[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

                              ----------                              

                           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

                              ----------                              


                         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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
                 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.

        [GRAPHIC] [TIFF OMITTED] T3019.001
        

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        [GRAPHIC] [TIFF OMITTED] T3019.003
        

        [GRAPHIC] [TIFF OMITTED] T3019.004
        

                                 ______
                                 
          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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
                            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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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, 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.

---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \1\ U.S. Chamber of Commerce.
    \2\ United States International Trade Commission.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \4\ Congressional Research Service.
    \5\ Office of the United States Trade Representative.
    \6\ American Farm Bureau.
    \7\ Office of the United States Trade Representative.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------
    \8\ National Association of Manufacturers.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \13\ Axios.
---------------------------------------------------------------------------

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.

                                   