[Senate Hearing 116-446]
[From the U.S. Government Publishing Office]
S. Hrg. 116-446
THE UNITED STATES-MEXICO-CANADA AGREEMENT
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JULY 30, 2019
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
44-682 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
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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
WITNESSES
Barnett, Paula, owner, designer, maker, Paula Elaine Barnett
Jewelry, Brownsville, OR....................................... 6
Blunt, Hon. Matt, president, American Automotive Policy Council,
Washington, DC................................................. 8
Collins, James C., Jr., chief executive officer, Corteva
Agriscience, Wilmington, DE.................................... 10
Leathers, Derek, president and chief executive officer, Werner
Enterprises, Inc., Omaha, NE................................... 11
Vilsack, Hon. Thomas J., president and chief executive officer,
U.S. Dairy Export Council, Arlington, VA....................... 13
Wessel, Michael, Staff Chair, Labor Advisory Committee for Trade
Negotiations and Trade Policy; and president, The Wessel Group,
Washington, DC................................................. 14
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Barnett, Paula:
Testimony.................................................... 6
Prepared statement........................................... 45
Responses to questions from committee members................ 46
Blunt, Hon. Matt:
Testimony.................................................... 8
Prepared statement........................................... 48
Responses to questions from committee members................ 49
Brown, Hon. Sherrod:
Letters to Richard J. Kramer, president and CEO, Goodyear
Tire and Rubber Company.................................... 52
Collins, James C., Jr.:
Testimony.................................................... 10
Prepared statement........................................... 55
Responses to questions from committee members................ 58
Grassley, Hon. Chuck:
Opening statement............................................ 1
Prepared statement........................................... 61
Leathers, Derek:
Testimony.................................................... 11
Prepared statement........................................... 63
Responses to questions from committee members................ 71
Vilsack, Hon. Thomas J.:
Testimony.................................................... 13
Prepared statement........................................... 74
Responses to questions from committee members................ 80
Wessel, Michael:
Testimony.................................................... 14
Prepared statement........................................... 83
Responses to questions from committee members................ 92
Wyden, Hon. Ron:
Opening statement............................................ 3
Prepared statement........................................... 94
Communications
Center for Fiscal Equity......................................... 97
Electronic Transactions Association.............................. 98
Florida Department of Agriculture and Consumer Services.......... 99
National Association of State Departments of Agriculture......... 100
Trade Works for America.......................................... 102
THE UNITED STATES-MEXICO-CANADA AGREEMENT
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TUESDAY, JULY 30, 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, Roberts, Cornyn, Thune, Portman,
Toomey, Scott, Young, Wyden, Cantwell, Menendez, Carper,
Cardin, Brown, Casey, Warner, Whitehouse, Hassan, and Cortez
Masto.
Also present: Republican staff: Nasim Fussell, Chief
International Trade Counsel; Brian Bombassaro, International
Trade Counsel; Mayur Patel, International Trade Counsel; and
Andrew Brandt, International Trade Policy Advisor. Democratic
staff: Sally Laing, Senior International Trade Counsel; Greta
Peisch, Senior International Counsel; and Jayme White, Chief
Advisor for International Competitiveness and Innovation.
OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM
IOWA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
We welcome our witnesses. We are here to have testimony
from a range of industries to tell us about the importance of
the United States-Mexico-Canada Agreement, which we are
referring to as USMCA. We look forward to hearing from our
witnesses about the significance of the agreement to America's
businesses--both small and large--the workers, and the farmers
that we all represent. Thank you for being here.
Mexico and Canada are our country's most important trading
partners. According to the International Trade Commission, for
the year 2017 more than one-third of America's merchandise
exports went to Mexico and Canada. In that year, Mexico and
Canada imported more than half a trillion dollars of American
goods, plus more than $91 billion of American services. For
Iowa, our $6.6 billion of exports to Mexico and Canada
supported 130,000 jobs.
The foundation of our strong trading relationships with
Mexico and Canada has been thus far NAFTA. The United States,
Mexico, and Canada negotiated that agreement between 1990 and
1993. At the time, it was a new standard of trade agreements.
It helped Mexico reform into a market economy. And it enabled
American businesses, workers, farmers, and ranchers to sell our
goods and services in Mexico and Canada without tariffs and
without many non-tariff barriers that for decades had burdened
our ability to compete in those two countries.
Of course the U.S. economy and global trade have changed
dramatically since 1993, and 25 years of experience with NAFTA
have provided valuable lessons. The time for modernizing NAFTA
has come, and that is what USMCA is all about. It sets a new
standard for our trade agreements. For example, once enacted
the agreement will be the first U.S. free trade agreement with
robust chapters dedicated to digital trade, anticorruption,
good regulatory practices, and small and medium-sized
enterprises.
USMCA will set a new benchmark in many other areas as well,
such as free transfer of data across borders, strong rules on
state-owned enterprises, North American content requirements
for preferential treatment, food safety and biotechnology
standards, Customs and trade facilitation, intellectual
property rights protection and enforcement, labor, and
environment.
The USMCA labor chapter squarely addresses workers' rights
in Mexico, and it already has resulted in the overhaul of
Mexico's labor laws. The labor and environmental standards in
the agreement are the most rigorous in any U.S. trade deal and,
unlike with NAFTA, they are in the core of the agreement and
are fully enforceable. USMCA also squarely addresses
longstanding U.S. concerns in the Canadian market, such as
Canadian policies on wheat grading, retail sales of wine, dairy
supply management, and the distribution of U.S. television
programming.
These are substantial improvements from NAFTA. They
represent benefits and new opportunities for Iowans and for
Americans across the board. According to the International
Trade Commission, the agreement will increase real GDP by $68
billion and create 176,000 new American jobs.
Now, that is not to say that every USMCA provision is
perfect. Trade agreements always need to balance the
preferences of different industries, regions, elected leaders,
and stakeholders. Some of my Democratic colleagues in the House
of Representatives have centered their attention on USMCA
outcomes that they view as imperfect.
Surely nobody could consider NAFTA to be better than USMCA.
And nobody--let me emphasize nobody--should dismiss the
importance of a half-trillion-dollar market for U.S.
agriculture products.
I came away from a meeting that I had with Speaker Pelosi
that was very positive, as I heard her words and her attitude
towards USMCA. People want to push and push, but I think we
must be patient as she works through this, and I have
confidence she wants to get to ``yes.''
Besides, I have also supported the ongoing work of the
Speaker's members with Ambassador Lighthizer to clarify
outstanding concerns and identify bipartisan solutions. I have
an open mind to workable ideas and stand ready to consider
possible improvements to the agreement.
For example, I support strong enforcement of all of the
chapters through a system that works reliably and has
credibility with our trading partners. I am also pleased that
important USMCA provisions on prescription drugs will not
require any changes to U.S. law, and I would be open to
proposals that would confirm that point.
At the same time, every day that passes is another day that
the benefits of USMCA go unrealized. Trying to reopen the whole
agreement could risk unraveling the deal altogether, which
would benefit nobody. I therefore urge the House of
Representatives and Ambassador Lighthizer to focus on their
specific concerns and to propose solutions in short order so
that we can pass USMCA. Doing so will provide much-needed
certainty to American workers, businesses, farmers, ranchers,
and families, and will enhance the credibility of our ambitious
global trade agenda.
[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. And I
want to make clear at the outset that I look forward very much
to working closely with you on all of these issues.
Colleagues, the Finance Committee meets this morning to
discuss what needs to happen for NAFTA 2.0 to deliver better
results for American workers, our farmers, our ranchers, and,
particularly, American families from sea to shining sea.
I do want to begin my remarks by giving a big Oregon
shoutout to one of our witnesses, Ms. Paula Barnett, not only
because she is an Oregonian, but as an entrepreneur Ms. Barnett
is a perfect example of why the original NAFTA needs a bold
upgrade.
Ms. Barnett is an artisan from Brownsville, OR. I have been
in that area often for town hall meetings in Linn County. The
population is about 1,800 people in Brownsville. She founded a
jewelry business that produces in Oregon and sells online,
primarily on Etsy, to customers in the United States and around
the world. She also sources some of what goes into her jewelry
from abroad. Getting that kind of business off the ground would
have been a lot harder just a few short decades ago when NAFTA
was created.
According to Etsy, the total economic output of its sellers
based in Oregon is more than $125 million, and that is just one
of the many online platforms that businesses use to grow.
Oregon's many success stories also include Ruffwear, based in
Bend, a producer of gear for Very Good Dogs all over the United
States and in other countries.
Updating NAFTA means addressing the challenges facing these
businesses that operate online. It also means confronting the
other areas where older trade agreements continue to this day
to fall short: fighting to protect labor rights and the
interests of working families, preventing a race to the bottom
when it comes to the environment, and making sure there is
vigorous enforcement of our trade agreements so that other
countries cannot treat those deals as empty documents that give
them time and opportunities to rip off American jobs.
And I want to particularly emphasize this trade enforcement
issue. My colleague, Senator Cantwell, and I come from the
Pacific Northwest, which is incredibly trade-sensitive. One out
of five jobs in the State of Oregon revolves around
international trade. The trade jobs pay better than the
nontrade jobs in many cases, because there is a value-added
component. And in my home State, one of the first things
anybody asks about when the trade topic is brought up is:
``Hey, Ron, what are you guys in Washington, DC doing to better
enforce the trade laws that are on the books?''
They understand you need to upgrade these policies, because
they want to make clear that the new day has to involve tough,
enforceable trade laws that have real teeth in them.
The administration has released its NAFTA 2.0 agreement,
and it is consulting with the Congress on what comes next. Just
as I wrap up here pretty quickly, I want to make some points on
that process.
There is important work left to be done on key issues. I
mentioned enforcement because the new NAFTA carries over the
weak enforcement system of the old NAFTA. It is too easy on
trade cheats. It is not good enough for American workers,
particularly on labor rights. Senator Brown and I have proposed
some additional tools to address specific challenges in Mexico,
and I hope that there will be progress on that front.
Additionally, one of the bigger challenges we confront is
identifying the hundreds of thousands of sham labor contracts
in Mexico that have exploited workers there and harmed workers
here. Mexico must remain on track to get those contracts
renegotiated on behalf of the workers' interests.
During the overhaul, the original NAFTA remains in place.
Workers, farmers, ranchers, and businesses should not have to
fear that economic uncertainty will cost them their
livelihoods. It is a problem when the President acts out and
makes impulsive threats regarding our trade relationships.
American farmers, American workers have been hurt by some of
these presidential impulses, and more will get hurt if the
President continues to offer threats and chaos--and possibly
this ends up causing the Congress to accept a bad deal on NAFTA
Passing a trade deal that would allow this President to
unilaterally change rules and in effect jerk around entire
industries would be a dangerous mistake that promotes
uncertainty. When I talk to businesses, more than anything they
constantly come back to certainty and predictability. And you
do not get trade done right with all of this uncertainty. And
based on that, I have some real concerns about how the
administration wants NAFTA 2.0 to be implemented.
That is what we are going to be talking about today. I know
my colleagues on both sides of the aisle care deeply about
trade, and I would like to close this comment where I began.
Ms. Barnett, we are so glad you are here. I think you are
the face of much of what the trade challenge is all about, and
we welcome you.
Thank you, Mr. Chairman.
[The prepared statement of Senator Wyden appears in the
appendix.]
The Chairman. Thank you.
Ms. Barnett, how can I do better than he did in introducing
you? I guess the only thing I would add from my notes is that
you
single-handedly run your business selling jewelry to buyers all
across the world. So you are definitely concerned about trade
agreements and trade generally. So thank you for being here.
Next I would like to welcome Matt Blunt, president of the
American Automotive Policy Council. Governor Blunt was the 54th
Governor of Missouri, serving his State as chief executive from
2005 to 2009. He has been president of the American Automotive
Policy Council since 2011. In that role, he represents the
common policy interests of America's largest automotive
manufacturers: Ford, General Motors, and Fiat-Chrysler. So we
welcome you, Governor Blunt.
Then we have Mr. James Collins, chief executive officer for
Corteva Agriscience. Mr. Collins leads the only major
agriscience company completely dedicated to agriculture. His
work in the industry began 35 years ago when he joined DuPont
in 1984. He worked his way up the ladder. Mr. Collins became
chief operating officer for the agriculture division of Dow-
DuPont before becoming CEO of a recently stand-alone company
Corteva Agriscience. Congratulations on your new position.
Then we welcome Derek Leathers, president and CEO, Werner
Enterprises. Founded in 1956, Werner moved its headquarters
from Council Bluffs, IA to Omaha, NE, which is still close
across the river. Now you are still a proud Iowan, I hope. I do
not agree with the move, but I will not fault you for
personally making that mistake. [Laughter.]
Werner is now one of America's largest transportation and
logistics companies, with a network of over 7,800 trucks and
extensive experience in shipping and distributing goods in
Canada and Mexico. Prior to joining Werner Enterprises, Mr.
Leathers was one of the first foreign members of Mexico's
Trucking Association, CANACAR, and was based out of Mexico City
for several years. Thank you.
Now I have the pleasure of introducing Iowa's former
Governor and former Secretary of Agriculture for the U.S.
Department of Agriculture, Tom Vilsack, who is now president
and chief executive officer of the U.S. Dairy Export Council.
He was elected Iowa's 40th Governor in 1998. He served 8 years
there, and then 8 years as Secretary of Agriculture. Now, as
leader of the U.S. Dairy Export Council, he represents the
trade interests of more than 100 dairy industry exporters and
affiliated entity members. So thank you for coming, Mr.
Secretary.
Finally, we welcome Michael Wessel, president of The Wessel
Group and Staff Chair to the Labor Advisory Committee for Trade
Negotiations and Trade Policy. As the Staff Chair, Mr. Wessel
helps direct committee responsibility for advising and
consulting the Secretary of Labor and the U.S. Trade
Representative regarding policies on labor and trade
negotiations. He worked as a congressional aide for over 20
years, and was also a Commissioner on the U.S. China Economic
and Security Review Commission. So thank you, Mr. Wessel.
Now we will start with Ms. Barnett, and we will go that
same way across the table as I introduced you.
STATEMENT OF PAULA BARNETT, OWNER, DESIGNER, MAKER, PAULA
ELAINE BARNETT JEWELRY, BROWNSVILLE, OR
Ms. Barnett. Good morning. My name is Paula Barnett, and I
am a jeweler living in Brownsville, OR with my 9-year-old
daughter Carla. Thank you, Chairman Grassley, Ranking Member
Wyden, and members of the committee, for inviting me to speak
to you today about my creative business.
I am a self-taught fine jeweler. I spent 6 years studying
art and architecture history. And while I loved it dearly, the
career options were extremely limited. After failing to find a
job in my field, I conducted market research and decided to
become a jeweler. I have always been a maker, and once I had
decided on this path, I dove head-first into teaching myself
how to make jewelry with simple tools and equipment.
I launched my business in 2013 on Etsy, an online
marketplace for hand-made and vintage goods and craft supplies.
Within a couple of months, I had already earned enough to cover
my initial investment in tools and supplies--a rare feat for a
new entrepreneur.
Today I am a full-time goldsmith. I make custom engagement
and wedding bands using recycled fine metals and ethically
sourced stones. I have come a long way from making brass rings
shaped like mountains to setting diamonds in solid gold. My
work is 100-percent made by me with my own hands in my home
studio in Oregon.
I am also a single mother, and my business allows me to be
there for my daughter Carla. I am home when she gets off the
school bus, sick days are a non-issue, and my flexible schedule
allows me to raise my child as I see fit. I am very blessed in
this regard. Carla also benefits from watching me exert myself
creatively and succeed in business.
I am proud of my success, but my story is not unique.
Globally, Etsy hosts over 2.2 million creative entrepreneurs
like me, and fully 87 percent of those sellers are women.
Nearly all of them are businesses of one working out of their
homes.
We are micro-businesses, yet we have a significant impact
on our communities and the broader economy. In 2018 alone, U.S.
Etsy sellers contributed $5.37 billion to the U.S. economy and
created over 1.52 million jobs. Our impact is especially big in
rural communities like mine. For example, 27 percent of Etsy
sellers live in rural communities, compared to just 17 percent
of business owners nationwide. Individually, we may be small,
but together we are supporting our families and revitalizing
communities across the Nation.
Perhaps it is surprising to find a business as small as
mine testifying before Congress about a multilateral trade
agreement, but I am an exporter in my right. About 20 percent
of my sales are international.
Like many Etsy sellers, I made my goods available to
international buyers from the moment I opened my online shop.
Today, 52 percent of all Etsy sellers export their goods.
Unfortunately, the U.S. is the only one of Etsy's core markets
where the majority of Etsy sellers do not ship their goods to
other countries. For example, 90 percent of Canadian Etsy
sellers ship internationally.
Trade agreements like the USMCA have huge potential to help
U.S. micro-exporters like me grow our international businesses.
In particular, de minimis Customs thresholds, digital trade
provisions, and educational resources targeted to small
businesses could all help me increase my exports. [Pauses.]
Senator Wyden. You are doing great, Ms. Barnett.
Ms. Barnett. Thanks. First, my business depends on my
packages being delivered quickly and with minimal hassle to my
overseas customers. Unfortunately, many of my customers must
pay extra taxes and fees on the pieces I export, often
unexpectedly. I have had many packages get stuck in Customs
and, to the dismay of my customers, they must travel in person
to pay the required fees before collecting their item.
In some cases, the cost can nearly double the price of the
item. This is a hindrance to sharing my work with the world. A
few customers have even refused packages due to extra taxes and
duties. In those cases, I find myself having to refund the item
including the shipping costs, or risk incurring a negative
review which can make or break an e-commerce business like
mine.
De minimis Customs exemptions are the single greatest tool
policymakers can use to help small and micro-businesses export
their goods. They enable my packages to move quickly across the
border, which is especially important as customers expect
faster shipping times. With plenty of customers in Canada and
Mexico, I am encouraged to see that the USMCA would increase de
minimis thresholds for both of these trading partners.
The U.S. de minimis threshold is also important to my
business. In addition to exporting my goods, I also import many
of my supplies. For example, I import my opals from a supplier
in Mexico. Some of these stones are of a high value but do not
reach the $800 U.S. de minimis threshold that Congress
established in 2015. I also occasionally process returns, and
am relieved that I do not need to pay additional fees on these
shipments. Given the importance of de minimis Customs
thresholds to my business, I am hopeful that Congress will
ensure the final agreement establishes certainty, not
uncertainty, around this important issue.
Second, digital trade provisions allow me to use the
Internet and online platforms like Etsy to reach buyers around
the world.
Thank you, Senator Wyden, for your early and ongoing
leadership in this area. I cannot overemphasize how important
the Internet is to my business and my family. My entire
business is online. Without the Internet, I and countless
others like me would be without work. A job is one thing, but
doing something you are passionate about is something else
entirely. And that is what my jewelry business is to me.
I am thankful that I can focus on growing my creative
business and do not need to think about the digital
infrastructure that underpins the global e-commerce, whether it
be data processing and transfer, electronic payments across
multiple currencies, or the intermediary liability protections
that enable Etsy to operate an open, uncurated marketplace.
I am honored to share my story with all of you today. My
plans for the future include growing my wholesale accounts,
expanding the complexity and craftsmanship of my work, opening
a retail studio space where I can meet with clients, and
continuing to make jewelry alongside my daughter, who is my
biggest fan.
As an Internet-based entrepreneur, I am hopeful the U.S.
can set the standard for sensible e-commerce policy through
agreements like the USMCA, and that these provisions can and
ultimately will be enforced to ensure the Internet continues to
act as a launching pad for millions of micro-business exporters
like me.
Thank you so much for your time and the opportunity to
speak before you today.
[The prepared statement of Ms. Barnett appears in the
appendix.]
The Chairman. We will recognize Senator Wyden.
Senator Wyden. And I will be very brief, Mr. Chairman. And
of course we so appreciate the input from Ms. Barnett.
I also want to note, and I think colleagues know that
Senator Thune, who is not here right now, has also been a
leader in this bipartisan effort to promote additional
opportunities for digital trade, and I just wanted to thank
you, Ms. Barnett, and note that there has been bipartisan
support across the aisle on that.
Thank you, Mr. Chairman.
The Chairman. Thank you, Ms. Barnett.
Now, Governor Blunt.
STATEMENT OF HON. MATT BLUNT, PRESIDENT, AMERICAN AUTOMOTIVE
POLICY COUNCIL, WASHINGTON, DC
Mr. Blunt. Thank you, Chairman Grassley, Ranking Member
Wyden, and members of the committee. I thank you for this
opportunity to testify today on USMCA, a truly 21st-century
trade agreement with our Canadian and Mexican trading partners.
My name is Matt Blunt, and I am the president of AAPC, the
American Automotive Policy Council, which represents the common
public policy interests of our U.S. automakers: FCA U.S., Ford
Motor Company, and General Motors. Our emphasis is on
international trade and the economic policy interests of our
member companies.
America's automakers are confident that, once approved by
Congress, USMCA will not only help bring much-needed
predictability and help maintain the competitiveness of the
U.S. auto industry, it will also serve as a blueprint for
future U.S. trade agreements. It will allow our automakers to
thrive in an increasingly competitive global auto market.
When negotiations with Canada and Mexico began, AAPC and
its member companies had four priorities. First, maintain duty-
free access to the Canadian and Mexican auto markets--two of
the largest vehicle markets in the world. Second, include
provisions to address currency manipulation by our trading
partners. Third, ensure continued acceptance of U.S. auto
safety standards in the region. And finally, include balanced
and workable rules of origin for vehicles and parts in North
America.
We firmly believe the negotiators achieved all of these
priorities.
First, USMCA will preserve critical duty-free access to two
of the largest vehicle markets in the world, markets where our
companies have been incredibly successful. In Canada, our
brands now account for 40 percent of the 2 million vehicles
sold. And in Mexico, American nameplates have secured 27
percent of the 1.4-million vehicle market, a market that is
expected to grow steadily in the future.
We also commend negotiators for creating stronger but
workable rules of origin for vehicles and parts in the region.
The new rules raise NAFTA's current minimum content levels,
which are already the highest of any trade agreement in the
world, from 62.5 percent to 75 percent. The new rules will
require all automakers to make changes to their sourcing
strategies, but we believe these changes are feasible and will
benefit the U.S. auto industry and the millions of jobs it
directly and indirectly supports here at home.
In fact, our three member companies have already announced
$6 billion in new U.S. investments, which were driven in part
by the new USMCA rule-of-origin requirements. We agree with the
administration that these new rules of origin will strongly
incentivize more investment in the United States. And more U.S.
investments mean more American jobs.
Ambassador Lighthizer and his team also successfully
crafted and negotiated two ground-breaking provisions that will
lock in the acceptance of vehicles built to U.S. safety
standards, as well as provisions to prevent currency
manipulation. These are the strongest such provisions ever
included in a U.S. free trade agreement. And like the
administration, we believe these provisions should be included
in every future U.S. free trade agreement.
In short, American automakers have given our full support
to USMCA because it will not only help the U.S. auto industry
remain globally competitive, but it brings certainty and
stability, which in turn will encourage automakers--foreign and
domestic--to invest and expand here in the United States.
The President's decision last month to lift the tariffs on
steel and aluminum from Mexico and Canada was a crucial
development for our automakers as well as many lawmakers on
both sides of the aisle. We also understand that conversations
between Ambassador Lighthizer and members of the House working
group on USMCA have been constructive.
Given this momentum, we hope members of this committee--
joined by your colleagues in the House and Senate--can work to
help resolve any remaining issues so that Congress can approve
USMCA and allow its full potential for U.S. automakers and our
Nation's economy as a whole to be realized.
Again, I want to thank you for holding this important
hearing and for the opportunity to testify. And I look forward
to answering your questions.
[The prepared statement of Mr. Blunt appears in the
appendix.]
The Chairman. Thank you, Governor Blunt. Now 1 minute for
personal privilege from the Senator from Delaware.
Senator Carper. Thanks so much, Mr. Chairman.
Before Jim Collins speaks, I just want to personally
welcome him, a native of Delaware. He grew up in Delaware. His
wife lived in a place called Kennett Square, which is my
favorite part of Delaware. It is actually just across the line
in Pennsylvania. [Laughter.]
But Jim, in addition, has been a terrific leader at DuPont
for many years in the agricultural business and now heads up
Corteva, which grew out of the DuPont-Dow merger, now split
into three companies, one of which is Corteva, headquartered in
Wilmington at the Experimental Station. We are delighted to see
that happen.
In addition to being a wonderful business leader, he is
also a great community leader and an Eagle Scout, and he serves
on a lot of boards in our State, including the University of
Delaware and the Hagley Museum and Library in Delaware, and he
has been a scout leader for many years of his life. He and his
wife Tina have raised 12 children--well, it seems like 12
children--but all are kids that we would, they are now adults,
but they are children we would be proud of.
Welcome today, and thanks for your testimony. Thanks, Mr.
Chairman.
The Chairman. Mr. Collins, proceed.
STATEMENT OF JAMES C. COLLINS, JR., CHIEF EXECUTIVE OFFICER,
CORTEVA AGRISCIENCE, WILMINGTON, DE
Mr. Collins. Thank you. Thank you, Chairman Grassley,
Ranking Member Wyden, and Senator Carper. I appreciate that
introduction. Two proud young boys--only two. And thank you,
members of the Finance Committee, for the opportunity to be
here today to testify.
As you have heard, my name is Jim Collins, and I am the CEO
of Corteva Agriscience. And as the Senator stated, this is a
new ag company that was spun off from the Dow-DuPont merger. It
is a company with more than 300 years of combined ag
experience, and I am honored to share the views of our more
than 20,000 Corteva employees with the over 400,000 U.S.
customers--American farmers and ranchers.
So I am here to address the critical need to pass the
United States-Mexico-Canada Agreement. USMCA features elements
critical to American agriculture: things like market access,
protection of innovation, and modernized regulatory mechanisms
to ensure our future competitiveness. Millions of American jobs
depend on trade with Canada and Mexico, by far the largest
export markets for the United States. International trade
supports 39 million jobs across America, with 12 million of
those jobs from trade with Mexico and Canada.
The U.S. International Trade Commission analysis indicates
that USMCA would increase U.S. ag and food exports by up to $2
billion. Now, farmers have flourished under the enhanced access
to Canadian and Mexican markets. NAFTA boosted U.S. ag exports
to North America by over 350 percent over the life of that
agreement. Canada and Mexico buy nearly $45 billion of ag
products annually from the United States, making them our first
and second largest ag export markets.
Now, in all of our conversations with farmers, they have
stressed that trade is one of their key elements of success. So
let me tell you about two first-generation Minnesota farmers,
Andrew and Heidi Pulk. The Pulks saw an opportunity to begin
farming with the demand that was coming from exports to China.
However, because of the recent trade challenges between the
U.S. and China, these young farmers were forced to search for
new markets. The North American market was crucial to the
Pulks, who last year sold their entire crop to buyers in
Canada.
Passing the USMCA will ensure that new farmers like the
Pulks can continue to survive.
So let's turn to the ag sector. As Chairman Grassley stated
so well in June's hearing, and I quote, ``We need to secure
strong agreements so that we can restore a level playing
field.'' With a level playing field, Corteva can innovate and
help U.S. agriculture become even stronger. At 12 percent, the
food and ag industry is responsible for the largest segment of
U.S. manufacturing jobs.
So it is clear, when farmers win, our Nation prospers and
we all win. The United States is the largest market for seed in
the world, and it is also the largest seed exporter. Mexico and
Canada, the U.S.'s two largest seed export markets, represent
$600 million in annual seed exports. That is one-third of the
total.
Seed varieties can cross as many as six international
borders before that bag of seed becomes commercialized and sold
to a farmer. USMCA offers the world-class regulatory and
phytosanitary disciplines that prevent rejected or delayed seed
shipments that can cause market disruptions and dissatisfied
customers, and we can count that in the millions of dollars.
Corteva's seed and crop protection products represent
decades of research and development. Thus, the intellectual
property rights protection is also crucial. We are particularly
excited about the biotech protections also afforded us under
USMCA.
Now lastly, agriculture's future is dependent upon passage
of USMCA. Corteva, as the only U.S.-based seed crop protection
and digital ag company, has a substantial presence in Iowa, in
Indiana, and in Delaware, with offices, sites, and employees
all across the country. But we are a global company as well,
and about half of our sales are outside of the United States.
So we need trade agreements to solve problems before they
become disputes. Through NAFTA, North America became more
economically integrated, and our governments established broad,
deep relationships among our officials. And these frank
discussions between officials were worth their weight in gold,
and the USMCA will build upon that foundation.
So we must not only pass USMCA to protect the North
American market, but we need to replicate this exercise going
forward in our other pending global trade negotiations. The
studies are clear. The International Trade Commission, USTR,
and private industry have found that USMCA creates jobs and
expands markets for family farmers like the Pulks and
agribusiness companies like Corteva.
Thank you again, Mr. Chairman, for the opportunity to
address the committee and to discuss the importance of swiftly
passing USMCA. I will be pleased to answer any of your
questions later.
[The prepared statement of Mr. Collins appears in the
appendix.]
The Chairman. Thank you, Mr. Collins. Now, Mr. Leathers.
STATEMENT OF DEREK LEATHERS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, WERNER ENTERPRISES, INC., OMAHA, NE
Mr. Leathers. Chairman Grassley, Ranking Member Wyden, and
members of the committee, thank you for the opportunity to
testify today on behalf of the American Trucking Associations,
and to discuss the importance of USMCA.
My name is Derek Leathers, and I am the president and CEO
of Werner Enterprises. Werner has grown from a one-truck
operation in 1956 to a global logistics company employing
13,000 associates and professional drivers worldwide.
In the United States, Werner has 8,000 trucks operated by
professional drivers safely moving America forward every day.
Werner continues to grow our business at home and
internationally. Our significant growth in Mexico is due to the
initial success of North American trade. And Werner is one of
the top five U.S. truckload carriers operating in Canada, with
8,600 cross-border movements in 2018.
As we at Werner celebrate our 20-year anniversary in
Mexico, we are the largest U.S. truckload carrier providing
ground transportation services to and from Mexico. Last year we
crossed 154,000 shipments.
Mr. Chairman, you would be interested to know that Werner
hauls protein--beef, pork, and poultry--from several locations
across Iowa to Mexico on a daily basis. And, Ranking Member
Wyden, Werner's largest cross-border customer in terms of
volume and revenue is based in Oregon.
I have spent over 25 years in trucking, which included
starting Werner's Mexico business while living in Mexico City.
I saw firsthand how NAFTA has transformed North America into
the most competitive trading block in the world.
Nearly 76 percent of all cross-border freight tonnage is
transported by truck. When trucks are not the primary mode of
transportation, the other modes still depend on trucks for
final delivery. Every day there are 33,000 truck entries across
our northern and southern borders, hauling more than $2 billion
of goods. To put this in perspective, 12.2 million truck
crossings moved approximately $772 billion of goods across our
Canadian and Mexican borders last year alone.
Beyond the numbers, the best way to truly grasp the scope
of cross-border trucking is to see it firsthand at our ports of
entry. I invite you to visit our terminal in Laredo, TX, where
you would see the immense volume of truck-transported freight
constantly moving across the U.S.-Mexico border, and why we
have expanded that location twice in the last 3 years. Or, if
so inclined, visit us in the interior of Mexico at any one of
our offices in Monterrey, Guadalajara, Queretaro, or Mexico
City, and we would be happy to host you. Technological advances
have redefined the trade environment to such a degree that
NAFTA is outdated.
The USMCA is a timely and necessary update. Twenty-five
years ago, trade did not need to accommodate same-day shipping
or two-day delivery that is now expected by consumers. Cross-
border trade by truck has since increased 191 percent.
The North American supply chains have grown increasingly
interconnected, so much so that there are countless examples of
products being transported around North America crossing our
northern and southern borders multiple times prior to reaching
the consumer.
Congress must elevate our North American trade policies
into the 21st century. The USMCA represents more than a trade
agreement. The flow of commerce between our Nations has become
a major cornerstone of our economy, supporting the livelihoods
of roughly 90,000 people employed in the U.S. trucking
industry, including nearly 60,000 U.S. truck drivers to move
freight to and from our borders.
U.S. trucking companies paid U.S.-based drivers more than
$3.25 billion in wages, plus health insurance and retirement
plans, in 2018. Simply put, trade is crucial for the blue-
collar workers in the trucking industry. Failing to pass USMCA
would have a negative impact on truck drivers, along with the
customers we serve across North America: manufacturers,
farmers, retailers, and consumers.
Ratification will provide certainty and usher in a new era
of increased innovation, more good-paying American jobs, and
sustained economic growth. The American Trucking Associations,
Werner, the Border Trade Alliance, and the broader trucking
industry strongly urge Congress to act swiftly and support
ratification of USMCA. And we stand ready to help drive this
agreement across the finish line.
Thank you again for the opportunity to testify today, and I
am happy to answer your questions.
[The prepared statement of Mr. Leathers appears in the
appendix.]
The Chairman. Secretary Vilsack, thank you for coming.
STATEMENT OF HON. THOMAS J. VILSACK, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, U.S. DAIRY EXPORT COUNCIL, ARLINGTON, VA
Mr. Vilsack. Thank you, Mr. Chairman, Senator Wyden, and
members of the committee. I want to express my appreciation for
the opportunity to appear today.
This is a hearing that is important to the 110 members of
the U.S. Dairy Export Council, as well as the 39,000 family
farm operations that provide safe, nutritious, and sustainably
approved dairy products for us here in the U.S. and around the
world.
I have a simple message for the committee: exports matter
to the American food and agriculture industry. Thirty percent
of all agricultural production and 20 percent of all
agricultural income is directly related to exports. It helps to
support, with $140 billion of activity, nearly a million good-
paying jobs.
Exports to Mexico and Canada matter to the dairy industry
and to farms across the United States. Twenty-eight percent of
all food and agriculture exports go to Mexico and Canada,
between $40 and $45 billion, five times what it was when NAFTA
was first enacted. For many commodities, Canada and Mexico
represent their top markets.
Ratification of the USMCA matters to the dairy industry and
to dairy farmers, as well as to ag producers, poultry
producers, wheat producers, and those involved with providing
alcoholic beverages, as well as many other agricultural
commodities.
As Mr. Collins indicated, the ITC has projected over $2
billion of additional income for American agriculture and the
food industry, which will help to support thousands of jobs.
For dairy, there are multiple benefits, not the least of which
is an increase of agricultural exports to Canada and Mexico
amounting to over $300 million annually.
It preserves our duty-free access to our number one market,
Mexico. It increases market access to our Canadian market that
has been limited for far too long, by increasing our trade
quotas in cheese, skim milk powder, whey, butter, and other
dairy products. It removes and reforms key trade-distorting
Canadian pricing policies, repealing Class 6 and 7 pricing
policies, and imposing more trade-friendly discipline on the
Canadian supply management system.
It establishes strong sanitary and phytosanitary provisions
that will protect food safety, helping to avoid unscientific
barriers to exports. It improves safeguards regarding U.S.
companies' right to use common food names, helping to avoid
further abuse of geographical indications that could cost the
U.S. dairy industry potentially billions of dollars of lost
revenue.
The ratification of the USMCA matters to all of the food
and agriculture industry, as it will build momentum for
progress hopefully in other trade discussions, especially in
Japan and possibly China.
Ratification of the USMCA impacts the food and agriculture
industry, and really matters to the entire country. Why do I
say that? Well, according to Dunn and Associates, the U.S. food
and agriculture industry represents directly or indirectly 43
million employed Americans, which is 28 percent of our entire
employment workforce, and impacts directly 20 percent of our
American economy. So whatever helps the U.S. food and
agriculture industry, helps the country.
Mr. Chairman, I appreciate the opportunity to be here
today. I look forward to responding to the questions and
assisting this committee in its important work, work that is
vital to the future of American agriculture and the food
industry, as well as to the country.
[The prepared statement of Mr. Vilsack appears in the
appendix.]
The Chairman. Thank you, Secretary Vilsack, and I know from
following publications you have been doing this for quite a few
months, and we thank you for your leadership in that area.
Mr. Wessel?
STATEMENT OF MICHAEL WESSEL, STAFF CHAIR, LABOR ADVISORY
COMMITTEE FOR TRADE NEGOTIATIONS AND TRADE POLICY; AND
PRESIDENT, THE WESSEL GROUP, WASHINGTON, DC
Mr. Wessel. Mr. Chairman, Ranking Member Wyden, members of
the committee, it is an honor to appear before you today. My
name is Michael Wessel, and I am here on behalf of organized
labor as the Staff Chair of the Labor Advisory Committee for
Trade Negotiations and Trade Policy.
Organized labor wants NAFTA fixed. We have worked in a
constructive, good-faith effort to find solutions, not just
lodge complaints. We remain optimistic about the ability to
resolve the issues, but we will not hesitate to oppose an
agreement that fails to improve NAFTA and the current trade
template in meaningful and effective ways by adopting the many
recommendations we have made.
Much work remains. The current USMCA is not good enough.
The negative impact of the existing NAFTA cannot be overstated.
It has had a corrosive impact on production, employment, and
wages in the U.S. Manufacturing, public and service-sector
workers have all been hurt. Steelworkers at Carrier in Indiana
have seen their jobs go to Mexico. Bakery workers at Nabisco in
Philadelphia and Chicago saw their jobs shipped to Mexico,
where workers are now paid as little as 97 cents an hour.
Auto workers in Lordstown, OH are seeing their jobs
relocated to Mexico. Aerospace workers throughout the country
have seen tens of thousands of jobs moved to Mexico, like
workers at UTC in Chula Vista, and that is just the tip of the
iceberg.
It is time to reverse that trend. Our engagement, and our
continued engagement, results not only from the depth of our
concerns but is also a tribute to Ambassador Lighthizer and his
team.
Let me make a number of quick points, but I do not want to
minimize the importance of issues I do not raise. We are not
moving the goalposts, but we will not accept charges that if we
did not raise an issue at every conversation, that issue must
not be of concern. There is a long list.
First is the critical need for improvement in the
enforcement provisions, which are essentially absent from the
current agreement. Panel-blocking would disable the ability to
resolve critical issues and must be fixed. In addition, we
support approaches such as the Brown-Wyden framework as a
necessary provision in the agreement. But enforcement is only
as good as the standards and laws that are subject to
enforcement.
We have repeatedly made suggestions for improving the labor
standards included in the labor chapter. Much work remains.
While the labor annex provided a new framework for Mexico, the
interpretation of some of the language is still in question,
and we have not seen how Mexico will implement and monitor its
new laws and provide funding. Specific text adversely limits
certain critical rights and must be fixed.
Mexico's labor reforms are being challenged, including by
the
employer-friendly Labor Federation. At last count, there were
more than 400 appeals against Mexico's labor reform.
There is no infrastructure to support on-the-ground
activities to allow workers to achieve their internationally
recognized workers' rights. There needs to be accelerated and
front-loaded implementation, rather than waiting for the 4-year
clock to toll. And we need to ensure that the process here for
bringing complaints is dramatically improved.
We need to address the access to medicines issues.
Virtually every labor contract here in the U.S. deals with
health-care costs as a core issue, with cost increases fueled
by huge prescription drug price increases. Workers, to protect
their family's health, are having to forego wage increases. And
fueling drug-price increases in Mexico and Canada via USMCA's
provisions is not only unjust, it will have a direct impact on
our ability to sell products there.
The rules-of-origins need to be strengthened and clarified,
and the loophole that allows foreign steel and aluminum to be
counted as domestic-originating materials must be closed.
Organized labor is committed to working to improve upon the
existing agreement. Labor leaders have publicly supported the
negotiations and, as it relates to the labor text, indicated
that it improves upon the existing framework of laws but must
be strengthened and coupled with successful and timely
implementing, monitoring, and enforcement provisions. But even
if we achieve all our goals, we will not oversell the final
product to our members.
They have lived with the devastating impact of existing
trade policies. They are rightly skeptical, and their leaders
will not mislead them. We need meaningful and effective changes
based on the recommendations we have made and that will
meaningfully address the outsourcing that continues across
industries.
We have waited for the flaws in NAFTA to be addressed, and
the substance of those changes and our experience will drive
our decision, not partisan politics.
We look forward to working with the committee and Congress
in the coming days. Thank you.
[The prepared statement of Mr. Wessel appears in the
appendix.]
The Chairman. Thank you, Mr. Wessel.
Now we will have a 5-minute round of questioning. I am
going to start with Mr. Collins.
This agreement for the first time dealt specifically with
biotechnology to support America's innovations in agriculture
and continued cooperation with Canada and Mexico. It improves
transparency and functioning of the approval process for
biotech crops, and provides for cooperation and information
exchange on agricultural biotechnology trade matters, including
gene editing.
So as CEO of a major agriscience company completely
dedicated to agriculture, how will these biotechnology
provisions of the agreement benefit Corteva's ability to
innovate and bring benefits to our farmers and consumers?
Mr. Collins. Thank you, Mr. Chairman, for the question.
You are exactly right. The USMCA creates a process for
U.S., Mexican, and Canadian regulators to more aptly share
information back and forth across themselves, and to better
collaborate on the regulation of biotech crops, including the
new breeding techniques that you mentioned.
This process has the potential to alleviate trade barriers
that can sometimes result from different processes and
different procedures that evolve in different countries,
including the time frames that are associated with the approval
of biotech products. So a more coordinated regulatory framework
by which we can approach these markets in lockstep, as opposed
to sequentially, is a real help. So it is a benefit for the
innovation that we drive here in the U.S., but also for all
farmers in North America.
And we think these provisions will provide an important
precedent for future trade discussions with other partners as
well.
The Chairman. Secretary Vilsack, the new agreement will
expand market access for U.S. dairy products in Canada and
eliminate that country's unfair milk pricing program that has
allowed their dairy products to undercut American competitors
in Canada and third-country markets.
Additionally, Mexico agreed not to restrict market access
for U.S. cheeses labeled with certain common names. How will
American dairy farmers benefit and take advantage of the new
market access as a result of USMCA?
And I guess I am also interested in whether or not it will
expand market share in Canada?
Mr. Vilsack. Mr. Chairman, in 2018 America suffered a loss
of seven dairy farms a day. Times were tough out in rural
America. This agreement would provide an opportunity for dairy
farms to stay in business. Why? Because it would expand access
to a Canadian market that for far too long has been closed. It
will in fact increase our market share opportunities in cheese,
whey, butter and other dairy products, and skim milk powder.
In repealing Class 6 and 7, it gives us an opportunity to
have a powder market, a global powder market, that actually
provides an appropriate pricing. The Canadian pricing system
basically undercut the world price, which created some havoc in
the powder market globally, impacting negatively our producers
as well as those around the world.
The implementation of this provision will be important. We
will have to keep an eye on making sure that this is not a
replacement that has the same effect as Class 6 and Class 7,
but we are hopeful.
There are also export controls. There are potential
penalties that Canadian exporters will have to pay if they
export more than the limits set forth in the agreement. So this
is an increase in market share. It is an increased opportunity
for U.S. dairy to do business in Canada. And it also, as I said
earlier, preserves our number one market, which is Mexico.
The Chairman. My last question will be for Mr. Leathers.
You referenced in a Bloomberg piece in your testimony about how
a single capacitor had crossed the border numerous times before
it was finally in a final product.
It paints a clear picture that, in 25 years since NAFTA was
enacted, technological advances have redefined the trade
environment. Could you shed a little more light on how
technology has revolutionized our trade practices in the last
25 years and why it is imperative that we modernize our North
American trade agreement?
Mr. Leathers. Yes. Thank you for the question, Mr.
Chairman. So by way of background, I was on the ground in
Mexico City before NAFTA was enacted the first time, living and
working and running a Mexican trucking company at that time.
And so over these 25 years, when we think about USMCA, and
I think about the opportunity in front of us, it literally
contemplates and for the first time addresses issues that
simply did not exist back then. We did not have Internet to
speak of, and there was no e-commerce. There was no
digitization of our Customs processes.
The average trucking cross-border time was 24 hours, if we
were lucky. And today we wake up in a world 25 years later
where we are doing advanced Customs clearance of goods. We are
digitally interacting with our shippers and our receivers. We
are working with a unified Customs process with both Mexican
and U.S. officials collaborating at the border in a more
seamless and efficient crossing process.
Having USMCA enacted and ratified to help address, from our
perspective, the importance of all of this digital e-commerce,
digital information, and the ability for these records and
their security to be better recognized and have better
treatment in the agreement, is of critical importance.
The future is only going to continue to go that direction.
And our business is increasingly one that is moving more
digitally by the day.
The Chairman. Senator Wyden?
Senator Wyden. Thank you, Mr. Chairman.
Ms. Barnett, I think your story is incredibly inspiring,
how you, as a single mom, have been able to come up with this
attractive, exciting new business where, in effect, you are
able to look to global markets as a result of digital
innovation.
I just have a quick question for you. U.S. de minimis rates
are in American law because John Thune, Republican Senator
sitting over there, and I wrote it. And this committee is not
going to go along with uncertainty in U.S. law and NAFTA.
Why don't you tell us what the value of across-the-board
certainty would mean for you in your business?
Ms. Barnett. Thanks, Senator Wyden, for that question. So I
export my goods, as well as import supplies, and I would like
to not have to worry about my items crossing the border. I want
my items to get to my customers as fast as possible, because
they expect that. And some of my items are lower-priced, and
some of them are quite higher-priced, and it would be valuable
to me to have my customers not have to pay so much extra taxes.
And in terms of the U.S. de minimis, since I do import a
lot of my stones, I would like to not have to worry about
having to pay extra taxes, because it does cut into my bottom
line. And since I am a sole proprietor, every dollar counts,
and certainty is important. Because I just make jewelry, I do
not want to also worry about uncertain provisions in laws.
Senator Wyden. Good. And you should know that on this
committee there is strong support for the kind of certainty you
are talking about, and you have really laid the case out very
well.
Mr. Wessel, I want to turn to you on this whole question of
the labor issue and enforcement. I am not sure everybody knows,
but you and I have been talking about these issues for years
and years, and I so appreciate your good work.
It seems to me the administration has made progress on
improving the labor obligations in the new agreement, but that
is not worth much unless you have tough, real enforcement. And
Senator Brown and I have been working on a new framework in
this area so there would be sufficient resources and technical
assistance to cooperate with Mexico on their new labor law, and
also to provide a backstop to protect American workers from
being disadvantaged by unscrupulous factories in Mexico.
What would it mean, Mr. Wessel--to somebody who has studied
this for years--what would it mean for U.S. workers if we were
able to finally get full compliance by Mexico of their labor
obligations?
Mr. Wessel. It really is the single most critical issue in
the question of the balance between our two countries--the
outsourcing of jobs, the relocation of a lot of our supply
chains to Mexico because of the artificially low wages in that
country, primarily stimulated by low current labor standards
and no enforcement.
As you know, there are roughly 700,000 protection contracts
currently in place in Mexico, the vast majority of which
workers have no idea exist or what their terms are. So making
sure that workers are paid a decent wage in return for their
hard work, their creativity, their skills, is a fundamental
component of what we are looking for long-term.
Without strong enforcement, we are going to continue to
have the same process and results we have today.
Senator Wyden. Let me follow that up and, in effect, try to
take this enforceability issue beyond what Senator Brown and I
have been working away on for months now--and we have been
working with the Speaker, and House members, and the like.
I gather you have some additional ideas for enforcing trade
law, and particularly NAFTA 2.0. Do you have some additional
recommendations that you would like to make?
Mr. Wessel. Well, first let me say that enforcement, which
is vital, often means that there has been injury and someone
has been hurt in the labor context. So our goal is to have the
infrastructure in place to make sure that workers know what
their rights are and are able to freely associate and enjoy the
rights that they have. And that is a fundamental component of
what you and Senator Brown have talked about in terms of the
infrastructure.
Clearly we need to make sure that the state-to-state
dispute resolution is binding. We need to make sure that, at
the front end of this process, we do not see what we saw in the
Colombia situation where we had an agreement that called for
certain actions, but those actions were not in fact adopted
prior to certification--so a better certification process than
we have had in the past.
We also need the infrastructure to provide greater access
to the enforcement process. All of the labor rights cases have
been brought by organized labor. It is a very difficult process
to enter, and time-consuming. We need to shorten that process.
We need to make sure that it is timely and certain.
Senator Wyden. Great. Thank you very much. And I want to
thank all of our witnesses. We look forward very much to
working with all of you.
The Chairman. Senator Toomey is next.
Senator Toomey. Thank you, Mr. Chairman.
I want to thank our witnesses as well. But, Mr. Chairman, I
want to focus on some of the concerns that I have about this
agreement. And I want to start by pointing out a really
important fact that we ought to keep in mind.
If and when we get to a vote on USMCA in the U.S. Senate,
the choice we will be making is not between USMCA and nothing.
The choice we will be making is between USMCA and the existing
NAFTA agreement. And I say that because the President clearly
does not have the constitutional or legal authority to
unilaterally withdraw from NAFTA. And NAFTA is in place. It is
in place by statute.
We should all be very clear about that. It is not going
away. The President does not have the authority to do that. So
the question before us should be, is USMCA a better agreement
than NAFTA, or is it not?
Now most of the witnesses here today in their prepared
testimony have cited as one of the biggest benefits of the
USMCA a reduction in trade policy uncertainty. Governor Blunt,
you said that USMCA will, and I quote, ``help bring much-needed
predictability to the auto industry.''
Mr. Vilsack, you noted that USMCA will benefit the dairy
industry, in part by, quote, ``restoring certainty to U.S.-
Mexico trade relations.''
Mr. Collins, you correctly identified that the positive
effects of USMCA found by the International Trade Commission
come, and I quote, ``primarily from the certainty created by
USMCA,'' end quote. ``Because markets abhor uncertainty.'' That
is also a quote.
So the question is, where does all the uncertainty come
from? It does not come from NAFTA. NAFTA is a well-defined
agreement we have had for a couple of decades. It establishes
zero tariffs on 100 percent of nonagricultural goods, zero
tariffs on 97.5 percent of agricultural goods. There is no
uncertainty intrinsic in NAFTA. The only uncertainty is whether
people think we might be unilaterally withdrawing from it, and
the President has no authority to do that.
I think the question we ought to be asking ourselves about
USMCA is, do the policy changes in USMCA actually promote
growth relative to NAFTA?
My colleagues sometimes point to a study from the ITC that
shows some very modest gains to economic growth from USMCA. It
does. But tellingly, the ITC found that reducing, quote,
``policy uncertainty accounts for nearly all the gains of the
agreement.''
And if you back out the little tiny boost to GDP of this
reduced uncertainty, then the ITC actually found that USMCA
would reduce real GDP, by a very small amount--but it is not a
gain. It is about 12 one-hundredths of a percent, about $23
billion over 6 years. And that is despite the fact that the
ITC's analysis did not attempt to quantify, did not factor in
at all, two of the provisions of the USMCA that are virtually
guaranteed to increase uncertainty and diminish investment and
reduce trade and act as a drag on growth.
One is the 16-year automatic expiration date, the sunset
provision. The ITC explicitly chose not to try to quantify the
effect of that. The other is dramatic gutting of protections
for American investors in Mexico and Canada. How could either
of those things provide more certainty? They clearly do not.
The sunset provision--this agreement goes away in 16 years
unless every one of the parties to the agreement agrees to
extend it.
We have no certainty that that is going to happen. The
investor-state dispute settlement mechanism, this is a
provision that is in every single free-trade agreement we have
except for Australia. And it says that if Mexican or Canadian
courts treat our investors unfairly, they can seek recourse,
including monetary damages.
Well, folks, this happens. And it happens in Canada as well
as in Mexico. There is a case of a Canadian local government
that tried to shut down a U.S. application to open a basalt
mine by claiming that the mine violated the, quote, ``core
community values'' of the neighboring town.
``Core community values'' was obviously an invention that
was meant to discriminate against American investors. So the
American investor challenged that in the ISDS and won. That is
what it is there for: to prevent discrimination against
American investors. And it works.
But now we are going to, under USMCA, completely eliminate
the investor-state dispute settlement mechanism for Canada and
virtually eliminate it in Mexico.
Now there are some provisions in the USMCA that I think are
constructive modernization. The digital trade chapter is good.
Enhanced IP protections is good policy; some very modest
reciprocal reductions in ag barriers. But it is worth noting
that these were all in TPP. These could have been achieved
without this.
Mr. Chairman, I see I am running out of time, but I just
want to say that if we adopt this agreement, it will be the
first time that I know of in the history of the Republic that
we will agree to a new trade agreement that is designed to
diminish trade.
The combination of the uncertainty in these provisions and
the onerous new costs imposed on Mexican automakers is designed
to reduce trade in autos and diminish total trade. I do not
think that is what we ought to be doing here. So I would urge
my colleagues to think hard before we endorse USMCA.
The Chairman. I am glad you are so wrong. [Laughter.]
Senator Cantwell?
Senator Cantwell. Well, Mr. Chairman, could he keep the
sign up for one minute? I so appreciate many aspects of your
remarks--not all of them--but I think the staff got it right
with just that one little mathematical sign there of NAFTA is
greater than USMCA. And I think that we have to remember, as
Secretary Vilsack said, the great economic impact that NAFTA
did have in some aspects of our economy. I am not saying in
every aspect, but certainly in the State of Washington we
export $2 billion worth of goods to Mexico. It probably
accounts for 107,000 jobs in the State of Washington.
And I certainly agree with my colleague that when we are
talking about these things, we should be talking about
expanding the economic opportunity. I agree, it is a
modernization in some areas that were not previously included,
but I want to also say I so support the chairman's great
activities in getting the administration to relent on 232
tariffs as they relate to Mexico and Canada.
I have a feeling we would not even be having this hearing
today if that first had not been accomplished. So, I greatly
appreciate that by the chairman. And I greatly appreciate, by
the ranking member, his focus with Senator Brown on these
enforcement mechanisms. This too is a critical aspect.
I authored some capacity building as part of the Customs
bill to try to get USTR to have the capacity to follow up on
disputes and enforce trade agreements. I just believe there is
a big market outside the United States, but we have to have the
tools and the teams to make sure that these agreements are
lived up to.
And so I wanted to ask you, Mr. Wessel: earlier this year
Mexico entered into new labor laws ensuring Mexican workers the
right to organize and bargain collectively. And now they have
to create their independent labor courts. And you were
mentioning Colombia and the challenges that we faced in getting
the right infrastructure there to make these decisions. So now
they have to implement these reforms.
So what do we need to do to build capacity in this area?
And do we not need to put in place enforcement tools to build
capacity to protect and enforce labor rights?
Mr. Wessel. Thank you for your question. And also, the
market opportunities you are talking about are enhanced by
having workers be able to enjoy the rights so that they are
good consumers of our products. So having labor rights in
Mexico will enhance opportunities for our exporters of all
products.
What you are talking about is a critical issue, and thank
you for your leadership several years ago on the trust fund,
because it helped to establish the funding mechanisms we need
for this.
Mexico has a number of things it needs to do on its own,
and they have set out a work plan to do some of that. In our
opinion, it is far too lengthy. It is a 4-year process. It is
uncertain--not only because of the constitutional challenges
that have been lodged, more than 400 of them so far--but Mexico
has failed to either define their budget or appropriate the
money. That will come later this year.
So the U.S. helping on capacity building in Mexico is vital
to help those workers who have not had rights, or understood
their rights for so long, to have, much as we do with trade
facilitation and capacity building, the support they need. It
means having people at our embassy who are able to go out to
the field and help support them, and understand what their
rights are.
It means having capacity here to support the unions and the
free labor movements that we need, as well as to have access to
the process to make sure that we do not have to go to
enforcement where injury has occurred, but we can build the
capacity to be able to make sure the agreement is a success.
Senator Cantwell. So you mentioned--you said U.S. support
for that. So you believe that, similar to using the Customs
bill and using those dollars to hire more lawyers at USTR, we
should also hire more capacity for implementing these, helping
to implement or oversee the enforcement of labor agreements?
Mr. Wessel. As we have in other trade areas--trade
facilitation, et cetera, Customs, et cetera--there is a role
for U.S. resources. Certainly we are not going to pay for
Mexico to hire its labor inspectors. That is a governmental
duty for them. But there is so much more infrastructure that
can be put in place in Mexico to make sure that the workers
understand, have the access, and know how to interact with
their, hopefully free, trade unions and their government.
Senator Cantwell. Well, Mr. Chairman, it may be a Northwest
perspective, but we definitely see an economy outside the
United States. And to me, the key is getting these issues right
and making sure that we can enforce our agreements.
So thank you for those ideas today. Thank you, Mr.
Chairman.
Mr. Wessel. Thank you.
The Chairman. Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman, and we thank all
of our witnesses for your contribution to this.
The USMCA is clearly an important agreement for American
manufacturers, producers, and farmers to maintain markets
between the United States, Mexico, and Canada. So we all
understand the importance of maintaining the trade relations
between the three countries.
I just want to first underscore a couple positive aspects.
We worked very hard on TPA to make sure there was a principal
objective of trade to improve good governance. And we worked in
TPP on a good governance, anti-corruption provision.
Unfortunately, we are not part of that. But I want to just
acknowledge that those provisions are carried over into the
USMCA agreements on good governance and anti-corruption, which
I hope will be standard for us on all trade agreements moving
forward.
I also want to speak in favor of the access on the poultry
industry, which is very important to the eastern shore of
Maryland.
I want to also just agree with Senator Wyden on the point
that you raised in regards to small businesses. A hat that I
wear--I am the ranking Democrat on the Small Business and
Entrepreneurship Committee, and the de minimis rule in the
United States, the $800 limit, is critically important, as
Senator Wyden pointed out, for small businesses.
I am deeply concerned that, because of the way that this is
structured, that number could be significantly reduced,
affecting small businesses, because of the President demanding
to have that to negotiate Canada's and Mexico's de minimis
rule.
But in the meantime, who gets hurt if he changes it? The
small businesses here in the United States. So I do not know
whether we will have an opportunity to negotiate that further,
but I can tell you, the way that is worded I think could be
damaging to small businesses here in this country.
But I want to concentrate on the dispute settlement
provisions and the fact that many of us think there is not
effective enforcement on the U.S.-Mexico-Canada agreement. We
carry over the provisions in regards to chapter 20 from NAFTA,
which means it is difficult to see how--Mr. Wessel, you talk
about the 4-year time schedule on labor, but if they do not
follow it, what is the enforcement? What do we have? What do we
do?
We are limited under chapter 20. So even if we want to use
our antidumping and countervailing duty provision, which is a
blunt instrument to enforce our trade rules under chapter 19--
which I believe has been carried over to the U.S.-Mexico-Canada
agreement--Canada and Mexico have the right to challenge us on
using our traditional trade remedy rules.
So it seems to me that we have really compromised our
ability to enforce the labor provisions, the environmental
provisions, and other provisions that are in this law because
there is not effective enforcement.
Question: how do we, within the context of the current
agreement, fix that?
Mr. Wessel. Well, my understanding is--that is one of the
principal issues certainly you and others have raised, but it
is one of the issues that is being discussed between the USTR
and the House working group to find a way to make sure that
panel-
blocking is eliminated and state-to-state dispute resolution
will work, but is also supplemented and enhanced by the kind of
provisions that Senator Brown and Senator Wyden have been
talking about that will ensure that, not only is there the
capacity within the structure, but that there are relief
measures that are available if, in fact at a site-specific
location, there have been inadequate labor rights for the
workers.
So we need to fix the underlying provision. We need to
supplement it with what, again, Senators Brown and Wyden are
working on and is under discussion, as I understand it, between
the House and the administration at this point.
Senator Cardin. I want to give any one of you on the panel
an opportunity to respond to Senator Toomey's point about the
sunset provisions. Because I find that somewhat unsettling, the
way that the sunset provisions have been drafted in this
agreement: 16 years with a 6-year review that could lead to
uncertainty as early as 6 years from now.
Does that raise concern?
Mr. Vilsack. Senator, one of the advantages of that process
would be to give us, at least in the dairy industry, the
opportunity to make sure that Canada is in fact following
through on eliminating Class 6 and Class 7, which for the dairy
industry is incredibly important.
So that is less of a concern on the dairy side, the farm
side, because it gives us a chance to revisit----
Senator Cardin. The chance to pull out of the agreement?
Mr. Vilsack. A chance to basically ensure that it is
implemented in the way that it was intended.
Senator Cardin. And if it is not?
Mr. Vilsack. Well, we have to make sure that Canada in fact
follows through. There is a replacement system for the pricing
mechanisms they are currently using, depending upon how that is
implemented. It could have a positive impact, but we are wary
because, in past agreements with Canada, they have had a
tendency to fudge on their commitments.
Senator Cardin. Thank you, Mr. Chairman.
The Chairman. Senator Warner?
Senator Warner. Thank you, Mr. Chairman. Thank you and
Senator Wyden for holding this hearing, and obviously this very
distinguished panel.
I want to start with just some concerns I have about--a
broader concern that this administration does not seem to have,
I think, a really coherent policy when it comes to trade. I
would argue, for decades our trade policy has built
relationships and promoted American values. We have managed to
maintain national security interests. I believe we missed an
opportunity in TPP, frankly--particularly as we focus on
America's relationship vis-a-vis China--to have developed a
regional counterweight against China, both on trade but also on
national security concerns.
Yet, the President took us out of TPP. On USMCA, it is
interesting to see that there are so many areas where it
appears, to me at least, that USMCA basically duplicates what
we had already negotiated in TPP. So it was not like it was
changing the standards.
And I worry that what we have seen from this administration
is two allies like Canada and Mexico that we have ended up
antagonizing--both of those countries.
I would offer for the whole panel: does anyone believe that
the highly contentious and adversarial process that the
President took with Mexico and Canada actually strengthened our
relationship?
I will let the rest of the panel answer that, and then, Mr.
Leathers, specifically, when the President constantly goes
about and threatens to shut down the border, what does that do
in terms of uncertainty vis-a-vis your industry?
So if anybody wants to comment first. Maybe we do not have
to have everybody go through, but this notion of approaching
our two allies Mexico and Canada in such an adversarial way,
does that really build a stronger relationship? Does anyone
want to take that on?
[No response.]
Senator Warner. Let the record reflect that they are all
being silent. [Laughter.]
Mr. Wessel. I would be happy to respond, Senator. You know,
from organized labor you might find it strange that we did not
believe that the tariffs applied under section 232 on Mexico
and Canada were appropriate.
The goal of enhancing aluminum and steel production in the
U.S. to support national security was a goal, but the fact that
the tariffs were applied more against allies than they were
against those who were cheating and breaking the rules, to us
was an inappropriate structure, and from day one we had said
that they should not be applied to those two countries.
So we support some of the goals of what the administration
is doing challenging China, et cetera, but there are a lot of
questions about the execution underlying that.
Senator Warner. I could not agree with you more that the
goal was right, but somehow the amount of damage we did to both
Canada and Mexico--long-term allies--Canada in particular, that
we used the national security provision to go against them, I
think was totally inappropriate. I have legislation with
Senator Toomey on this issue.
Mr. Leathers, I want you to comment, because I do want to
come back to Secretary Vilsack in a moment.
Mr. Leathers. Sure. So I will comment on both. First, on
the issue of whether it created adversarial relations or
concerns with some of the rhetoric, I mean, I think we could
all agree--and I am not really looking to be political here
with the statement--that there may have been times when the way
things were expressed could have been done differently, or more
delicately. But I also would tell you that in my experience--
having again lived and worked, and predominantly 20 percent of
my working life was in Mexico, 70 percent of my working life
has been doing North American trade and working on North
American trade activity with my customers--that what has
happened is that the elevation of the conversation, business-
to-business between companies, to talk about the real issues
and the underlying problems and why they need to be addressed,
has never been greater.
Seldom do we go to a meeting now on movement of freight
that does not end up being an open, transparent dialogue about
issues of concern to both parties. So I think there is a
positive in there as well.
As it relates to border and border shutdowns, clearly any
time there are threatened shutdowns with the border, it is a
concern to me because it is a concern to my customer, and I am
in the business of delivering their freight so they can make
their products.
And so we would like to see--and I think one of the things
USMCA does is, it at least gives the opportunity to provide a
framework with, in my opinion, certainty that we can live with
and have less disruptions.
Senator Warner. Thank you.
I want to make sure I get Secretary Vilsack in. I worry
that--and this was a prelude to USMCA--but when you get out of
TPP, what happens with things like Japan, U.S. agriculture, and
having the Europeans then come in and take advantage of that
opportunity? Thank you.
Mr. Vilsack. Senator, the challenge, I think, is that it
opened up an opportunity for some of our competitors,
particularly in the dairy industry, to move into market
opportunities that they did not have before.
Europe basically accelerated their negotiations with both
Mexico and Japan once we pulled out of TPP to enter into a free
trade agreement that put at risk common names, put at risk
certain cheese names due to geographic indications, and
negatively impacted our capacity to do trade in both of those
countries.
Fortunately, the removal of 232 tariffs began a process of
restoring that market in Mexico, and we are keeping our fingers
crossed that negotiations with Japan will result in us getting
back into that market fully and completely.
The Chairman. I will call on Senator Whitehouse. Because we
have three votes, this is how we are going to run the
committee. Senator Roberts is voting. And when he comes back, I
am going to go over and vote on the first one and the second
one, and we will keep it going.
So Senator Whitehouse is next.
Senator Whitehouse. Great. Well, thank you, Mr. Chairman,
and thank you to the panel for being here. Rhode Island, I
think, was pretty hurt by NAFTA. I think you are seeing some
interesting views across party lines here, because this is an
area where geography and economy matter.
I can remember going to manufacturing facilities and seeing
holes in the floor and asking what they were. Those were the
places where the machinery had been unbolted from the floor of
the plant so that it could be shipped to Central America so the
same product, for the same customers, on the same machine,
could be made in a different country thanks to NAFTA.
So I do not see this as a very significant change. I agree
with the ranking member that this is just NAFTA 2.0. You can
call it whatever you want, but it looks a damn lot like NAFTA.
And if you focus particularly on the environmental side, which
I tend to, this is really pretty bleak.
In this day and age, if you can believe it, this agreement
does not even mention climate change. I mean, I do not know how
grownups can write an agreement in this environment and not
address these environmental issues and not mention them.
Second, it singles out the polluting industries to protect
with ISDS, so that they remain able to go and bully and
intimidate small countries that might try to regulate their
pollution, which is, I think, really unnecessary and
inappropriate.
I take as a signal the area of marine plastic debris,
because the area of marine plastic debris is the one
environmental area in which the Trump administration has tried
to give itself some degree of environmental credibility. We
have had bills come through this body unanimously. It has been
very bipartisan. The President gave very strong remarks about
marine plastic waste. ``It is a tremendous problem,'' he said.
Thousands and thousands of tons of this debris float onto our
shores after it is dumped into the oceans by other countries.
This is a tremendous problem. Thousands and thousands of tons
of garbage come to us.
So I start from the proposition that, on this issue, they
are putting their best foot forward. This is how they are
really going to try to make up for the environmental disaster
that most of the Trump administration is.
But once you look behind what the President says, once you
look behind what Secretary Pompeo says, once you look behind
what Trade Representative Lighthizer says, it ain't good.
Last year at the G7 meeting in Canada, the U.S. refused to
sign the Oceans Plastic Charter. In March at the U.N.
Environment Conference in Nairobi, U.S. interference produced
nonbinding proposals and weak targets, and the U.S. then
rejected even the final watered-down declaration. In June, the
G20 failed to agree on concrete measures on marine debris,
again reportedly due to U.S. intransigence. Most recently, EPA
Administrator Wheeler pushed to have OECD member countries be
exempt from new rules agreed to under the Basil Convention--
already agreed to--that prevented the dumping of plastic waste
without consent.
The headlines that I see on this: ``U.S. halts tighter
rules on plastic waste trade.'' ``G20 urges voluntary action on
marine plastic crisis with the United States blocking demands
for global targets.''
One unexpected sticking point at the G7: plastic pollution
in the ocean. Why? The Americans did not want to sign onto an
oceans charter which contained targets. They had hoped the U.S.
would agree to take joint action to tackle plastic pollution in
the world's oceans, and in the end, it did not.
The communique released at the end of the summit: ``We, the
leaders of Canada, France, Germany, Italy, the United Kingdom,
the European Union, endorsed the G7 Oceans Plastics Charter.''
Guess who did not sign? The United States.
``Nearly all countries agree to stem the flow of plastic
waste into poor nations. Not the United States.'' ``The United
States is accused of blocking ambitious global action against
plastic pollution,'' March 15th.
All of those stories since March. So if this is the way
that the Trump administration enforces environmental concerns
that it claims to support, then look out for the other
environmental enforcements.
And as somebody who has been critical of the Obama
administration for their incredibly weak enforcement of
environmental and labor standards, I see us just going off a
cliff. I see no prospect for any serious environmental
enforcement. Our companies are going to lose business to
polluters and people who dump plastic waste into the rivers and
the oceans in other countries, and although there is a lot of
big talk from the Oval Office about how this is their big
environmental issue, when the rubber hits the road, when the
negotiators are working on these agreements, it is always the
Trump administration that is the weak link and dragging back
against progress.
So I just find the whole thing pretty incredible at this
point. Thank you.
The Chairman. Thank you.
Senator Hassan?
Senator Hassan. Well thank you, Mr. Chairman. And I want to
thank you and the ranking member for having this hearing. I
would also like to associate myself with Senator Whitehouse's
remarks just now about environmental enforcement and
protections.
Secretary Vilsack, I wanted to follow up on some of Senator
Grassley's questioning to you about the enforcement mechanisms
in the USMCA that would ensure that Canada reverses its unfair
pricing policy for certain skim milk products called Class 7
products.
As you know, Canada has used this special pricing policy to
undercut competition from American dairy exporters, including
farmers in my State of New Hampshire. You have raised concerns
that Canada could potentially work around the USMCA's
elimination of the Class 7 price, effectively recreating unfair
milk practices that are like the Class 7 price in everything
but name.
So can you explain to the committee, please, how that might
happen in practice, and how you think the USMCA's elimination
of this milk price could be effectively enforced?
Mr. Vilsack. Senator, thank you very much for the question.
There is no question that the Class 7 did in fact hurt your
dairy producers as well as producers around the United States.
And for that reason, we strongly urged the administration
to take a tough stance in the negotiations on this issue. Six
months after the ratification of these agreements by all three
countries, Canada has agreed to eliminate Class 6 and Class 7,
replacing it with a classing system and pricing system that is
tied to our Class 4 milk.
So first and foremost, it is an opportunity for us to keep
an eye on how that is implemented.
Secondly, the agreement does contain restrictions or limits
on how much can be in fact exported in these areas. And there
are financial penalties, if you will, if those limits are
exceeded. So obviously, it gives us a tool that we did not have
relative to Class 7.
Then there is the opportunity for a periodic review of the
agreement and concerns that all countries can raise whether or
not the agreement is in fact being implemented. This is
incredibly important. Seventy percent of the powder that is
produced in this country is exported. So anything that impacts
and affects the export of powder is certainly a concern to us.
So we are hopeful that the elimination of Class 6 and 7 and
the export limitations and penalties will provide a forceful
mechanism for us to ensure that it is indeed a repeal of Class
7 and not a replacement with something similar to it.
Senator Hassan. Well, thank you. As you know, Canada's
supply management for dairy is not very transparent, so we need
to have effective enforcement of the USMCA to ensure that
Canada does not restrict its dairy market in some new way.
I also wanted to touch on another aspect of the agreement
when it comes to dairy. As you know, under the USMCA Canada has
agreed to increase the amount of dairy exports from American
farmers that are exempt from large tariffs.
You have suggested that Canada could still play games with
these so-called tariff rate quotas. And you talked about that
just a little now. You pointed out, for example, that in past
years Canada's tariff quotas have counted cross-border
purchases, like when Canadians drive to New Hampshire to
purchase dairy products.
Can you elaborate on the games that you believe Canada
could play with tariff rate quotas under the USMCA? And again,
how do you think we can effectively stop them?
Mr. Vilsack. Well, there is obviously a concern in terms of
how the Canadians define certain products, and how they define
meeting the quota. You mentioned the fluid milk issue. There
was a quota for fluid milk, and they basically contended that
they were complying with the quota because people were crossing
the border, purchasing fluid milk in New Hampshire, and then
coming back into Canada.
Obviously, I think the concerns that that practice has
raised will ensure that we keep a wary eye on these quotas,
making sure that they are in fact enforced.
The good news is, the amount of the quotas, the amount of
the increase, is greater than we would have received under TPP,
and obviously we do not have to share that quota with other
nations.
So clearly again, the opportunity to periodically review
the agreement and the enforcement agreement gives us a chance
to raise issues sooner rather than later and not have to wait
for years and years and years to raise the issue. So I think it
is an opportunity for us to make sure that our Canadian friends
are following through.
Senator Hassan. Thank you very much.
Ms. Barnett, your story from your testimony earlier reminds
me of the many small online business owners in my State who are
also helping fuel our economic growth. Unfortunately, in both
New Hampshire and Oregon the Supreme Court's backwards Wayfair
decision has created massive uncertainty for online
entrepreneurs.
With all this uncertainty around Internet sales tax
collection, I believe that trade certainty for small online
businesses is all the more important. That is why I am
concerned, like the chair and ranking member, about a footnote
in the USMCA that would allow the administration to lower our
so-called de minimis threshold that allows small businesses to
ship products tariff-free and with simple Customs forms.
You talked a little bit about this in response to Ranking
Member Wyden's questions, but just so people can understand
this a little better, can you tell the committee how de minimis
thresholds help cut red tape for your business's exports to
Canada and elsewhere?
Ms. Barnett. So when I ship, say a $40 pair of earrings to
Canada or Mexico, usually mostly Canada and not so much Mexico,
it will generally fly across the border and into the customer's
hands.
If an item is over a certain amount--I am not sure exactly
what the amount is, but around like $40--the customer is going
to have to run down to the Customs office and pay a fine or
extra taxes and duties just to collect their item. And
sometimes it could be as much as they paid for the item. And I
mean, that is----
Senator Hassan. It is a major hassle for you and for them,
and it is an impediment to your business. I am over time, so I
am going to perhaps follow up with you in writing. I want
people to understand how important it is to have consistent,
predictable border policies and de minimis amounts, and I look
forward to talking more about it. Thank you.
Senator Roberts [presiding]. As the acting presiding
chairman, I know that Mr. Portman is next, but I had promised
Mr. Thune, because of his schedule, I would recognize him next.
In the Agriculture Committee, of which I am chair, I am fond of
calling Mr. Thune, Senator Thune, a long-time friend, ``Coop.''
That is short for a movie star way back with regards to the
person who starred in ``High Noon,'' Gary Cooper.
Then we realized that nobody knew what I was talking about
in terms of Gary Cooper or the movie. [Laughter.] Nevertheless,
for the first time in this committee, Coop, you are up.
Senator Thune. Thank you, Mr. Chairman. And it is almost
high noon. So--and you are my chairman, and I appreciate that.
And like many people in the audience, I had to look up Gary
Cooper to see if I was flattered by that or not. [Laughter.]
Let me just begin by saying that I want to associate myself
with the comments that Senator Wyden made earlier about the
strong bipartisan support there is for maintaining the
increased U.S. de minimis threshold, which I think is something
he and I got signed into law. I think it is really important,
and I hope that in this agreement that we can maintain those
levels, because I think it is important to our ability to trade
effectively with other countries and make it easier for U.S.
small businesses to compete.
Just very quickly, let me ask: this agreement, I think, is
the most worker-friendly trade agreement the United States has
ever considered, and it is a big improvement, in my view, on
the North American Free Trade Agreement--the agreement under
which we are currently operating--on the issues over which a
number of my friends across the aisle have expressed concern.
So I would just like a ``yes'' or ``no'' answer from all of
you on the panel. Given the choice between USMCA and NAFTA,
which would you choose?
Ms. Barnett. Yes.
Senator Thune. So USMCA?
Ms. Barnett. USMCA, yes.
Senator Thune. Okay, great. Thank you.
Mr. Blunt. USMCA is a significant improvement.
Mr. Collins. With the modernization of the rules and the
transparency around the regulatory process for agriculture, we
would choose USMCA.
Mr. Leathers. USMCA.
Mr. Vilsack. There are 2.2 billion reasons for saying
USMCA, Senator.
Mr. Wessel. USMCA, when fixed.
Senator Thune. So let me just then say, my own view is that
this is something we can get done and get done quickly, and I
think it is an improvement. If you look at the whole gamut from
manufacturing to digital services, to automotive, and for sure
to agriculture, which I care deeply about, the ITC study said
that it would create 176,000 new U.S. jobs, grow our economy,
and raise wages for workers.
And so, given the breadth of the progress that we have
made, I think it is time to pass this agreement and to start to
realize some of those economic benefits.
In any of your opinions, is there any reason why we would
not act now? And could somebody maybe just explain what the
cost of not acting would be?
Mr. Leathers. Yes. So I will start. I mean, obviously our
opinion is that we should act now. I think the cost of not
acting is the uncertainty that we have talked about several
times today.
In corporate America, we go through processes not
dissimilar from the Federal Government to figure out and
allocate capital expenditures. And in our company's case, that
number is at or around $300 million a year; some years a little
more or a little less. Not knowing with great certainty that
USMCA will be ratified makes it difficult to make decisions. We
have invested heavily on the southern border, and our operation
in Laredo is now 100 acres and the largest such operation of
its kind on the southern border.
We would like to see that certainty. We believe it is a
huge step forward. I personally believe, on labor in
particular, it is a step forward, and the time to act is now.
Mr. Wessel. My view is that we cannot afford the current
situation. We cannot afford to see jobs like the bakery workers
in Chicago and Philadelphia who are making Oreos, that those
jobs have now gone to Mexico, where workers are making 97 cents
an hour. And the last time I checked, the Oreo package is not
being sold any cheaper here in the U.S.
USMCA, with its variety of provisions, labor laws that are
going to be effectively enforced--implemented and enforced--can
help change that. And we are working for that.
Mr. Collins. I would just add, maybe if we put ourselves in
the role of our customers here--as a farmer, they typically
make decisions about what they plant 12 months ahead. They
start to order their inputs. They order seed. They plant. They
make their farm management plan. And so having that certainty
of where that demand is going to come from, that global market,
really helps in that decision-making.
So growers are going to come through a tough year here in
2019, and they are trying to make the best decisions they can
for 2020. And so having certainty about what that market looks
like in the future would be very beneficial.
Senator Thune. Thank you. And I could not agree more.
Farmers and ranchers in my State, they are facing a ton of
uncertainty about trade. And with all of these ongoing trade
negotiations and their being unsure about what the rules of the
road are going to look like in the future is very problematic.
And the one thing that we have in front of us that we can
get done now, which starts to change that trajectory and bend
it in the right direction, is this agreement. So we do not need
to wait on this anymore. We need to get it done.
I know that the folks in Kansas the chairman represents and
mine, desperately need this. So I hope we can get it done, and
I thank you, Mr. Chairman. I thank my colleague from Ohio for
his courtesy in letting me go first. Thank you.
Senator Roberts. I am happy to recognize Senator Portman,
with apologies.
Senator Portman. I thank the chairman. Thank you all for
being here today. I think this was a great hearing to build on
the momentum to try to get USMCA done. Because one of my
colleagues had a chart earlier, I figured we have to have the
dueling charts appear. So, what the heck, I thought we would
bring one too. And Sam is doing an awesome job of holding that
up. A little bit more to the--perfect.
Senator Roberts. Excuse me. Could you see what we have--oh,
my Lord.
Senator Portman. Let Senator Roberts see it too. So the----
Senator Roberts. It is too complex for me. [Laughter.]
Senator Portman. The reason I--I am going to make it
simple. The reason I like USMCA better than NAFTA is that it
does modernize an agreement that is 25 years old, one. And so
things like the digital economy--and Ms. Barnett talked about
that today--I mean, we have to upgrade it, and that is done.
And I think that is going to be very helpful.
We talked earlier about the de minimis threshold. We did
not talk about the fact that Mexico and Canada both agreed to
raise their de minimis threshold, not as much as I would like,
but again the alternative is NAFTA. Or, I guess you could say,
nothing. I think the alternative is NAFTA, because I think that
is what we are stuck with. I do not think there is any way for
the President to actually pull out of NAFTA at the end of the
day, because it is a law. And, although this would be a case of
first impression, that is what most of the lawyers tell me. As
a former U.S. Trade Representative, I also like the fact that
we now have some standards that we can turn to for labor and
the environment.
We have these in all the more modern agreements, but not in
the NAFTA, which is 25 years old. We can talk about
enforcement, but folks, the choice is not about enforcement or
not, it is about whether you even have the standard at all that
is enforceable. And in NAFTA we do not, and in USMCA we do.
The market access for farmers in Ohio is very important to
me, and that is why our ag community is strongly supportive of
it. And I appreciate you being here, Secretary Vilsack, to talk
about that.
In terms of the labor standards that are not only better
and enforceable, we have things in this agreement that we have
never had in any agreement, as Mr. Wessel knows. And some of my
Democratic colleagues who have talked for years about some of
these issues, including talking to me when I was USTR, it
surprises me that they are not finally saying that they can
accept victory, because this is what they have been asking for.
Here are some examples. We will start with the number of
jobs created. This is the ITC study. That is an independent
entity as you know, and they did their analysis--176,000 new
jobs.
Enforceable labor standards. Are they in NAFTA? No. Are
they in USMCA? Yes. The same with environmental standards.
Rules for the Internet economy we talked about, yes, no.
Seventy percent of the steel of vehicles made, including in
Mexico, has to be made with steel from North America. That is a
big deal, and that is something I do not think has been talked
about at all today.
That is in USMCA. It is certainly not in NAFTA. Forty to
forty-five percent of the vehicles must be made by workers
making at least $16 an hour. Now, frankly, it is surprising to
me that a Republican administration would negotiate that, but
they did. And for Democrats now to look at it and say that is
not good enough? Give me a break. I mean this is exactly what
many of my Democratic colleagues have been calling for for
years, and that is in this agreement.
Is it in NAFTA? No, of course it is not in NAFTA. So these
are just an example of some of the differences. And I think if
we are objective about it, as you all have been today, and
point out what the differences are, I think it is a pretty easy
decision for a Republican or a Democrat who really cares about
these standards.
Now, Mr. Wessel, you have talked today about how you would
like to see more certainty on the enforcement side. And I get
that. By the way, I appreciate you are on the Goodyear board, a
good Ohio company, and I appreciate all the work you have done
over the years with the Steelworkers and others, and we have
made some progress. But you are looking for a way to ensure
that we can have better standards.
So I would just say that, of course we want them to fully
and effectively implement these agreements. I would also say,
if we want Mexico to do all that, if we want them to expedite
the hiring of thousands of judges and labor rights'
professionals, appropriate the funds necessary to implement the
reforms, take labor justice seriously, we need to make good on
our end of the bargain. Otherwise, none of that happens, I do
not think.
In other words, Mexico adopted these reforms legally. They
changed their laws, their statutes, because of this agreement
and because of our willingness to say that we would make good
on our promise and support USMCA.
You make a good point about Mexico's 4-year transition
period for its labor reforms. I too want them to fully
implement the law because, like you, I know it is going to help
create that level playing field for our workers, but we also
have to consider what governs the rules of U.S.-Mexico trade
during that period, and that leads me to my question.
During the 4-year transition period for Mexico's labor
reforms, is it better for American workers to compete under
NAFTA's rules that lack labor enforcement, or under USMCA rules
which upgrade NAFTA to make labor provisions enforceable and
make the rules of origin stronger?
Mr. Wessel. Thank you for your question, and thank you also
for your work leveling the playing field and other issues where
labor has worked with you and your office; so we appreciate it.
Let me respond, if I can, not only to that question but the
chart as well, because we are still working to improve some of
those standards.
So as it relates to the 70 percent of the product, the
steel and aluminum, it still would allow for Chinese carbon
steel to be imported into Mexico, for example, transformed into
body panels, and qualify as originating. Similar for aluminum.
We are seeking to fix that and have been engaged in
discussions with the administration on that.
Your last point about earning at least $16 an hour--it is
actually an average provision. So you could have two people
making $28, which is often the base salary, three people, and
then you would have a number who could make $12, and it would
all be averaged in.
So behind each one of the provisions you have outlined
there, there is still a lot of work that needs to be done. And
we are working on that. We are looking at trying to have a
high-value target approach, working with the administration to
make sure that in certain traded sectors--let us take autos and
auto parts, which contribute so much to the bilateral deficit
where we have seen so much job loss--that action in those work
places be a priority first, understanding that it is going to
take Mexico quite some time to be able to implement all of its
commitments.
We think there can be a phased front-loaded approach to
make sure that we get the high-value targets that matter to
U.S. workers the most first, and implement over time all the
remaining provisions.
Senator Portman. Well, Mr. Wessel, I hope you will be able
to work through some of those issues and get the clarification
you need, but also not make the perfect the enemy of the good.
Mr. Wessel. We are hard at work.
Senator Portman. This is a vast improvement for you and
your interests, and it would just be to me a crime if we were
to end up not being able to get this agreement done and then go
into next year, an election year, with all the uncertainty that
that would entail. And again, all of us would have slight
differences in how we would approach this, no question about
it, but this agreement is a big improvement over the status
quo, and I hope we can all agree on that.
Thank you.
Senator Roberts. Senator Portman, this is a tough choice in
terms of awarding the former Senator Conrad Chartman award
between you and Senator Toomey, but I think you won hands down.
[Laughter.]
I will talk to you later about how you receive that.
Senator Carper? Senator Menendez, you are on deck.
Senator Carper. Thank you, Mr. Chairman.
Secretary Vilsack, when I first met you, I think it was at
new Governors' school, housed at the Hotel DuPont in
Wilmington, DE. And previously you had been, I want to say, was
it a State Senator? And I would just say to the other panelists
and our guests and my colleagues, I was so impressed with you
as a newly elected Governor, not just by the fact you were
smart and obviously worked hard and had a great wife, but I was
impressed by your humility. And I say that one of the hallmarks
of great leaders is humility, and I applaud you for the
wonderful work you did as Governor, and then as Secretary of Ag
for the entire 8 years of the Obama administration. And it is
great to see you here today in this role. So, welcome.
I have a question for three of our witnesses. This will be
a question for Jim Collins, for Mr. Wessel--Michael--and for
you, Tom.
The question is about an issue that I raised at our last
trade hearing--I think it was about a month or two ago, in
June--involving enforcement of the new NAFTA through the state-
to-state dispute settlement system. The state-to-state
settlement system in the new NAFTA continues to allow for panel
blocking, which is the main reason a dispute settlement panel
has not been established since the early 2000s, as I recall.
The Trans-Pacific Partnership, TPP, made changes to fix
panel blocking, but these improvements were not included in the
new NAFTA. A number of the provisions from TPP were included,
have been included. This is one that has not been included.
But 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
the new NAFTA when a dispute occurs. I am concerned that using
section 301 tariffs as a unilateral enforcement mechanism would
very likely invite retaliation from Canada and Mexico. And as
we have seen over the last year and a half or so, American
farmers are oftentimes the first target for retaliation.
So here are the questions, if I could, for Jim, for the
Secretary, and for you, Mr. Wessel. We have heard from just
about all the witnesses today on the importance of business
certainty. I hear that every day. It is part of my DNA as well.
How have the administration's section 301 tariffs on China
and China's retaliatory tariffs impacted business certainty in
the industries that you represent? Mr. Collins?
Mr. Collins. Thank you, Senator. In production agriculture,
we have a deep history of cooperation with Canada and Mexico.
Some of the statistics I showed earlier include exports being
up 350 percent since the adoption of NAFTA. So, these areas
that we are talking about covered by USMCA, we already have a
very good traditional relationship. However, we do need to have
some mechanisms in place to resolve disputes. There is no doubt
about that. And it is our view that no one country should have
the ability to block the enforcement of the panel process that
you mentioned.
You know, I am not a trade expert, especially around the
specific mechanisms that can be utilized for those
enforcements. I will leave that to the administration and to
Congress.
What we would hope for in that dialogue and discussion
would be a system that is the most agile, and also action-
oriented enforcement system as possible. So, despite the
successes we have had, to have some mechanism in there is
important.
Senator Carper. Governor Vilsack?
Mr. Vilsack. Thanks, Senator. I appreciate the kind words.
You and I share something in common: we both married up.
Senator Carper. They did not do too badly either.
[Laughter.]
Mr. Vilsack. Specifically to your question, we were headed,
in the first 5 months of 2018, to a record year in exports with
China. The assessment of the tariffs resulted in us losing that
momentum, and we ended up with a roughly 43-percent decline in
activity in China in the dairy industry.
So clearly, it has had an impact and continues to have an
impact. I think the preference for the dairy industry would be
that we would use tools other than tariffs to compel
enforcement.
Senator Carper. Mr. Wessel, could you respond as well,
please? Just briefly. Thank you.
Mr. Wessel. Yes, and thank you. I think the position of
most of organized labor would be that we have lost far more
jobs to the predatory protectionist and unfair trade practices
of China over the years, and need to respond. The President's
tariffs have brought the parties to the table. We hope that
they will be successful. We are not interested in tariffs long-
term, but we are interested in relief and therefore support the
continuation of the tariffs.
Senator Carper. All right; thank you. All right, Mr.
Chairman, thanks again. Thanks to each one of you. It is great
to see you all. Thank you--especially our friend from Oregon.
Your testimony was very compelling and heartfelt. Thank you.
Senator Roberts. Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Not a week goes by that I do not hear from folks in New
Jersey who find it harder to grow their businesses and hire
more workers because of the administration's unpredictable
trade policy.
Over a year ago, the President imposed tariffs on our
allies in the name of national security. A month ago, he put
tens of thousands of American jobs at risk by threatening
tariffs on Mexico, our third largest trading partner, over an
issue completely unrelated to trade. And just last week, he
threatened to do the same to Guatemala.
Now, I always like to remind people that ``tariff'' is just
a fancy word for a tax. And those taxes are ultimately paid by
the American people. And every time the President threatens to
impose more tariffs, he forces businesses to freeze their
plans, rearrange their supply chains, and lose export sales due
to retaliation.
So when we talk about Democrat efforts to strengthen labor
protections and enforcement in the new NAFTA, these are not
insurmountable challenges. But every time the President
threatens to pull out of NAFTA, or he creates more uncertainty
for businesses and jeopardizes the opportunity to fix NAFTA's
shortcomings so we can finally get a trade agreement that works
for all Americans, I think that that is greater uncertainty.
So I would like to ask our witnesses. Would you agree that
threatening to put tariffs on imports from a major trading
partner on an issue completely unrelated to trade has increased
uncertainty and held back our economy in the past few months?
Mr. Blunt?
Mr. Blunt. I can certainly start. Certainly threats of
tariffs, just by definition, do create uncertainty for
industry.
Mr. Collins. I would say, specifically, tariffs have
created some impact with our grower customers. You mentioned
China earlier, and the impact on farmers on trade as that has
been felt.
At the same time, the offset here is we have to acknowledge
that there have been other issues on the intellectual property
side and the approval of biotech imports.
Senator Menendez. Is immigration something worthy of
putting in tariffs that disrupt the economic realities?
Mr. Leathers. So I will not speak to that because I am not
an expert on that, but I will comment that----
Senator Menendez. Well, it does not take an expert to
understand that, if you apply tariffs to non-tariff issues, you
are creating uncertainty. You know, I had just about every
major CEO of every company come to visit me when the committee
was considering tax reform. And while they had different
visions of what tax reform would say, the one common thread,
regardless of what sector of the American economy they were
involved in, they said to me two things: ``No matter what your
tax policy is, give me predictability and certainty, and we
will make money.''
Well, the President is driving the greatest lack of
predictability and creating the greatest amount of uncertainty
in his tariff wars. And you all stay quiet over it. It is
pretty amazing.
Let me ask you this. Would USMCA prohibit the President
from imposing tariffs on Canada or Mexico for issues not
related to trade? Governor Vilsack?
Mr. Vilsack. No, Senator. And in fact agriculture, I think,
has deep concerns about the use of tariffs. Because every time
the tariffs are utilized, it is agriculture that pays the
price.
Senator Menendez. In other words, even if we pass USMCA,
the President's conflation of trade and other issues can be a
continued source of economic uncertainty. Is that not fair?
Mr. Vilsack. Yes.
Senator Menendez. Let me ask you this. Is it correct that
USMCA and NAFTA have essentially the same procedures governing
withdrawal?
Are any of you familiar with that? Can anybody give me a
``yes'' or ``no'' answer?
Mr. Wessel. I am not aware of any change in the USMCA----
Senator Menendez. Let me help you out there. They are the
same procedures. So if they are the same procedure, could we
not find ourselves facing the same uncertainty if the President
in the future threatens to withdraw from USMCA over an issue
like immigration?
Mr. Vilsack. I think the hope from the ag community would
be that the President and Congress eventually end up with a
comprehensive immigration reform package that makes sense.
Senator Menendez. That has been my hope for some time. We
passed one in 2013 with 67 votes in the Senate, only to
languish in the House and never get a vote. But my point is
this: it is beyond immigration.
The point is, when you use tariffs for non-tariff issues,
for non-trade issues, you are creating uncertainty. Let me ask
you one last question.
Mr. Wessel, turning to labor reform, Mexico enacted an
ambitious labor reform package. There is a lot of work between
having reforms and making those reforms enforceable. What
specifically should we be looking for when it comes to
questions of implementation, resources, and enforcement so that
we can finally get an agreement with Mexico that addresses the
shortfalls in labor rights there?
I mean, Colombia is an example of where we went wrong. That
is why I did not vote--I am a big fan of Colombia as a country.
It has come a long way. I did not vote for their trade
agreement because it did not have enforceable protections. I
was just in Colombia recently. Sure enough, everything I was
worried about is happening.
What should we be looking for as it relates to Mexico?
Mr. Wessel. I think the experience you just outlined with
Colombia and the certification of its compliance with
standards, and the action plan before those provisions were in
fact appropriately implemented, has given us tremendous pause.
And we believe there need to be strong certification provisions
in the USMCA that will ensure that there are certain steps that
have to be taken before the agreement enters into force.
And those would look at what Mexico has already identified
publicly as the steps they will take to hire the inspectors, to
hire the judges, to put the infrastructure in; what we need to
do here is to support that through a variety of mechanisms that
would support facilitation and capacity building on the ground.
No one should think that USMCA is going to enter into force
on January 1st if we pass it in the next couple of months.
There is a lot of work that needs to be done before it should
be implemented so that we have the confidence that what you are
raising about Mexico doing the right thing happens.
Senator Menendez. Thank you, Mr. Chairman.
Mr. Leathers. Mr. Chairman, if I may? Could I make one
comment to the last line of questions?
Senator Menendez. Certainly.
Mr. Leathers. I was attempting to make it several times.
Just this idea that being unrelated, and immigration being
unrelated--I just want to speak for the trucking industry--
because there was, in this case, some very direct relationships
for us.
So as Customs and Border Patrol people and assets were
being shifted from Customs to Border Patrol, we saw crossing
times go from 45 minutes to up to 9 to 11 hours for extended
periods of time. So the immigration issue to us was affecting
trade, and we saw it in slowdowns in the supply chain and our
ability to deliver on behalf of our customers.
So that was the point I was trying to make at the
beginning, that there was connectivity in our view.
Senator Menendez. And those wait times were increased
because of a differing in policy, because otherwise those
border crossings would be much more effective.
The Chairman. Senator Roberts, and then Senator Brown.
Senator Roberts. I have 7 minutes before the vote, so do
not worry, I will be on time.
I do not think I have been on a trade hearing--and I have
been through a lot of trade hearings even dating back to
NAFTA--that has had a better panel than this panel,
representing all segments of the American economy and industry,
and thank you all for coming. You made excellent statements.
So, feathers in your cap with regards to that.
I wish we would quit beating up on NAFTA. I remember the
days when Kika de la Garza, the great chairman of the sometimes
powerful House Agriculture Committee--I was the ranking
member--had the distinction of doing that; we worked terribly
hard on NAFTA. He would take me to Florida, take me to Texas
where there was some opposition, and he said, ``Well, I am a
little mixed on this NAFTA, but here is a guy from Kansas who
wants it, so let him talk.''
And so we had a good time. And if you look at the progress
over the several decades that followed, it has been
unprecedented.
I had a whole series of questions to ask, but I am going to
turn to Tom Vilsack, who is my great friend. I remember him
when he was Governor, when he was a presidential candidate,
when he was a Secretary, and now of course in his current role.
And, Tom, what I am really concerned about is, if this
continues with the tariffs, the tariff retaliation, more
especially with agriculture--I want to just look at that scope.
We are into mitigation payments. Never expected that. Farmers
do not want aid, they want trade. You know that. And you have
been a great proponent of that.
You know, if we did it in 2018 and 2019, and with the
demand situation that we see out there and a continuation of no
real breakthroughs, if we can possibly get that one shot, but
that is an uphill battle, and I am just very worried. Other
things, effects of Mother Nature on world demand for product,
where we are in 2020, 2021, 2022--if this keeps up, we are
going to lose a lot of folks in the agriculture sector.
And once that happens, it is very hard--when you lose a
market, it is hard to get it back. When you lose a farming
operation, it is very seldom that you get at least the same
family--maybe somebody else will jump in and take the punch.
Where are we headed? What do you see if we do not get a
better situation with trade down the road for agriculture? And
I am talking about looking over the hill. I am not talking
about right now.
Mr. Vilsack. Senator, thank you for the question. As I said
earlier, last year we lost 7 dairy farms a day, in large part
because of market conditions and circumstances impacting and
being impacted by trade.
I think the future for American agriculture long-term can
potentially be quite bright, because there are rising middle
classes, increased populations, and there is an opportunity
obviously to feed an ever-increasing world population that is
urbanizing. That plays to the strengths of American
agriculture.
Having said that, I think it is going to be incredibly
important for us to have trade agreements that provide a level
playing field for our farmers and for American agriculture and
the food industry.
Let me give you an example. In Japan, by pulling out of
TPP, we essentially invited the European Union to come in and
complete their free trade agreement. Here is what is at risk.
If we do not get a fair, level playing field in Japan with
our European friends and our New Zealand friends, we could lose
a third of our market share and our number four market, as
opposed to the possibility of increasing by twice the volume
and triple the value of dairy sales in Japan if we just have a
level playing field.
So that is, I think, an example of the opportunity that
exists, but it does require us to be more competitive. And it
does require us to have a level playing field. And that
requires trade agreements that level that playing field.
And it starts, I think, with USMCA, because that is where
our number one market is, in Mexico--preserving that market and
expanding opportunity in Canada.
Senator Roberts. I appreciate your comments. I want to
thank all the witnesses for emphasizing the value of ``Omska,''
which by the way is USMCA, which stands for the United States
Marine Corps Always. [Laughter.] And a fair trade deal too.
Tom, thank you, and thank you again to all the witnesses.
We are going to do the best we can on this committee, and we
have been working hard, the chairman has, Sherrod Brown has,
all of us have, in a bipartisan way. Thank you so much.
The Chairman. Senator Brown?
Senator Brown. Thank you, Mr. Chairman. Thank you for your
comments, Senator Roberts.
I want to focus on the need for--perhaps not surprising to
some of you--the need for enhanced enforcement for what I will
call anti-outsourcing provisions, the labor and environmental
standards in our trade agreements.
We know that corporations offshore jobs to low-wage
countries like Mexico because it helps their bottom line. In
2014, Goodyear, an iconic American company headquartered in
Akron, OH, announced they were going to make a $500-million
investment in a new manufacturing facility in the Americas.
I wrote the CEO urging him to consider building that plant
in Ohio with our highly skilled generational workforce. They
chose instead to build the plant in San Luis Potosi. It opened
in 2017. Representative Blumenauer of the Ways and Means
Committee, I believe the subcommittee chair on trade, led a
codel of House Democrats to Mexico earlier this month. They
asked in advance if they could tour the facility. Goodyear said
``no.'' They showed up at the facility and asked if they could
enter. Goodyear said ``no.''
We know why the company does not want members of Congress
to tour the facility. Workers there make less than $6 an hour,
many much lower than that, far lower than the $23 an hour their
American counterparts make. They are subject to a protection
contract, meaning a collective bargaining agreement written
Mexican-style. Their past governments, PRI governments and
others, buy the employer for the employer. Between 600 and 800
workers went on strike within a year of the plant opening to
protest the low wage and working conditions.
The company turned around and fired dozens of these
workers. Goodyear built that factory in Mexico instead of Akron
because of the low wages, because they would not have to live
up to U.S. labor standards. They did it to make more money for
executives at the expense of American jobs.
Our trade agreements, again, let them get away with it.
This new NAFTA is no different. Our first goal must be to stop
American jobs from going to Mexico. If this administration,
though, does not make improvements so that the anti-outsourcing
provisions are actually enforceable, then more factories will
be built in Mexico instead of Ohio.
Senators Cantwell and Cardin, and Mr. Wessel, all mentioned
the Brown-Wyden Amendment and what that means. It is why
Democrats--it is what we are fighting for here. We want our
trade agreements to stop the race to the bottom, not exacerbate
and accelerate it.
Ranking Member Wyden and I offered the proposal that would
allow the U.S. Government to inspect factories in Mexico and
then block goods from those factories into the United States--
not just denial of NAFTA benefits, but blocking goods from
those plants into the United States if violations were found.
It would allow us to enforce our labor standards at that
Goodyear plant at the factory level where the violations occur.
My questions are for you, Mr. Wessel. I know you are on the
board. I know you have a fiduciary responsibility to Goodyear.
I ask you to answer these as the labor representative on this
panel. And since I do not have a lot of time left, I ask that
you give ``yes'' or ``no'' answers.
Do you agree that companies like Goodyear build new
factories in Mexico and not in the U.S. because they can pay
the Mexican workers lower wages?
Mr. Wessel. Yes.
Senator Brown. Do you believe a U.S. company would deny
members of Congress access to their Mexican facilities because
they would not want elected officials to see their labor
violations at that facility?
Mr. Wessel. Yes.
Senator Brown. Do you agree that, without the changes
Democrats are asking for, the new NAFTA will let companies
continue to make offshoring decisions like that with impunity?
Mr. Wessel. Yes.
Senator Brown. Do you agree that the facility-level
inspections on enforcement, the core of Brown-Wyden which I
described earlier, are necessary to make sure NAFTA's
outsourcing provisions actually mean something?
Mr. Wessel. I would say it is vital, yes.
Senator Brown. Thank you. I ask unanimous consent to insert
two things into the record: first, Mr. Chairman, the letter I
wrote to the CEO of Goodyear, Richard Kramer, in 2014 urging
their company to build a new factory in Ohio.
And second is the letter sent to the same CEO, Mr. Kramer,
yesterday by House Democrats asking the company to respond to
worker reports of labor violations at the facility that those
members of Congress were denied access to.
The Chairman. Without objection, they will be included.
[The letters appear in the appendix beginning on page 52.]
Senator Brown. Thank you.
The Chairman. Senator Cortez Masto?
Senator Cortez Masto. Thank you. Thank you, Mr. Chairman. I
am committed, and I think I have said this in the past, to work
collaboratively to get a positive outcome here. I think we all
are. And there are some good things within the proposal that I
have seen.
But we also know that more work needs to be done. I do want
to reaffirm my hope that the administration will continue to
work with the Democrats to incorporate the Brown-Wyden labor
enforcement proposal to make the agreement as good as possible
for American workers, and to ensure it gets bipartisan support.
I also want people to know that, in Nevada, we do have a
dairy industry. So there are some good proposals and
opportunities there. So, thank you for the hard work.
Mr. Wessel, let me ask you this. You talked a little bit
about these earlier, which are the protection contracts when we
are dealing with Mexico. I also understand Mexico wants to
phase in their compliance over a 4-year period.
What is your understanding of why the old protection
contracts are allowed to continue for up to 4 years before they
are phased in? And why is that unacceptable?
Mr. Wessel. Well, two things. One, the provisions of
Mexico's labor law--if fully implemented, funded, et cetera--
will require that, for any new contract to be voted on by the
workers, the 4-year phase-in regards existing contracts. And
during the 4-year period, every one of them will have to be
voted on.
So they have tried to have an orderly process with 700,000,
or however many of those agreements exist; they are trying to
be able to accommodate that. Our view is, it needs to be a
shorter period of time, and it needs to be front-loaded in
terms of making sure the most trade-impacted or trade-sensitive
ones vis-a-vis U.S. jobs be voted on as early as possible.
Senator Cortez Masto. And what is the shorter period of
time that you are looking for?
Mr. Wessel. We would like to see this by starting mid next
year.
Senator Cortez Masto. Okay. And is this something that you
identified earlier, that the USTR and the House working group--
is this something they are working on as well and an area they
are trying to address?
Mr. Wessel. As I said earlier as well, this administration
has been more aggressive about engagement, more responsive,
than any I have seen, and I have done this for 40 years. There
is still a lot of work. This is one of the items on the table,
and I do not think Democrats are willing to push their chairs
away from the table until this issue is addressed as well.
Senator Cortez Masto. And how long do you anticipate it
will take for the Mexican Government to build its legal
infrastructure to ensure the reforms are fully implemented?
Mr. Wessel. They have a document the Department of Labor
has put out that has a schedule for implementation. We think
that needs to be kept--they need to be kept strictly to that
schedule. And again, as I said earlier, entry into force of the
agreement should be delayed until there is certification that
they are in fact living up to the standards and the commitments
they have made.
Senator Cortez Masto. Okay, thank you. Thank all of you for
being here.
The Chairman. I have two questions I want to ask, and then,
if nobody else shows up, we will adjourn.
Governor Blunt, the U.S. International Trade Commission has
highlighted that the agreement will have a number of important
economic things, including 176,000 new jobs for our country.
However, you have said the benefits will actually be even
larger, particularly for the U.S. auto industry.
I would like to have you--since you have a good view on
this, could you explain how you have come to that conclusion on
the benefits that I read about?
Mr. Blunt. Certainly, Senator. And thank you for the
question. We believe that the changes in USMCA, particularly
the changes in the rules of origin, will drive tremendous
investments in the United States, and in North America, but in
the United States in particular.
The USTR has done analysis that is based on plans submitted
by the companies for what they will need to do, the transition
plans that they will need to comply with. And if you aggregate
those, you have $34 billion of new automotive investment over a
5-year period, $23 billion of annual sourcing of U.S. parts,
and then they conclude over 176,000 new jobs.
We think the jobs number in particular is probably
conservative, but all of those numbers are easy to support. Our
three member companies--FCA, Ford, and General Motors--which
have deep footprints in the United States, have announced $6
billion in investment. And all three have cited the need to
comply with USMCA rules of origin as a part of the reason they
locate that investment in the United States.
The Chairman. Thank you for that answer. And I want to ask
Mr. Wessel just kind of a do-you-agree or do-you-not-agree--
three questions.
Do you agree that this is the first time we have had such
strong labor and environmental commitments in a free trade
agreement?
Mr. Wessel. Yes, but they need enforcement provisions, and
certain standards need to be fixed.
The Chairman. Okay, and I have publicly expressed my
willingness, as Ambassador Lighthizer is doing, to try to see
what we can reach to particularly get this through the U.S.
House of Representatives.
Also, by any measure the labor and environment commitments
in the agreement exceed those of any other free trade
agreement. Would you agree on that?
Mr. Wessel. I would say on labor they are a step forward,
which labor has indicated. On environment, there are actually a
number of MEAs that are not subject to commitments, so the
environment is actually a step backwards in many areas.
The Chairman. Okay; and then the USMCA labor commitments
have heavily encouraged Mexico to pass and then commit to
expeditiously implement historic labor reforms. Do you agree?
And I think maybe I heard the answer in a previous question you
responded to, so if that is a repetitive question, still answer
it.
Mr. Wessel. We are very appreciative of the steps that
Mexico has taken to implement the constitutional changes that
passed 2 years ago, I believe it was. They still need work, and
we are in fact deeply engaged, organized labor is, to try and
make sure they are able to implement all of those on the
ground.
The Chairman. As I should, for the hard work that all six
of you have put into this, I would thank you for your time
commitment and being here from your busy schedules to answer
questions. Your input has been extremely valuable.
I think that I want to see this agreement get through, even
if some changes have to be made to get it through the House of
Representatives, because we have a chance to bring more jobs
and opportunities to American farmers, workers, businesses, and
even benefit our consumers.
So, for the benefit of staff who are still here, but I
think is pretty normal, we will have until close of business
August the 13th for questions to be submitted in writing. And
if you folks get such questions, I hope you will respond to
them.
Thank you all very much. Meeting adjourned.
[Whereupon, at 12:55 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Paula Barnett, Owner,
Designer, Maker, Paula Elaine Barnett Jewelry
Good morning. My name is Paula Barnett, and I am a jeweler living
in Brownsville, OR with my 9-year-old daughter Carla. Thank you,
Chairman Grassely, Ranking Member Wyden, and members of the committee,
for inviting me to speak with you today about my creative business.
I am a self-taught fine jeweler. I spent 6 years studying art and
architecture history, and while I loved it dearly, the career options
were extremely limited. After failing to find a job in my field, I
conducted obsessive market research and decided to become a jeweler.
I've always been a maker, and once I had decided on this path, I dove
head-first into teaching myself how to make jewelry with simple tools
and equipment. I launched my business in 2013 on Etsy, an online
marketplace for handmade and vintage goods, and craft supplies. Within
a couple of months, I had already earned enough to cover my initial
investment in tools and supplies--a rare feat for a new entrepreneur.
Today I am a full-time goldsmith. I make custom engagement and
wedding bands using recycled fine metals and ethically sourced stones.
I've come a long way from making brass rings shaped like mountains to
setting diamonds in solid gold. My work is 100-percent made by me, with
my own hands, in my home studio in Oregon.
I am also a single mother, and my business allows me to be there
for my daughter Carla. I am home when she gets off the school bus, sick
days are a non-issue, and my flexible schedule allows me to raise my
child as I see fit. I am very blessed in this regard. Carla also
benefits from watching me exert myself creatively and succeed in
business. As an artistic child herself, her experience with my business
will help her flourish in her own capacity when she grows older.
I'm proud of my success, but my story is not unique. Globally, Etsy
hosts over 2.2 million creative entrepreneurs like me, and fully 87
percent of those sellers are women. Nearly all of them are businesses
of one working out of their homes. We are micro-businesses, yet we have
a significant impact on our communities and the broader economy. In
2018 alone, U.S. Etsy sellers contributed $5.37 billion to the US
economy, and created over 1.52 million jobs.\1\ Our impact is
especially big in rural communities like mine. For example, 27 percent
of Etsy sellers live in rural communities, compared to just 17 percent
of business owners nationwide.\2\ Individually, we may be small, but
together we are supporting our families and revitalizing communities
across the Nation.
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\1\ Etsy. Economic Impact Dashboard. etsy.me/impact dashboard.
\2\ Etsy. Celebrating Creative Entrepreneurship Around the Globe.
2019.
Perhaps it's surprising to find a business as small as mine
testifying before Congress about a multilateral trade agreement, but
I'm an exporter in my own right. About 20 percent of my sales are
international. Like many Etsy sellers, I made my goods available to
international buyers from the moment I opened my online shop. Today, 52
percent of all Etsy sellers export their goods. Unfortunately, the U.S.
is the only one of Etsy's core markets where the majority of Etsy
sellers do not ship their goods to other countries. For example, 90
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percent of Canadian Etsy sellers ship internationally.
Trade agreements like the USMCA have huge potential to help U.S.
micro-exporters like me grow our international businesses. In
particular, de minimis Customs thresholds, digital trade provisions,
and educational resources targeted to small businesses could all help
me increase my exports.
First, my business depends on my packages being delivered quickly
and with minimal hassle to my overseas customers. Creative
entrepreneurs rely on each and every customer, international and
domestic, to make their living. Unfortunately, many of my customers
must pay extra taxes and fees on the pieces I export, often
unexpectedly. I have had many packages get stuck in Customs, and to the
dismay of my customers, they must travel in person to pay the required
fees before collecting their item. In some cases, the cost can nearly
double the price of the item. This is a hindrance to sharing my work
with the world. A few customers have even refused packages due to extra
taxes and duties. In those cases, I find myself having to refund the
item including the shipping costs, or risk incurring a negative review,
which can make or break an e-commerce business like mine.
De minimis Customs exemptions are the single greatest tool
policymakers can use to help small and micro-businesses export their
goods. They enable my packages to move quickly across the border, which
is especially important as consumers expect faster shipping times. With
plenty of customers in Canada and Mexico, I am encouraged to see that
the USMCA would increase de minimis thresholds for both of these
trading partners.
The U.S. de minimis threshold is also important to my business. In
addition to exporting my goods, I also import many of my supplies. For
example, I import my opals from a supplier in Mexico. Some of these
stones are of a high value, but do not reach the $800 U.S. de minimis
threshold that Congress established in 2015. I also occasionally
process returns, and am relieved that I do not need to pay additional
fees on these shipments. Given the importance of de minimis Customs
thresholds to my business, I'm hopeful that Congress will ensure the
final agreement establishes certainty, not uncertainty, around this
important issue.
Second, digital trade provisions allow me to use the Internet and
online platforms like Etsy to reach buyers around the world. Thank you,
Senator Wyden, for your early and ongoing leadership in this area. I
can't overemphasize how important the Internet is to my business and my
family. My entire business is online. Without the Internet, I and
countless others like me would be without work. A job is one thing, but
doing something you are passionate about is something else entirely.
And that is what my jewelry business is to me.
I'm thankful that I can focus on growing my creative business, and
don't need to think about the digital infrastructure that underpins
global e-commerce, whether it be data processing and transfer,
electronic payments across multiple currencies, or the intermediary
liability protections that enable Etsy to operate an open, uncurated
marketplace. Regarding intellectual property protection, I have used
Etsy's notice and takedown system three times in the last 6 years to
protect my own work, and would be thankful if such systems and a
balanced approach to copyright protection were the norm worldwide.
I am honored to share my story with all of you today. My plans for
the future include growing my wholesale accounts, expanding the
complexity and craftsmanship of my work, opening a retail studio space
where I can meet with clients, and continuing to make jewelry alongside
my daughter, who is my biggest fan. As an Internet-based entrepreneur,
I'm hopeful the U.S. can set the standard for sensible e-commerce
policy through agreements like the USMCA, and that these provisions can
and ultimately will be enforced, to ensure the Internet continues to
act as a launching pad for millions of micro-business exporters like
me.
Thank you so much for your time and the opportunity to speak before
you today.
______
Questions Submitted for the Record to Paula Barnett
Questions Submitted by Hon. Chuck Grassley
Question. The USMCA digital trade chapter will not only benefit
traditional tech companies. It offers benefits for firms across
sectors, like manufacturing, transportation and agriculture. Businesses
of all sizes rely on the Internet to sell their products globally.
Global business rely on the free flow of data to conduct business and
communications, and make payments. Our modern economy requires modern
rules.
Would you briefly describe how the digital trade provisions in the
USMCA will benefit your business and other companies that utilize the
Internet to do the business more generally?
Answer. I am a small business of one, working out of my home in a
rural community in Oregon. Yet thanks to the Internet and the digital
infrastructure that underpins it, I am able to sell my jewelry to
customers around the world. The digital trade provisions of the USMCA
ensure that businesses like mine can continue to use online platforms
like Etsy to reach a global customer base. For example, the digital
trade chapter of USMCA protects the free flow of information across
borders, enables digital transactions, and protects the online
intermediaries we depend on from undue liability for user-generated
content. The digital trade protections in USMCA are essential to my
continued ability to find customers abroad and transact with them
seamlessly.
Question. The Customs and Trade Facilitation chapter of USMCA
includes new provisions that cut red tape and ease trade with our
neighbors. The USMCA requires Canada and Mexico to raise their de
minimis Customs thresholds, which will allow U.S. businesses to export
low-value shipments to Canada and Mexico free of duties, taxes, and
burdensome paperwork. The agreement also requires making Customs
regulations readily available online with a searchable database to
streamline procedures that will especially help small and medium-sized
businesses.
How do the streamlined Customs procedures in the USMCA make it
easier for a small business like yours to succeed and reach more
customers in Canada and Mexico?
Answer. The Customs and Trade Facilitation chapter of USMCA would
improve my ability to sell my jewelry into Canada and Mexico, where I
already have many customers. To date, it has been a major hassle for me
to ship goods to these countries, due in large part to their low de
minimis thresholds. My goods may get stuck at the border, or my
customers may refuse to accept a package when they realize that they
must pay additional fees before collecting the items. I often end up
reimbursing these costs or processing a refund (even though the buyer
is technically responsible), because providing exceptional customer
service is my top priority. I believe increasing the Canadian and
Mexican de minimis thresholds will eliminate this unnecessary friction
and increase my ability to export my goods to these countries. I would
also benefit from clear, simple, easily accessible information
regarding Customs regulations, both to inform my own research when
exporting my goods, and also to share with buyers who may be confused
about their own obligations. Any effort to put this information online
in a simple, clear, user-friendly, machine-
readable format would benefit small and micro-exporters in the U.S.
Question. It's critical that our trade agreements support small
business owners like you. You operate a small business out of your home
that, in part, relies on your ability to import materials you then use
to craft the finished products you sell. And in many cases, these are
products you sell to international customers. In 2016, Congress
increased the level at which customs duties and fees apply to imports
from $200 to $800. Even though this was a popular, bipartisan
initiative that helps businesses like yours, the administration has
suggested that it may try to lower the U.S. level in the USMCA
implementing bill.
If the U.S. were to reduce this level, how would your business and
other small online enterprises be affected?
Answer. I am strongly supportive of Congress's action to increase
the de minimis in 2016, and depend on the U.S. de minimis level of $800
to import my materials into the U.S. For example, I source my opals in
Mexico, and the shipments never exceed $800. If I had to pay additional
fees on these imports, I would likely have to increase my prices or
reduce my margin, both of which would harm my business and potentially
threaten my ability to export these goods to international customers.
Likewise, I occasionally have to process returns from customers in
Canada and Mexico. I sell fine jewelry, much of which is priced between
$200 and $800. If I had to pay additional fees on my returns, that
would make the difficult setback of an unanticipated return even more
challenging to manage. I strongly oppose any effort on the part of the
administration to lower the U.S. de minimis level, as doing so would
hurt my micro-business and many others like it.
______
Question Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. I do not have specific legal expertise regarding the
President's authority to unilaterally withdraw from NAFTA without the
consent of Congress. However, as a micro-business owner, I believe that
withdrawing from NAFTA would harm my business by increasing the costs I
face importing my supplies and reducing my ability to export my goods
to Canada and Mexico.
______
Prepared Statement of Hon. Matt Blunt, President,
American Automotive Policy Council
Chairman Grassley, Ranking Member Wyden, and members of the
committee, thank you for the opportunity to testify today on USMCA--a
truly 21st-century trade agreement with our Canadian and Mexican
trading partners.
My name is Matt Blunt, President of AAPC--the American Automotive
Policy Council--which represents the common public policy interests of
our U.S. automakers: FCA US, Ford Motor Company, and General Motors
Company, with an emphasis on international trade and economic policy
interests of our member companies.
America's automakers are confident that--once approved by
Congress--USMCA will not only help bring much needed predictability and
help maintain the competitiveness of the U.S. auto industry, it will
also serve as a blueprint for future U.S. trade agreements, allowing
our automakers to thrive in the increasingly global auto market.
When negotiations with Canada and Mexico began, AAPC and its member
companies had four priorities:
(1) Maintain duty-free access to the Canadian and Mexican auto
markets--two of the largest vehicle markets in the world;
(2) Include provisions to address currency manipulation by our
trading partners;
(3) Ensure continued acceptance of U.S. auto safety standards
in the region; and
(4) Include a balanced and workable rules of origin for
vehicles and parts in North America.
We firmly believe the negotiators achieved these priorities.
First, USMCA will preserve critical duty-free access to two of the
largest vehicle markets in the world, where our companies have been
incredibly successful. In Canada, our brands now account for about 40
percent of the 2 million vehicles sold. And in Mexico, American
nameplates have secured 27 percent of the 1.4 million vehicle market--a
market that is expected to steadily grow in the future.
We also commend U.S. negotiators for creating stronger but workable
rules of origin for vehicles and parts in the region. The new rules
raise NAFTA's current minimum content levels--which are the highest of
any trade agreement in the world--from 62.5 percent to 75 percent--will
require all automakers to make changes to their sourcing strategies,
but we believe these changes are feasible and will benefit the U.S.
auto industry and the millions of jobs they directly and indirectly
support here at home. In fact, our member companies have already
announced $6 billion in new U.S. investments, which were driven in part
by the new USMCA rule-of-origin requirements. We agree with the
administration that the new rules of origin will strongly incentivize
more investment in the United States, and more U.S. investment means
more American jobs.
Ambassador Lighthizer and his team also successfully crafted and
negotiated two ground-breaking provisions that will lock in the
acceptance of vehicles built to U.S. safety standards, as well as
provisions to prevent currency manipulation. These are the strongest
such provisions ever included in a U.S. free trade agreement. Like the
administration, we believe these new provisions should be included in
every future U.S. free trade agreement.
In short, American automakers have given their full support to
USMCA because it will not only help the U.S. auto industry remain
globally competitive, it brings certainty and stability, which in turn
will encourage automakers--foreign and domestic--to invest and expand
here in the United States.
The President's decision last month to lift the tariffs on steel
and aluminum from Mexico and Canada was a crucial development for our
automakers, as well as many lawmakers on both sides of the aisle. We
also understand that conversations between Ambassador Lighthizer and
members of the House working group on USMCA have been constructive.
Given this momentum, we hope members of this committee--joined by your
colleagues in the House and Senate--can work to help resolve any
remaining issues, so that Congress can approve USMCA and allow it to
fulfill its full potential for U.S. automakers and our Nation's economy
as a whole.
Again, thank you for holding this important hearing and for the
opportunity to testify. I would be happy to answer your questions.
______
Questions Submitted for the Record to Hon. Matt Blunt
Questions Submitted by Hon. Chuck Grassley
Question. The USMCA digital trade chapter will not only benefit
traditional tech companies. It offers benefits for firms across
sectors, like manufacturing, transportation and agriculture. Businesses
of all sizes rely on the Internet to sell their products globally.
Global business rely on the free flow of data to conduct business and
communications, and make payments. Our modern economy requires modern
rules.
Would you briefly describe how the digital trade provisions in the
USMCA will benefit your industry more generally?
Answer. The increasing digitalization of many aspects of today's
automotive industry makes the inclusion of a chapter on digital trade
important. We expect that importance will only grow in the future as
our industry increasingly relies on the free flow of data between the
U.S. and its trade partners. This is particularly critical for the
automotive industry during this era of rapid technological change and
innovation (i.e., electrification of the automobile and the development
of automated vehicles), where the ``Internet of things'' is creating
closer connections between previously independent parts of the auto
business (research/development, manufacturing, supply chains,
dealerships/service centers, consumers/drivers, etc.). The digital
trade chapter will allow America's automakers to leverage the
innovations they have developed and leadership they have in this area
to make U.S. automakers more competitive throughout the North American
region.
Question. In your June 26th op-ed in The Detroit News, you
mentioned addressing currency manipulation as a key benefit to this new
trade agreement. The USMCA includes the strongest ever provisions in a
trade agreement on currency manipulation. The USMCA requires
transparency in currency policies and addresses unfair currency
practices.
How is addressing currency manipulation essential to your member
companies maintaining competitiveness in the global autos market?
Answer. Currency exchange rates can be as important a determinant
of trade outcomes as the quality of the traded good or service.
Currency manipulation provides an unearned and unfair competitive trade
advantage to the manipulating countries' export industries. In the
past, America's automotive industry has been materially harmed in the
U.S. auto market and in third-party auto markets by U.S. trade partners
intervening in the foreign exchange markets to undervalue their
currency vis-a-vis the U.S. dollar--thus providing an unfair
competitive advantage for their auto industry's exports, while also
decreasing the competitiveness of U.S. exports to the manipulating
country's market and third party markets (i.e., Middle East, Latin
America, etc.).
Trade agreements that provide strong and enforceable measures to
curtail and prevent currency manipulation by our trading partners will
provide U.S. automakers with a more ``level playing field'' in our
domestic market, as well as critical export markets around the world.
That is why we have urged previous administrations, as well as the
Trump administration, to include enforceable currency disciplines in
all new and renegotiated U.S. free trade agreements (FTAs).
We welcome the inclusion of a currency manipulation discipline in
the USMCA--the first of its kind for a U.S. FTA. While Mexico and
Canada do not have a history of currency manipulation, inclusion of
this chapter in the USMCA establishes an important precedent for future
U.S. FTAs. Moreover, while the USMCA currency manipulation provisions
are adequate for Canada and Mexico, if a future trade agreement is
negotiated with a country that has a history of manipulating its
currency, American automakers would expect U.S. negotiators to require
stronger currency manipulation disciplines with more robust enforcement
mechanisms than those that were included in the USMCA.
______
Questions Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. We believe both the executive and legislative branches have
important roles to play in establishing and administering U.S. trade
policy, and we hope they can work together to avoid a withdrawal from
NAFTA prior to the entry into force of the USMCA, which would have
severe consequences for AAPC members, the auto industry, auto workers
and the U.S. economy. We therefore urge all parties to refrain from
considering such a course of action.
Question. In your written testimonies provided to the committee,
you cited a reduction in trade uncertainty as a benefit of the USMCA.
For example, you stated (emphasis mine):
Governor Blunt: USMCA ``will not only help the U.S. auto
industry remain globally competitive, it brings certainty and
stability, which in turn will encourage automakers--foreign and
domestic--to invest and expand here in the United States.''
Mr. Collins: ``While USMCA provides significant direct
benefits to U.S. agriculture and other sectors relative to
NAFTA, importantly, it also reduces the likelihood that trade
disputes will worsen and disrupt trading relationships.''
Mr. Vilsack: ``This trade agreement will bring strong
benefits to American agriculture exports, including the U.S.
dairy industry, by restoring certainty to U.S.-Mexico trade
relations, making needed improvements to U.S.-Canadian trade
and upgrading trade rules to discourage nontariff barriers to
trade.''
As you know, the International Trade Commission (ITC) in its
required analysis of USMCA found that nearly all of the agreement's
modest benefits stem from a reduction in ``policy uncertainty,''
largely due to the inclusion of some modernizing rules. By removing
this boost, however, the ITC found that USMCA would reduce real GDP by
0.12 percent--or $22.6 billion--over 6 years. An additional study
conducted by the International Monetary Fund (IMF) concluded that the
``effects of the USMCA on real GDP are negligible.'' A Canadian think
tank, the C.D. Howe Institute, reached a similar conclusion: ``The
negative elements outweigh the positives and the CUSMA results in lower
real GDP and welfare for all three parties, with Mexico being the
hardest hit and the United States the least.''
In your view, what factors are currently generating trade policy
uncertainty? How would the USMCA adequately address such factors?
Please be specific.
Answer. The heavy capital investments inherent in motor vehicle
manufacturing \1\ coupled with the especially long lead times from
concept to finished product (i.e., 5-7 years), makes the automotive
sector especially sensitive to changes in levels of certainty/
uncertainty. Automakers need to make footprint and sourcing decisions
several years in advance, and the establishment of clear rules for the
future--including for automotive technologies that were not
contemplated in NAFTA--will help bring certainty to that process.
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\1\ The typical automobile assembly plant requires an investment of
$1-$2 billion.
From a trade policy perspective, we are supportive of congressional
passage of the USMCA because we believe it will live up to its
potential to reduce uncertainty in a number of auto-related areas,
including rules of origin, and the commitment by Mexico to continue to
accept U.S. auto standards (no such commitment on auto standards was
included in the NAFTA). This in turn will boost investment in the North
American auto sector and contribute to economic growth in the U.S. and
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in the economies of our North American trade partners.
Question. Does the inclusion of a ``sunset'' provision in the USMCA
(article 34.7) increase or decrease long-term certainty about the
continuance of the trading relationship between the United States,
Mexico, and Canada?
Answer. Both NAFTA and USMCA allow for a 6-month notice of
withdrawal, so both agreements create some level of uncertainty. While
the USMCA also includes a more elaborate periodic review process, we
hope that this provision will provide an opportunity to address issues
that arise over time and might otherwise lead a party to consider
withdrawal.
Moreover, we are confident that the long-term merits of the USMCA
will be recognized by all three parties and that, once enacted, it will
clearly demonstrate its contributions to the U.S. economy and U.S.
economic competitiveness in the coming decades--making termination of
the agreement through the ``sunset'' process highly unlikely.
Question. In your view, what should be the role of Congress in the
``joint reviews'' of USMCA conducted every 6 years, per USMCA's
``Review and Term Extension'' (i.e., sunset) provision? Should such a
role be codified in U.S. law via USMCA's implementing legislation?
Answer. We support a strong role for Congress in trade policy.
Question. Does the curtailment of the Investor-State Dispute
Settlement (ISDS) mechanism in Mexico and its elimination in Canada
increase or decrease certainty for American investors in those
countries?
Answer. We see no expected impact on the U.S. automotive sector
from the curtailment of the ISDS mechanism.
Question. As you know, the USMCA includes significantly more
complex automotive rules of origin (ROO) compared with the current
NAFTA. While NAFTA requires that passenger vehicles and light trucks
must meet a regional value content (RVC) of 62.5 percent in order to
qualify for tariff-free treatment, USMCA contains seven distinct auto
ROO requirements: (1) 75 percent overall RVC, (2) 75 percent core parts
requirement, (3) 70 percent principal parts requirement, (4) 65 percent
complementary parts requirement, (5) 70 percent steel content, (6) 70
percent aluminum content, and (7) a new ``labor value content'' (LVC)
standard requiring that 40-45 percent of the value of an auto is
produced at a facility where the average production wage is at least
$16/hour.
Unsurprisingly, analyses of the USMCA have predicted that these
onerous new requirements on auto production will result in higher costs
of production for vehicles, decreased sales, and fewer choices for
consumers. While the ITC estimated an increase in U.S. employment in
segments of the auto industry due to assumptions surrounding
``reshoring,'' the ITC overall estimated a decrease of 1,600 full-time
jobs in U.S. vehicle production over 6 years. The ITC also estimated a
decline in U.S. vehicle consumption of approximately 140,000 vehicles.
USMCA's new auto rules understandably raise concerns about
offshoring of vehicle production. For example, instead of complying
with the stringent new ROO, producers could shift all production
outside of the U.S. to Mexico or other lower-wage countries, and pay
the 2.5 percent MFN tariff when exporting to the United States. Do you
agree that stricter auto rules could create a disincentive to produce
vehicles in the United States in the long term?
Answer. Instead of creating a disincentive to produce vehicles here
in the United States, we firmly believe the new automotive rules of
origin (ROO) will provide an incentive for automakers and suppliers--
foreign and domestic--to invest more within the North American region,
strengthening the U.S. auto industry and our economy in general.
We believe the new USMCA auto ROO strikes the right balance by
discouraging excessive use of foreign content in vehicles produced in
North America, while allowing those companies that have made
significant investments in the region to qualify for the agreement's
duty-free benefits. While the new rules will present some near-term
challenges for our industry, we believe the administration included
sufficient phase-in provisions that will help our automakers remain
competitive while they successfully transition to the new, more
stringent rules of origin included in the new agreement. Consequently,
all three of AAPC's member companies have indicated they intend to
comply with the new rule of origin for North American-built vehicles.
In addition, while a 2.5-percent tariff may seem insignificant, in
a highly competitive U.S. marketplace it can make the difference
between being commercially viable or not. Many of the passenger
vehicles that would be subject to this 2.5-percent tariff are smaller
passenger cars, and since the profit margin on a small car is already
very narrow, a 2.5-percent tariff--combined with shipping costs--can
have a significant impact on whether an automaker chooses to import a
model from outside North America.
Additionally, the rules of origin only apply to vehicles shipped
between USMCA partners. Because vehicles built in the U.S. and sold in
the U.S. would not be subject to these requirements, there is the
potential that some companies could choose to assemble in the U.S.
rather than comply with the new ROO.
Question. As you know, in his prepared testimony before the
committee, Mr. Wessel argued, ``it is hard to understand why major
automotive firms would support the USMCA if it imposed any significant
new costs on them or forced them to alter their production plans. [. .
.] If they are not complaining, this should give us all pause.'' What
is your response to Mr. Wessel's assertion?
Answer. The zero-sum view that if the agreement is good for
America's automakers, it must be bad for the auto workers or for the
United States as a whole is outdated. We view the agreement as a win-
win-win for automakers, auto workers, and the U.S. economy as a whole.
As indicated in our testimony, AAPC and its member companies
acknowledge that USMCA--particularly the new auto ROO--will require all
automakers to make changes to their internal processes, sourcing
strategies and related production plans. However, we believe the short-
term costs associated with these changes are outweighed by the benefits
over the long-term that the USMCA auto ROO will provide the American
auto industry and the U.S. economy. These include the commitment by
Mexico to continue to accept U.S. auto standards, as well as the other
updates made to the USMCA compared to NAFTA.
As such, we strongly support passage of the USMCA as soon as
possible.
______
Submitted by Hon. Sherrod Brown, a U.S. Senator From Ohio
United States Senate
washington, dc 20510-3505
June 16, 2014
SHERROD BROWN
Ohio
Richard J. Kramer
President and CEO
Goodyear Tire and Rubber Co.
200 Innovation Way
Akron, OH 44316-0001
Dear Mr. Kramer:
Given your plans to build a state-of-the-art tire factory in the
Americas, I strongly urge you to give full consideration to locating
this facility in your hometown of Akron or elsewhere in Ohio.
Selecting Ohio would be another step in your company's continued
investment in our great State. Your decision last year to invest in
your Akron-based Global Headquarters was a proud development for all of
us. I ask that you fully consider adding to that commitment and
bolstering your proud legacy as Goodyear Tire and Rubber Company of
Akron, OH.
Our State is a leader in automotive manufacturing, with one in
every six cars produced in the United States being made in Ohio. Ohio
is a day's drive to 60 percent of the U.S. population and possesses
workers who know how to manufacture components in the entire automobile
supply chain. It is home to over 800,000 auto-related jobs, a robust
supplier base, and assembly plants for Chrysler, Ford, GM, and Honda.
In addition, Ohio's skilled workforce and infrastructure are second to
none. Ford Motor Company's recent decision to invest $500 million in
one of its Ohio-based plants is a testament to the quality of Ohio's
workers.
If Goodyear locates the new plant in our State, the company will
have direct access to a highly skilled workforce, quality
infrastructure, and world-class educational institutions. I urge you to
continue Goodyear's proud tradition in our State and locate the new
tire factory in Ohio.
Sincerely,
Sherrod Brown
United States Senator
______
Congress of the United States
washington, dc 20515
July 29, 2019
Richard J. Kramer
Chairman of the Board, Chief Executive Officer, and President
The Goodyear Tire and Rubber Company
200 Innovation Way
Akron, Ohio 44316
Dear Mr. Kramer:
We are members of Congress serving various constituencies across
the United States and on various committees in the House of
Representatives. Last month, Speaker Nancy Pelosi appointed us to serve
also on the House Democratic Working Group to engage with Ambassador
Lighthizer to secure improvements to the renegotiated North American
Free Trade Agreement (the new NAFTA or USMCA) that will bring broad,
bipartisan support for passage of the bill. The Working Group's mandate
is to focus on four key areas for improvement: the worker protections,
environment provisions, provisions affecting affordable access to
medicines, and enforcement of the entire agreement.
As part of the Working Group's efforts to meaningfully improve the
deal, Ways and Means Trade Subcommittee Chairman Blumenauer led a
congressional delegation on a visit to Mexico earlier this month. To
inform our negotiations with the administration, it is important for us
to see labor conditions on the ground in Mexico and hear directly from
Mexican workers, especially in manufacturing sectors that have seen the
highest level of outsourcing from the United States. As we have seen
under 25 years of the NAFTA, if Mexico' s workers do not have rights,
good wages, or acceptable working conditions, American workers' rights,
wages, and working conditions suffer too.
Goodyear is an iconic American company. In 2015, Goodyear announced
a $500-million investment to build a tire plant in Mexico, expected to
manufacture 6 million tires a year. At the time of this announcement,
it was stated that this plant would serve the Mexican and Brazilian
markets as well as some overflow into the United States that the
company could not supply from its domestic operations. The San Luis
Potosi plant opened in 2017.
Before opening or hiring a single line worker, Goodyear had already
signed a contract with a non-democratic ``protection'' union. Less than
6 months after starting its operations, conditions were so poor that
workers at the plant went on a wildcat strike demanding a democratic
union, higher wages, and improved conditions. Wages for the most junior
workers at the plant amount to less than $2 per hour while the highest
paid production workers make just over $6 per hour. (By contrast, the
base rate for most workers under the USW Goodyear contract in the
United States is $23 per hour. Note that thus far in 2019, Goodyear has
announced and made layoffs in Danville, VA and Gadsden, AL.)
The wildcat strike in April 2018 grew to include almost 600 of the
800 workers in the plant, over a period of 25 hours. Management agreed
to address the workers' demands and the head of human resources
promised that the company would not take reprisals. Two months later,
however, the company systematically fired a total of 57 workers who had
participated in the strike. A number of these workers refused the
company's offer of severance pay and are maintaining legal demands for
reinstatement.
In planning the delegation's visit, Chairman Blumenauer requested a
tour of Goodyear's manufacturing plant in San Luis Potosi. Goodyear did
not grant Chairman Blumenauer's request for a plant tour, offering an
offsite meeting with executives instead.
While we were not able to see conditions inside the Goodyear San
Luis Potosi plant for ourselves, we met with several of the workers who
were fired after striking. The workers provided compelling testimony
about the poor working conditions, lack of protective gear and safety
and overall training provided to workers, non-
reporting of hazards, deductions that are taken from already low wages,
and discrimination and harassment (directed at women workers
especially) at the Goodyear facility.
We are disappointed that Goodyear was unwilling to accommodate our
request for a plant tour and that the security team also rejected our
in-person request during our visit to San Luis Potosi on Saturday, July
20th. We are also disappointed that an iconic American company like
Goodyear, which is shedding jobs at home in America while building new
facilities in Mexico, is failing to provide its workers in Mexico with
basic labor rights that are recognized internationally and under
Mexican law.
What is happening at Goodyear highlights the deeply ingrained
problems with Mexico's labor market. Workers are routinely mistreated
and paid wages that are shockingly low, in light of Mexico's wealth
relative to other Latin American countries where average workers' wages
are actually higher.
Mexico is currently in the midst of implementing new and ambitious
labor justice reforms that are intended to enable its workers to
realize democratic association and bargaining rights. In the meantime,
the U.S. Congress is preparing to consider approval for a new NAFTA
deal. Current Mexican law already requires that basic rights be
provided to workers. What is going on at Goodyear in San Luis Potosi
undermines our confidence and hope in the promise of the reforms. While
we are told that Mexico's labor reforms and a renewed NAFTA will lead
to positive change in Mexico and in America, what we saw at Goodyear
clearly illustrates the entrenched way of doing business in Mexico that
is based on exploiting a powerless workforce.
We will of course continue to explore ways to support Mexico's
implementation of its labor reform and to improve the USMCA's worker
provisions. However, companies operating in Mexico--especially American
companies like Goodyear--must do their part to change the practices of
the past. Without corporate commitment to reform labor conditions and
practices in Mexico, the new NAFTA will be stymied by many of the same
problems as the old NAFTA. Corporate accountability must drastically
improve, or we could be right back here, renegotiating NAFTA again in
the near future.
Accordingly, with our important responsibilities as part of the
Speaker's Working Group in mind, we ask that Goodyear provide a formal
response to the allegations made by former Goodyear workers regarding
poor working conditions, inadequate wages, illegal termination, and
discrimination at the San Luis Potosi plant, We further request that
you inform us what percentage of the tire production coming out of San
Luis Potosi is being exported to the U.S. and what effect this will
have on existing U.S. operations. We request your responses to this
letter and our questions within two weeks.
Sincerely,
Earl Blumenauer Rosa DeLauro
Member of Congress Member of Congress
Terri A. Sewell Jimmy Gomez
Member of Congress Member of Congress
Cc:
The Honorable Robert E. Lighthizer
U.S. Trade Representative
600 17th Street, NW
Washington, DC 20508
______
Prepared Statement of James C. Collins, Jr.,
Chief Executive Officer, Corteva Agriscience
Chairman Grassley, Ranking Member Wyden, and members of the Finance
Committee, thank you for giving me the opportunity to testify today on
the importance of USMCA to the agriculture economy. My name is Jim
Collins, and I am CEO of Corteva Agriscience.
First, I would like to congratulate Chairman Grassley on his recent
Washington International Trade Association ``American Leadership
Award''; the award is well-deserved for your leadership in fighting for
international trade throughout your time in Congress.
As you may know, Corteva Agriscience became an independent public
company on June 1st. Formed from the Agriculture Division of DowDuPont,
Corteva is the only remaining and largest U.S. based, publicly traded,
pure-play company, solely dedicated to agriculture. I am honored to
share the views of our 20,000 Corteva employees and our more than
400,000 customers--the American farmers. They are our partners and
their success is our success.
While our company is new, we come from a legacy of more than 200
years of agriculture. Corteva combines the strengths of DuPont Pioneer,
DuPont Crop Protection and Dow AgroSciences--and centuries of
scientific innovation. Corteva provides the latest in seed, crop
protection solutions and digital technology to farmers. Corteva's
heritage has informed our commitment to enrich the lives of those who
produce and those who consume, ensuring progress for generations to
come.
I personally began working in agriculture about 35 years ago. I'm
proud to work in an industry that is so productive, it not only feeds
our own country, but hundreds of millions of people around the world.
We strengthen global food security while supporting economic
development and job creation in rural America.
With this in mind, I'm here today to address the critical need to
pass the United States-Mexico-Canada Agreement to support employment
and economic growth in farming communities across the United States.
USMCA features disciplines critical to Corteva: not only preserved
market access, but protection of biotechnology innovation and
intellectual property and enhanced sanitary/phytosanitary standards.
We salute the administration in its modernization of NAFTA,
obviously necessary after 25 years. Millions of American jobs depend on
trade with Canada and Mexico, by far the largest export markets for the
United States. According to a 2019 Business Roundtable study,
international trade supports 39 million jobs across America, 12 million
of those jobs from trade with Mexico and Canada.
The NAFTA agreement was signed into law in 1993. Since then, U.S.
trade with Mexico has increased fivefold in nominal terms, while trade
with the rest of the world has only tripled. Corn exports increased
sevenfold, with Mexico the top buyer of U.S. corn. Three-way trade
quadrupled, creating a powerful engine for economic growth. Rather than
offshoring to Asia, critical supply chains have been able to remain in
North America, enhancing our Nation's ability to compete.
The required U.S. International Trade Commission analysis indicates
the market access provisions of USMCA would increase total U.S.
agricultural and food exports by $435 million. And when all provisions
of USMCA are considered, the impact could be more than $2 billion. This
difference comes primarily from the certainty created by USMCA. Markets
abhor uncertainty. While USMCA provides significant direct benefits to
U.S. agriculture and other sectors relative to NAFTA, importantly, it
also reduces the likelihood that trade disputes will worsen and disrupt
trading relationships.
Corteva supports USMCA as a tool to stabilize markets, further
expand and modernize North American trade and increase grower and
consumer access to innovation. We believe promoting open trade is
crucial, especially as agriculture is in a time of transition and
increased demands. Our customers feel intense pressures from weather,
pests, unprotected intellectual property, and the need to grow global
food supplies for a surging middle class in emerging markets. Yet, we
are living and working in a time of great opportunity. As we discuss
USMCA today, I'd like to focus on three reasons why USMCA is so
important. First, for farmers, second for U.S. agroscience, and third
for protecting our future.
Let me begin by sharing USMCA's impact on farmers, because they are
the reason Corteva exists today.
Farmers have relied on an integrated North American market for more
than 25 years and have flourished under enhanced access to the Canadian
and Mexican markets. NAFTA boosted U.S. agricultural exports to North
America by 350 percent over the life of this agreement. Canada and
Mexico buy nearly $45 billion in agricultural products annually from
the United States, making them our first and second largest
agricultural export markets, respectively.
In all of our conversations with farmers, they stress trade as one
of the key elements needed for their success. I just attended a meeting
of the American Farm Bureau Federation, and I heard this message loud
and clear. Corteva's deep understanding of American agriculture comes
from constant conversations with farmers and our partners and
stakeholders all along the food value chain.
We are also talking to the National Corn Growers Association and
the American Soybean Association that are actively working to ensure
they have new markets to sell their products. No one understands the
imperative around preserving robust export markets as much as farmers.
In recent years, we've seen the impact that weather and markets have
had on our agricultural producers. Some crops have hit new price lows,
other crops languish in warehouses or silos due to ongoing global trade
tensions. While I hear that farmers appreciate the aid packages, what
they truly want are new markets and the free flow of trade.
In listening to our partners in rural America, we hear from farmers
such as Andrew and Heidi Pulk in Wannaska, MN.
Andrew and Heidi are first-generation farmers. We absolutely need
young farmers like the Pulks, as many of our farmers are nearing
retirement.
The Pulks have an entrepreneurial spirit, like most farmers. When
they began farming, they did what any good business owner does--they
analyzed what they could best produce for the strongest market. They
correctly saw an opportunity with soybeans in China and invested in the
seeds, crop protection products and infrastructure needed to meet
Chinese demand. However, because of the trade challenges between the
U.S. and China--something completely beyond their control--the Pulks
have been forced to search for new market opportunities. Our very own
North American competitiveness zone was crucial to the Pulks continuing
down their path as first-generation farmers. Last year, they sold their
entire corn crop to buyers in Canada.
Passing USMCA will ensure that farmers like the Pulks can thrive
with the certainty of North American market access and of fixed rules
of the road in today's dynamic export-focused farm economy. That's good
for all of us, as the Pulks represent the face of farming today and in
the future.
Second, I will address the impact of USMCA on Corteva and U.S.
agroindustry.
As you know, U.S. farmers navigate uncertainty every day. Will it
rain? Will a new pest emerge? As the world's leading seed and crop
protection solutions provider--and the only one headquartered in the
U.S.--these are questions that keep Corteva and me personally up at
night. We want to get ahead of these problems and ensure farmers'
success.
Right now, rural communities need Washington to provide stability.
USMCA passage can be a key building block in creating that stability
during a challenging time for our customers. The American farmer wants
to know where he or she can sell and what export markets want. That's
why securing USMCA and other trade agreements, such as those under
negotiation with China, Europe and Japan, must be a priority. As
Chairman Grassley stated so well in June's hearing, ``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.''
With a level playing field, Corteva has the ability to innovate and
help U.S. agriculture become even stronger. Supporting farmers and
agricultural markets benefits society as a whole. The farmer does not
operate in isolation, but is the epicenter of an ecosystem, connected
to countless communities, industries and businesses. At 12 percent, the
food and agriculture industry is responsible for the largest segment of
U.S. manufacturing jobs. So it is clear--when farmers win, our Nation
prospers and we all win.
Corteva not only fuels rural America, but also has many customers
in Mexico and Canada. About half of Corteva's business is conducted
within North America. We believe USMCA is a strong and advanced trade
agreement that rebalances our trading relationships with Canada and
Mexico in the context of the modern era.
The United States is the largest market for seed in the world and
is also the largest seed exporter. Without competitive seed exports,
the United States would lose $1.7 billion in sales annually. Mexico and
Canada are our two largest export markets and vital trading partners,
representing $600 million in annual exports.
Some of the most persistent barriers in agricultural trade are
phytosanitary barriers, rather than tariffs. The gold standard
regulatory and sanitary/phytosanitary disciplines of USMCA ensure that
stakeholders have the opportunity to provide meaningful input into
rulemaking processes in North America, as well as significant advanced
notice before new rules go into effect to allow farmers to adjust
accordingly.
Why are clear rules so important? Seed varieties can cross six
international borders before being commercialized. This movement is
critical to bring the highest-quality seed to producers and requires
consistent phytosanitary regulations. For example, each truck of
commodity grain seed is worth upward of $50,000. If that truck is
rejected at the U.S.-Mexico border because of surprise or inconsistent
phytosanitary regulations, it costs the company $3,000 in return
shipping charges, in addition to the loss of income from the truck in
question. Rejected and delayed shipments cause quality reductions and
dissatisfied customers in not only present-day but future losses,
counted in the millions of dollars.
Corteva's seed and crop protection products represent decades of
in-house and collaborative research and development, meaning the
intellectual property rights protection provided by USMCA for our
innovations is crucial. By most accounts, these changes are estimated
to increase U.S. trade. The Corteva scientific team is particularly
excited about the biotechnology protections afforded by USMCA. We
believe the United States should pursue similar biotechnology
provisions in future trade agreements to continue to promote
agricultural innovation.
To illustrate, plant breeders must use the most precise and
efficient breeding methods available. Breeders specializing in
vegetable seed breeding varieties want high-quality produce with innate
resistance to devastating plant diseases. In just a few seasons, a
disease can evolve and destroy a previously disease-resistant variety.
Therefore, plant breeders must always stay one step ahead, developing
new varieties faster than diseases can evolve. To be effective, plant
breeders must work in a consistent and science-based policy environment
such as that provided by USMCA. This supports investment and biotech
breakthroughs, equipping farmers with the latest methods and techniques
to safeguard human and animal health, secure our food supply, and
protect the environment. Through USMCA, North America can be the world
leader in biotechnology innovation as it binds our three countries
under a common goal of innovation and respect for the conditions needed
to bring the lab to the marketplace.
Lastly, I want to address how USMCA can support agriculture's
future in America and beyond. While my testimony has largely focused on
the United States, it is important to also acknowledge the future
global implications of USMCA. Corteva is based here--in Iowa, Indiana
and Delaware, but we have a global reach. Farmers also compete
internationally. We need synchronicity in the rules featured in U.S.
trade agreements, and we must expand the web of U.S. trade agreements
globally to keep our industry moving forward.
We usually focus on the gains from tariff reductions and stable
rules provided in free trade agreements. These are certainly easy to
quantify, and I've tried to do that with you today. But we sometimes
forget that the institutions and relationships created by trade
agreements can help solve problems before they become intractable trade
barriers or disputes.
Through the 25-plus years of NAFTA, North America became more
integrated economically, but our governments also established broad and
deep relationships among our officials. Sometimes a frank discussion
between trusted interlocutors is worth its weight in gold. During the
months of USMCA's negotiation, we saw the importance of that trust. We
must not only pass USMCA to protect the North American competitiveness
zone, but we must replicate this exercise going forward in our other
pending trade negotiations.
I fully understand that fears linked to globalization and
automation--with trade agreements as a scapegoat--can dominate the
headlines, but we must have the courage to continue to open markets for
American farmers and businesses.
Thank you again for the opportunity to address the committee and
discuss the importance of swiftly passing USMCA for the benefit of
American farmers, U.S. businesses such as Corteva, and the future of
agriculture and trade. I want to express my gratitude for this
committee's active engagement in supporting policies that promote
farming, agriculture and trade. I will be pleased to answer questions
you may have or supply additional information for the record.
______
Questions Submitted for the Record to James C. Collins, Jr.
Questions Submitted by Hon. Chuck Grassley
Question. The USMCA digital trade chapter will not only benefit
traditional tech companies. It offers benefits for firms across
sectors, like manufacturing, transportation and agriculture. Businesses
of all sizes rely on the Internet to sell their products globally.
Global businesses rely on the free flow of data to conduct business and
communications, and make payments. Our modern economy requires modern
rules.
Would you briefly describe how the digital trade provisions in the
USMCA will benefit your business and your industry more generally?
Answer. About 60 percent of the U.S. jobs created by digital
services exports are outside of the tech sector--increasingly including
agriculture. Core to our new company is responding to farmer demands
and equipping them with tools to predictably and efficiently bring
their products to market. Farmers navigate uncertainty every day with
conditions such as weather, pests and diseases. The more we can help
introduce reliability into their days, the better. And the more we talk
to farmers, the more we hear that digital, data-driven solutions are
key to their future success. A modernized USMCA goes a long way in
meeting this demand across the North American continent.
The USMCA reduces trade barriers and facilitates cross-border data
flows that allow companies of all sizes and in all industries--
including agriculture--to access digital services at affordable prices.
This efficiency allows for companies such as Corteva to offer or create
new data-driven services and products that can transform ideas into
businesses. These benefits apply as much to U.S. farmers as they do to
tech entrepreneurs.
We've only begun to tap into the potential of digital agriculture,
but Corteva is already helping farmers oversee operations, maximize
yield through data-driven crop modeling, and improve the predictive
accuracy of these digital tools. The benefits of digital ag accrue at
an increased rate over time, as modeling benefits from a greater
quality and quantity of inputs. Farmers are already seeing results. The
USMCA can be a leading-edge supporter of this new and dynamic sector by
leveling the playing field for North American farmers and preserving
the U.S.'s role as the world's leading agricultural innovator.
Question. The USMCA secures powerful enforcement of intellectual
property rights and strong patent protection to help drive innovation
and create economic growth. The agreement specifically increases data
protection for agricultural chemicals from 5 to 10 years.
Why is data protection for agricultural chemicals important for a
company like Corteva, and how will a longer duration of data protection
benefit American farmers and consumers?
Answer. The average lead time between the first synthesis of a new
crop protection chemical and its commercial launch has been steadily
increasing. From 2010-2014, the lead time was about 11.3 years. Much of
this increase in lead time can be attributed to greater complexity in
the data requirements of regulatory agencies, as well as the time taken
for regulatory agency review (Phillips McDougall, https://www.ecpa.eu/
sites/default/files/R-and-D_report_2016_FINAL_revised_2016-04-13.pdf).
The crop protection industry is highly competitive, and patent
applications for new crop protection chemicals are typically filed
shortly after the first synthesis. Since patents generally have a term
of 20 years from filing, many new crop protection chemicals have less
than half their effective patent life remaining at commercial launch.
Data protection provides additional differentiation for off-patent
crop protection chemicals and protects the significant investment made
by companies such as Corteva in conducting required toxicology and
environmental testing during development of a new crop protection
chemical. The USMCA's extension of data protection from 5 to 10 years
propels companies such as Corteva toward bolder innovation and
discovery of new crop protection chemicals to benefit American farmers
and consumers. Longer data protection incentivizes environmentally
favorable profiles and new modes of action that may require additional
data characterization for regulatory agencies. By protecting the return
on investment in innovation, data protection helps enable us to provide
products and services to produce what our food system demands and to
conserve resources and sustain the land.
______
Question Submitted by Hon. Pat Roberts
Question. Agriculture faces a number of non-tariff barriers to
trade. I was very pleased to see that USMCA includes strong provisions
as it relates to biotechnology and new technologies such as gene
editing that encourage information sharing and cooperation.
How do these provisions impact not only our trading relationship
with Canada and Mexico, but also future trade agreements with other
countries?
Answer. As noted in my testimony, the USMCA's support of
agricultural innovation is an extremely positive provision and will
help create a pathway for plant breeders as well as all facets of our
industry to keep pioneering for consumers who trust and rely on us for
their food source. Biotechnology also attracts investment--which breeds
new biotech breakthroughs--and equips farmers with the latest methods
and techniques to help safeguard human and animal health, secure our
food supply, and protect the environment.
Through the USMCA, North America can be the world leader in
biotechnology innovation as it brings together our three countries
under the common goal of innovation and respect for what it takes to
bring the lab to the marketplace. From a global perspective, we see
firsthand how multilateral agreements, such as USMCA, can help
facilitate science-based international rules and standards that foster
innovation. We need synchronicity based on science in our trade
agreements, so farmers and consumers can realize the benefits of
innovation and more sustainably grow our industry to meet the demands
and challenges of the future. When even one trading country fails to
follow science-based regulatory approval processes, it can impact
production in all associated trading countries.
In our support for international trade in commodity grains, we
advocate for harmonized, predictable, science-based regulatory polices
around the world. Within the 195 countries in the world, trade and
regulatory practices vary widely. Countries not following the
principles outlined in the USMCA can operate regulatory systems that
are unpredictable, non-science based, and intentionally politicized.
These non-functional systems should not be permitted to effectively
block access to innovation that would benefit growers and consumers.
______
Questions Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. The question you pose on withdrawal is exactly why I
personally have confidence in the separation of powers between the
three co-equal branches of the U.S. Government. From Corteva's
perspective, swift passage of the USMCA, ideally without entertaining
U.S. withdrawal from NAFTA, would help create certainty in North
American agricultural investment and markets to the benefit of American
farmers.
Question. In your written testimonies provided to the committee,
you cited a reduction in trade uncertainty as a benefit of the USMCA.
For example, you stated (emphasis mine):
Governor Blunt: USMCA ``will not only help the U.S. auto
industry remain globally competitive, it brings certainty and
stability, which in turn will encourage automakers--foreign and
domestic--to invest and expand here in the United States.''
Mr. Collins: ``While USMCA provides significant direct
benefits to U.S. agriculture and other sectors relative to
NAFTA, importantly, it also reduces the likelihood that trade
disputes will worsen and disrupt trading relationships.''
Mr. Vilsack: ``This trade agreement will bring strong
benefits to American agriculture exports, including the U.S.
dairy industry, by restoring certainty to U.S.-Mexico trade
relations, making needed improvements to U.S.-Canadian trade
and upgrading trade rules to discourage nontariff barriers to
trade.''
As you know, the International Trade Commission (ITC) in its
required analysis of USMCA found that nearly all of the agreement's
modest benefits stem from a reduction in ``policy uncertainty,''
largely due to the inclusion of some modernizing rules. By removing
this boost, however, the ITC found that USMCA would reduce real GDP by
0.12 percent--or $22.6 billion--over 6 years. An additional study
conducted by the International Monetary Fund (IMF) concluded that the
``effects of the USMCA on real GDP are negligible.'' A Canadian think
tank, the C.D. Howe Institute, reached a similar conclusion: ``The
negative elements outweigh the positives and the CUSMA results in lower
real GDP and welfare for all three parties, with Mexico being the
hardest hit and the United States the least.''
In your view, what factors are currently generating trade policy
uncertainty? How would the USMCA adequately address such factors?
Please be specific.
Does the inclusion of a ``sunset'' provision in the USMCA (article
34.7) increase or decrease long-term certainty about the continuance of
the trading relationship between the United States, Mexico, and Canada?
In your view, what should be the role of Congress in the ``joint
reviews'' of USMCA conducted every 6 years, per USMCA's ``Review and
Term Extension'' (i.e., sunset) provision? Should such a role be
codified in U.S. law via USMCA's implementing legislation?
Does the curtailment of the Investor-State Dispute Settlement
(ISDS) mechanism in Mexico and its elimination in Canada increase or
decrease certainty for American investors in those countries?
Answer. As I stated in my testimony, Corteva supports the USMCA as
a tool to help stabilize markets and to further expand and modernize
North American trade. We believe that consistently promoting open trade
in a manner that promotes innovation is crucial, especially as
agriculture is in a time of transition and increased pressures--from
weather, pests, unprotected innovations, and growing food demand.
I would highlight that the non-tariff barriers addressed in the
USMCA are of equal importance to maintaining a mostly tariff-free North
America. Of course, the modernization of NAFTA--while necessary--did
introduce uncertainty into North America trading relationships. Canada
and Mexico are typically the #1 and #2 export destinations for American
farmers. This means immediate passage is critical. But it's also
important to have periodic check-ins on the agreement to guard against
instability of North American trade and continue to foster innovation.
Regarding the curtailment of ISDS in the USMCA, I would hope and
expect that cross-border agricultural investments would be protected
and respected throughout North America, as Corteva has found to be the
case.
______
Question Submitted by Hon. Todd Young
Question. In your testimony, you described the importance of North
American trade to a young farming family in Minnesota, the Pulks. Just
last week, I met with a Hoosier farmer, Joe Steinkamp from Evansville,
IN and heard a similar story. Joe farms corn and soybeans in
southwestern Indiana. His farm is uniquely located on a peninsula along
the Ohio River which allows him to easily barge his products down the
Ohio River to the Mississippi. In prior years, Joe sold between a third
and half of his soybeans to China. However, that market has been
temporarily closed off to Hoosier farmers. As you indicated in your
testimony, Joe--like the Pulks--was required to search for new market
opportunities and thanks to existing trade agreements with Mexico,
Columbia, and Korea he has viable foreign markets to sell his goods to.
Passing the USMCA will provide certainty to the Pulks, Steinkamps, and
the entire Hoosier farming community.
Can you speak to the importance of trade certainty to American
farmers, how it affects their purchasing and planting decisions months
before they ever take their goods to market?
Answer. I am glad you had the opportunity to meet the Steinkamp
family in Indiana. Joe Steinkamp is actually a customer of Corteva's
Pioneer brand seed. The impact of the USMCA and other trade and
innovation policies hits home when we meet the people who are directly
impacted by these policies, or who suffer the consequences of our
failure to get the USMCA and similar trade policies implemented.
It's important to keep in mind that, while farmers are producers
and manufacturers of feed and food ingredients, they aren't operating
assembly lines of widgets. They can't adjust their production plans in
a day, a week or a month. To secure what they need for their
operations, American farmers start making planting decisions for their
next year's crops at or before harvesting their current year's crop.
For example, they will decide this fall what and how much they will
plant in April or May 2020. And their decisions rely on expected
markets and demand for what they will harvest in fall 2020. This is a
full 12 months after they made their initial plans and placed orders
for input needs.
Once the seed goes in the ground in the spring, farmers' production
plans are set for the year--there's no going back. They can't shift
production mid-season to align with changing political trade winds.
Therefore, if trade and innovation policy certainty doesn't exist, we
have hard-working American farmers such as the Steinkamps and the Pulks
who are left with semi-truck loads of grain with more limited markets.
After investing significant dollars into the production of the grain--
from labor, seed and crop protection inputs, machinery, land
acquisition, taxes and other costs--they not only are unable to recoup
their investment, but the bills and invoices for production needs come
due regardless of whether growers find a market for their grain. If we
expect American farmers to make investments and continually innovate to
more sustainably feed the world, we owe it to them to provide a
reliable market with trade and technology policy certainty. If we fail
to do so, farmers will be faced with additional challenges that make it
even more difficult to produce crops and remain profitable.
______
Question Submitted by Hon. Sheldon Whitehouse
Question. I've recently heard from Rhode Island businesses
concerned about the process for small companies applying for exclusions
from increased tariffs. In July, I introduced the American Business
Tariff Relief Act of 2019 (S. 2362), which would establish a process
for U.S. businesses to request exclusions from increased tariffs under
section 301 and section 232 prior to the imposition of new tariffs.
Specifically, it would require the USTR or Department of Commerce to
make a determination within 30 days and provide a rationale for any
denials.
Have you heard about related concerns from small businesses?
Do you think it would be helpful to have a process in place to
ensure that small businesses are not being overlooked when applying for
tariff exclusions?
Answer. I have not personally heard complaints from small
businesses but believe that it is critical that the exclusion processes
being run by USTR and the Department of Commerce be as transparent and
agile as possible for all companies. Corteva is making several
exclusion requests to defend the interests of our agricultural
customers and would hope that determinations could be made within 30
days as the Senator suggests.
______
Prepared Statement of Hon. Chuck Grassley,
a U.S. Senator From Iowa
Good morning, and welcome to our witnesses, who are with us today
from a range of industries to tell us about the importance of the
United States-Mexico-Canada Agreement, or the USMCA. We look forward to
hearing from you about the significance of USMCA to the American
businesses--small and large--the workers, and the farmers that you
represent. Thank you for being here.
Mexico and Canada are our country's most important trading
partners. According to the United States International Trade
Commission, in 2017, more than one-third of American merchandise
exports went to Mexico and Canada. In that year, Mexico and Canada
imported more than half a trillion dollars of American goods, plus more
than $91 billion of American services. For Iowa, our $6.6 billion of
exports to Mexico and Canada in 2017 supported 130,000 jobs.
The foundation of our strong trading relationship with Mexico and
Canada has been the North American Free Trade Agreement, or NAFTA. The
United States, Mexico, and Canada negotiated NAFTA from 1990 to 1993.
At the time, NAFTA set a new standard for trade agreements; it helped
Mexico reform into a market economy; and it enabled American
businesses, workers, farmers, and ranchers to sell our goods and
services in Mexico and Canada without tariffs and without many non-
tariff barriers that, for decades, had burdened our ability to compete
in those markets.
Of course, the U.S. economy and global trade have changed
dramatically since 1993, and 25 years of experience with NAFTA have
provided valuable lessons. The time for modernizing NAFTA has come, and
USMCA does exactly that.
Across the board, USMCA sets a new standard for our trade
agreements. For example, once enacted, USMCA will be the first U.S.
free trade agreement with robust chapters dedicated to digital trade,
anticorruption, good regulatory practices, and small and medium-sized
enterprises.
USMCA will set new benchmarks in many other areas too, such as the
free transfer of data across borders, strong rules on state-owned
enterprises, North American content requirements for preferential
treatment, food safety and biotechnology standards, Customs and trade
facilitation, intellectual property rights protection and enforcement,
labor, and environment.
The USMCA labor chapter squarely addresses worker rights in Mexico,
and it already has resulted in an overhaul of Mexican labor law. The
labor and environmental standards in USMCA are the most rigorous in any
U.S. trade deal and, unlike with NAFTA, they are in the core of the
agreement and fully enforceable.
USMCA also squarely addresses longstanding U.S. concerns in the
Canadian market, such as Canadian policies on wheat grading, retail
sales of wine, dairy supply management, and the distribution of U.S.
television programming.
These are substantial improvements from NAFTA. They represent
benefits and new opportunities for Iowans and for Americans across the
board. According to the U.S. International Trade Commission, USMCA will
increase real GDP by $68.2 billion and create 176,000 new American
jobs.
Now, that's not to say that every USMCA provision is perfect--trade
agreements always need to balance the preferences of different
industries, regions, elected leaders, and stakeholders. Some of my
Democratic friends in the House of Representatives have centered their
attention on USMCA outcomes they view as imperfect.
Surely nobody could consider NAFTA to be better than USMCA. And
nobody, and let me emphasize this, nobody should dismiss the importance
of a half-trillion-dollar market for U.S. exports.
I have spoken to Speaker Pelosi. I have supported the ongoing work
of her members with Ambassador Lighthizer to clarify outstanding
concerns and identify bipartisan solutions. I have an open mind to
workable ideas and stand ready to consider possible improvements to
USMCA.
For example, I support strong enforcement of all USMCA chapters,
through a system that works reliably and has credibility with our
trading partners. I am also pleased that the important USMCA provisions
on prescription drugs will not require any changes to U.S. law, and I
would be open to proposals that would confirm this point.
At the same time, every day that passes is another day that the
benefits of USMCA go unrealized. Trying to reopen the whole of USMCA
could risk unraveling the deal altogether, which would benefit nobody.
I therefore urge House Democrats and Ambassador Lighthizer to focus on
their specific concerns and to propose solutions in short order, so
that we can pass USMCA. Doing so will provide much-
needed certainty to American workers, businesses, farmers, ranchers,
and families, and will enhance the credibility of our ambitious global
trade agenda.
______
Prepared Statement of Derek Leathers, President
and Chief Executive Officer, Werner Enterprises, Inc.
introduction
Chairman Grassley, Ranking Member Wyden, and members of the
distinguished committee, thank you for the opportunity to testify today
on behalf of the American Trucking Associations (ATA),\1\ and discuss
the importance of the United States-
Mexico-Canada Agreement (USMCA). My name is Derek Leathers, and I am
the President and Chief Executive Officer of Werner Enterprises, a
premier transportation and logistics company headquartered in Omaha,
NE.\2\
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\1\ ATA is a united federation of motor carriers, State trucking
associations, and national trucking conferences created to promote and
protect the interests of the trucking industry. ATA, and its affiliated
organizations, encompass over 34,000 motor carriers and suppliers of
every type and class of operation.
\2\ Werner Enterprises, Inc. was founded in 1956 and is among the
five largest truckload carriers in the United States, with coverage
throughout North America, Asia, Europe, South America, Africa, and
Australia. Werner maintains its global headquarters in Omaha, NE and
offices in the United States, Canada, Mexico, and China.
Werner is an active member of ATA, which is an 86-year-old
federation and the largest national trade organization representing the
trucking industry, with affiliates in all 50 States. ATA's membership
encompasses over 34,000 motor carriers and suppliers both directly and
through affiliated organizations. ATA represents every sector of the
industry, from truckload to less-than-truckload, agriculture and
livestock to auto haulers, and from the large motor carriers to the
owner-operator and mom-and-pop one truck operations. Our federation has
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members in every congressional district.
Throughout my tenure at Werner, I have served in many different
capacities, including the direct creation of Werner's Mexico cross-
border operations and the launch of Werner Global Logistics. Today,
Werner Global specializes in transportation management and freight
movement within intermodal, ocean, air, and brokerage. Prior to joining
Werner in 1999, I spent over 5 years in Mexico as the top executive of
a U.S.-owned Mexican trucking company. I also served as one of the
first foreign members of Mexico's trucking association, CANACAR. All
told, I personally have more than 25 years of international
transportation experience. During my time living and working in Mexico
City, I saw first-hand how the North American Free Trade Agreement
(NAFTA) directly benefited the trucking industry and the economies of
all three countries. NAFTA resulted in the development of highly
integrated and valuable supply chains spanning the United States,
Canada, and Mexico. These integrated supply chains are what drive
Werner's cross-border operations.
Werner has grown from a one-truck operation to a global logistics
company employing approximately 13,000 combined associates and
professional drivers worldwide. In the United States, Werner operates
in all 48 contiguous States with 8,000 trucks on the road driving
approximately 3.3 million miles each business day. Year after year,
Werner continues to grow our business at home and internationally. As
one of the top five U.S.-based motor carriers for shipments to and from
Canada, Werner Canada had 8,600 cross-border movements in 2018 while
providing transportation solutions throughout the 10 Canadian provinces
with an office in Milton, Canada. On average about 325 to 350 of our
U.S.-owned tractors go into Canada each month delivering and/or picking
up cross-border loads.
This year, Werner is celebrating the 20-year anniversary of its
Mexico-based operations. Throughout the last 20 years, Werner Mexico
has continually expanded its dry van, temperature-controlled,
intermodal, brokerage, and international transportation services and is
the only U.S. carrier with a refrigerated cross-dock facility in
Laredo, TX. Several of our customers use our services to haul protein
such as beef, pork, and poultry from several points in Iowa to Mexico
on our temperature-
controlled, or reefer, trailers. Werner Mexico encompasses four offices
in Mexico City, Queretaro, Monterrey, and Guadalajara; multiple border
terminals and logistics centers; and a combined network of over 6,000
trucks operating in Mexico with approximately 70 partner carriers.
Today, Werner is the largest U.S. truckload carrier providing ground
transportation services to and from Mexico, with over 154,000 cross-
border movements in 2018.
Werner's operations in Mexico, Canada, and other foreign countries
are subject to the risks of doing business internationally, including
fluctuations in foreign currencies; difficulties in enforcing
contractual obligations and intellectual property rights; burdens of
complying with a wide variety of international export and import laws;
and social, political, and economic instability. Additional risks
associated with foreign operations, including restrictive trade
policies and the imposition of duties, taxes, or government royalties
by foreign governments, are present but largely mitigated by the terms
of NAFTA for operations in Mexico and Canada.
nafta and the trucking industry
NAFTA has been a tremendous benefit to the trucking industry. When
NAFTA was drafted over 25 years ago, the goal was to expand trade
between the United States, Canada, and Mexico. NAFTA effectively
removed trade barriers, increased business investment in the region,
and helped North America become more competitive in the global
marketplace.
The U.S. trucking industry has been, and will continue to be, the
backbone of the North American trade economy. Trucking is the largest
mode of NAFTA surface trade; nearly 76 percent of all cross-border
freight tonnage is transported by truck, and even when trucks are not
the primary mode of transportation, other modes often depend on trucks
on the front end for pickup or on the backend for final delivery.\3\
Every single day, there are 33,000 total truck entries along our
northern and southern borders hauling more than $2 billion of goods.\4\
To put this in perspective, 12.2 million truck crossings moved
approximately $772 billion of goods across our Canadian and Mexican
borders in 2018.\5\ Nearly everything we buy--from food to clothing to
commodities, as well as domestically produced goods and imports--has
been hauled by truck at least once before ultimately landing in the
hands of the consumer. Ultimately, when the trucking industry is
efficiently and effectively moving cross-border freight, our Nation's
suppliers, shippers, retailers, and consumers reap the benefits, and
the wheels of a robust economy keep moving.
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\3\ Trade Moves North America Forward (2019); American Trucking
Associations, https://www.trucking.org/ATA%20Docs/
News%20and%20Information/Reports%20Trends%20and%20
Statistics/ATA_NorthAmericanTrade2018.pdf.
\4\ Ibid.
\5\ Ibid.
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usmca is a timely and necessary update
NAFTA has been enormously beneficial to the trucking industry as
truck entries from Canada and Mexico have increased 40 percent since
1996, leading to millions of additional loads for U.S.-based
carriers.\6\ The USMCA is a timely and necessary update to the
incumbent agreement. When NAFTA took effect on January 1, 1994, its
terms were sufficient to govern a 20th-century trade environment.
However, NAFTA was not drafted with the foresight to anticipate the
monumental impact of technology on the modern trade environment. In
1994, the Internet was in its infancy and trade primarily occurred
through the exchange of tangible goods and services or through direct
investment. Similarly, 25 years ago, trade did not accommodate same-day
shipping or 2-day delivery that is often expected today. Traffic
volumes at ports of entry have changed dramatically since NAFTA took
effect, as cross-border trade via truck has increased by 191 percent
since 1995.\7\ It would defy logic to continue operating under the
status quo. As technology becomes even more integrated into the supply
chain, it is imperative that our North American trade framework follows
suit. Simply put, a 21st-century trade environment necessitates a 21st-
century trade agreement, and the USMCA is the best vehicle to modernize
North American trade.
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\6\ Bureau of Transportation Statistics. U.S. Department of
Transportation, https://www.bts.
gov/content/border-crossingentry-data.
\7\ Ibid.
The USMCA is a comprehensive, state-of-the-art trade agreement that
preserves and builds upon the current trilateral framework. The USMCA
modernizes the rules for trade in North America with cutting-edge
provisions on digital trade, agriculture, state-owned enterprises,
labor, and the environment, among many others. Moreover, the
intellectual property provisions in the USMCA are the most
comprehensive of any multilateral United States trade agreement, and
are vastly superior to those included in NAFTA. The merits of the USMCA
are self-evident--it makes targeted improvements to NAFTA and is,
undeniably, an improvement over the incumbent agreement. The U.S.
International Trade Commission (USITC) concluded as much in its
congressionally mandated report, ``United States-Mexico-
Canada Agreement: Likely Impact on the U.S. Economy and Specific
Industry Sectors.''\8\ As required by the Bipartisan Congressional
Trade Priorities and Accountability Act of 2015, the USITC assessed the
likely impact of the agreement on the U.S. economy as a whole, on
specific industry sectors, and on the interests of U.S. consumers. The
report concluded that, if fully implemented and enforced, the USMCA
would have a positive impact on all broad industry sectors within the
U.S. economy, raise U.S. real gross domestic product by $68.2 billion,
and increase U.S. employment by 176,000 jobs.\9\ When compared to
NAFTA, it is clear that the USMCA is a significant and definitive step
forward.
---------------------------------------------------------------------------
\8\ U.S.-Mexico-Canada Trade Agreement: Likely Impact on the U.S.
Economy and on Specific Industry Sectors (2019); United States
International Trade Commission, https://www.usitc.gov/publications/332/
pub4889.pdf.
\9\ Ibid.
Trade with our northern and southern neighbors has created tens of
thousands of jobs in the United States with motor carriers, and
supports many thousands more with our suppliers and shippers,
underscoring the benefits of free trade. The USMCA is not only a trade
agreement--it is the foundation of our economic and broader
relationship with our strongest allies that supports the livelihoods of
the 90,000 people employed in the U.S. trucking industry, including
nearly 60,000 U.S. truck drivers (full-time equivalent), from truck
transported trade.\10\ To move freight to and from our northern and
southern borders, U.S. trucking companies paid U.S.-based drivers more
than $3.25 billion in wages alone, not including benefits last
year.\11\ The average truck driver hauling freight makes $55,000 per
year, plus benefits like health insurance, a retirement plan (e.g.,
401(k)), and paid time off.\12\ A North America without a better trade
agreement could have an adverse effect on the trucking industry, as
trucks haul 84 percent of all surface trade with Mexico and 67 percent
of all surface trade with Canada.\13\ Simply put--trade is crucial for
the tens of thousands of blue-collar workers in the trucking industry,
and ratification of the USMCA will provide occupational certainty to
the dedicated men and women who drive the economy forward.
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\10\ Trade Moves North America Forward (2019); American Trucking
Associations.
\11\ Ibid.
\12\ ATA Driver Compensation Study (2017); American Trucking
Associations, https://www.
atabusinesssolutions.com/ATA-Store/ProductDetails/productid/3852684.
\13\ Ibid.
The United States, Mexico, and Canada have been transformed by
tariff-free trade, generating highly integrated and valuable supply
chains that support shared competitiveness in a global marketplace.
Such integration has elevated the prominence of trucking, as the
vitality of the U.S. economy depends on a dynamic trucking industry to
deliver goods throughout the continental supply chain. Interconnected
supply chains spanning all three countries means that goods are hauled
across our borders multiple times during the manufacturing process,
amplifying the importance of tariff-free trade with our closest
neighbors and top two export partners. In 2017, Bloomberg traced the
path of a single capacitor, a small component that stores electrical
energy, to illustrate how ``U.S. manufacturers rely on numerous border
crossings and thousands of miles of travel to produce goods at the low
cost and high quality that customers demand.''\14\
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\14\ ``One Tiny Widget's Dizzying Journey Through the U.S., Mexico
and Canada'' (2017); Bloomberg, https://www.bloomberg.com/graphics/
2017-trump-protectionism-alters-supply-chain/.
First, a supplier in Colorado imports the capacitor components from
multiple producers in Asia. Then, the Colorado supplier ships the
capacitor to a company in Michigan. From there, the product is
transported to Ciudad Juarez, Mexico, where it is inserted into a
circuit board. After, the circuit board is shipped back to the United
States to a warehouse in El Paso, TX. The product is hauled across the
border again to a factory in Matamoros, Mexico, where it is assembled
into a seat actuator, a mechanical device that folds seats. Next, the
seat actuator is shipped to, among other destinations, a seat-
manufacturing plant in Arlington, TX and a plant in Mississauga,
Ontario. Finally, the capacitor, which is embedded in the seat
actuator, is transported to an auto assembly plant where it ultimately
becomes a part of a motor vehicle.\15\ From the beginning to the end of
the supply chain, the capacitor crossed the U.S. border five times
before it became a finalized product.
---------------------------------------------------------------------------
\15\ Ibid.
Trade involves a complex web of border crossings that are often
invisible to consumers and benefit the U.S. motor carriers and their
drivers. It is important to emphasize the critical role of the U.S.
trucking industry, which operates diligently and proudly behind the
scenes to transport goods throughout the supply chain and ultimately
into the hands of the consumer. Again, the U.S. trucking industry has
been, and will continue to be, the backbone of the North American trade
economy--benefiting the tens-of-thousands of blue-collar workers in the
---------------------------------------------------------------------------
industry.
If the United States neglects to modernize the current NAFTA
framework, it could lead to more production overseas and irreparably
decrease freight movement across North America. The USMCA's improved
framework ensures that North America will remain the most competitive
trading bloc in the world, and the region where companies from across
the globe choose to invest and grow their businesses.
customs administration and trade facilitation
Beyond the underlying economics, chapter 7 of the USMCA greatly
benefits the trucking industry. Chapter 7, titled ``Customs
Administration and Trade Facilitation,'' parallels the ``Customs
Procedures'' chapter of NAFTA with several new provisions and
modifications. The proliferation of technology in the trade environment
has introduced numerous opportunities for businesses to increase
competitiveness and streamline efficiencies, and chapter 7 addresses
how these advances can also apply to Customs administration and trade
facilitation.
Trucks engaged in cross-border freight transport regularly
interface with three Customs authorities: U.S. Customs and Border
Protection, the Canada Border Services Agency, and the Aduana de
Mexico. Chapter 7 provides a framework for all three agencies to
modernize customs procedures to facilitate better coordination.
Particularly important to the trucking industry is the provision
mandating the establishment of a single window system that enables
electronic submissions of documentation required for importation.
Chapter 7 also improves customs procedures related to advanced rulings,
simplified entry, risk management, e-signatures, and self-certification
of origin. Furthermore, the USMCA requires customs authorities to make
available by electronic means all forms and documents required for
importation and exportation; permit the electronic submission of
customs declarations; allow the electronic payment of duties, taxes,
and fees; and promote the use of electronic systems to facilitate
communication with the trade community. The integration of technology
across all trade processes will help to minimize costs, foster greater
efficiency, and expedite border crossings upon arrival. This is
critical for the trucking industry because delays at ports of entry can
jeopardize the timely delivery of goods, which can have significant
downstream effects on the rest of the supply chain.
Moreover, the efficiencies and cost savings generated by the
integration of technology into customs administration is great for
small businesses. Larger companies like Werner certainly appreciate the
benefits of modernized customs processes, and smaller trucking
companies are also acutely aware of how trade inefficiencies can cost
both time and resources. Twentieth-century trade processes are,
effectively, barriers to entry for smaller companies whose leaner
profit margins cannot accommodate the extra costs. The terms of the
USMCA will help to break down those trade barriers and pave the way for
more small business involvement in North American trade.
conclusion
When NAFTA took effect on January 1, 1994, it was an unprecedented
and historic moment for the United States, Canada, and Mexico. NAFTA
fundamentally reshaped North American economic relations, driving
integration between all three countries' economies and promoting the
development of continental supply chains. Over 2 decades later, NAFTA
is a relic of the past. Technological advances have redefined the trade
environment to such a degree that NAFTA is no longer sufficient to
govern modern trade practices. At this juncture, Congress has a unique
opportunity to elevate our North American trade policies into the
present and usher in a new era characterized by increased innovation,
more jobs in U.S. communities, and overall prosperity.
Thank you for the opportunity to testify today. The American
Trucking Associations, Werner, and the broader trucking industry
strongly urge your support for swift ratification of the USMCA and
stand ready to assist the committee to make this goal a reality.
______
American Trucking Associations
950 N. Glebe Road, Suite 210
Arlington, VA 22203-4181
www.trucking.org
_______________________________________________________________________
Chis Spear
President and Chief Executive Officer
July 17, 2019
The Honorable Nancy Pelosi The Honorable Mitch McConnell
Speaker Majority Leader
U.S. House of Representatives U.S. Senate
Washington, DC 20515 Washington, DC 20510
The Honorable Kevin McCarthy The Honorable Chuck Schumer
Minority Leader Minority Leader
U.S. House of Representatives U.S. Senate
Washington, DC 20515 Washington, DC 20510
Dear Speaker Pelosi, Majority Leader McConnell, and Minority
Leaders McCarthy and Schumer:
The American Trucking Associations (ATA), the largest national
trade association representing the interests of the trucking
industry,\1\ urges your support for the swift ratification of the U.S.-
Mexico-Canada Agreement (USMCA). Nearly 25 years after the
implementation of the North American Free Trade Agreement (NAFTA), it
is time to modernize and update our trade policies with two of our most
important allies and trading partners: Canada and Mexico. The USMCA is
a comprehensive, 21st-century trade agreement that preserves and builds
upon the current trilateral framework to solidify North America's role
as the most competitive and successful trading bloc in the world.
Ratification of the USMCA will provide occupational certainty to the
nearly 90,000 Americans, including approximately 60,000 truck drivers,
whose livelihoods depend on continuous cross-border freight movements
between the U.S., Canada, and Mexico.
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\1\ ATA is a united federation of motor carriers, State trucking
associations, and national trucking conferences created to promote and
protect the interests of the trucking industry. ATA, and its affiliated
organizations, encompass over 34,000 motor carriers and suppliers of
every type and class of operation.
U.S. trade with Canada and Mexico has surged since the enactment of
NAFTA.\2\ Every day, there are 33,000 truck entries along our northern
and southern borders hauling more than $2 billion of goods. To put this
in perspective, in 2018, 12.2 million truck crossings moved
approximately $772 billion of goods across our Canadian and Mexican
borders.\3\ Given that Canada and Mexico are our number one and two
export markets, respectively,\4\ the trucking industry supports
ratification of the USMCA to both maintain market access and ensure the
continuity of cross-border trucking operations. Ultimately, when the
trucking industry is efficiently and effectively moving cross-border
freight, our Nation's suppliers, shippers, retailers, and consumers
reap the benefits, and the wheels of a robust economy keep moving.
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\2\ Freight Facts and Figures (2018); Bureau of Transportation
Statistics, U.S. Department of Transportation.
\3\ Trade Moves North America Forward (2019); American Trucking
Associations, https://www.trucking.org/ATA%20Docs/
News%20and%20Information/Reports%20Trends%20and%20
Statistics/ATA_NorthAmericanTrade2018.pdf.
\4\ Top Trading Partners--March 2019: Year-to-Date Exports (2019);
United States Census Bureau, https://www.census.gov/foreign-trade/
statistics/highlights/toppartners.html#exports.
The USMCA is also a timely, welcome, and necessary update to the
incumbent agreement. NAFTA entered into force on January 1, 1994--long
before the advent of e-commerce and digital trade. As technology
inevitably becomes more integrated into the global supply chain, it is
imperative that our North American trade framework follows suit.
Simply, a 21st-century trade environment necessitates a 21st-
century trade agreement, and the USMCA is the best vehicle to propel
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the U.S. trade economy into modernity.
Trade and trucking are interdependent, and the vitality of the U.S.
economy depends on a dynamic trucking industry to deliver goods
throughout the supply chain. If the United States neglects to modernize
the current NAFTA framework, it could lead to more production overseas
and irreparably reduce freight movement across the continent. Ratifying
the USMCA will ensure that the U.S., Canada, and Mexico continue to
benefit from an alliance that has promoted economic growth and
innovation, and we look forward to working with Congress to make this a
reality.
Sincerely,
Chris Spear
President and CEO
American Trucking Associations
cc: Members of the House Ways and Means and Senate Finance Committees
______
American Trucking Associations (ATA)
The Trucking Industry Urges Congress to Ratify the USMCA
While the North American Free Trade Agreement (NAFTA) has been great
for the U.S. trucking industry, the United States-Mexico-Canada
Agreement (USMCA) is a timely and necessary update to the now-
antiquated 1994 trade agreement.
Since 1995, the value of goods traveling via truck across both the
northern and southern borders jumped 191 percent and totaled over $772
billion in 2018. This increase in trade has created or supported tens
of thousands of trucking jobs in the United States.
The USMCA will help the trucking industry maintain market access
and continuity of cross-border operations. Not only is it good for the
industry, it's good for the economy.
Reasons Why the Trucking Industry Supports the United States-Mexico-
Canada Agreement:
(1) The 21st-century trade environment warrants a 21st-century
trade agreement
Modernizes Customs procedures with regard to advanced
rulings, simplified entry, risk management, single window, e-
signatures, and self-certification of origin.
Promotes more North American trade, including more U.S.
exports, which will benefit U.S. motor carriers.
Fosters more cooperation with Canada and Mexico regarding
transportation, Customs, and cross-border operations.
Creates a better, more competitive North American economy.
(2) The continued success of the trucking industry depends on
critical partnerships with our Mexican and Canadian neighbors
The U.S. trucking industry generated $12.62 billion in
revenue from truck transported trade with Canada and Mexico in
2018.
The new agreement will expand trade and stimulate industry
employment to support that trade. In 2018, U.S. motor carriers
employed nearly 90,000 full-time equivalent workers to haul
goods across our borders, including 59,600 U.S. truck drivers.
Canada and Mexico purchase more U.S.-made goods than our
next 10 trading partners combined. We need open access to reach
foreign customers in our two largest export markets--Canada and
Mexico.
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______
Questions Submitted for the Record to Derek Leathers
Questions Submitted by Hon. Chuck Grassley
Question. The USMCA digital trade chapter will not only benefit
traditional tech companies. It offers benefits for firms across
sectors, like manufacturing, transportation, and agriculture.
Businesses of all sizes rely on the Internet to sell their products
globally. Global business rely on the free flow of data to conduct
business and communications, and make payments. Our modern economy
requires modern rules.
Would you briefly describe how the digital trade provisions in the
USMCA will benefit your business and your industry more generally?
Answer. With regard to digital trade, the USMCA promotes best-in-
class rules to foster U.S. growth in the digital economy. While the
trucking industry is not directly involved in the digital economy, we
haul freight for U.S. firms of all sectors and sizes that are direct
beneficiaries of these new digital trade provisions. When American
businesses trading in digital goods and services are treated fairly in
foreign markets and empowered to innovate and expand, the trucking
industry is called upon to move their goods throughout the North
American supply chain. The trucking industry provides the logistical
support necessary to promote continued American innovation in the
digital economy.
Question. Effective trade relies on smooth cross-border
transactions and transportation. USMCA includes commitments to
streamline the way goods are moved across the border through the
elimination of burdensome paperwork requirements, by providing for the
electronic submission of documents, and requiring use of advanced
technology to expedite the process of releasing goods.
Can you share how companies like yours, and the broader trucking,
transportation and logistics sectors in America will benefit from these
types of customs facilitation commitments?
Answer. The USMCA commits the United States, Canada, and Mexico to
address trade barriers, such as lack of Customs procedural transparency
and overly burdensome documentation requirements, through increased
utilization of technology. Like many other industries, the trucking
industry is rapidly incorporating technology to streamline operations
and reduce costs. As the trucking industry modernizes its operations
and as technological innovation becomes more commonplace, the Customs
authorities in the United States, Canada, and Mexico must similarly
evolve to keep pace with the modern trade environment. The USMCA
streamlines many facets of the Customs processes in all three
countries, including advanced rulings, simplified entry, risk
management, single window, e-signatures and self-certification of
origin. Efficient Customs facilitation processes translate to reduced
redundancies, more rapid transmissions of information, and enhanced
coordination between the trade community and all three countries'
Customs authorities. A 2019 Congressional Research Service report
clearly articulates the importance of the USMCA's modernized Customs
text: ``Given the magnitude and frequency of U.S. trade with NAFTA
partners, more updated Customs provisions in NAFTA could have a
significant impact on companies engaged in trilateral trade.''\1\
---------------------------------------------------------------------------
\1\ ``NAFTA Renegotiation and the Proposed United States-Mexico-
Canada Agreement (2019)''; Congressional Research Service, https://
crsreports.congress.gov/product/pdf/R/R44981.
______
Questions Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. My background in the transportation logistics industry
affords me the experience to speak knowledgably about the benefits of
NAFTA to Werner and the broader trucking industry, but my expertise
does not extend to interpretation of the Constitution.
Question. In your testimony provided to the committee, you included
data demonstrating the critical importance of the trucking industry in
moving goods across U.S. borders with Mexico and Canada. For example,
you included the statistic that $424 billion worth of goods were moved
by truck across the U.S.-Mexico border in 2018, amounting to 6.3
million individual truck entries across that border.
As you know, 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 adequate steps to
address illegal immigration. While I was glad to see that the President
ultimately did not impose these tariffs, it is concerning to
contemplate the impact that such an action would have had on the
trucking industry and the broader U.S. economy.
Please describe the impact that a 5-percent blanket tariff on all
goods from Mexico would have had on truck entries across the U.S.-
Mexico border.
Answer. Mexico is one of the top three largest trading partners for
the United States and the number two U.S. export market. Trade with
Mexico is predominantly facilitated via truck, as trucks haul 84
percent of all surface trade across the U.S.-Mexican border.\2\ The
imposition of a 5-percent blanket tariff on all goods from Mexico would
certainly have an immediate impact on the trucking industry because
NAFTA eliminated the need for complex Customs infrastructure to govern
most trade between the United States and Mexico. Since the trade
community has enjoyed tariff-free trade with our southern neighbor for
nearly 25 years, there would be a steep adjustment curve for both
American businesses and U.S. Customs and Border Protection to
accommodate such a dramatic shift in trade policy. As a result, cross-
border freight movements would likely slow down, at least initially, as
the trade community adjusts its Customs operations to incorporate new
requirements. Moreover, CBP would be obligated to develop new
mechanisms of compliance for the importers and brokers who would be
required to pay the tariffs. Additionally, this would require extensive
communication with the trade community. Given that over 17,000 trucks
cross the U.S.-Mexico border carrying about $1 billion worth of goods
every single day,\3\ delays at ports of entry are not only costly for
the trucking industry, but also for the entire North American supply
chain and consumers.
---------------------------------------------------------------------------
\2\ Trade Moves North America Forward (2019); American Trucking
Associations, https://www.trucking.org/ATA%20Docs/
News%20and%20Information/Reports%20Trends%20and%20
Statistics/ATA_NorthAmericanTrade2018.pdf.
\3\ Ibid.
Question. Are you concerned that your industry could be negatively
impacted in the future by such unilateral tariffs--which were unrelated
to trade policy issues--even if the USMCA is ratified by Congress and
---------------------------------------------------------------------------
enters into force?
Answer. Ratification of the USMCA would provide much-needed
occupational certainty to the nearly 90,000 Americans employed in the
U.S. trucking industry, including nearly 60,000 U.S. truck drivers
(full-time equivalent), from truck-
transported trade. As president and CEO of the largest U.S. truckload
carrier providing ground transportation services to and from Mexico, I
remain focused on the future ratification of this modernized trade
agreement. Looking to future trade negotiations and their implications
for the trucking industry, Werner will continue to provide exemplary
service and seamless operations independent of trade policy or economic
climate.
Question. In the USMCA's implementing legislation, should there be
assurances made to Mexico and Canada, and codified into U.S. law, which
would prevent the unilateral imposition of tariffs on them without the
assent of Congress? How would such a provision benefit your industry?
Answer. Without question, trade certainty is essential to Werner
and the broader trucking industry. As a result, the trucking industry
supports measures that guarantee stability for the tens of thousands of
blue-collar workers in our industry whose livelihoods depend on cross-
border freight movements. Any significant changes that restricts trade
between these countries would be detrimental to our cross-border
business.
______
Questions Submitted by Hon. Catherine Cortez Masto
Question. The testimony highlighted a number of proposals under
chapter 7 that you believe can help streamline the process for trucks
crossing the border, specifically citing mandating a single-window
system between each nations' Customs agencies, e-signatures, and self-
certification of origin as examples of efficiencies in the USMCA that
will help improve the flow of trade cross borders.
Please outline how implementing some of these processes can
streamline transit for your company.
Does anything under NAFTA today prohibit the implementation of
these processes? Are any of these processes currently in effect at any
of the border crossings your trucks utilize today and if so, how does a
new NAFTA do this any better?
Answer. While there are no provisions in NAFTA that explicitly
prohibit the implementation of streamlined processes, NAFTA does not
incentivize or require parties to pursue greater efficiencies either.
Conversely, the USMCA requires all three parties to adopt or maintain
simplified Customs procedures in order to facilitate trade between the
parties. Chapter 7, ``Customs Administration and Trade Facilitation,''
and chapter 4, ``Rules of Origin,'' of the USMCA build on the
foundation established by NAFTA with several important modernizations.
The USMCA incorporates new elements from the World Trade Organization
(WTO) Trade Facilitation Agreement (TFA) and the Trans-Pacific
Partnership (TPP) related to transparency and efficiency. NAFTA's
chapter on Customs procedures includes provisions on certificates of
origin, administration and enforcement, and Customs regulation and
cooperation, and the USMCA brings these policies into the 21st century.
Unlike NAFTA, the USMCA commits all three parties to adopt measures
that complement existing obligations with a view to further facilitate
trade.
First, in the USMCA, the United States, Mexico, and Canada affirm
their rights and obligations under the WTO TFA, one of the newest
international trade agreements in the WTO. No such commitment exists in
NAFTA. Compared to the Customs and trade provisions in NAFTA, the TFA
simplifies and streamlines Customs procedures to allow for the easier
flow of goods across borders, thereby reducing the costs of trade.
According to a 2019 Congressional Research Service report, ``the TFA
aims to address trade barriers, such as lack of Customs procedural
transparency and overly burdensome documentation requirements.''\4\
---------------------------------------------------------------------------
\4\ ``NAFTA Renegotiation and the Proposed United States-Mexico-
Canada Agreement'' (2019).
`Second, the USMCA contains new procedures for certifying a good as
``originating'' that differ significantly from those currently in
effect under NAFTA. Under NAFTA, Canada, Mexico, and the United States
established a uniform Certificate of Origin that is utilized by all
parties to certify that imported goods qualify for preferential tariff
treatment. Conversely, the USMCA allows for more flexibility and does
not mandate a prescribed format. Moreover, the USMCA follows the model
set forth in TPP, and allows importers to complete a certification of
origin, which can be transmitted on an invoice or any other document.
This is a substantial departure from NAFTA, which requires a uniform
Certificate of Origin that may only be signed by the exporter of the
goods. The terms of the USMCA also require the United States, Canada,
and Mexico to allow a certification of origin to be submitted
electronically and signed with a digital signature. NAFTA did not
---------------------------------------------------------------------------
include this obligation.
Third, the USMCA requires parties to employ technology across all
trade processes to both increase efficiency and provide for greater
transparency. This includes (1) making available online all forms/
documents required for import and export; (2) permitting the electronic
submission of Customs declarations; (3) permitting the electronic
payment of duties, taxes, and fees; and (4) permitting an importer to
correct multiple import declarations through a single form. Given that
NAFTA was drafted in the 20th century, the outdated agreement does not
contain mandates that require the United States, Canada, and Mexico to
utilize technology to the degree that is required by the USMCA. The
terms of the USMCA explicitly promote the use of online publication and
information technology, which is evidence of the benefits of
modernization in the trade realm.
Fourth, the ``Release of Goods'' article within chapter 7 of the
USMCA requires parties to adopt procedures that provide for the
``immediate release of goods upon receipt of the Customs declaration
and fulfillment of all applicable requirements and procedures.'' By
contrast, under TPP, the allotted time frame is 48 hours. Under the
USMCA, parties must allow goods to be released at the point of arrival
without requiring temporary transfer to warehouses or other facilities.
Relatedly, all three parties must also allow the release of goods prior
to a final determination and payment of any Customs duties, taxes,
fees, and charges incurred in connection with the importation of the
goods. These mandates are aimed at reducing the amount of time that
imported goods sit idly at ports or in warehouses, facilitating a
smoother trading process, and incorporating technology to expedite the
Customs process upon arrival.
Finally, the following articles in chapter 7 of the USMCA will
certainly help streamline the process for trucks crossing the border
and are not included in NAFTA:
Article 7.3, ``Communication with Traders,'' requires parties to
``maintain a mechanism to regularly communicate with traders within its
territory on its procedures related to the importation, exportation,
and transit of goods,'' so the trade community can proactively identify
emerging issues. While NAFTA requires that parties, to the extent
practicable, ``provide interested persons and parties a reasonable
opportunity to comment on such proposed measures,''\5\ the mechanism
mandated by the USMCA provides for continuous, open channels of
communication that are not limited to the consideration of a proposed
measure.
---------------------------------------------------------------------------
\5\ Article 1802, ``Publication,'' North American Free Trade
Agreement.
Article 7.4, ``Enquiry Points,'' requires that parties ``establish
or maintain one or more enquiry points to respond to enquiries by
interested persons concerning importation, exportation, and transit
procedures.'' NAFTA establishes enquiry points for issue-specific
---------------------------------------------------------------------------
matters but not for general Customs matters.
Article 7.12, ``Risk Management,'' requires that parties maintain a
risk management system to ``focus inspection activities on high-risk
goods'' and simplify ``the release and movement of low-risk goods.''
This language is similar to provisions in TPP and TFA.
Article 7.18, ``Penalties,'' clarifies that ``clerical or minor
error[s] in a Customs transaction'' do not constitute a breach of laws,
regulations, or procedural requirements.
Article 7.21, ``Customs Brokers,'' prohibits parties from limiting
the number of ports at which Customs brokers can operate. This article
effectively levels the playing field between self-filers and Customs
brokers and is similar to language in TFA.
______
Prepared Statement of Hon. Thomas J. Vilsack, President and Chief
Executive Officer, U.S. Dairy Export Council
introduction
Chairman Grassley, Ranking Member Wyden, and members of the
committee, thank you for the opportunity to testify before you today. I
am appearing before the committee on behalf of America's dairy farmers
and processors as President and CEO of the U.S. Dairy Export Council
(USDEC).
USDEC is a non-profit, independent membership organization that
represents the export trade interests of U.S. proprietary processors,
milk producers, dairy cooperatives, and export traders. The Council's
mission is to increase the volume and value of U.S. dairy product
exports.
testimony summary
Maintaining our trade relationships and expanding market access for
U.S. agricultural goods is vital to the economic health of rural
America. The new U.S.-
Mexico-Canada Agreement (USMCA) will secure existing markets and open
new opportunities by modernizing the 25-year-old North American Free
Trade Agreement (NAFTA).
America's farmers are asking Congress to act quickly to pass USMCA.
This trade agreement will bring strong benefits to American agriculture
exports, including the U.S. dairy industry, by restoring certainty to
U.S.-Mexico trade relations, making needed improvements to U.S.-
Canadian trade and upgrading trade rules to discourage nontariff
barriers to trade. Among its benefits:
Strengthens our trading relationship with Mexico by locking
in existing zero tariff access to Mexico for agriculture
exports. Mexico is by far our largest dairy export destination
at $1.4 billion in sales in 2018 and USMCA preserves our role
as the market's key supplier.
Makes important advances in removing and reforming key
trade-distorting Canadian dairy pricing policies--including
classes 6 and 7--and in increasing dairy export opportunities
to Canada to provide much-needed access to a dairy market
largely excluded from the current NAFTA framework.
Strengthens safeguards regarding U.S. companies' rights to
use common food names through new commitments in the
intellectual property chapter and through two side letters with
Mexico that aim to preserve market access for those products in
that key market.
Establishes strong sanitary and phytosanitary provision s
focused on ensuring the highest scientific standards for food
safety while discouraging unscientific barriers to safe food
exports.
Secures improvements for other agricultural sectors,
including addressing Canadian nontariff barriers plaguing the
U.S. wheat and wine industries, improving access to Canada for
U.S. egg and poultry products, and forging new commitments on
the safe use of agricultural biotechnology.
Furthermore, the passage of USMCA will send a clear message that
the U.S. values robust, rules-based trade with our allies and will give
the U.S. the momentum necessary to execute a productive trade agenda
that delivers positive benefits for the American people.
It has been a difficult few years as dairy producers have found
their livelihoods under threat from falling milk prices that reduced
farm income while dairy processors have seen carefully cultivated
foreign sales threatened or even dry up in key markets. America's dairy
farmers and processors need some good news, and Congress has the power
to deliver.
When USMCA comes up for a vote, American agriculture is asking that
you stand up for rural America and swiftly ratify this trade agreement.
free trade critical to the rural economy
It's a common refrain: America's farmers feed the world. Every
single day, our farmers and manufacturers supply markets across the
globe with superior agriculture and food products.
According to the U.S. Department of Agriculture (USDA), the U.S.
exported nearly $140 billion in agricultural products in 2018, with the
top markets for agricultural products being Canada and Mexico.\1\ The
success of these trading relationships is built upon the 25-year-old
legacy of NAFTA.
---------------------------------------------------------------------------
\1\ ``Agricultural Trade.'' (April 4, 2019). Retrieved from USDA
Economic Research Service: https://www.ers.usda.gov/data-products/ag-
and-food-statistics-charting-the-essentials/agricultural-trade/.
NAFTA eliminated all Mexican tariffs on U.S. exports and eliminated
nearly all tariffs on U.S. goods entering Canada, allowing trade with
our North American neighbors to flourish. Canada and Mexico received
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more than 29 percent of all U.S. farm and food exports in 2018.
Nearly 1,000 food and agricultural groups, including USDEC,
recently sent a letter to Senate and House leadership, illustrating the
progress to trade made under NAFTA and the importance of cultivating a
fair and robust trade relationship between the U.S., Canada, and Mexico
through USMCA. We wrote:
Over the last 25 years, U.S. food and agricultural exports to
Canada and Mexico have more than quadrupled under NAFTA--
growing from $9 billion in 1993 to nearly $40 billion in 2018.
NAFTA has significantly helped create a reliable, high-quality
supply of food products for U.S. consumers, while supporting
more than 900,000 American jobs in food and agriculture and
related sectors of the economy.\2\
---------------------------------------------------------------------------
\2\ ``A Letter From U.S. Food and Agriculture Associations and
Companies.'' (June 6, 2019). Retrieved from https://www.usdec.org/
Documents/USMCA_Grassroots_Letter.pdf.
It is clear that agricultural exports have brought significant
positive benefits for the U.S. economy that extend far beyond the farm.
USDA's Economic Research Service estimates that every dollar in
agricultural goods sent overseas in 2017 generated an additional $1.30
in economic activity here at home. And every $1 billion in agricultural
exports supports 8,400 American jobs.\3\ Our trade relationships with
Canada and Mexico alone support 330,000 jobs.\4\
---------------------------------------------------------------------------
\3\ Persaud, S. (February 21, 2019). ``Effects of Trade on the U.S.
Economy.'' Retrieved from USDA Economic Research Service: https://
www.ers.usda.gov/data-products/agricultural-trade-multipliers/effects-
of-trade-on-the-us-economy/.
\4\ ``USMCA: Strengthening Ties With Our North American
Neighbors.'' (2019). Retrieved from USDA Foreign Agricultural Service:
https://www.fas.usda.gov/sites/default/files/2019-07/usmca-infographic-
07162019_0.png.
America's dairy industry, in particular, is an economic force that
employs nearly 1 million Americans, creates approximately $38 billion
in direct wages for workers, contributes more than $64 billion in tax
revenue and adds about $620 billion to the U.S. economy.\5\
---------------------------------------------------------------------------
\5\ Retrieved from https://medium.com/dairy-exports-mean-jobs/new-
hope-for-a-new-trade-deal-with-mexico-and-canada-44565974b674.
Trade has been essential to the health of the dairy industry. Our
farmers and processors have established themselves as the world's
preeminent suppliers of high-quality dairy products, exporting $5.6
billion in dairy products in 2018 to customers around the world. U.S.
dairy exports in 2018 were the equivalent of 10 million gallons of milk
going overseas every day in the form of a wide variety of dairy
---------------------------------------------------------------------------
products from cheese to ice cream to milk powder.
Thanks to the framework of NAFTA, Mexico is currently the largest
export destination for U.S. dairy products, with America commanding 80
percent \6\ of the value of Mexico's import market and $1.4 billion in
sales in 2018. In 2018, the equivalent of 2.8 million gallons of milk
crossed the border into Mexico every day--28 percent of what we export
worldwide. For farmers, that means that the average dairy cow produces
2.7 pounds of milk daily that goes to the Mexican market. Mexico's
importance to our farmer-owned cooperatives and to dairy processors
also can't be overstated--for instance, U.S. exports to Mexico last
year accounted for 49 percent of U.S. exports of milk powder and 28
percent of cheese. Those sales have benefited our industry but also our
partners in Mexico, as we've worked closely with them over the past
couple decades to build greater demand for dairy in Mexico--to the
benefit of both our industries.
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\6\ Global Trade Atlas: Major Dairy Product Categories of SMP, WMP,
Whey, Butterfat, Cheese, and Lactose.
However, right now rural America is facing a crisis. The prolonged
rural recession that has gripped the heartland has been exacerbated by
trade disputes and uncertainty in the global marketplace. America's
dairy industry has been among the hardest hit. Dairy farmers and
processors have endured four years of depressed milk prices,
jeopardizing family farms and businesses manufacturing high-quality
Made-in-America products, and having a negative impact on the
communities and economies that depend on these producers. In fact, the
U.S. Department of Agriculture recently found that the U.S. lost an
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average of seven dairy farms every day in 2018.
I recently joined local farming and agriculture groups at
roundtable discussions in my home State of Iowa where it quickly became
clear that securing market access and restoring certainty to our trade
relationships by passing USMCA is a top priority for America's farmers
and the wider food and agriculture sector. Finalizing this trade
agreement and demonstrating that America is a reliable supplier will be
key to turning the tide for the rural economy.
America's agricultural and food communities are asking Congress to
secure our trade relationship with Mexico, expand opportunities with
Canada, and usher in the significant trading rules improvements USMCA
makes for U.S. exports. Congress has an immediate opportunity to help
support the future of farming by moving quickly to pass USMCA.
usmca modernizes nafta
While NAFTA helped set the stage for America to become the leading
exporter of agricultural goods, USMCA makes important improvements that
will modernize NAFTA and pay dividends to both the farming community
and the economy as a whole.
According to the U.S. International Trade Commission's report on
the likely impact of USMCA, full implementation of this trade agreement
will increase annual U.S. agricultural and food exports by $2.2
billion. Additionally, it will ``likely have a positive impact on all
broad industry sectors within the U.S. economy,'' raising the GDP by
$68.2 billion and increasing employment by 176,000 jobs.
The International Trade Commission stated that the dairy sector
ultimately stands to gain more than $314 million in expanded sales to
Canada, Mexico and other global markets as a result of USMCA's
provisions.\7\ The U.S. dairy industry estimates that over the first 6
years of implementation, U.S. dairy farm revenue will increase by a
total of an additional $548 million.
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\7\ ``U.S.-Mexico-Canada Trade Agreement: Likely Impact on the U.S.
Economy and on Specific Industry Sectors.'' (2019). Washington, DC:
United States International Trade Commission.
USMCA will lift the cloud of uncertainty hanging over North
American trade and adversely affecting U.S. farmers and exporters by
safeguarding our valuable export market in Mexico and instituting
improvements to trade with Canada.
Strengthens Trading Relationship With Mexico
Under USMCA, agricultural tariffs between the U.S. and Mexico will
remain at zero. This is critical for the U.S. dairy industry, as Mexico
is our number one export market. Furthermore, without a trade treaty in
place, the dairy industry would be hard pressed to maintain and expand
these sales, as our competitors in Europe are expected to implement a
lucrative new trade arrangement with Mexico by next year. As noted
below in the section on USMCA's preservation of common food names,
USMCA includes key new Mexico-specific commitments designed to further
shore up our market access rights to that top dairy market.
Makes Important Advances in Dismantling Canada's Dairy Trade Barriers
Only limited dairy market access to Canada is granted under NAFTA
today. Adding insult to injury, Canada's damaging trade practices have
further limited U.S. export opportunities and thereby resulted in lost
revenues and jobs for the U.S. dairy industry. While USMCA does not
address the full range of Canada's problematic tariff and nontariff
policies, it makes very important advances, including opening up new
export avenues, the elimination of classes 6 and 7 and additional
reforms to Canada's controversial dairy pricing system.
USMCA delivers additional export market access in Canada for U.S.
dairy products across a diverse range of product categories. The access
exceeds that secured previously by the U.S. in the Trans-Pacific
Partnership context by virtue of being granted exclusively to U.S.
suppliers. This expansion of access to the very tightly constrained
Canadian market is very welcome and will create some new opportunities
for the U.S. dairy industry in Canada's trade-restrictive market.
In addition, USMCA eliminates Canada's class 6 and 7 dairy pricing
system 6 months after implementation and establishes new pricing
structures for skim milk powder (SMP), milk protein concentrate (MPC),
and infant formula. For the remaining products that were previously
covered by classes 6 and 7, USMCA mandates that Canada reclassify them
so that their associated milk class prices be established appropriately
based on end use. The intent of this is clear: for instance, ultra-
filtered milk that is used, in either liquid or dried form, in the
production of cheddar cheese must be classified in milk class 38;
similarly, this ingredient must be classified in milk class 2A if used
in the production of yogurt.
USMCA also establishes annual export limits on Canadian exports of
SMP, MPC, and infant formula, above which export surcharges are levied.
The clear goal of this portion of the agreement is to constrain
Canada's ability to dump unlimited quantities of dairy products onto
global markets. To carry out this commitment, Canada must ensure that
these surcharges function as intended to discipline the export
expansion of these product areas and that the export surcharge proceeds
are not in turn redistributed to industry or otherwise offset by other
support programs.
Finally, the agreement introduces robust transparency and
consultation commitments with Canada on dairy. Given Canada's
entrenched track record of intentionally using policy tools to
undermine trade commitments and refusing to provide all relevant
information on its programs, these represent vital elements to ensuring
the U.S. is able to fully realize the benefit of the pricing policy
disciplines introduced by USMCA. The reforms USMCA makes to a number of
Canada's trade-distorting dairy policies and the expansion of market
access it ushers in will create new opportunities for American farms
and businesses.
As a result of these policies and others in the agreement, USMCA
provisions will ultimately bolster U.S. sales to Canada, Mexico and
other global markets by $314.5 million according to the International
Trade Commission.
I would like to underscore to the committee that achieving this
forecast and maximizing the ultimate impact of the USMCA agreement on
U.S. dairy trade with Canada will depend on how it is implemented by
Canada and enforced by the United States. Reaping the full benefit of
the impactful provisions painstakingly secured by U.S. negotiators in
USMCA will requiring proactive work with Canada in advance of their
implementation of the agreement to ensure that revised policies fully
comply with the letter and intent of their commitments under USMCA and
vigilant enforcement efforts should Canadian policies deviate from
USMCA's focus on uprooting the harmful and global trade distorting
impacts of Canadian dairy policies.
Strengthens the Rights of Common Food Names Users
USMCA also includes multiple provisions aimed at tackling the
misuse of geographical indications that erect barriers to U.S. exports
of products that rely on common food names. As the EU continues to work
to erect nontariff barriers to U.S. exports in various markets through
its free trade agreements, these provisions are essential to preserving
our North American access rights, particularly with Mexico given its
agreement with the EU last year, and to establishing strong precedents
upon which the U.S. should build in securing firm commitments upholding
our market access rights with other trading partners. Below is an
overview of those provisions:
Non-exhaustive List of Commonly Used Cheese Names.
A side letter to USMCA establishes a ground-breaking precedent
by providing clear market access assurances on a non-exhaustive
list of commonly produced products that Mexico may not restrict
moving forward, including terms such as mozzarella, cheddar,
havarti, swiss, and others. As our European competitors are
likely to continue to seek to chip away at our rights to use
these terms, active monitoring and enforcement by theU.S. of
this clear prohibition on any restriction on the use of these
terms will remain vital as USMCA is implemented.
U.S.-Mexico Side Letter on Prior Users of GIs.
Another valuable commitment secured in USMCA is a second side
letter with Mexico clarifying that ``prior users'' granted
grandfathering rights under the 2018 EU-Mexico trade agreement
includes all elements of the supply chain, namely producers,
distributors, marketers, importers and exporters. This letter
maximizes the ability of U.S. companies to continue to export
their products to this important market and of Mexican
companies to maintain wider supply source options.
Government-to-Government Consultations on GIs.
USMCA includes an important new commitment specifying that the
Committee on Intellectual Property Rights shall ``endeavor to
reach a mutually agreeable solution before taking measures in
connection with future requests of recognition or protection of
a geographical indication from any other country through a
trade agreement.'' This requirement for government to
government consultations and the directive to work to arrive at
solutions of mutual interest to the parties is a much-needed
and very welcome addition to the administration's ability to
defend the interests of U.S. stakeholders against the predatory
efforts of non-parties to use trade treaties to erect barriers
to trade in common product categories under the guise of GI
protections.
Due Process Disciplines for Geographical Indications.
The intellectual property chapter of USMCA establishes a
critical framework for beginning to introduce more transparency
and due process procedures to the area of GI consideration and
should help to mitigate against the inappropriate future
registration of unwarranted GIs, including by providing those
opposing a GI with greater tools to object to a term's
restriction. This would avoid future scenarios like that in the
Canada EU FTA in which Canada simply acquiesced to a long list
of GIs proposed by the EU without any public notice or input.
As noted above, careful monitoring of USMCA commitments will be
essential to prevent registration of GIs or trademarks for GI products
that restrict the use of commonly used terms in a manner that is
contrary to either the letter or spirit of the agreement's provisions.
Looking ahead, USMCA contains numerous positive elements that
collectively establish a basic structure on the topic of GIs and common
food names upon which the U.S. can and should build further in trade
discussions with other countries as well. To assist with this process,
I encourage the Senate Finance Committee to hold a hearing examining
the global challenge posed by the EU's geographical indications
policies and arrangements to U.S. food and agriculture exports relying
on common food names.
Establishes Strong Sanitary and Phytosanitary Provisions
USMCA establishes modern, science-based sanitary and phytosanitary
standards to ground regulations in ways that should help prevent
nontariff barriers to trade. The International Trade Commission's
report on USMCA noted the economic benefit of improved sanitary and
phytosanitary provisions in USMCA:
Transparency, harmonization, and cooperation in SPS measures
have been shown to facilitate trade in the long run by lowering
cost and risk. Multiple forms of regulatory coherence,
including through trade agreements, can boost both trade and
investment by supporting global value chains. In particular,
trade agreements that include SPS cooperation and transparency
have been shown to reduce trade costs.\8\
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\8\ ``U.S.-Mexico-Canada Trade Agreement: Likely Impact on the U.S.
Economy and on Specific Industry Sectors.'' (2019). Washington, DC:
United States International Trade Commission.
---------------------------------------------------------------------------
Secures Improvements for Other Agricultural Sectors
USMCA will bring sizable benefits for other agricultural sectors as
well, most notably by ending discriminatory pricing for wheat exports
to Canada, removing nontariff barriers to U.S. wine exports to Canada
and increasing Canadian market access for egg and poultry products.
USMCA's changes to Canada's current grain grading system will help
improve the fairness of wheat trade between the U.S. and Canada. While
U.S. wheat exports to Canada under NAFTA are automatically designated
as the lowest grade wheat, USMCA will enable certain U.S. varieties
registered in Canada to be afforded reciprocal treatment.
For the poultry industry, USMCA requires Canada to provide new
access for U.S. chicken and eggs by establishing a U.S.-specific duty-
free tariff-rate quota on chicken meat and eggs in addition to Canada's
existing World Trade Organization commitments. According to the North
American Meat Institute, ``Model results indicate that U.S. poultry
meat exports to Canada would increase by $183.5 million, or nearly 50
percent, in year 6 of the agreement.''\9\
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\9\ ``ITC Releases Report on USMCA.'' (April 23, 2019). Retrieved
from North American Meat Institute: https://www.meatinstitute.org/ht/d/
ArticleDetails/i/155617.
Additionally, USMCA secures increased access for turkey, resulting
in a 29-
percent increase in U.S. turkey exports to Canada, according to
estimates from the National Turkey Federation.\10\
---------------------------------------------------------------------------
\10\ ``NTF Statement on U.S.-Mexico-Canada Agreement.'' (October 2,
2018). Retrieved from National Turkey Federation: https://
www.eatturkey.org/2018/10/02/ntf-statement-on-u-s-mexico-canada-
agreement/.
Lastly, USMCA eliminates discriminatory trade practices that have
hindered U.S. wine exports. With Canada being the number one export
market for U.S. wine, reaching $1.53 billion in winery revenues in
2017, increasing market access in Canada will be a major boon for U.S.
farmers and producers.\11\
---------------------------------------------------------------------------
\11\ ``Wine Institute Applauds Market Access Gains Made in U.S.-
Mexico-Canada Agreement (USMCA).'' (October 1, 2018). Retrieved from
Wine Institute: https://www.wineinstitute.org/resources/pressroom/
10012018.
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looking forward
Our trade negotiators should be commended for their tireless work
on behalf of America's farmers and ranchers. America's agricultural
economy relies on a predictable, transparent and rules-based system of
international trade to provide certainty and opportunities to grow. A
swift ratification of USMCA will signal to the rest of the world that
the U.S. values our free trade relationships and we are open for
business.
Beyond USMCA, America is engaged in trade negotiations with
countries that represent high potential markets--namely Japan and the
United Kingdom. The results of those agreements will directly affect
the future of dairy farmers, dairy manufacturers, and rural communities
from coast to coast. Passage of USMCA will allow trade negotiators to
work effectively on other issues of paramount importance to the U.S.
dairy industry, such as resolving differences with China that have led
to harmful retaliatory tariffs, swiftly forging a strong agreement with
Japan that improves upon the trade treaties it shares with other
nations, forging a strong free trade agreement with the U.K. should its
Brexit terms allow a negotiation with the U.S. to proceed, addressing
our lopsided dairy trade deficit with Europe, and pursuing beneficial
new trade treaties with dairy-deficit partners such as those in
Southeast Asia.
However, we must tackle the most pressing item first: America's
current trade agenda begins with passage of USMCA. When USMCA comes up
for a vote, U.S. agriculture is asking that you act quickly to ratify
this trade agreement.
Once again, thank you for the opportunity to testify before this
committee, and for your leadership on these vital issues for rural
America.
______
Questions Submitted for the Record to Hon. Thomas J. Vilsack
Questions Submitted by Hon. Chuck Grassley
Question. The USMCA digital trade chapter will not only benefit
traditional tech companies. It offers benefits for firms across
sectors, like manufacturing, transportation and agriculture. Businesses
of all sizes rely on the Internet to sell their products globally.
Global business rely on the free flow of data to conduct business and
communications, and make payments. Our modern economy requires modern
rules.
Answer. Would you briefly describe how the digital trade provisions
in the USMCA will benefit your industry generally?
Answer. We are not aware of implications of the digital trade
chapter for dairy.
Question. Iowa is a State with a very efficient agriculture
industry that is coupled with the best soils and climate conditions in
the world for growing crops. As you know, States like ours produce far
more food than we could possibly consume.
Could you tell us why it is so important for farmers to have access
to foreign markets and how agreements like the USMCA impact long-term
investment decisions in rural America?
Answer. Trade has been essential to the health of American
agriculture broadly and to the dairy industry. Our dairy farmers and
processors have established themselves as the world's preeminent
suppliers of high-quality dairy products, exporting $5.6 billion in
dairy products in 2018 to customers around the world. U.S. dairy
exports in 2018 were the equivalent of 10 million gallons of milk going
overseas every day in the form of a wide variety of dairy products from
cheese to ice cream to milk powder.
To continue to remain competitive and expand, however, the U.S.
dairy industry needs to see the pursuit of high-quality trade treaties
with net dairy-importing nations such as those in Southeast Asia and
other key markets for U.S. agricultural products around the world.
USMCA is the first step in that process.
What is true for dairy is true for farmers and ranchers more
generally. America's farmers feed the world. Every single day, our
farmers and manufacturers supply markets across the globe with superior
agriculture and food products. According to the U.S. Department of
Agriculture (USDA), the U.S. exported nearly $140 billion in
agricultural products in 2018, with the top markets for agricultural
products being Canada and Mexico.
However, right now rural America is facing a crisis. The prolonged
rural recession that has gripped the heartland has been exacerbated by
trade disputes and uncertainty in the global marketplace. Maintaining
our trade relationships and expanding market access for U.S.
agricultural goods is vital to restoring the economic health of rural
America. USMCA will secure existing markets and open new opportunities
by modernizing the 25-year-old North American Free Trade Agreement
(NAFTA), and it is therefore essential that Congress pass USMCA as soon
as possible. Doing so will help to restore certainty to our critically
important trade relationships with Canada and Mexico and set the stage
for further market opening efforts in other markets. That certainty and
the prospect for further export growth will have a positive impact on
long-term investment decisions in rural America and will be key to
turning the tide for the rural economy.
______
Questions Submitted by Hon. Pat Roberts
Question. Market access for dairy in Canada has long been an issue
for U.S. producers. Positive steps were taken during TPP negotiations
to begin to open protected dairy markets with countries including
Canada. Soon after, Canada developed and implemented the class 6 and 7
pricing system that further distorted trade for dairy products.
The USMCA agreement importantly eliminates the class 6 and 7
pricing system and establishes a new pricing structure.
How can we ensure the components of this agreement are strongly
implemented and enforced, and that our producers maintain the ability
to compete both in Canada, and around the world?
Answer. Although there many aspects of U.S.-Canada dairy trade that
remain problematic and must be addressed in the future, reaping the
full benefit of the impactful provisions painstakingly secured by U.S.
negotiators in USMCA will represent a great step forward. Proper
implementation of the USMCA provisions by Canada will require proactive
work by the U.S. with Canada to ensure that revised policies fully
comply with the letter and intent of their commitments under USMCA and
vigilant enforcement efforts should Canadian policies deviate from
USMCA's focus on uprooting the harmful and global trade distorting
impacts of Canadian dairy policies.
In addition, USMCA introduces robust transparency and consultation
commitments with Canada on dairy. Given Canada's entrenched track
record of intentionally using policy tools to undermine trade
commitments and refusing to provide all relevant information on its
programs, these represent vital elements to ensuring the U.S. is able
to fully realize the benefit of the pricing policy disciplines
introduced by USMCA.
In particular, it will be necessary to use USMCA's transparency and
consultation provisions to closely monitor several areas of critical
importance to Canada's USMCA implementation:
Canada's implementation of export surcharges on skim milk
powder, milk protein concentrate, and infant formula. The
surcharges must be designed in a manner that will be effective
in discouraging exports above the volumes specified in USMCA.
In addition, the proceeds from the surcharges must not be
redistributed to the Canadian dairy industry;
The reclassification of products post class 6/7 based on end
use must be appropriately carried out in keeping with the
intent of the agreement. That intent is to ensure that pricing
for input products (e.g., ultrafiltered milk) is determined
based on the pricing of the product in which it will be used
(e.g., cheddar cheese, classified in milk class 3B; or yogurt,
classified in milk class 2A, etc.);
Canada's tariff-rate-quota (TRQ) administration practices
must not discourage full utilization of the market access
quantities provided to U.S. producers. In addition, it will be
important to ensure that the end-use restrictions on certain
TRQs do not unduly thwart the ability of U.S. exporters to
fully fill the established TRQs;
Market access granted by Canada under USMCA must be provided
in addition to that already extended under earlier agreements
and programs, including Canada's WTO commitments and Canada's
existing levels of dairy imports under its Duties Relief
Program and Import for Re-export Program. Canada must not cut
back the existing scope or volume of dairy products that may be
imported under these programs as it implements new USMCA market
access;
Canada must fully adhere to the transparency and
consultation requirements in USMCA, and the U.S. must monitor
and take action based on the resulting data to the full extent
possible, to ensure Canada's compliance with both the letter
and the spirit of USMCA dairy disciplines. The consistent use
of these USMCA tools will be critically important given
Canada's track record of intentionally using policy tools to
undermine trade commitments.
Question. I hear from dairy processors that there is real urgency
to passing USMCA as Canada continues to dump skim milk powder (SMP) on
the world market, which has the effect of depressing global SMP prices.
Please describe how USMCA resolves this dumping of SMP and share
how Canada's SMP activities have hurt the U.S. dairy industry.
Answer. Canada's SMP activities were used to suppress global SMP
prices and reduce export opportunities for the U.S. dairy industry.
USMCA will help to resolve Canada's dumping of SMP and guard against
future resurgences of inappropriate Canadian exports by eliminating
Canada's class 6 and 7 dairy pricing system 6 months after
implementation and establishing new pricing structures for skim milk
powder (SMP) as well as certain other dairy products. In addition,
USMCA establishes an export surcharge on skim milk powder intended to
discourage exports above volumes specified in USMCA. In order to ensure
this surcharge operates as was clearly intended under USMCA, the
proceeds from the surcharges must not be redistributed to the Canadian
dairy industry.
______
Questions Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. The U.S. Dairy Export Council is opposed to any unilateral
withdraw from our trade treaties. USDEC urges this administration, as
well as future ones, to preserve our existing trade agreements and
negotiate new ones. And--most immediately--for Congress to pass USMCA
as soon as possible in order to place our trading relationships with
Canada and Mexico on a firm, long-term footing, rendering moot many of
the difficult questions that have arisen in connection with the NAFTA
debate such as that pertaining to withdrawal.
Question. In your written testimonies provided to the committee,
you all cited a reduction in trade uncertainty as a benefit of the
USMCA. For example, you stated (emphasis mine):
Governor Blunt: USMCA ``will not only help the U.S. auto
industry remain globally competitive, it brings certainty and
stability, which in turn will encourage automakers--foreign and
domestic--to invest and expand here in the United States.''
Mr. Collins: ``While USMCA provides significant direct
benefits to U.S. agriculture and other sectors relative to
NAFTA, importantly, it also reduces the likelihood that trade
disputes will worsen and disrupt trading relationships.''
Mr. Vilsack: ``This trade agreement will bring strong
benefits to American agriculture exports, including the U.S.
dairy industry, by restoring certainty to U.S.-Mexico trade
relations, making needed improvements to U.S.-Canadian trade
and upgrading trade rules to discourage nontariff barriers to
trade.''
As you know, the International Trade Commission (ITC) in its
required analysis of USMCA found that nearly all of the agreement's
modest benefits stem from a reduction in ``policy uncertainty,''
largely due to the inclusion of some modernizing rules. By removing
this boost, however, the ITC found that USMCA would reduce real GDP by
0.12 percent--or $22.6 billion--over 6 years. An additional study
conducted by the International Monetary Fund (IMF) concluded that the
``effects of the USMCA on real GDP are negligible.'' A Canadian think
tank, the C.D. Howe Institute, reached a similar conclusion: ``The
negative elements outweigh the positives and the CUSMA results in lower
real GDP and welfare for all three parties, with Mexico being the
hardest hit and the United States the least.''
In your view, what factors are currently generating trade policy
uncertainty? How would the USMCA adequately address such factors?
Please be specific.
Does the inclusion of a ``sunset'' provision in the USMCA (article
34.7) increase or decrease long-term certainty about the continuance of
the trading relationship between the United States, Mexico, and Canada?
In your view, what should be the role of Congress in the ``joint
reviews'' of USMCA conducted every 6 years, per USMCA's ``Review and
Term Extension'' (i.e., sunset) provision? Should such a role be
codified in U.S. law via USMCA's implementing legislation?
Does the curtailment of the Investor-State Dispute Settlement
(ISDS) mechanism in Mexico and its elimination in Canada increase or
decrease certainty for American investors in those countries?
Answer. USMCA will provide new opportunities for U.S. dairy and
restore certainty to North American trade relations. The negotiations
to modernize NAFTA necessarily involved uncertainty as to their
outcome, and completion of the negotiations offers the prospect of
removing this uncertainty, should Congress act soon to approve USMCA.
In addition, retaliatory tariffs directly created tremendous upheaval
for U.S. dairy exporters by upending the dependability of U.S. pricing
and competitiveness; as USMCA has advanced those issues have now also
been settled. USDEC is hopeful that all implementation mechanisms
(U.S., as well as those of our trading partners) for USMCA will help to
ensure full compliance with the letter and spirit of agreement
commitments, in particular Canada's commitments on market access and
dairy pricing. We urge Congress to work with the administration to
monitor Canada's implementation of its commitments closely and to use
agreement enforcement tools aggressively should Canada's implementation
fall short.
The sunset provision in USMCA will help to ensure that each party
to the agreement takes its commitments seriously through the regular
review of the functioning of the agreement. Congress should have a key
role to play in this review process, working closely with the
administration to evaluate on an ongoing basis both the benefits of the
agreement to the U.S. economy and each of our trading partners' degree
of compliance with their commitments under it.
The U.S. dairy industry has not utilized ISDS provisions to date
nor is this a provision we believe is likely to be a key element of the
agreement for us moving forward. Our sector primarily produces our
products here in the U.S. for export to Mexico, and to a lesser extent
to Canada. What cross-border investment exists is in dairy is more
prevalent by way of our NAFTA partners' firms' investments in U.S.
dairy processing capacity, rather than U.S. firms outsourcing their
dairy processing to Mexico or Canada through the establishment of
plants in those countries.
______
Prepared Statement of Michael Wessel, Staff Chair, Labor Advisory
Committee for Trade Negotiations and Trade Policy; and President, The
Wessel Group
Mr. Chairman, Ranking Member Wyden, members of the committee, it is
an honor to appear before you today as you evaluate the impact of the
existing North American Free Trade Agreement and seek to assess the
U.S.-Mexico-Canada Trade Agreement (USMCA) and evaluate what changes
and additional provisions are needed.
My name is Michael Wessel, and I am appearing today on behalf of
organized labor. For many years I have been a staff liaison for the
United Steelworkers union to the Labor Advisory Committee (LAC), one of
the statutory advisory committees to the USTR and Secretary of Labor
and currently serve as the staff chair of that committee because the
president of the Steelworkers is the current LAC chair. I have been a
cleared advisor aware of, and participating in, discussions regarding
the negotiations of the USMCA, its possible ratification and
implementation.
In addition, I appear before you today with a good bit of
experience on this issue: I served on the staff of former Democratic
Leader Richard Gephardt for more than 2 decades, having left as general
counsel in 1998. During my tenure with Mr. Gephardt, I was intimately
involved in the negotiations and review of the original NAFTA
agreement.
So that I don't bury the lead: organized labor wants NAFTA fixed.
We have worked throughout the negotiations, in what we believe is a
constructive, good-faith effort to find solutions, not just lodge
complaints. During the negotiations, a group of labor leaders met on
three separate occasions with the President to discuss the issue. We
remain committed to working with Congress and the administration to
ensure that we reach a compromise that advances the interests of
working people. We want to reform the existing agreement. We remain
optimistic about the ability to resolve the issues. But we will not
hesitate to oppose an agreement that fails to improve NAFTA and the
current trade template in meaningful ways.
Much work remains: the current USMCA is not good enough because it
does not include sufficient improvements to ensure that the terms of
trade in North America will change, key among them the lack of swift
and certain enforcement mechanisms to replace the current broken system
in which labor complaints languish for years and labor abuses by our
trading partners go unaddressed, seemingly condoned by Republican and
Democratic administrations alike.
The negative impact of the existing North American Free Trade
Agreement cannot be overstated. The inevitable negative outcomes were
baked into its structure, which included an extensive set of rules
establishing rights for multinational corporations, while providing no
effective protections for workers, communities, and the environment.
This imbalance has had a fundamental and corrosive impact on
production, employment and wages in the U.S. As projected by many of
NAFTA's opponents more than a quarter-century ago, it has led to
outsourcing of production and wage suppression in the U.S. Very few
sectors have been immune to its impact. Even public-sector workers--
emergency responders, teachers and others--have faced the negative
impact of NAFTA as they have had to deal with diminished resources from
tax bases eroded by plant closures, stagnating wages, and lost jobs.
Service-sector workers have been adversely affected as well. For
example, there are now nearly 700,000 workers in the Business Process
Outsourcing (BPO) sector in Mexico, many serving the U.S. market,
directly costing jobs for customer service call center representatives
in the U.S.\1\ Similarly, workers in the arts and entertainment fields
have been harmed by NAFTA's failure to adequately protect the
copyrighted works they help create.
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\1\ Nearshore Americas, Infographic: How Competitive Is the BPO
Sector in Mexico? September 10, 2018, https://
www.nearshoreamericas.com/infographic-bpo-sector-in-mexico/.
Manufacturing companies in the U.S. continue to outsource
production and jobs to Mexico. The auto sector now represents the
largest contributor to the U.S.-Mexico trade deficit, fueled by U.S.
auto assembly and parts manufacturers that have closed or cut
operations in the U.S. and relocated them to Mexico. This has gotten
much worse over the last decade. Between 2005 and 2016, the U.S. lost
10 light vehicle final assembly facilities while Mexico gained eight
and its share of total NAFTA production increased from 8 percent to 19
percent. Auto production in Mexico is now 3.2 million cars and light
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trucks with nearly 80 percent of Mexico's exports coming to the U.S.
Mexico's automotive workforce has grown from 112,000 in 1994 to
767,000 in 2016. Ninety-three percent of that growth is in the
manufacture of parts. As vehicle assembly leaves the U.S. the parts
jobs generally follow.\2\
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\2\ Testimony of Josh Nassar, ``Trade and Labor: Creating and
Enforcing Rules to Benefit American Workers,'' before the House Ways
and Means Subcommittee on Trade, March 26, 2018.
The overwhelming majority of these Mexican workers are covered by
so-called ``protection contracts'' which dramatically limit wages and
compensation and deny them a fair opportunity to form unions to fight
for safer workplaces, higher wages, and improved benefits. The fabled
Mexican middle class that NAFTA proponents argued would be a
substantial new market for U.S. goods never materialized because
Mexico's labor and economic policies and practices impeded its growth.
Mexican manufacturing compensation today is one-tenth of U.S.
compensation.\3\ Instead of a thriving economy, with millions of
potential customers for ``Made in USA'' goods and services, Mexico has
become more unequal, drawing production from the U.S. and Canada, but
failing to fairly reward Mexican workers.
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\3\ The Conference Board, International Comparisons of Hourly
Compensation Costs in Manufacturing, 2016--Summary Tables, February 16,
2018, https://www.conference-board.org/ilcprogram/index.cfm?id=38269.
This doesn't even account for the devastating impact of recent
announcements, like General Motor's decision to shutter its Lordstown,
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Ohio facility while increasing employment in its Mexican operations.
U.S. workers in other industries have also seen their jobs
outsourced to Mexico. Since NAFTA was implemented, over 40,000
aerospace jobs have been created in Mexico--many of them could have
remained in the U.S.
Environmental concerns continue. As far back as 1991, documented
evidence exists as to Mexico's lax laws and environmental enforcement
acting as a draw for U.S. companies to relocate, to lower their costs--
despite the environmental degradation and human impact that would
result. In 1991, GAO documented the movement of furniture firms from
Los Angeles to Mexico because of, in part, higher environmental
standards here in the U.S.\4\ And, as GAO indicated in 2009, the labor
and environmental provisions in U.S. trade agreements are essentially
unenforced.\5\ The Mexican people, and their new leadership, don't want
Mexico to be a dumping ground. Indeed, they are dedicated to
environmental stewardship. Unfortunately, many companies still seek to
invest and operate there, bidding U.S. and Canadian laws against
Mexico's developmental needs.
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\4\ United States General Accounting Office, ``Few Wood Furniture
Firms Moved to Mexico From the Los Angeles Area,'' May 8, 1991.
Testimony of Frank C. Conahan, before the Subcommittee on Commerce,
Consumer Protection, and Competitiveness of the House Committee on
Energy and Commerce.
\5\ General Accounting Office, ``Four Free Trade Agreements GAO
Reviewed Have Resulted in Commercial Benefits, But Challenges on Labor
and Environment Remain,'' July 2009, https://www.gao.gov/new.items/
d09439.pdf.
The current text undermines environmental protection and a just
transition to a clean energy economy. The environmental chapter fails
to address their weak laws and preserves NAFTA's offshoring loophole
that allows companies to offshore jobs, climate emissions and toxic
---------------------------------------------------------------------------
pollution to Mexico.
NAFTA's failings are well-known, which led the administration to
seek its renegotiation, which brings us here today.
I'm not here to re-litigate the original agreement but to talk
about the current issues that have so adversely impacted domestic
production and employment, the provisions of the USMCA that seek to
address some of those problems, and what else needs to be done as
Congress evaluates the agreement and works with the administration to
make it better.
Organized labor, via the LAC, engaged extensively with the
administration during this process--undoubtedly in a more robust way
than with any prior administration. At the end of my testimony, I
provide citations to public reports of the LAC, supplemented by
references to additional submissions, congressional testimony and other
documents. It is hard for me to see how organized labor could have been
more engaged, more specific, and more responsive in these negotiations.
Since NAFTA passed, the Teamsters and other stakeholders have
raised concerns about cross-border trucking and the threat to highway
safety from Mexican-
domiciled carriers. NAFTA gave the Mexican trucking industry unfettered
access to American interstates. Under a non-conforming measure in Annex
II of the USMCA, however, the U.S. government will be able to impose
new restrictions on operating authority for Mexican carriers upon a
showing of material harm to U.S. drivers or the U.S. trucking industry.
This is an important improvement to the original agreement.
The Teamsters also engaged closely in the difficult dairy market
access negotiations and support the final compromises, especially the
additional market access for American made milk protein concentrates
(MPCs) but also the survival of the Canadian supply management system.
However, as the LAC engages both publicly and privately, through
the cleared advisor process, not every issue has been publicly
addressed. As the heat of the negotiations and the debate intensify,
there are claims that there is some moving of the goal posts. The
members of this committee are very experienced in the art of
negotiation and know that it's a common ploy to say that new issues are
being added to the agenda. To be clear, any comments as to ``new
issues'' would be completely unfounded. Sure, new approaches to
previously stated concerns may arise, but all the underlying issues
that need to be addressed were raised at some point in the process;
many of the concerns being raised countless times.
Today, I want to address some issues that must be addressed for an
agreement to promote the interests of domestic producers and workers--
manufacturing and service sector workers, who have seen their jobs
outsourced to Mexico or faced the pressures of the NAFTA to their
detriment. My comments will be far from comprehensive. Indeed, the
LAC's original submission to the USTR identifying labor's views spanned
88 pages. While I will not address every issue here, my failure to
address an issue does not signal that it does not need to be addressed.
Every issue impacts the lives, livelihoods, health, safety and future
of workers here in the U.S. and in Mexico and Canada.
It is vital to understand that, like every single trade agreement
in the past, the USMCA is being oversold by its proponents. While it
makes good strides to curtail access to private justice systems for
multinational investors and includes a number of other ``first ever''
innovations, much work remains.
The USMCA cannot be viewed in isolation. As work on USMCA
continues, we cannot ignore the continuing trade problems with China
and other countries. We cannot ignore the fact that there is a
significant infrastructure deficit or that our tax policies create
incentives to offshore production. We cannot ignore a multitude of
other policies that have undermined the interests of working people. In
this light, try as they might, the economists will be unable to prove
the macro-economic merits of the USMCA.
At the same time, as organized labor has said--repeatedly--we are
committed to working with the administration to improve the existing
agreement. AFL-CIO President Trumka and many other labor leaders have
publicly supported the negotiations and, as it relates to the labor
text, indicated that it improves upon the existing framework of
standards, but must be strengthened and coupled with accessible and
timely implementing, monitoring and enforcement provisions. If we
cannot be certain that the labor provisions will be effectively and
timely enforced, even improved standards are of little use. They won't
help discourage outsourcing, raise wages and working conditions in
Mexico, and they won't help restore balance between labor and employers
in the U.S.
However, even if we were to achieve all our goals, we will not
oversell the final product to our members. They have lived with the
devastating impact of NAFTA for a generation--they are rightly
skeptical, and their leaders will not mislead them.
Given the chance to improve upon the existing agreement, if it
makes meaningful and effective changes that will be implemented,
monitored and aggressively enforced, and that will significantly
address the outsourcing that continues across industries, we should
take those steps. We have worked to address the flaws in the new NAFTA
and the substance of those changes and our experience will drive our
decisions, not partisan politics.
Since the first days of this administration, Ambassador Lighthizer
and his team have been highly accessible, engaged and open to honest
dialog about what a good USMCA must contain. They have taken our advice
seriously--even when they have strongly disagreed with it--something
prior USTR teams--on both sides of the aisle--failed to do. They have
earned and deserve the engagement that exists which is why organized
labor remains engaged. And it is why Speaker Pelosi created a
negotiating group to work with the administration to achieve a product
that can garner broad and bipartisan support. This is one of the few
policy issues that could actually be on a potential track to
resolution.
The positive impact of the USMCA's current provisions, however, are
not going to be achieved simply through the existing text of the
agreement and won't be resolved with minor word changes and enforcement
proposals that lack specificity, automaticity, and teeth. While there
is a lot of pressure to achieve a quick result, this process should not
be rushed. There is a shared desire to reach a successful conclusion
and we believe progress is being achieved.
Chairman Grassley, Ranking Member Wyden, I and others from
organized labor have met with your staffs and appreciate their time,
commitment and openness. We appreciate that they have traveled to
Mexico to learn more about the specific concerns we have raised.
Continued substantive engagement, rather than the politicization of
USMCA is more likely to achieve positive results. We remain committed
to putting in the time, energy, and engagement on a substantive basis.
So, with that long introduction, let me address several specific
issues.
First is the issue of the labor text, Mexico's commitments under
the Labor Annex and the need for a robust implementation, monitoring
and enforcement regime. That is the single most important issue which,
over the long-term, will result in a more balanced trade relationship
and will begin to address the significant impact NAFTA has had on
suppressing and reducing wages and promoting outsourcing of jobs.
These changes will not stop outsourcing of U.S. jobs, but, over
time, they may help reduce the pressures. As Mexican workers and free
and independent labor unions are able to jettison the hundreds of
thousands of so-called protection contracts and exercise their
fundamental rights to freedom of association and collective bargaining,
we will see their wages and conditions of employment improve.
Right now, the vast majority of major workplaces in Mexico are
covered by protection contracts. In many instances, workers never had a
hand, or a say--or sometimes knowledge of--the contracts they are
covered by. The contracts are called protection contracts because they
protect the economic interests of employers, not employees. Producers
often are handed a contract as they decide to invest, even before the
footers for the factory are poured or the office site is chosen.
The experience of the workers at Nabisco provides a textbook
example of the problems that exist.
Earlier this decade, Mondelez-Nabisco invested over $500 million in
a new plant in Salinas Victoria, Mexico. Before the facility was even
complete, Nabisco started laying off workers in the United States, many
in the iconic Oreo line, to be replaced by production in Mexico.
In June of 2015, Mondelez-Nabisco closed a bakery in Philadelphia,
laying off 450 workers. In 2016, Mondelez laid off 600 workers at its
flagship bakery at the Chicago Nabisco plant, to be replaced by
production in Mexico.
It was largely believed the Salinas facility was operating under a
protection contract, which most workers didn't even know existed, much
less had a say in.
When the Bakery, Confectionery, Tobacco Workers, and Grain Millers
(BCTGM) union in the United States requested and received a copy of the
protection contract--a rare feat to obtain these secretive contracts--
it was found the workers in the Salinas plant had a 3-tier scale. The
highest pay rate converted to $1.29 per hour, the middle rate to $1.14
per hour, and the lowest, a mere 97 cents per hour.
While Mondelez-Nabisco pays Mexican workers less than 10 percent of
their U.S. counterparts, the price of Oreos and other baked goods
produced in Salinas aren't any cheaper on U.S. shelves. It's clear U.S.
consumers and workers are not the ones benefiting from these
outsourcing scenarios.
Fixing NAFTA requires that these examples--of which there are too
many to account for--be addressed.
The Labor Chapter and Annex, properly implemented, monitored and
enforced, and coupled with greatly improved labor standards will
hopefully improve conditions--over time. The USMCA allows Mexico a 4-
year window in which to implement the changes. During that period,
existing contracts will remain unless and until they are renegotiated.
And, even with the advent of a freer and more independent union
movement, it will still be difficult. Four years is a long time for
workers to wait to achieve their rights, and the fruits of an equitable
bargain. Moreover, effective and independent unions will not just
appear--they will need nurturing and support to grown in the context of
decades of labor suppression.
While the Labor Chapter and Annex to the USMCA includes
improvements over current law, there are still significant issues that
must be addressed.
Some want to shift the debate immediately to implementation,
monitoring and enforcement. But the threshold question is: What are the
standards that underly the commitments?
The agreement, through a footnote, appears to limit the ability to
utilize International Labor Organization (ILO) standards and
jurisprudential guidance to inform what the USMCA and its provisions
are supposed to guarantee to workers. By failing to simply refer to the
relevant ILO conventions, this footnote introduces needless confusion
over the substantive meaning of the labor rights each party has agreed
to adopt and enforce. Organized labor has called for the removal of the
footnote since its adoption many years ago. It is outdated and
inappropriate. Eliminating the footnote will not require the U.S. to
change its labor laws. This remains an important issue.
There are also limiting terms in the text that should be eliminated
specifically the phrases ``in a manner affecting trade'' and in a
``sustained or recurring course of action.'' USTR did address some of
our concerns but the retention of those terms, and the potential
negative impact on workers merits their deletion. These limitations do
not apply to NAFTA rules addressing investor rights, banking rules,
telecom rules and the like. They have historically been a way of
singling out labor and environmental rules for lesser enforcement.
Workers' rights impact the operation of markets. Free markets
require free labor rights so that workers can freely associate and
bargain for the wages and compensation that their skills and aptitude
merit and that reflect the proper balance of power in the workplace.
While a worker may not produce a good destined for export, his or her
income determines their demand which is vital not only to fuel domestic
consumption but to enhance the appetite for imports. Requiring a
showing of how a product or service is related to trade is
inappropriate.
Second, and even more troublesome, is the question of why a
violation of workers' rights must occur through a sustained or
recurring course of action or inaction. No one contemplates that a
single, minor workplace grievance will rise to the level of triggering
a trade complaint. On the other hand, there are egregious, single
actions which can and do have a chilling impact on the free exercise of
rights. For example, the shooting of a worker by anti-union thugs can
and has stopped an organizing effort it its tracks. Under the standard
in the agreement as it now stands, a single murder would not be
actionable, no matter what its impact on organizing efforts. Again,
this limitation should be removed.
Moreover, we are concerned that the footnote designed to clarify
the definition of ``sustained or recurring'' could instead create new
barriers to effective enforcement, as there are myriad ways that a
government could fail to enforce workers' rights, meaning that proving
that multiple violations were ``the same or related in nature'' may
prove challenging.
It's important to recognize that, while the 2015 Trade Promotion
Authority refers to these terms, TPA has never been treated as a word-
for-word blueprint for trade agreements. TPA only requires that
Presidents give their best efforts to achieve the TPA objectives.
Moreover, TPA was written 2 years before the arbitral decision in the
Guatemala workers' rights case made clear for all to see that these
terms serve as a barrier to enforcement. Congress should support the
elimination of those provisions in the text.
This, of course, raises a separate issue: Does the text of the
agreement need to change? The short answer is ``yes.'' Many of the most
recently negotiated agreements signed by the U.S. were amended after
signing but before approval by Congress. We need to get it right, not
shackle ourselves to an unacceptable approach. For organized labor the
question is whether any changes will be treated as core agreement
language that is not severable from the other provisions of the
agreement.
These are among the standards that must be addressed in the
agreement that will subsequently need to be effectively implemented,
monitored and enforced.
Of course, standards that are not implemented are worthless. Many
of the changes Mexico has adopted in its labor reforms are not yet in
place. As noted above, the Mexican government has proposed a 4 year
window for implementation, with key actions--such as the verification
that collective bargaining agreements have worker support--left to the
initiative of incumbent unions. The new legislation requires Mexico to
set up a new system of courts and a new government agency to handle
conciliation and contract registration, which will require the hiring
and training of thousands of judges, inspectors, conciliators, and
other skilled professionals but to date, no funds have been authorized
or appropriated to support the implementation.
Yet already the protection unions and their supporters have
counter-attacked, filing more than 400 requests for injunctions against
the new legislation. Some courts have already granted injunctions,
generating legal uncertainty and potentially slowing the implementation
process even further.
On the shop floor in Mexico, nothing has changed yet as a result of
the reform.
In the past, we have seen action plans announced but not fully
implemented before compliance has been certified allowing for trade
benefits to flow. That is unacceptable. Implementing the laws with
concrete steps, resources, personnel and commitment must occur before
the agreement enters into force.
The last administration certified that Colombia had met the terms
of its action plan, thereby granting the benefits Colombia so
desperately wanted. But in fact, Colombia had only partially
implemented its action plan. The premature certification stunted
further labor improvements in Colombia and dealt a set-back to workers
hoping to exercise new rights. We cannot allow that to happen again and
certification requirements must be adopted, with appropriate oversight,
to ensure that the agreement's terms are being properly met, not that
political favors are being granted. The certification requirement is an
important substantive provision that has not yet been drafted.
There must also be adequate resources and a concrete implementation
plan for what the U.S. will do. We have had extensive discussions with
the USTR over the past 2 years on the components of such a proposal and
the need for mandatory, assured and significant funding for a
protracted period to support implementation of these new labor
commitments.
Mexican workers have not had the labor rights they deserve. This
agreement may help if it is coupled with the resources to provide on-
the-ground support. Our own government needs to expand its activities
in this vital area. There are a large number of documented labor rights
violations occurring on an ongoing basis which are not being addressed.
That sends a very negative message as to what the future might hold.
We need to treat facilitating workers' rights in Mexico the same
way that the business community has treated trade facilitation
provisions.
Coupled with these improvements, the agreement must include much
stronger enforcement provisions. Right now, as the committee knows, any
of the three signatory countries may block an arbitral panel from
forming which, essentially, means that no enforcement case can proceed.
In the context of workers' rights, as virtually every case in the past
has been subject to dilatory and disabling tactics, it's a recipe for
disaster.
While the Ambassador's concerns about panels imposing obligations
on the U.S. that were never negotiated are shared, we must abandon the
principle that the labor standards in U.S. trade agreements are fully
enforceable. We cannot allow our trade partners to short-circuit the
state-to-state dispute resolution process by blocking arbitration
panels. A functioning dispute settlement panel is necessary but not
sufficient to improve on the disastrous U.S. record of labor non-
enforcement. Even if panel blocking is eliminated, the enforcement
mechanism would then duplicate the mechanism in CAFTA, which relies on
labor unions to investigate and report on violations, includes no
effective deadlines, allows for endless delays and places no
obligations on any party to actually enforce the rules they mutually
negotiated. State-to-state dispute settlement must be supplemented with
more specific and effective mechanisms, such as those outlined by
Senators Brown and Wyden in their enforcement proposal.
As the existing agreement states in article 23.2(3) ``The parties
also recognize the goal of trading only in goods produced in compliance
with this chapter.'' That fundamental principle must be effectuated
through additional provisions in the agreement. Just as goods produced
in violation of a company's intellectual property rights can be blocked
from entry, so should the products produced in violation of the
workers' rights provisions. The interests of workers are just as, if
not more, important.
Access to medicines is another critical issue that must be
addressed. The agreement advances the rights of pharmaceutical
companies to the detriment of patients. There is simply no reason why
Canada and Mexico should have to adopt more lucrative provisions for
the drug companies at the expense of their people. The provision would
also tie Congress's hands in reforming laws that unfairly privilege
brand name drug companies--leaving too many U.S. families unable to
afford their medicines and leading to spiraling costs in programs like
Medicare and Medicaid.
Every worker knows that the cost of health care is part of their
overall compensation. The rising cost of prescription drugs has helped
drive the price of health insurance to unacceptable levels. To maintain
their coverage, and protect their family's health, many workers have to
forgo wage increases and their retirement security at the bargaining
table as a tradeoff for health coverage. This reduces their disposable
and future income.
Story after story highlights the exorbitant cost of prescription
drugs and the USMCA's gift to the drug companies was not only
unnecessary, it will have a devastating impact on people in all three
countries.
Just last month Florida passed legislation allowing for the
importation of prescription drugs from Canada and other countries. The
ability of Floridians to afford the cost of their prescriptions through
this mechanism--something the administration apparently supports \6\--
would be undermined by USMCA.
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\6\ Associated Press, June 11, 2019, ``Florida Governor Signs Bill
for Foreign Drug Importation,'' by Curt Anderson. ``DeSantis said
President Donald Trump supports the initiative and has directed the
U.S. Health and Human Services Department to approve it.''
Most problematically, provisions in the current agreement would
lock in excessive monopoly protections for biologic drugs that would
keep life-saving biosimilars off the market. Bipartisan legislation
(H.R. 3379) is currently pending in Congress that would reduce from 12
years to 5 years the amount of exclusivity afforded to biologics. That
legislation would be blocked by provisions in this agreement that set a
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minimum of 10 years of exclusivity for biologics.
In addition, the USMCA does not exclude chemically synthesized
polypeptides from the definition of biologic drugs--as current U.S. law
does--thus appearing to risk the possibility that the agreement would
force us to deem these drugs biologics and, thus, afford them
additional exclusivity. Chemically synthesized polypeptides include
important treatments for diabetes, osteoporosis and other conditions,
and we cannot afford to raise prices on those drugs moving forward.
These provisions must be eliminated.
The rules of origin in the USMCA are being advanced as a way of
promoting manufacturing in North America. They still need improvements
and their impact on the U.S. is uncertain.
This may sound strange in light of the agreements' provisions
increasing the rule of origin in the automotive sector from the
existing 62.5 percent to 75 percent. Indeed, because of the change in
the method for calculations, the existing NAFTA 62.5 percent standard,
based on more recent trade agreements and the method in the USMCA is
actually lower--somewhere in the neighborhood of 52-53 percent.
So, why wouldn't the increase to 75 percent result in huge job
gains for the U.S.? It's because the standard applies to North American
content. The higher standard may incentivize auto assembly companies to
resource auto parts that they are presently obtaining from Asia and
elsewhere but, with the dramatic cost benefits of producing in Mexico,
many auto parts producers will continue to relocate there rather than
produce here.
And, despite several conversations and requests, there still are a
number of specific definitions in the rules of origin for the
automotive sector that are in question. We have met repeatedly with
USTR to try and obtain answers and are awaiting responses.
The USMCA does include a new Labor Value Content (LVC) relating to
the automotive rules of origin. This is a novel and creative approach
that, for the first time, ties content to a wage standard. As a
concept, this is something organized labor welcomes, but still has
questions about and believes needs to be improved. The provision
essentially requires that 30 percent of an auto's content consists of
parts made by workers making an average of $16 an hour.
Let me provide an example that fuels our concerns. The Ford Fusion
is made at a plant in Hermosillo, Mexico. According to American
University's Kogod School of Business' Made In America Auto Index 2018,
each of the three models produced at that plant has a level of content
produced in either the U.S., or Canada that already meets the 30
percent level.\7\ Presumably, the jobs in the U.S. or Canada equal or
exceed the $16 per hour average figure required by the LVC.
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\7\ American University, Kogod School of Business, Made in America
Auto Index 2018, Research by Frank DuBois, https://www.american.edu/
kogod/research/autoindex/2018-autoindex.cfm.
To be fair, the administration disputes this analysis, indicating
that it is based on faulty methodology. We have asked for specific
information as well as suggested that they contact the authors of the
studies to correct any inaccuracies. As the companies do not share
their sourcing, production or other similar information with us, we
cannot independently perform an analysis. So, this data, and
information produced by others is forcing us to continue to evaluate
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the proposal.
In addition, the LVC is based on an average, not a minimum. Thus,
for every worker at a factory producing an auto component that will be
factored into the LVC making $28 an hour, 3 more could be making $12 an
hour and the average requirement of $16 would still be met. In addition
the requirement is not indexed to inflation.
As I noted before, the creativity and direction of the USTR's
proposal is appreciated. But our duty is to engage in a detailed
examination of the proposals and their potential impact on our members.
A related issue pertains to the requirement that 70 percent of the
steel and aluminum for autos be sourced from North America.
Unfortunately, the underlying definition behind this requirement does
not require that the steel be melted and poured in North America or
that the analogous definition relating to aluminum apply. Thus, carbon
steel slabs could be imported from China, rolled into sheet and made
into body panels and the ``steel'' would qualify as ``originating''
under the USMCA. I don't think that meets anyone's common-sense
definition of what it means to have the steel and aluminum be made here
and it should be fixed.
And, for me, it is hard to understand why major automotive firms
would support the USMCA if it imposed any significant new costs on them
or forced them to alter their production plans. Their goal is profits.
They are not charitable enterprises. If they are not complaining, this
should give us all pause.
The draft Statement of Administrative Action (SAA) also needs to be
altered to limit the authority of this or future administrations to
change the rules of origin without congressional input and review. The
draft SAA sent to Congress gives the administration sole discretion to
make changes to the rules.
As an overlay enforcement proposal, which we have raised with the
USTR throughout the process, there needs to be a robust verification
and validation infrastructure supporting these provisions. We have seen
too many circumvention schemes in the past that have not been a
priority for CBP or others to uncover. Workers deserve to have trade
agreements that are enforced and that they can have confidence in.
This infrastructure should include regular and detailed public
reporting requirements, based on the Steel Import Monitoring and
Analysis (SIMA) System \8\ but should be extended to cover aluminum
products. Both steel and aluminum were covered by the President's
section 232 investigations, and ongoing review of trade flows in those
products is necessary.
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\8\ The Steel Import Monitoring and Analysis System is maintained
by the U.S. Department of Commerce, https://enforcement.trade.gov/
steel/license/index.html.
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And other industries must be included.
An additional issue for Congress which has been raised with the
USTR but merits more attention, is the analysis needed to support the
6-year review of the USMCA. Originally the administration had floated
the idea of a mandatory sunset if the agreement was not living up to
the promises that had been made. For organized labor, this was a
significant proposal that would guarantee that, if mistakes occur, that
workers would not be burdened with those mistakes forever.
The sunset is now fashioned as an evaluation. That's a critical
missed opportunity. But, the debate about the review must be supported
by robust data, and not mere political rhetoric. Concrete and
comprehensive data collection and publication should occur to inform
Congress and the public as the 6-year review approaches. Among the
information that must be collected and published is the exact impact of
the auto rules of origin on workers and production here in this
country. What is the outsourcing of U.S. production and how are supply
chains altered and what is the impact on jobs, wages and compensation?
These, and many other data sets must be developed and available for
review.
There are many other issues in the context of the USMCA that merit
attention which I have not raised here, but which are addressed in the
public and private submissions of organized labor and its affiliate
unions. Environment, currency, country of origin labeling, protections
for migrant labor and a variety of other issues are addressed in our
submissions.
And Mexico must set a course for action. Part of that will be
dispensing with the dozens of cases that have been filed by the
protection unions themselves to overturn the recent labor reforms which
seek to implement the USMCA commitments. Mexico must also fund and
implement a credible enforcement strategy to address violations in key
sectors immediately, not 4 or 6 years down the road.
The agenda is broad and deep. Organized labor has many different
interests, but it is united in wanting an improved NAFTA that will
support and promote a rising standard of living for workers in all
three countries. We are committed to that task.
I will do my best to answer your questions. Where I do not have the
expertise, I will seek to provide you responses in writing, after
consultation with my colleagues. And, as the discussion about the USMCA
continues, I and my colleagues stand ready to work with you.
Thank you.
Selected Supporting Documents
NAFTA Negotiations Recommendations, Docket No. USTR-2017-0006, June 12,
2017, Testimony of Celeste Drake on behalf of the AFL-CIO (also
included as appendix in September 18, 2018 document below)--https://
aflcio.org/sites/default/files/2017-06/
NAFTA%20Negotiating%20Recommendations%20from%20AFL-CIO%
20%28Witness%3DTLee%29%20Jun2017%20%28PDF%29_0.pdf.
Report on the Impacts of the Renegotiated North American Free Trade
Agreement, Labor Advisory Committee on Trade Negotiations and Trade
Policy, September 18, 2018--https://ustr.gov/sites/default/files/files/
agreements/FTA/AdvisoryCommit
teeReports/Labor%20Advisory%20Committee%20on%20Trade%20Negotiations%20
and%20Trade%20Policy%20%28LAC%29.pdf.
Addendum to the Report on the Impacts of the Renegotiated North
American Free Trade Agreement, Labor Advisory Committee on Trade
Negotiations and Trade Policy, October 25, 2018--https://ustr.gov/
sites/default/files/files/agreements/FTA/AdvisoryCommitteeReports/
Labor_Advisory_Committee_on_Trade_Negotiations_and
_Trade_Policy_%28LAC%29_Addendum.pdf.
``Trade and Labor: Creating and Enforcing Rules to Benefit American
Workers,'' testimony before the House Ways and Means Subcommittee on
Trade, March 26, 2019
Testimony of Steve Catanese, president, Local 668 Chapter,
Service Employees International Union--https://docs.house.gov/meetings/
WM/WM04/20190326/109127/HHRG-116-WM04-Wstate-CataneseS-20190326.pdf.
Testimony of Celeste Drake, trade and globalization policy
specialist, AFL-CIO--https://docs.house.gov/meetings/WM/WM04/20190326/
109127/HHRG-116-WM04-Wstate-DrakeC-20190326.pdf.
Testimony of Holly Hart, assistant to the international
president, United Steelworkers--https://docs.house.gov/meetings/WM/
WM04/20190326/109127/HHRG-116-WM04-Wstate-HartH-20190326.pdf.
Testimony of Shane Larson, director of legislation, politics,
and international affairs, Communications Workers of America--https://
docs.house.gov/meetings/WM/WM04/20190326/109127/HHRG-116-WM04-Wstate-
LarsonS-201903
26.pdf.
Testimony of Josh Nassar, legislative director, United Auto
Workers--https://docs.house.gov/meetings/WM/WM04/20190326/109127/HHRG-
116-WM04-Wstate-NassarJ-20190326.pdf.
``Enforcement in the New NAFTA,'' testimony of Owen E. Herrnstadt,
chief of staff and director of trade and globalization, International
Association of Machinists and Aerospace Workers, AFL-CIO, before the
House Ways and Means Subcommittee on Trade, May 22, 2019--https://
docs.house.gov/meetings/WM/WM04/20190522/109520/HHRG-116-WM04-Wstate-
HerrnstadtO-20190522.pdf.
``Mexico's Labor Reform: Opportunities and Challenges for an Improved
NAFTA,'' testimony of Cathy Feingold, international director, AFL-CIO
before the House Ways and Means Subcommittee on Trade, June 25, 2019--
https://waysandmeans.
house.gov/sites/democrats.waysandmeans.house.gov/files/documents/
Feingold%20
Testimony.pdf.
______
Questions Submitted for the Record to Michael Wessel
Question Submitted by Hon. Chuck Grassley
Question. You wear two hats that I think are quite relevant here:
you're a Commissioner on the U.S.-China Economic and Security Review
Commission and Staff Chair to the Labor Advisory Committee for Trade
Negotiations and Trade Policy. You're very familiar with how China
unfairly takes advantage of open trading systems to the detriment of
workers around the world. USMCA was drafted from the outset with the
understanding of the risks and challenges posed by China. For example,
USMCA requires Canada and Mexico to let the United States review any
trade agreement they might enter into with China, so that we can assess
its possible impact on North American trade. China has loudly condemned
this provision.
Do you agree that one of NAFTA's weaknesses was that it did not
anticipate China's predatory policies, and that USMCA is accordingly a
significant improvement in that regard?
Answer. Going forward, the provision in USMCA that allows the
United States to review any trade agreement our signatory partners may
sign with China is recognition of the increasing impact that China's
trade policies have on the North American market. In addition to other
provisions that will allow for cooperation on Customs and trade
enforcement, USMCA may allow for more coordinated responses to Chinese
unfair trade practices. But it is important to recognize that the
damage that the original NAFTA has wrought on the U.S. market was
structurally-based on trade among the three NAFTA partners, well before
China became a significant player in North America. China's activities
have deepened the decline in U.S. manufacturing and employment and
added to the negative impact of the original NAFTA.
______
Question Submitted by Hon. Patrick J. Toomey
Question. I have been clear in my view that the President does not
have the unilateral power to terminate NAFTA without the consent of
Congress. As you know, article I, section 8 of the Constitution
explicitly vests Congress with trade responsibilities, and there is no
explicit language anywhere in U.S. statute that delegates to the
executive the ability to unilaterally withdraw from trade agreements.
Do you believe that the President has the legal authority to
unilaterally withdraw the United States from NAFTA?
Answer. I do not believe that the law is settled on this matter. As
the Congressional Research Service has noted (U.S. Withdrawal From Free
Trade Agreements: Frequently Asked Legal Questions, September 7, 2016),
there are a variety of questions that the withdrawal would trigger and,
ultimately, the issue would probably be decided by the courts.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. The USMCA doesn't contain strong enforcement mechanisms
to ensure that Mexico will successfully implement necessary labor
standards.
Do you agree that we need stronger enforcement mechanisms to make
sure that labor standards are upheld?
How about for environmental standards?
Answer. The existing USMCA text does not include adequate
enforcement mechanisms on either labor or environmental standards which
is a fundamental flaw of the agreement. As we have seen with many FTAs
and other trade initiatives, enforcement has been essentially lax, or
nonexistent. This undermines production, employment, a sustainable
environment, the health and safety of our people and our standard of
living. It also undermines support for trade initiatives as confidence
in the proclaimed positive results is limited as our trading partners
fail to abide by the commitments they have made.
If enforcement measures are not substantially strengthened, along
with addressing a number of other key limitations in the existing USMCA
text, the agreement should be rejected.
Question. While I understand the corporate community's desire to
reach an agreement on the USMCA, are there any benefits to American
workers by rushing this agreement through Congress?
Answer. Significant work is still needed to ensure that the USMCA
text advances, rather than undermines, production and employment in the
U.S. While workers are anxious to update and reform the existing failed
NAFTA, we must not rush through an agreement without modifying the text
of the USMCA and including significant implementation, monitoring and
enforcement provisions in the implementing bill. U.S. workers, along
with their counterparts in Mexico and Canada, cannot afford to have a
new flawed agreement put in place.
______
Questions Submitted by Hon. Catherine Cortez Masto
Question. Under USMCA, Mexico needs to pass and implement labor
laws before a new agreement can be enacted.
Has Mexico shown a serious and immediate commitment to providing
the resources and implementing the new law?
Answer. Mexico has been slow to develop a comprehensive
implementing, monitoring, and enforcement regime for its new labor
laws. Work has already been delayed from the initial passage of
Constitutional commitments to expand workers' rights in Mexico. While
the legislation to implement those commitments has finally passed,
roughly 400 legal challenges have been initiated and no budget has been
adopted or funds appropriated to ensure that the new regime will
advance workers' interests. Much work remains.
Congress should not vote on a revised USMCA until it has confidence
that Mexico has put in place a comprehensive plan to address these
issues. And, the entry into force of the agreement should be
conditioned on a clear implementation path, with resources,
infrastructure, personnel and initial actions.
Question. Do you think that this administration and Congress have a
clear understanding of how much there is to do in Mexico, particularly
with a decades-long denial of basic workers' rights and correct that
track record?
Answer. Reversing a decades-long workers' rights regime that has
adversely impacted workers in all three countries will take significant
resources and commitment. This is a massive task and there will be
substantial efforts by those who have profited from the status quo
approach to stifle any progress. We must be clear on the steps that
must be taken and reserve leverage to ensure that effective change is
implemented and irreversible.
Question. In your review, how can we strengthen the agreement to
make to ensure the new Mexican labor laws are implemented and enforced?
Answer. As I outlined in my testimony, there are a number of
changes that must be made to the text of the USMCA provisions that must
be included in our implementing legislation (and supporting actions),
and steps that Mexico must take.
The existing agreement does not include adequate enforcement
mechanisms. This problem must be addressed through timely, effective
and accessible enforcement provisions that include state-to-state
dispute resolution provisions that cannot be blocked as well as
provisions based on the framework outlined by Senators Brown and Wyden.
In addition, we must ensure that adequate steps to put Mexico on
the path to change are adopted prior to Congress's consideration of an
implementing bill, and entry into force must be delayed until there is
a certification that Mexico has taken the steps needed to ensure
effective change. There must be an independent evaluation of the
conditions relating to certification so that a President cannot
certify--as happened with the U.S.-Colombia action plan--compliance
where adequate steps have not taken place.
Question. Is USMCA sustainable policy that survives changes in
political landscapes?
Answer. It's clear that, as with NAFTA, China PNTR, and many other
trade agreements and initiatives, that Congress must engage in
aggressive oversight and compliance efforts. Too often, the success of
our trade policies have been measured by the number of agreements that
are signed, rather than the results they produce.
Our trade policies must be constantly evaluated and, where needed,
reformed, updated, or repealed, when they do not advance the core
objective of raising living standards for our people, promoting human
rights, ensuring a sustainable environment, and protecting the health
and welfare of our people and those in all signatory countries. USMCA
will continue to need updating and reforming as conditions change.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The Finance Committee meets this morning to discuss what needs to
happen for NAFTA 2.0 to deliver better results for American workers and
farmers and ranchers and their families.
I want to start my remarks by welcoming one of our witnesses--and
not only because she's an Oregonian. It's because her business is a
perfect example of why the original NAFTA needs an overhaul. Paula
Barnett is an artisan from Brownsville, OR in Linn County, population
1,800. She founded a jewelry business that produces in Oregon and sells
online, primarily on Etsy, to customers in the U.S. and around the
world. She also sources some of what goes into her jewelry from abroad.
Getting that kind of business off the ground would have been a lot
harder just a few short decades ago when NAFTA was created.
According to Etsy, the total economic output of its sellers based
in Oregon is more than $125 million, and that's just one of the many
online platforms that businesses use to grow. Oregon's many success
stories also includes Ruffwear, based in Bend, a producer of gear for
Very Good Dogs all over the United States and in other countries.
Updating NAFTA means addressing the challenges facing these
businesses that operate online. It also means confronting the other
areas where older trade agreements continually fall short: fighting to
protect labor rights and the interests of working families, preventing
a race to the bottom when it comes to the environment, and making sure
there is vigorous enforcement of our trade agreements, so that other
countries cannot treat those deals as empty documents that give them
time and opportunities to rip off American jobs.
The administration has released its NAFTA 2.0 agreement, and it is
consulting with the Congress on what comes next. There are a few points
I need to make on that process. As I've said in the past, there's work
left to be done on key issues. I have concerns about enforcement,
because the new NAFTA carries over the weak enforcement system of the
old NAFTA. It's too easy on trade cheats, and it's not good enough for
American workers--particularly on labor rights. Senator Brown and I
have proposed some additional tools to address specific challenges in
Mexico, and I'm hopeful there will be progress on that front.
Additionally, one of the bigger challenges that we confront is
identifying the hundreds of thousands of sham labor contracts in Mexico
that have exploited workers there and harmed workers here in the United
States. Mexico must remain on track to get those contracts renegotiated
on behalf of the workers' interests.
During this overhaul, the original NAFTA remains in place. Workers,
farmers, ranchers, and businesses should not have to fear that economic
uncertainty will cost them their livelihoods. It's a problem when the
President acts out and makes impulsive threats regarding our trade
relationships. American workers and farmers have already been hurt by
the President's impulses, and more will get hurt if Trump threats and
chaos cause the Congress to accept a bad deal on NAFTA.
Passing a trade deal that would allow this President to
unilaterally change trade rules and jerk around entire industries would
be a dangerous mistake that promotes uncertainty. That's not how you
get to trade done right. Based on that, I have some real concerns about
how the administration wants NAFTA 2.0 to be implemented.
I'm looking forward to discussing these issues and more today.
Thank you again to Ms. Barnett and all our witnesses for joining the
committee today.
______
Communications
----------
Center for Fiscal Equity
14448 Parkvale Road, Suite 6
Rockville, MD 20853
[email protected]
Statement of Michael G. Bindner
Chairman Grassley and the Ranking Member Wyden, thank you for the
opportunity to submit these comments for the record to the Committee on
Finance. They are an excerpt from our Trade Policy Agenda comments
submitted last two months and for NAFTA from July of 2017. We also
include comments from the Ways and Means Subcommittee on Trade from
June regarding Mexican labor reform. We have the same reservations and
tax policy solutions.
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.
Labor reform will take the pressure off of migration, although that is
now the case already. Mexican workers who can join a Union in Mexico
and not in so called right-to-work states will face an easier choice to
stay home. We hope that this will lead manufacturers in such states to
rethink their positions on organized labor and American labor unions to
seek expansion into these states and to link with Mexican unions in
solidarity. This may increase prices for some goods, particularly food,
but it will increase wages even more, particularly among lower wage
workers. We have suffered under a two-tier economy for too long, with
undocumented workers suffering the most of all. As a more union-based
economy progresses on both sides of the border, the desire for more
workplace democracy through employee ownership. Tax reform can
certainly facilitate expanding ownership when actual worker control,
rather than simply a change in management at the top, evolves.
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
potion 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 weak 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.
Over time, ownership will change the economies of the nations' we trade
with, as working in employee-owned companies will become the market
preference and force other firms to adopt similar policies (in much the
same way that, even without a tax benefit for purchasing stock,
employee-owned companies that become more democratic or even more
socialistic, will force all other employers to adopt similar measures
to compete for the best workers and professionals).
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.
______
Electronic Transactions Association
1620 L Street, NW, Suite 1020
Washington, DC 20036
202-828-2635
https://www.electran.org/
July 30, 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 the Committee holds its July 30th hearing on the USMCA trade
agreement, we urge Committee members 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. Similarly, 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
______
Florida Department of Agriculture and Consumer Services
https://www.fdacs.gov/
Statement of Hon. Nicole ``Nikki'' Fried,
Florida Commissioner of Agriculture
Chairman Grassley, Ranking Member Wyden, and members of the Committee,
thank you for the opportunity to address concerns regarding the lack of
remedies in the United States-Mexico Canada Agreement (USMCA) for U.S.
seasonal produce growers.
As Florida's second largest industry, agriculture has a $132 billion
economic impact in our state. Our 47,000 farms support 2 million
workers, and good jobs that help Floridians provide for their families.
Our farmers export $4 billion in commodities to 164 nations, feeding
our neighbors, our communities, and the world.
For 25 years, the North American Free Trade Agreement (NAFTA) has
created a multitude of challenges for farmers in Florida and the
southeast. Trade disadvantages have allowed our markets to be flooded
with cheap produce, while no meaningful protections have been offered.
Like NAFTA, the proposed USMCA trade agreement will do nothing to
address unfair trade practices and the lack of protections for
Florida's seasonal and perishable crop growers.
Florida's growing season runs parallel to Mexico's, and with the
Mexican government's agricultural subsidies and lower labor costs and
safety standards, Mexican producers dump artificially low-priced
products in the U.S. market. In just the past 8 years, imports of
strawberries, blueberries, bell peppers, and tomatoes have increased by
33 percent, which comes directly at the expense of southeastern farming
families.
Without enforceable remedies in place, these unfair practices will
continue, further threatening our farmers, our agriculture industry,
and our entire state economy.
Should the USMCA take effect as currently written, without action from
the Administration or Congress to protect America's seasonal produce
industry, the results would be devastating for southeastern farmers. In
Florida alone, nearly 8,000 farm jobs could be lost; our state may
suffer up to $389 million in farm losses, $271 million in lost labor
income, and $70 million in lost federal, state and local tax revenue.
These troubling findings were published in a June 4, 2019 study by the
University of Florida's Institute of Food and Agricultural Sciences,
``Potential Economic Impacts in Florida of increased Imports of Mexican
Fruits and Vegetables'' (Hodges, Court et al.), which I implore all
members to review as these important discussions continue.
Fruit and vegetable farming supports 90,000 jobs and adds over $6
billion to Florida's economy, with thousands more jobs in Georgia and
other southeastern states. The USMCA was a bad deal when introduced;
without provisions to protect these jobs, it remains a bad deal now.
The produce trade war should serve as a reminder to our citizens: the
food we enjoy is grown by real people, and comes at a real cost with
real jobs at stake. Our fresh produce comes from the farms of
hardworking family businesses with generations of history behind them.
As you and your colleagues consider ratification of the USMCA, I
encourage you to put American farmers first, and insist the agreement
contain provisions that put an end to the unfair trade practices of
which Mexico for years has taken advantage.
I also strongly urge this Congress to support the Domestic Produce
Protection Act (S. 16/H.R. 101) sponsored by Senator Rubio and
Representatives Buchanan and Lawson. This legislation has the
bipartisan support of Florida's entire congressional delegation, the
remedies in which will provide assurances to U.S. seasonal growers that
they will not, once again, be left behind.
This is a time in which our agricultural producers face extraordinary
challenges from foreign competition, natural disasters, pests and
diseases, climate change, and an evolving economy. Agriculture is a way
of life, central to our identity as a nation.
I ask this Committee and members of the Senate to take appropriate
steps to protect American farmers from devastating trade practices that
continue to undermine our proud agriculture industry.
Thank you.
______
National Association of State Departments of Agriculture
The National Association of State Departments of Agriculture
(NASDA) commends the Senate Finance Committee for holding a hearing on
the U.S.-Mexico-
Canada Agreement (USMCA). USMCA is a vital trade agreement for the U.S.
food and agriculture industry. Swift ratification of the USMCA will
allow farmers, ranchers, foresters, and agribusinesses across the
country to fully realize the benefits of open markets and science-based
trade in North America. Given the importance of the agreement, NASDA
urges Congress and the administration to work together on successful
ratification and implementation of the USMCA.
I. About NASDA
NASDA represents the Commissioners, Secretaries, and Directors of
the state departments of agriculture in all 50 states and 4 U.S.
territories. State departments of agriculture are responsible for a
wide range of programs including food safety, combating the spread of
disease, and fostering the economic vitality of our rural communities.
NASDA members are also responsible for promoting their states' products
in international markets, as well as managing regulatory and
certification programs that facilitate agriculture and food exports.
Given the important role exports play in ensuring a prosperous
agriculture sector, promoting exports and increasing international
trade is a top priority for NASDA. The USMCA will help NASDA and our
members achieve this goal by increasing market access for U.S. products
and modernizing trade standards. Agricultural producers and
agribusinesses in every state stand to gain from these improvements.\1\
Once implemented, the USMCA will enhance the efficient North American
supply chains that have allowed U.S. agriculture to flourish.
---------------------------------------------------------------------------
\1\ For a state-by-state overview of USMCA impacts, please visit:
https://www.nasda.org/policy/issues/marketing-trade/international-
trade-and-promotion/u-s-mexico-canada-trade-agreement/usmca-state-fact-
sheets.
---------------------------------------------------------------------------
II. USMCA Benefits the U.S. Food and Agriculture Industry
For over 25 years, agricultural producers have enjoyed open markets
and science-based trade in North America. Both Canada and Mexico are
critical trading partners for U.S. producers, consistently ranking as
two of the top three export markets for food and agricultural products.
Last year, food and agriculture exports to Canada and Mexico were
valued at close to $45 billion \2\--a four-fold increase since the
North American Free Trade Agreement (NAFTA) was implemented in 1993.\3\
---------------------------------------------------------------------------
\2\ U.S. Department of Agriculture. (2019). Global Agricultural
Trade System. Available from https://apps.fas.usda.gov/gats/.
\3\ Ibid.
The USMCA builds on U.S. agriculture's 25-year success story,
bringing our trading relationships with Canada and Mexico into the 21st
century. USMCA includes important modernizing provisions and increased
market access for agricultural goods. The International Trade
Commission estimates that these improvements will increase exports of
food and agriculture exports by over $2 billion.\4\ For the nation as a
whole, the USMCA is expected to raise overall GDP by over $68
billion.\5\
---------------------------------------------------------------------------
\4\ U.S. International Trade Commission. (2019). United States-
Mexico-Canada Agreement: Likely Impact on the U.S. Economy and Specific
Industry Sectors.
\5\ Ibid.
U.S. farmers, ranchers, and agribusinesses are facing uncertainty
in the global marketplace and a weak farm economy. Congress can provide
a much-needed boost to agricultural producers and rural communities by
bringing the USMCA into force as quickly as possible. The benefits of
such a move will also be felt across many sectors of the economy. When
industries such as transportation are considered, U.S. agriculture
exports support more than one million American jobs.\6\
---------------------------------------------------------------------------
\6\ Persaud S. (2019). U.S. Agricultural Exports Supported 1.2
Million Full-Time Jobs in 2017. Available from https://
www.ers.usda.gov/data-products/agricultural-trade-multipliers/.
---------------------------------------------------------------------------
III. Certainty at Home Will Lead to More Opportunities Abroad
In addition to the immediate economic benefits, ratifying the USMCA
will enable Congress and the administration to devote additional
resources to other critical international trade initiatives. Resolving
the ongoing trade dispute with China and expanding market access around
the world are top priorities for NASDA and U.S. agriculture.
China's unjustified retaliatory tariffs have hit U.S. agricultural
producers particularly hard in the last year. Nonetheless, China
continues to hold enormous market potential. NASDA remains hopeful that
the U.S. and China can agree to a deal that restores market access for
U.S. agricultural commodities and addresses the unscientific, non-
tariff barriers imposed on U.S. producers.
At the same time, NASDA supports efforts to strike new bilateral
trade agreements that open opportunities for U.S. agriculture. Japan is
a particularly important market, given that many of our leading
competitors have already secured preferential market access through
agreements like the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) and the European Union-Japan Economic
Partnership Agreement (EPA). For U.S. agriculture to remain competitive
over the long-term, the U.S. needs a comparable agreement that will
level the playing field. Ideally a U.S.-Japan deal would eliminate and/
or phase out all existing tariffs and tariff-rate quotas, but at a
minimum market access provisions should match or improve on the
provisions found in CPTPP and EU-Japan EPA.
Other important trade agreements for U.S. agriculture include the
European Union and, post-Brexit, the United Kingdom. It is critical to
include agriculture as part of these agreements and work with our
partners to ensure the implementation of science-based trade standards.
Trade agreements with both established and emerging partners must
respect the international trade principles enshrined in institutions
like the Codex Alimentarius.
IV. Conclusion
The USMCA builds on 25 years of successful food and agriculture
trade with Canada and Mexico, our closest neighbors and trading
partners. Increased market access, streamlined customs procedures, and
enhanced standards for biotechnology are just a few of the improvements
included in this 21st-century agreement. NASDA urges Congress and the
administration to bring the USMCA into force as quickly as possible.
With ratification of the USMCA in the rearview mirror, the full force
of the federal government can focus on tearing down trade barriers for
U.S. agriculture around the world.
Barbara P. Glenn, Ph.D.
Chief Executive Officer
______
Trade Works for America
1747 Pennsylvania Avenue, NW, Suite 450
Washington, DC 20006
Trade Works for America is a nonpartisan, 501(c)(4) coalition
advocating for passage of the United States-Mexico-Canada Agreement
(USMCA). The coalition is led by former Senator Heidi Heitkamp (D-ND)
and former Republican Governors Association Executive Director Phil
Cox.
As you are aware, the USMCA is a trilateral free trade agreement meant
to replace the North American Free Trade Agreement (NAFTA) negotiated
by the United States, Mexico, and Canada in 1994. The USMCA is a
modernized, updated agreement that addresses a number of the issues we
have seen with NAFTA over the past 25 years, including issues regarding
the outsourcing of jobs and enforcement. The USMCA will benefit many
sectors of the United States economy, including American innovators and
technology companies, autoworkers, farmers and ranchers, energy
workers, manufacturers, and small businesses.
Passage of the USMCA will not only maintain the 14 million jobs \1\
supported by trade with our closest neighbors, but according to a
report by the International Trade Commission (ITC), the agreement will
add an estimated 176,000 new American jobs, as well as contribute $68.2
billion to the U.S. economy.\2\
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\1\ U.S. Chamber of Commerce.
\2\ United States International Trade Commission.
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American Innovators Win
High-tech industries are essential to the American economy. They
provide high-skilled, high wage jobs for America's workers.
Technological superiority is also vital to our national security. It is
imperative that America remains the world leader in the technology
industry. NAFTA was approved in 1994 when technology was vastly
different than today. USMCA recognizes those changes and modernizes the
agreement to support 21st century jobs and protect our national
interests.
The USMCA includes ways to protect Intellectual Property (IP), which
will protect U.S. technology firms and start-ups, and by extension,
protect U.S. technology jobs. Additionally, the agreement includes
provisions to support the expansion of digital trade in a fair and
balanced way, prohibiting customs duties on products that are traded
electronically. The USMCA will also help to limit forced technology
transfer, preventing Mexico and Canada from undercutting American
businesses and jobs through the theft of source code and algorithms.
American Autoworkers Win
The USMCA will support growth in the auto industry while ensuring that
a level playing field protects American jobs and businesses. The
agreement requires Mexico to pass certain labor reforms, including
giving workers the right to collective bargaining if they so choose.
Mexico has already passed these labor reforms in compliance with the
agreement.
The USMCA also includes new labor protections to protect workers in all
three countries. Specifically, the USMCA will prevent Mexico from
undercutting American autoworkers and underpaying their own workers by
requiring that 40 to 45 percent of auto content be made by workers
earning at least $16.00 per hour. The USMCA's Labor Value Content (LVC)
formula is a completely new formula not used in any previous U.S. trade
agreements, and it specifically limits the amount of research and
development costs as well as technology costs that can be used in the
calculation of the LVC to ensure that the calculation emphasizes high-
wage manufacturing costs.\3\ This reform will help prevent outsourcing
of American auto jobs.
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\3\ Ibid.
Mexico has already made several concrete steps towards meeting its
obligations under the USMCA, particularly as it relates to labor
enforcement. Earlier this year, Mexico enacted landmark labor reforms
to fulfill its obligations under the agreement. Mexico was also the
first of the three nations to ratify the agreement and recently hosted
a congressional delegation to provide additional insight into the steps
Mexico has taken to comply with the USMCA.
American Farmers and Ranchers Win
The USMCA is supported by the American Farm Bureau, farmers, and
ranchers across the country. That's because this modem trade agreement
will provide new access to American agricultural products while
protecting farmers and ranchers from unfair labor and environmental
practices in other countries.
The USMCA will open up Canadian markets to American dairy products
after years of unfair practices. Under current law, many U.S. products
are subject to tariffs from Canada that are as high as 313.5
percent.\4\ Under the USMCA, the number of dairy, poultry, and egg
products that can be exported from the U.S. to Canada without being
subject to tariffs will greatly increase. In fact, under the USMCA, the
amount of tariff-free egg products sold to Canada will increase by 600
percent (1.67 million to 10 million dozen eggs).\5\ The deal will
continue to allow U.S. farmers to access $39 billion \6\ in exports and
support the 325,000 U.S. jobs that are supported by agricultural
exports.\7\
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\4\ Congressional Research Service.
\5\ Office of the United States Trade Representative.
\6\ American Farm Bureau.
\7\ Office of the United States Trade Representative.
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American Energy Wins
The energy sector continues to play a central role in North American
trade, representing tens of billions in imports and exports as well as
millions of American jobs. The USMCA is a modernized trade agreement
that renews commitments to market-opening practices and secures
American energy security and independence.
The agreement will ensure the free flow of energy within North America
by maintaining the zero-tariff policy on energy products traded between
the three countries. This will ensure energy costs remain affordable
for American consumers, while also strengthening North American energy
security and independence. The USMCA will also safeguard U.S. investors
and provide needed confidence and certainty, from the practice of
``direct expropriation,'' whereby the Mexican government takes private
American investments to use for its own purposes.
American Manufacturing Wins
American manufacturing jobs rely on certainty in the North American
market, the biggest U.S. export market in the world. Manufacturers
support the USMCA because it gives them needed certainty while
protecting the 2 million jobs that are dependent on exports to our
North American trading partners. The National Association of
Manufacturers (NAM), the largest manufacturing association in the
nation, supports the quick consideration and implementation of the
USMCA.
The same LVC calculation that will protect American autoworkers and
prevent outsourcing will also protect American manufacturing jobs and
keep manufacturing jobs in the United States. Additionally, the
agreement will modernize NAFTA and open up additional access for
manufactured goods. Overall, the agreement will support the more than 2
million manufacturing jobs that rely on trade with Mexico and
Canada.\8\ Not only will the agreement support U.S. manufacturers, it
will also support small businesses; many of the U.S. manufacturers that
export to Canada and Mexico are small or medium-sized enterprises.
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\8\ National Association of Manufacturers.
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American Small Businesses Win
Many Americans believe that free trade agreements only help larger
corporations and big companies. The fact is that small businesses
account for 98 percent of the United States' exporters,\9\ and tariff
and non-tariff barriers can disproportionately affect these businesses
that do not have the resources to comply. This modern trade agreement
will provide new access to Mexican and Canadian markets while
protecting business owners' intellectual property and limiting the
regulatory burdens of exporting to other countries.
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\9\ U.S. Small Business Administration.
The USMCA contains a number of first-of-its-kind small business
provisions, including the establishment of a standing, trilateral
committee to collaborate on and expand opportunities for small and
medium-sized businesses. The agreement also helps lower barriers to e-
commerce, raising the minimum cost of exports shipments that are
subject to taxes in Mexico and Canada. It also encourages the
involvement of diverse and under-represented small businesses with the
creation of a framework for engagement with these partners. Finally,
the agreement makes it easier for small businesses, including smaller
sellers that operate exclusively online, to participate in the 21st
century economy, prohibiting duties on products like e-books, software
and games.
Bipartisan Support for the USMCA
The USMCA has received support from experts and elected officials
across the political spectrum. This strong bipartisan support
demonstrates that the agreement is an effective compromise and a
balanced trade deal for all parties.
Recently, the Progressive Policy Institute (PPI) released a report
stressing the importance of ``getting to yes'' on the USMCA and
detailing the many benefits of the agreement. The report stresses the
importance of the North American economic relationship and the 12
million American jobs this partnership supports. According to PPI,
Canada is the number one goods export market for over 30 states, and
Mexico is the top market for an additional seven states. Specifically,
the report highlights how America's small and medium-sized businesses
rely heavily on exports to Canada and Mexico.
In this report, PPI provides an analysis on how the USMCA modernizes
and improves the North American Free Trade Agreement (NAFTA) to ensure
it is a better deal for the United States.
According to the report, the USMCA will:
Establish strong and enforceable labor and environmental rules,
which were not included in the text of NAFTA;
Establish the most comprehensive set of rules on digital
commerce in any international trade agreement;
Cut red tape for U.S. small businesses with the first chapter on
small and medium-sized businesses in a U.S. trade agreement;
Provide greater access to Canada's once-restrictive dairy
market;
Enhance protections and enforcement for copyrights, patents,
trademarks, and trade secrets; and
Update provisions on cross-border data transfers, to allow more
financial services trade among the three nations.
Furthermore, PPI's analysis shows that boosting the ability of small
businesses to trade and export with our neighbors will ``democratize''
trade by allowing more diverse businesses to thrive.
PPI goes on to explain that trade with Mexico and Canada has been
hugely beneficial to local American communities:
The San Diego region's economy is now larger than Vietnam's;
Texas border cities have been transformed by cross-border trade,
creating thousands of small businesses and cutting unemployment; and
Kansas City, although located nowhere near either border, sends
over half of their exports to Canada and Mexico, providing significant
support to the local economy.\10\
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\10\ Progressive Policy Institute.
Additionally, Republican governors unanimously called for passage of
the USMCA in a letter released on June 20, 2019. The letter to
Congressional leadership urged ratification of the agreement to ensure
continued economic growth. In part, the letter stated, ``[c]ompletion
of the trade agreement is critical to our states as we seek to boost
economic development and encourage new investment that leads to job
creation.''\11\
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\11\ Republican Governors Association.
Former Iowa Governor, and former Agriculture Secretary under former
President Barack Obama, Tom Vilsack, has also been a strong supporter
of the agreement, urging ratification of the USMCA as quickly as
possible.\12\
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\12\ Sioux City Journal.
A group of 14 House Democrats recently urged Speaker Pelosi to bring
the USMCA to the House floor before the end of the year. These 14
members represent a variety of regions and districts across the
country, demonstrating how the USMCA will benefit every state and every
industry spanning the nation. The letter urges negotiations to continue
over August recess and notes that Canada and Mexico are the United
States' most important trading partners.\13\
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\13\ Axios.
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Conclusion
We believe the USMCA represents a fair, balanced, and rules-based
approach to free trade with our closest neighbors, updating and
modernizing our past agreements to reflect our modem economy and
implementing important enforcement mechanisms that fell short under
NAFTA.
This is an agreement that will benefit American workers and small
businesses. The USMCA requires commitments from our trading partners in
Mexico and Canada to ensure the United States is operating on a level
playing field and trading with countries that uphold high-quality labor
and environmental standards.
Notably, the USMCA also includes a safeguard to address concerns and
issues going forward. The agreement can be reviewed and reopened every
6 years, so the U.S. will never again be trapped under an outdated
agreement like NAFTA, ensuring the USMCA continues to support the best
interests of the American economy and American worker.
Trade Works for America believes the USMCA is the best path forward for
modernizing our important trade relationship with Mexico and Canada,
and we encourage Congress to move forward with consideration of the
agreement.