork products and 15-percent tariffs on tree 
nuts (shelled and in-shell) including almonds, walnuts and pecans; 
fruit (fresh and dried) including apples, cherries, grapes, oranges and 
lemons; wine; ginseng; denatured ethanol and other products. This 
action was in direct response to increased U.S. steel and aluminum 
tariffs on China that went into effect on March 23, 2018. These tariffs 
by China have impacted approximately $2 billion of U.S. food and 
agricultural exports.

In addition, the imposition of tariffs on $50 billion of imports from 
China in July and August 2018 also brought immediate retaliation. For 
agriculture, this list includes soybeans, wheat, beef, pork, poultry, 
com, sorghum, cotton, tree nuts, fruit, wine, tobacco and other 
products. This action by China continues to negatively affect farmers 
and ranchers across America.

China now has applied successive retaliatory tariffs on many 
agricultural products, such as pork. Unfortunately, these multiple 
tariffs have resulted in some U.S. agricultural products facing 
retaliatory tariffs in the range of 40 to 50 percent. These tariff 
actions have resulted in large cumulative tariffs that have now priced 
U.S. agricultural products out of foreign markets.

The tariffs on $200 billion of Chinese imports has also brought 
retaliatory tariffs on additional U.S. agricultural exports to China. 
Now, over 95 percent of all U.S. agricultural and food exports to China 
are subject to increased retaliatory tariffs.

We understand that other countries, particularly China, have not played 
fairly, and we respect the need to remedy those situations. The problem 
is, those countries know just where to punch us back in a dispute--
agricultural products. Through no fault of agriculture, farmers and 
ranchers end up being used for leverage.

The agriculture industry has not shared in the current economic 
uptrend, and the reduction in income due to long-term trade disputes 
only make matters worse for family farms.

Our members are starting to ask, what is this Administration's exact 
goal? Is there a strategy that will benefit farmers and ranchers? 
Obviously, none of us know the time frame, and the months of 
uncertainty are harmful to the economic situation of farmers.

Rather than fixing all the problems at once, we suggest a more targeted 
approach. First, we support the U.S.-Mexico-Canada Agreement and urge 
Congress to work with the Administration to pass the agreement as soon 
as possible. Secondly, agriculture also needs agreements with China, 
Japan and the European Union completed. We are losing important markets 
to our competitors who now have more favorable tariff treatment.

American agriculture has long supported a rules-based international 
trading system, through the agreements in the WTO. As reform is being 
discussed for the WTO, we must maintain the market-opening 
opportunities that are due to enforceable international rules

Conclusion

We urge our trade officials to engage in discussions to resolve trade 
concerns before resorting to tariffs. Adding on tariffs, such as those 
targeting the many countries that export automobiles and automotive 
parts to the U.S., and on an expanded list of Chinese imports, will 
result in hurtful retaliation against U.S. agricultural exports.

We must get back to the negotiating table and get these issues 
resolved. If we cannot do that, the consequences are increasingly dire 
for our nation's family farms and ranches.

                                 ______
                                 
                        Center for Fiscal Equity

                      14448 Parkvale Road, Suite 6

                          Rockville, MD 20853

                      [email protected]

                    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.

Trade negotiations with China, Japan, the EU, and the UK threatening 
tariffs have taken on the character of economic gunboat diplomacy, but 
without the Navy. These occur because the President is ill-equipped by 
his background as a businessman to work cooperatively, which is the 
essence of governance in a free society. He has a freer hand in trade 
negotiations. Sadly, his experience as a CEO has not served the nation 
well. The modus operandi of most executives is to break things in order 
to be seen fixing them. This must stop. The public is not amused, 
including the Chamber of Commerce, farmers and the stock and commodity 
markets.

The solution to these problems lies not with oversight of trade policy 
but through using criminal contempt proceedings against the leadership 
of the Internal Revenue Service, the Secretary of the Treasury and 
anyone in the White House, possibly, if not probably, including the 
President for not releasing the tax information requested by the 
Chairman. The penalties for refusing to do so are quite clear and the 
opinion that a sitting President cannot be indicted can no way apply to 
this matter.

Today's witness is not likely to say his boss is a vainglorious idiot, 
so allow me to. It is well known that in this Administration, 
professional diplomatic expertise is not valued. Mr. Trump prefers to 
shoot from the lip. The incompetence of this president is tragic for 
our ongoing trade policy, which relies on a high degree of 
professionalism and careful work over a period of several 
administrations. NAFTA negotiations and its successor, as well as 
similar free trade agreements are an example of this. The Trans-Pacific 
Partnership was one such effort, but it was derailed by presidential 
politics on both sides. In trade, what is good politics is often not 
good economic policy.

This is not to say that there are not fundamental issues that need to 
be addressed in current and future agreements. We have reservations in 
matters having to do with the U.S.-Mexico-Canada Agreement. Material 
stating our reservations (which should be yours as well, but more 
formally) on both Enforcement and who is allowed to migrate are brought 
forward from our testimony on May 22nd of this year and July 2017 on 
the modernization of NAFTA. There are two other issues we would like to 
address as it relates to NAFTA and to all subsequent trade agreement.

The first is Chapter 19 tribunals. These tribunals put national and 
state sovereignty at the mercy of the interests of multinational 
enterprise. If such enterprise were employee owned, we would see no 
problem. That, however, is not the case. Local workers and the 
environment are put at the mercy of the wealthy few.

The second is visas. Canadian (including refugees from Hong Kong) and 
American citizens can immigrate for one year (renewable) on a NAFTA 
visa. Mexican workers cannot. This is purely racism. If the Congress 
believes there are too many Mexican workers in American fields and 
factories, repeal right to work laws and immigration restrictions. Most 
employers will prefer American workers if they have to pay a union wage 
and operate under safety standards set in collective bargaining. Until 
then, make visa rules uniform and apply them to workers already here. 
If this does not happen, someone may yet raise an equal protection case 
in our courts, which will also give us a test of the constitutionality 
of the Chapter 19 tribunals.

WTO participation, like NAFTA/USMCA, have issues regarding extra-
territorial regulation of American business interest. The interesting 
question is who is regulating who? We explored this in comments to the 
Senate Finance Committee on March 22nd of this year. You can find these 
comments in Attachment One.

The interaction of tax and trade is worthy of mention. Attachment Two 
contains our revised tax reform proposals. Two elements of these 
proposals are discussed below.

Consumption taxes could have a big impact on workers, industry and 
consumers. Canada has a Goods and Services or Value-Added Tax (VAT), as 
does Mexico. In our tax reform proposal, we refer to such taxes as an 
Invoice or I-VAT. Such taxes are zero rated at the border, so American 
consumers benefit while our lack of these taxes means that Canadian and 
Mexican consumers pay our taxes indirectly while getting none of the 
associated benefits. This essentially means they often shop elsewhere, 
which is not good for our workers or industry.

Enacting an I-VAT is far superior to a tariff. The more government 
costs are loaded onto an I-VAT the better. Indeed, if the employer 
portion of Old-Age and Survivor's Insurance, as well as all of 
disability and hospital insurance are decoupled from income and 
credited equally and personal retirement accounts are not used, then 
there is no reason not to load them onto an I-VAT. This tax is zero 
rated at export and fully burdens imports. Seen another way, to not put 
as much taxation into VAT as possible is to enact an unconstitutional 
export tax. Adopting an I-VAT is superior to its week sister, the 
Destination Based Cash Flow Tax that was contemplated for inclusion in 
the TCJA. It would have run afoul of WTO rules on taxing corporate 
income. I VAT, which taxes both labor and profit, does not.

The second tax applicable to trade is a Subtraction VAT or S-VAT. This 
tax is designed to benefit the families of workers through direct 
subsidies, such as an enlarged child tax credit, or indirect subsidies 
used by employers to provide health insurance or tuition reimbursement, 
even including direct medical care and elementary school tuition. As 
such, S-VAT cannot be border adjustable. Doing so would take away 
needed family benefits. As such, it is really part of compensation. 
While we could run all compensation through the public sector.

The S-VAT could have a huge impact on long term 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). 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. Attachment Three further 
discusses employee ownership.

Over time, ownership will change the economies of the nation's 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).

In the long run, 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.

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--Senate Finance, ``Approaching 25: The Road Ahead for 
the World Trade Organization,'' March 12, 2019

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 are 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.

Attachment Two--Tax Reform, Center for Fiscal Equity, May 22, 2019

For the past 8 years, we have had a standard plan with four elements 
followed by explanatory paragraphs. The following is a different 
presentation with the same concepts.

Individual payroll taxes. These are optional taxes for Old-Age and 
Survivors Insurance after age 60 (or 62). These will be collection of 
these taxes occurs if an income sensitive retirement income is deemed 
necessary for program acceptance. The ceiling should be lowered to 
reduce benefits paid to wealthier individuals and a floor should be 
established so that Earned Income Tax Credits are no longer needed. 
Subsidies for single workers should be abandoned in favor of radically 
higher minimum wages.

Income Surtaxes. Individual income taxes, which exclude business taxes, 
above an individual standard deduction of $50,000 per year. It will 
include initial cash distributions from inheritance (except those from 
the sale of estate assets, see below). This tax will fund net interest 
on the debt (which will no longer be rolled over into new borrowing), 
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the 
result of battlefield injuries, including mental health and addiction 
and eventual debt reduction.

Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes 
and the estate tax. It will apply to assets held for a longer period of 
time, exercised options, inherited assets and the profits from short 
sales. Tax payments for option exercises and inherited assets will be 
reset, with prior tax payments for that asset eliminated so that the 
seller gets no benefit from them. In this perspective, it is the 
owner's increase in value that is taxed. Free assets to the seller will 
be counted as such. As with any sale of liquid or real assets, sales to 
a qualified broad-based Employee Stock Ownership Plan will be tax free. 
These taxes will fund the same spending items as income or S-VAT 
surtaxes. This tax will end Tax Gap issues owed by high-income 
individuals.

Subtraction Value-Added Tax (S-VAT). These are employer paid Net 
Business Receipts Taxes that allow multiple rates for higher incomes, 
rather than collection of income surtaxes. They are also used as a 
vehicle for tax expenditures including healthcare (if a private 
coverage option is maintained), veterans' health care for non-
battlefield injuries, educational costs borne by employers in lieu of 
taxes as either contributors, for employee children or for workers 
(including ESL and remedial skills) and an expanded child tax credit.

The last allows ending state administered subsidy programs and 
discourages abortions, and as such enactment must be scored as a must 
pass in voting rankings by pro-life organizations (and feminist 
organizations as well). An inflation-adjustable credit should reflect 
the cost of raising a child through the completion of junior college or 
technical training. To assure child subsidies are distributed, S-VAT 
will not be border adjustable.

The S-VAT is also used for personal accounts in Social Security, 
provided that these accounts are insured through an insurance fund for 
all such accounts, that accounts go toward employee ownership rather 
than for a subsidy for the investment industry. Both employers and 
employees must consent to a shift to these accounts, which will occur 
if corporate democracy in existing ESOPs is given a thorough test. So 
far it has not.

Regardless, S-VAT funded retirement savings will be credited equally 
for every worker, which allows for funding both the current program and 
personal accounts and lessens the need for bend points in benefit 
calculations. It also has the advantage of drawing on both payroll and 
profit, making it less regressive.

Invoice Value-Added Tax (I-VAT) Border adjustable taxes will appear on 
purchase invoices. The rate varies according to what is being financed. 
If Medicare for All does not contain offsets for employers who fund 
their own medical personnel or for personal retirement accounts, both 
of which would otherwise be funded by an S-VAT, then they would be 
funded by the I-VAT to take advantage of border adjustability. I-VAT 
also forces everyone, from the working poor to the beneficiaries of 
inherited wealth, to pay taxes and share in the cost of government.

Enactment of both the A-VAT and I-VAT ends the need for capital gains 
and inheritance taxes (apart from any initial payout). This tax would 
take care of the low-
income Tax Gap.

I-VAT will fund domestic discretionary spending, disability and 
survivors insurance (which will no longer be tied to income and shall 
be raised to the increased minimum wage rate and adjusted for 
inflation), and OASI employer contributions if personal accounts are 
not enacted and non-nuclear, non-deployed military spending, possibly 
on a regional basis. Regional I-VAT would both require a constitutional 
amendment to change the requirement that all excises be national and to 
discourage unnecessary spending, especially when allocated for 
electoral reasons rather than program needs.

As part of enactment, gross wages will be reduced to take into account 
the shift to S-VAT and I-VAT, however net income will be increased by 
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will 
replace pass-through and proprietary business and corporate income 
taxes.

Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility, 
which allows comparison shopping based on carbon content, even if it 
means a more expensive item with lower carbon is purchased. C-VAT would 
also replace fuel taxes. It will fund transportation costs, including 
mass transit, and research into alternative fuels (including fusion). 
This tax would not be border-adjustable.

Attachment Three--Employee Ownership From Improving Retirement Security 
for America's Workers, Center for Fiscal Equity, June 6, 2018

In the January 2003 issue of Labor and Corporate Governance, we 
proposed that Congress should equalize the employer contribution based 
on average income rather than personal income. It should also increase 
or eliminate the cap on contributions. The higher the income cap is 
raised, the more likely it is that personal retirement accounts are 
necessary. A major strength of Social Security is its income 
redistribution function.

We suspect that much of the support for personal accounts is to subvert 
that function--so any proposal for such accounts must move 
redistribution to account accumulation by equalizing the employer 
contribution.

We propose directing personal account investments to employer voting 
stock, rather than an index funds or any fund managed by outside 
brokers. There are no Index Fund billionaires (except those who operate 
them).

People become rich by owning and controlling their own companies. 
Additionally, keeping funds in-house is the cheapest option 
administratively. I suspect it is even cheaper than the Social Security 
system--which operates at a much lower administrative cost than any 
defined contribution plan in existence.

If employer voting stock is used, the Net Business Receipts Tax/
Subtraction VAT would fund it. If there are no personal accounts, then 
the employer contribution would be VAT funded.

Safety is, of course, a concern with personal accounts. Rather than 
diversifying through investment, however, we propose diversifying 
through insurance. A portion of the employer stock purchased would be 
traded to an insurance fund holding shares from all such employers. 
Additionally, any personal retirement accounts shifted from employee 
payroll taxes or from payroll taxes from non-corporate employers would 
go to this fund.

The insurance fund will save as a safeguard against bad management. If 
a third of shares were held by the insurance fund than dissident 
employees holding 25.1% of the employee-held shares (16.7% of the 
total) could combine with the insurance fund held shares to fire 
management if the insurance fund agreed there was cause to do so. Such 
a fund would make sure no one loses money should their employer fail 
and would serve as a sword of Damocles' to keep management in line. 
This is in contrast to the Cato/PCSSS approach, which would continue 
the trend of management accountable to no one. The other part of my 
proposal that does so is representative voting by occupation on 
corporate boards, with either professional or union personnel providing 
such representation.

The suggestions made here are much less complicated than the current 
mix of proposals to change bend points and make OASI more of a needs-
based program. If the personal account provisions are adopted, there is 
no need to address the question of the retirement age. Workers will 
retire when their dividend income is adequate to meet their retirement 
income needs, with or even without a separate Social Security program.

No other proposal for personal retirement accounts is appropriate. 
Personal accounts should not be used to develop a new income stream for 
investment advisors and stock traders. It should certainly not result 
in more ``trust fund socialism'' with management that is accountable to 
no cause but short term gain. Such management often ignores the long-
term interests of American workers and leaves CEOs both over-paid and 
unaccountable to anyone but themselves.

If funding comes through an S-VAT, there need not be any income cap on 
employer contributions, which can be set high enough to fund current 
retirees and the establishing of personal accounts. Again, these 
contributions should be credited to employees regardless of their 
salary level.

Conceivably a firm could reduce their S-VAT liability if they made all 
former workers and retirees whole with the equity they would have 
otherwise received if they had started their careers under a reformed 
system. Using Employee Stock Ownership Programs can further accelerate 
that transition. This would be welcome if ESOPs became more democratic 
than they are currently, with open auction for management and executive 
positions and an expansion of cooperative consumption arrangements to 
meet the needs of the new owners.

The new House Majority should not run away from this proposal to enact 
personal accounts. If the proposals above are used as conditions for 
enactment, we suspect that it won't have to. The investment sector will 
run away from them instead and will mobilize the next version of the 
Tea Party against them. Let us hope that the rise of Democratic 
Socialism in the party invests workers in the possibilities of employee 
ownership.

                                 ______
                                 
                  Electronic Transactions Association

                     1620 L Street, NW, Suite 1020

                          Washington, DC 20036

                              202-828-2635

                       https://www.electran.org/

June 18, 2019

The Honorable Chuck Grassley        The Honorable Ron Wyden
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
Washington, DC 20515                Washington, DC 20515

Dear Chairman Grassley and Ranking Member Wyden.

On behalf of the members of the Electronic Transactions Association 
(ETA), I am writing in support of the United States-Mexico-Canada 
Agreement (USMCA). Ratifying the USMCA would strengthen U.S. cross 
border digital trade leadership and advance electronic payment products 
and services ability to grow platforms and services that enable 
engagement with the digital economy.

As Congress considers the many important provisions in the USMCA, we 
urge lawmakers to take into account the significance of the digital 
trade rules on the United States economy and to take the necessary 
steps to ratify the USMCA and start receiving the myriad of benefits. 
Likewise, ETA is working with the Canadian government and asking them 
to take the appropriate steps to ratify the trade agreement.

ETA is the leading trade association for the payments industry, 
representing over 500 companies that offer electronic transaction 
processing products and services; its membership spans the breadth of 
the payments industry to include independent sales organizations, 
payments networks, financial institutions, transaction processors, 
mobile payments products and services, payments technologies, equipment 
suppliers, and online small business lenders.

Digital technology drives global commerce and ensures payments happen 
on time and in the right amount. The USMCA promotes and sets a new and 
important precedent for modem trade rules that reflect the importance 
of data, technology, and innovation in the United States--and the North 
American--economy.

Businesses and entrepreneurs in every American state and every 
community use the Internet to sell and export their goods and services 
across the globe and the USMCA provides strong provisions in the 
agreement allow for the free flow of information across borders. 
Additionally, the USMCA encourages governments to release non-sensitive 
data in an open format so companies have the opportunity to build 
additional applications and services. This is essential to the vibrancy 
of the international economy and ensures American businesses and 
entrepreneurs can easily access data and provide services to partners 
in Canada and Mexico.

The USMCA also limits government restrictions on information flow 
across borders, recognizing that wide availability of information leads 
to more trade and economic growth. By barring any country from 
requiring any sector to use or locate computing facilities in their 
territory as a condition for conducting business, this provision will 
allow companies to store their data wherever they choose. Reducing the 
cost and regulatory burdens of doing business in other countries and 
ensuring their data isn't vulnerable to attack. Leveraging the global, 
interconnected nature of the Internet is beneficial to all consumers--
especially for United States small businesses expanding into new 
markets.

The USMCA reflects the important principle that consumers' privacy 
should be protected no matter what country and individual or business 
is located. The USMCA promotes flexible but strong privacy laws and 
cybersecurity standards to protect people's data without prohibiting 
the movement of data across borders.

Ratification of the USMCA would be a boost for the American economy and 
bring predictable rules for all companies that use electronic payments 
in North America. The United States has an important opportunity to 
continue to be the world's leader in global commerce by passing the 
USMCA. We urge the Administration and Congress to work together to do 
so.

We appreciate your leadership on this important issue. If you have any 
questions, please feel free to contact me directly at 
[email protected].

Sincerely,

Scott Talbott
Senior Vice President of Government Relations
Electronic Transactions Association

                                 ______
                                 
                     Flexible Packaging Association

                 185 Admiral Cochrane Drive, Suite 105

                          Annapolis, MD 21401

                           Tel (410) 694-0800

                           Fax (410) 694-0900

                       https://www.flexpack.org/

    My name is Alison Keane, and I am the President and CEO of the 
Flexible Packaging Association (FPA). FPA is the voice of U.S. 
manufacturers of flexible packaging and their suppliers. The 
association's mission is connecting, advancing, and leading the 
flexible packaging industry. Flexible packaging represents over $31 
billion in annual sales in the U.S. and is the second largest, and one 
of the fastest growing segments of the packaging industry. The industry 
employs over 80,000 workers in the United States. Flexible packaging is 
produced from paper, plastic, film, aluminum foil, or any combination 
of these materials, and includes bags, pouches, labels, liners, wraps, 
rollstock, and other flexible products.

    On behalf of the FPA membership, I am urging you to support the 
U.S.-Mexico-Canada Agreement (USMCA). This agreement is critical to our 
economic future because it will preserve and strengthen U.S. trade ties 
to Canada and Mexico, our two biggest trading partners. FPA was very 
pleased with the decision by the Administration to eliminate the steel 
and aluminum tariffs on both countries and their responding elimination 
of the retaliatory tariffs. Aluminum, specifically aluminum foil, is 
particularly important to the FPA membership, as it is a critical 
component in food and medical device packaging, providing the sterile 
barrier necessary to keep these products safe and shelf-stable.

    This packaging includes everyday food and beverage products such as 
candy, salty snacks, yogurt, and beverages; as well as health and 
beauty items and pharmaceuticals, such as aspirin, shampoo, and shaving 
cream. Aluminum foil provides the barrier protection from oxygen, 
light, and bacteria that these products need to ensure stable shelf 
life and freshness. Aluminum foil is also used by the flexible 
packaging industry for medical device packaging to ensure that the 
products packaged, such as absorbable sutures, human tissue, and 
artificial joints, maintain their efficacy at the time of use.

    Aluminum foil used by the flexible packaging industry is not 
manufactured in the U.S. in the quantities and qualities needed. 
Failure to invest and quality lapses, including gauge, width, and lack 
of appropriate alloys all contribute to the fact that the U.S. 
producers of aluminum foil are not able to serve the U.S. flexible 
packaging industry. For many packaging manufacturers, those that did 
not receive exemptions from the tariffs, the damage from them and the 
reciprocal trade actions far outweighs any benefit that may have accrue 
to the U.S. aluminum industry. Thus, FPA supports approval of the USMCA 
in order to continue to provide a level playing field for all 
manufacturers and their trading partners.

    The U.S. Chamber of Commerce reports that more than 12 million 
American jobs depend on trade with Canada and Mexico. U.S. 
manufacturer's export more made-in America manufactured goods to our 
North American neighbors than they do to the next 11 largest export 
markets combined. The USMCA will help U.S. companies and the workers 
they employ compete in our top two export markets. The case for the 
agreement's approval is strong. We urge Congress to approve USMCA as 
soon as possible.

    Thank you.

                                 ______
                                 
                                TechNet

                     805 15th Street, NW, Suite 708

                          Washington, DC 20005

                         Telephone 202-650-5100

                            Fax 202-650-5118

                            www.technet.org

June 18, 2019

The Honorable Chuck Grassley (R-IA) The Honorable Ron Wyden (D-OR)
Chairman                            Ranking Member
U.S. Senate                         U.S. Senate
Committee on Finance                Committee on Finance
135 Hart Senate Office Building     221 Dirksen Senate Office Building
Washington, DC 20510                Washington, DC 20510

RE: Comments of TechNet for the June 18, 2019 hearing of the Senate 
Committee on Finance titled, ``The President's 2019 Trade Policy Agenda 
and the United States-Mexico-Canada Agreement''

Dear Chairman Grassley, Democratic Leader Wyden, and Distinguished 
Members of the Committee on Finance:

As the committee meets today for a hearing to discuss the 2019 trade 
agenda, we welcome this opportunity to express the tech industry's 
support for the U.S.-Mexico-Canada Agreement (USMCA) and encourage 
Congress to ratify it this year.

TechNet is the national, bipartisan network of innovation economy CEOs 
and senior executives. Our diverse membership includes dynamic American 
businesses ranging from startups to the most iconic companies on the 
planet and represents over three million employees and countless 
customers in the fields of information technology, e-commerce, the 
sharing and gig economies, advanced energy, cybersecurity, venture 
capital, and finance.

Much has changed in our economy since the North American Free Trade 
Agreement (NAFTA) was ratified 24 years ago. Since then, the Internet 
has revolutionized the way we do business, and digital trade has become 
a major driver of economic growth worldwide. Online platforms have 
helped local American entrepreneurs and small businesses reach new 
markets and grow, tearing down barriers to entry that once prevented 
them from growing beyond their communities. Advancements in cloud 
technologies have facilitated the transfer of data, goods, and services 
at speeds once thought unimaginable, a phenomenon that has generated 
enormous economic value: the U.S. runs a $159 billion trade surplus in 
digitally-deliverable services, and these services are responsible for 
7.1 percent of U.S. gross domestic product (GDP) and nearly 6.7 million 
American jobs.

When the Trump Administration announced its intention to renegotiate 
NAFTA in May 2017, we saw an opportunity to update the trade agreement 
to account for the many transformative changes that have upended global 
commerce. A little more than a year later, the leaders from the U.S., 
Canada, and Mexico realized this goal with the signing of the USMCA on 
November 30, 2018. The USMCA makes significant progress in eliminating 
barriers to digital trade and promoting economic growth and 
opportunities that benefit American workers, businesses, and 
entrepreneurs. We fully support its ratification.

We understand that some lawmakers have outstanding concerns they want 
resolved before they can support the agreement, and we encourage 
members of both parties and the Trump Administration to continue 
working in good faith to accomplish this. We were encouraged that, in 
April, one important concern was addressed by the Mexican government's 
passage of labor reform legislation.

As you consider this issue, below are several reasons we support the 
USMCA because it will promote economic growth and opportunities that 
benefit American workers, businesses, and entrepreneurs.

A top objective of any trade agreement entered into by the U.S. must be 
to reduce tariff and non-tariff barriers to information and 
communications technology products, services, and investments. We 
support the USMCA's provisions allowing for freer trade in 
remanufactured goods, greater flexibility in approaches to 
telecommunications regulation, light-touch approaches to value-added 
telecommunications services, and safeguards to help protect technology 
choice. Greater economic competition and growth will also be enhanced 
in this agreement by binding Mexico to its 2013 telecommunications 
reforms.

In the modern digital economy, protections for the free flow of data 
across borders, strong protections for intellectual property (including 
source code), and safeguards against intermediary liability are 
essential. We support the USMCA's provisions restricting the three 
governments' ability to constrain cross-border data flows, the absence 
of duties on digital products, improved protections for intellectual 
property rights (including criminal and civil prosecution of trade 
secret misappropriation), allowing products with commercial encryption 
to be traded freely, and improved market access for trade in all 
services, including those that are digitally delivered. Together, these 
measures will facilitate digital trade between the U.S., Mexico, and 
Canada and result in greater economic growth for our nations' digital 
economies in the years to come.

In the nearly two and a half decades since NAFTA was ratified, global 
supply and value chains have become highly prevalent in international 
production and trade. They have proven to be essential for global 
innovation, as the production process for complex technology products 
is increasingly spread out across several countries and, in some cases, 
continents. Innovators face challenges and higher costs, however, when 
these chains are disrupted by localization requirements, including 
forced technology and investment conditions that discriminate against 
U.S. interests. The USMCA preempts this potential problem and 
streamlines the supply and value chains in North America in part by 
prohibiting governments from requiring localization of communications 
infrastructure.

Each new trade agreement is an opportunity to modernize customs systems 
in ways that facilitate trade. For the digital economy, customs 
modernization and the promotion of open payment systems that support 
digital trade flows, particularly by small and medium-sized enterprises 
(SMEs), are especially important. The USMCA succeeds on both counts. 
One critical way the agreement enhances customs-related trade 
facilitation is by providing for advanced rulings and requiring 
governments to post trade documentation online.

It is important that trade agreements address cybersecurity, given the 
economic harm that cyber-attacks can inflict. In 2016, more than four 
billion records were stolen by cyber-criminals, and cyber-crimes were 
estimated to cost the American economy between $57 and $109 billion. By 
the end of 2019, cybercrimes are expected to be a $2.1 trillion problem 
for the global economy. As our three nations are poised to become even 
more integrated as a result of the USMCA, we must be prepared to 
protect against the cyberthreats we will continue to face. We are 
encouraged that the USMCA promotes the use of risk-based approaches to 
cybersecurity and requires governments to recognize telecommunications 
certification test reports from each other's countries. This is an 
important step to ensuring the proper protocols are in place to protect 
the flow of information across our borders.

In sum, the USMCA makes important progress in eliminating barriers to 
digital trade and promoting economic growth and opportunities that 
benefit American workers, businesses, and entrepreneurs. It represents 
a significant upgrade from NAFTA on issues important to the digital 
economy, including protections for intellectual property rights, the 
facilitation of cross-border data flows, and cybersecurity standards, 
among others.

Thank you for considering our industry's perspective. We welcome the 
opportunity to serve as a resource as the committee, its members, and 
both the House and Senate chart a path forward on the USMCA.

Sincerely,

Linda Moore
TechNet President and CEO

CC: Senator Michael Bennet (D-CO)
    Senator Sherrod Brown (D-OH)
    Senator Richard Burr (R-NC)
    Senator Maria Cantwell (D-WA)
    Senator Ben Cardin (D-MD)
    Senator Tom Carper (D-DE)
    Senator Bob Casey (D-PA)
    Senator Bill Cassidy (R-LA)
    Senator John Cornyn (R-TX)
    Senator Catherine Cortez Masto (D-NV)
    Senator Mike Crapo (R-ID)
    Senator Steve Daines (R-MT)
    Senator Mike Enzi (R-WY)
    Senator Maggie Hassan (D-NH)
    Senator Johnny Isakson (R-GA)
    Senator James Lankford (R-OK)
    Senator Bob Menendez (D-NJ)
    Senator Rob Portman (R-OH)
    Senator Pat Roberts (R-KS)
    Senator Tim Scott (R-SC)
    Senator Debbie Stabenow (D-MI)
    Senator John Thune (R-SD)
    Senator Pat Toomey (R-PA)
    Senator Mark Warner (D-VA)
    Senator Sheldon Whitehouse (D-RI)
    Senator Todd Young (R-IN)



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