[Senate Hearing 117-]
[From the U.S. Government Publishing Office]
COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2023
----------
WEDNESDAY, JUNE 22, 2022
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:34 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Jeanne Shaheen (Chair) presiding.
Present: Senators Shaheen, Feinstein, Reed, Coons, Manchin,
Van Hollen, Moran, Murkowski, Collins, Hagerty, and Braun.
OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
opening statement of hon. jeanne shaheen
Senator Shaheen. Good morning. Welcome to today's Commerce,
Justice, Science, and Related Agencies Subcommittee Hearing, to
review the activities in fiscal year 2023 funding request of
the Office of the U.S. Trade Representative.
We will recognize members in order of appearance, and there
will be 5 minutes for questions.
Our witness today is Ambassador Katherine Tai, the United
States Trade Representative. Welcome, Ambassador Tai. We are
glad you are here, and it is nice to see you again.
As this committee knows, the Office of the U.S. Trade
Representative is responsible for developing and coordinating
U.S. international trade, commodity, and direct investment
policy, and overseeing negotiations with other countries. As
the U.S. Trade Representative, Ambassador Tai, is the
administration's principal trade advisor, negotiator, and
spokesperson on U.S. trade policy.
In order for USTR to succeed this subcommittee must ensure
it has sufficient resources to carry out its important mission.
To that end, the fiscal year 2022 Omnibus Spending Bill
included $71 million for the Office of the United States Trade
Representative, for fiscal year 2023 the administration
requests $76.54 million for USTR.
So we look forward to hearing how you plan to use that
money and what your priorities are, Ambassador.
While we consider these priorities it is important to also
consider the most pressing trade issues confronting our
country. One of those issues is Russia, following Vladimir
Putin's illegal invasion of Ukraine, the United States led a
broad coalition of allies to swiftly punish Putin and his
cronies with crippling sanctions. During today's hearing I
would be interested in learning more about your efforts to
counter Russia's aggression, especially in light of the
recently signed law revoking Russia's permanent normal trade
relations status.
Another issue is our trade relationship with China. As you
know, China has failed to fulfill obligations outlined in the
Phase One Agreement, particularly its purchase commitments
under that deal. China also, serially, violates human rights
and workers rights despite its assertions to the contrary.
I am interested to hear about the administration's efforts
to ensure China lives up to its end of the deal, and your view
of the future of the U.S.-China trade relationship. I would
also like to learn more about how the administration's recent
launch of the Indo-Pacific Economic Framework for Prosperity
fits into that relationship.
Another related issue is the tariffs imposed on goods from
China under Section 301 of the Trade Act. In fiscal year 2022
Omnibus Spending Bill passed in March, Congress directed USTR
to establish and administer an exclusion process for these
tariffs.
Now, I can speak to many New Hampshire businesses that
can't source goods from outside of China, who are
understandably seeking some real relief from tariffs. We look
forward to hearing how USTR is working to comply with this
congressional directive.
And I just want to close by commending you on your
achievements in your first year as U.S. Trade Representative,
through your work the United States ended a decades-long civil
aircraft trade dispute resulting in lifted tariffs on billions
of dollars worth of U.S. exports, ranging from products like
cheese to distilled spirits. We also reached deals with the
United Kingdom, the European Union, and Japan to remove
existing tariffs on steel and aluminum.
And moreover, under the U.S.-Mexico-Canada Agreement,
USMCA, USTR has employed the Rapid Response Mechanism to defend
workers' rights. I think that is proved that when done right,
trade agreements can really foster positive movement on labor
and environmental rights, rather than negative ones.
Ambassador Tai, we have a lot to discuss. I thank you for
appearing before us today.
And with that, our Ranking Member is just right on cue, for
his remarks. But while he is getting ready let me just say I
have a statement that I will submit for the record, and that
includes some additional comments that I left out; so I will do
that, without objection.
Senator Shaheen. And if the Ranking Member is ready, I will
call on him.
opening statement of senator jerry moran
Senator Moran. Chair Shaheen, thank you very much. And
please know that my tardiness was not related to the moment in
which you concluded your opening remarks.
Senator Shaheen. And that is okay. I told everybody where
you were. So they knew you weren't just playing hooky.
Senator Moran. Thank you very much. Thanks for covering for
me. I appreciate you convening this hearing, and I appreciate
you accepting, honoring my request that we have a hearing
focused on trade, and have the Trade Ambassador before us. And
so, thank you very much.
And Ambassador Tai, welcome. I appreciate you coming to
testify before our subcommittee.
At last year's hearing I stated that you were stepping into
your role at USTR at a time in which trade policy and trade
enforcement has arguably never been more important. I believe
that statement is even more true today, when you consider
record-high inflation impacting Americans at the pump, the
grocery store, and the pharmacy; supply chain disruptions that
continue to ripple through the economy; and China's continued
effort to steal American intellectual property, and always be
our adversary.
Ambassador, due to inflation the American people are
struggling to meet. You have a critical role in helping lead us
out of this economic environment, and helping Americans get
back on their feet. I am very interested in the enforcement of
USMCA, and the Phase One China Trade Deal, as both have
significant impacts on my Home State of Kansas.
Kansans benefit from exporting goods and services in a fair
trade environment. Given that Mexico, China, and Canada are
consistently the top markets for Kansas exports, we must ensure
that these trading partners live up to their commitments in
USMCA, and in the Phase One Agreement.
I am eager to receive an update from you about the current
compliance with these agreements, I support efforts to crack
down on unfair trade practices.
I also want to further understand how you are managing a
full slate of Section 301 investigations. Congress has directed
USTR to ``Immediately establish and administer an exclusion
process for U.S. businesses'', and the inaction of the
administration is putting extra burdens on American businesses,
and upon their workers.
I look forward to hearing from you how USTR plans to
execute an exclusion process, and how you are reviewing expired
exclusions to make certain that businesses have the opportunity
to petition their government for relief.
As we consider USTR's funding needs for fiscal year 2023, I
am looking forward to learning more about President Biden's
trade strategy, and priorities, and also better understanding
what level of resources USTR requires to perform these growing
responsibilities.
I believe the administration's policies have been unclear
thus far, and I hope today that you will provide some clarity
on trade strategies you are pursuing to benefit Kansas, and all
the people of America.
Finally, I am concerned about this administration's failure
to pursue and secure new trade agreements. Other countries are
securing market opening trade agreements and our absence from
large, bilateral, multilateral trade agreements is putting the
U.S. at a disadvantage. This includes seeing little or no
progress on an agreement with the United Kingdom, and continued
unwillingness to join an agreement with our Indo-Pacific
partners, such as the Comprehensive and Progressive Trans-
Pacific Partnership.
My view is we can't afford to remain on the sidelines as
other countries enhance their market access and set rules that
may disadvantage U.S. companies and our workers.
Ambassador, thank you. Again, I recognize the challenging
circumstances you find yourself in. And I look forward to
hearing your testimony today, and hope that we can work
productively together to promote free and fair global trade
policies that benefit America, its economy, our workers, and
our families. Thank you, Ma'am.
Senator Shaheen. Thank you, Senator Moran.
Ambassador Tai, the floor is yours.
STATEMENT OF KATHERINE TAI, AMBASSADOR, U.S. TRADE
REPRESENTATIVE
Ambassador Tai. Well, thank you so much Chair Shaheen, and
Ranking Member Moran. It is an honor to be here with you, and
the Members of the Subcommittee today.
Thank you for inviting me to discuss President Biden's
fiscal year 2023 budget request for the Office of The United
States Trade Representative.
Today, I would like to highlight our progress in
implementing a worker-centered trade policy that increases
American competitiveness abroad, advances the rights of
workers, and establishes the United States as a leader in
shaping a more resilient form of globalization.
Before I begin, I want to be clear that Congress is our
constitutional partner on trade and close collaboration is
critical to developing successful American trade policy.
The President's budget request for fiscal year 2023
provides $76.54 million for USTR. This includes $61.54 million
available directly to USTR, and $15 million allocated through
the Trade Enforcement Trust Fund.
This request will help the agency enforce our existing
trade agreements, strengthen ties with allies, and advance a
trade agenda that supports the middle class, improves labor and
environmental standards, and creates an inclusive prosperity.
Enforcement is a critical component of our administration's
trade agenda. Manufacturers, farmers, and ranchers do not
always get the full benefits of our trade agreements. Workers
and communities suffer due to unfairly traded imports. This
creates a trust gap with the public, which is why enforcement
is needed as part of our worker-centric trade policy.
For example, using the Rapid Response Mechanism in the
U.S.-Mexico-Canada Agreement, we asked the Government of Mexico
to review whether workers at four facilities in Mexico were
denied the rights of free association and collective
bargaining. Thanks to the operation of this mechanism, workers
at the General Motors facility in Silao, Mexico, voted for a
new union that negotiated a better contract, which will provide
higher wages, and that is good for American workers.
Our enforcement efforts also helped to protect the
environment. We initiated consultations with Mexico to prevent
illegal, unreported, and unregulated fishing. We also reached
an agreement with Vietnam to keep, illegally harvested or
traded timber out of the global supply chain.
Finally, we are pressing Canada to fulfill its commitment
to U.S. dairy farmers and producers, and recently initiated a
second set of dispute settlement consultations over Canada's
tariff-rate quota restrictions. Canada's actions continue to
prevent U.S. dairy producers from receiving the benefits
promised in the USMCA. We will not give up until our farmers
see those promises delivered.
The next major component of our trade agenda is the
realignment of the U.S.-its commitments under the Phase One
Agreement. Several rounds of difficult discussions made clear
the limits of the PRC's interest in delivering on those
obligations.
And that is why it is time for us to turn the page on the
old playbook. The PRC's non-market industrial policies unfairly
target U.S. workers, businesses, and key sectors. We have to
use all available tools, and develop new tools, to defend our
economic interests and values.
President Biden recognizes market economies must act in
concert to confront policies that are fundamentally at odds
with the modern trading system. And that is why we have also
brought a renewed focus to engagement with our partners and
allies, who also are negatively impacted by the PRC's unfair
trade and economic practices.
Beyond this cooperation, we are deepening our engagement
with key trading partners through new and existing bilateral
and multilateral agreements and arrangements.
Last month, I joined President Biden to launch the Indo-
Pacific Economic Framework for Prosperity. We are developing
high-standard commitments for the digital economy, labor,
environment, agriculture, and trade facilitation that promotes
resilience and facilitates sustainable economic growth for our
workers and for our planet.
We also announced the U.S.-Taiwan Initiative on 21st-
Century Trade in June. Under the auspices of the American
Institute in Taiwan, and the Taipei Economic and Cultural
Representative Office, we are developing concrete ways to
strengthen this bilateral trade and investment relationship.
And beyond the Indo-Pacific region, we have stepped up our
trade engagement in many other areas, most recently, at the
World Trade Organization. During the WTO's 12th Ministerial
Conference last week, the United States helped produce
breakthroughs on key issues, including: A multilateral
agreement to prohibit subsidies for those engaged in illegal,
unreported and unregulated fishing; an extension of a
moratorium on customs duties, on electronic transmissions, a
modification of intellectual property protections for COVID
vaccines, for the COVID pandemic, and a ministerial declaration
on food insecurity, and a commitment to examine how we can,
together, facilitate safe agricultural trade to feed a growing
global population.
We are also building on our bilateral engagement with our
transatlantic partners. Last year we reached an understanding
in the Boeing-Airbus dispute and adopted a framework to resolve
the Section 232 steel and aluminum trade disputes that removed
or avoided more than $20 billion in tariffs, all without
surrendering our principles and our interests.
Lowering those tensions helped us begin negotiations on a
global arrangement with the European Union. This will be the
world's first sectoral arrangement on steel and aluminum trade
to tackle emissions and non-market excess capacity. We also
regained access to the EU market for American shellfish for the
first time in a decade, and recently concluded the Second
Ministerial Meeting of the U.S.-EU Trade and Technology
Council.
Our work to use trade as a collective policy tool to raise
standards in the world economy extends to our efforts directed
at eliminating the use of forced labor in global supply chains.
On June 21, which was yesterday, the Forced Labor
Enforcement Task Force launched its enforcement strategy of the
Uyghurs Forced Labor Prevention Act to prohibit the importation
of goods produced entirely, or partially, in the Xinxiang
Autonomous Region of the PRC, or produced by certain entities.
As you can see, we have an ambitious and important agenda.
I look forward to working with the subcommittee to enact our
fiscal year 2023 budget request, so that USTR can fulfill this
agenda on behalf of the American people. Thank you.
[The statement follows:]
Prepared Statement of Ambassador Katherine Tai, the United States Trade
Representative
Good morning, Chair Shaheen, Ranking Member Moran, and Members of
the Subcommittee. Thank you for inviting me to discuss President
Biden's fiscal year 2023 budget request to support the Office of the
United States Trade Representative (USTR).
Before I begin, I want to be clear that Congress is our
constitutional partner on trade and close collaboration is critical to
developing successful trade policy.
The President's budget request for fiscal year 2023 features $76.54
million for USTR. This includes $61.54 million available directly to
USTR and $15 million allocated through the Trade Enforcement Fund.
This request will help the agency enforce our existing trade
agreements, strengthen ties with allies and partners, and advance
President Biden's new approach to trade policy that supports the middle
class, improves labor and environmental standards and creates inclusive
prosperity and new opportunities for our workers, farmers and
businesses.
Enforcement
Our Administration is committed to enforcement as a critical
component of our trade agenda. Manufacturers, farmers and ranchers do
not always get the full benefits of access to new markets and too many
workers and communities suffer due to unfairly traded imports. This has
created a trust gap with the public and is why enforcement is a key
component of our worker-centered trade policy.
For example, using the Rapid Response Mechanism in the United
States-Mexico-Canada Agreement, we asked the Government of Mexico to
review whether workers at four facilities in Mexico were denied the
rights of free association and collective bargaining. Thanks to the
operation of this mechanism, workers at the Silao GM facility voted for
a new union that negotiated a better contract, which will pay workers a
higher wage.
Our enforcement efforts have also helped protect the environment.
We initiated consultations with Mexico designed to prevent illegal,
unreported, and unregulated fishing. We also reached an agreement with
Vietnam to keep illegally harvested or traded timber out of the global
supply chain.
Finally, we continue to press Canada to fulfill its commitment to
U.S. dairy farmers and producers, and recently initiated a second set
of dispute settlement consultations over its tariff-rate quota
restrictions. Canada's actions are preventing U.S. dairy producers from
receiving the market access benefits promised in the USMCA and we will
not let up.
China
The next major component of our trade agenda is the realignment of
the U.S.-China trade relationship.
In October, I announced a new strategy to re-align our engagement
with the PRC, which would begin with direct discussions with its
leaders.
We pressed the PRC to live up to its commitments under the ``Phase
One Agreement.'' Several rounds of difficult discussions made clear the
limits of the PRC's interest in delivering fully on those obligations.
This has become part of a pattern. The United States has repeatedly
sought and obtained commitments from China, only to find that lasting
change remains elusive.
That is why we need to turn the page on the old playbook. The PRC's
non-market industrial policies unfairly target U.S. workers,
businesses, and key sectors. We have to use all available tools, and
develop new tools, to defend our economic interests and values.
President Biden also recognizes that our ability to defend against
unfair PRC economic practices requires that market economies act in
concert to confront policies and practices that are fundamentally at
odds with the modern global trading system. That is why we have also
brought a renewed focus to engagement with our partners and allies, who
also are negatively impacted by the PRC's unfair trade and economic
practices.
Strengthening and Deepening our Trade Relationships
Beyond this cooperation, we are deepening our engagement with key
trading partners through new and existing bilateral, plurilateral and
multilateral agreements and arrangements.
Look no further than our renewed engagement with the Indo-Pacific.
I was proud to join President Biden last month to launch the Indo-
Pacific Economic Framework (IPEF) for Prosperity. USTR is leading the
discussions on IPEF's trade pillar
I recently held a productive meeting with our 13 partners in Paris
to discuss our vision and priorities for this pillar. We are beginning
to develop high-standard commitments across several areas including the
digital economy, labor, environment, agriculture, and trade
facilitation that support our larger goals of promoting resilience and
facilitating sustainable and inclusive economic growth that benefits
our workers and our planet.
We also announced the U.S.-Taiwan Initiative on 21st-Century Trade
earlier this month, under the auspices of the American Institute in
Taiwan (AIT) and the Taipei Economic and Cultural Representative Office
(TECRO), to develop concrete ways to strengthen our trade and
investment relationship with Taiwan and advance our mutual economic
priorities.
Beyond the Indo-Pacific region, we have stepped up our bilateral
and multilateral engagement at the G7, G20, OECD, Summit of the
Americas, and, most recently, at the World Trade Organization.
We also continue to build on our bilateral engagement with our
Transatlantic partners. In the last year, we reached an understanding
in the Boeing-Airbus dispute and adopted a framework to resolve the
Section 232 steel and aluminum trade disputes that removed or avoided
more than $20 billion in tariffs--without surrendering our principles
and interests.
Lowering those tensions helped pave the way for us to begin
negotiations on a global arrangement with the EU. While our discussions
are still ongoing, this will be the world's first sectoral arrangement
on steel and aluminum trade to tackle both emissions and non-market
excess capacity. We also regained access to the EU market for American
shellfish for the first time in a decade, and just recently concluded
the second ministerial meeting of the US-EU Trade and Technology
Council.
Our work to use trade as a collective policy tool to raise
standards in the world economy extends to our efforts directed at
eliminating the use of forced labor in global supply chains. We are
doing our own part to set the pace of this important work. On June 21,
the Forced Labor Enforcement Task Force launched its enforcement
strategy of the Uyghur Forced Labor Prevention Act in order to prohibit
the importation of goods produced entirely or partially in the Xinjiang
Autonomous Region of the PRC or produced by certain entities.
The U.S. Customs and Border Protection, in coordination with USTR,
has issued withhold release orders in 35 instances over the years that
flag products coming from the PRC produced partially or entirely with
forced labor. This includes 11 active WROs on products from Xinjiang.
I look forward to working with this subcommittee to enact our
fiscal year 2023 budget request so that USTR can fulfill this agenda on
behalf of the American people.
Senator Shaheen. Thank you very much Ambassador Tai.
I would like to begin with the 301 Tariffs and the
exclusion process. I was pleased to have the chance to talk
with you a little bit about this on the phone this week, and I
think this hearing gives us an opportunity to explore what USTR
is thinking with respect to the exclusion process, and how this
process is going to move forward.
So, I want to--as I referenced in my opening statement, the
2022 Omnibus Appropriations Bill included a directive for USTR
to what I am quoting here, ``Immediately establish and
administer an exclusion process for U.S. businesses seeking
relief from section 301 Tariffs that are active as of the date
of enactment of this act.'' End quote.
So more than 3 months have passed, and it is not clear what
process has been established, and again, as we discussed this
is a process that is essential for many of our New Hampshire
businesses. I am sure everybody on this subcommittee has
examples in their own States of how businesses are affected.
So, can you update us on how USTR is planning to comply
with this congressional directive?
Ambassador Tai. Thank you for that question, Senator
Shaheen. I appreciate the attention that you and the
subcommittee have paid to the tariff exclusion process, and I
know the particular leadership that this subcommittee has
played in the history of the tariff exclusion process. The
purpose of the Section 301 investigation, and associated tariff
action is to address China's unfair trade practices.
The existing tariffs are there to address China's IP rights
abuses, and also forced tech transfer practices. At the same
time, we are committed to ensuring that the 301 tariffs support
the Biden-Harris administration's deliberative long-term vision
for realigning the U.S. China trade relationship with our
priorities.
So let me just say this, I think that you and, in general,
our Members of Congress have been extremely articulate and
effective in advocating for your constituents in terms of--as
Senator Moran mentioned--very challenging economic
circumstances that we have all found ourselves in over these
past several years.
What I would like to let you know, is that at my office,
USTR, we are taking into consideration in the design of the
tariff exclusion processes that we have implemented, and the
ones that we are looking to implement in the future, all the
feedback that we have gained from Congress and our stakeholders
including the results of a GAO Report addressing the past
administration of the 301 exclusion process.
So, what I would like to convey to you is that we, in the
Biden administration, are moving forward with respect to the
entire China trade relationship, including the tariffs and the
requests for an exclusion process, with a deliberativeness to
ensure that any exclusion processes that we implement, and have
implemented are fair, transparent, administrable, and give our
stakeholders the opportunity to make their case for relief at a
very challenging time in our economy, and the world economy.
Senator Shaheen. Well, thank you. I appreciate there are a
lot of considerations when it comes to tariffs, particularly
when we are looking at the actions of China. But you called
what Congress is asking ``a request'', it is not a request,
Ambassador Tai, it is a directive. And I wonder if you will
commit to us and the subcommittee that you are going to comply
with this directive, and give us some sort of a timeframe on
when you expect that to happen?
Ambassador Tai. Senator Shaheen, on this one I think I
would direct you to the President's comments over the weekend,
that with respect to China tariffs, and next steps on actions,
they are pending with him right now.
Senator Shaheen. So, are you suggesting that the
subcommittee needs to refer this issue to the President and ask
him when USTR is planning to comply?
Ambassador Tai. I think what I am saying to you, Chair
Shaheen, is that these issues are under consideration for a
decision as we speak right now.
Senator Shaheen. Thank you. Senator Moran.
Senator Moran. Senator Shaheen, thank you for your
highlighting the directive nature of what Congress has told the
USTR Ambassador to do. And while it may take a short amount of
time in order to accomplish that, we have seen no evidence that
the requirement, the directive is being followed.
Ambassador, the pinch of input costs is soaring and very
damaging to American agriculture producers. The invasion of
Ukraine has only heightened the demand for food production, but
tariffs on fertilizer represent an opportunity for you to
relieve some of the pressure on the agricultural community.
Many of these duties are put in place by the Department of
Commerce. Yet USTR can and should play a role, certainly in
expanding markets.
But what can you do? I am talking about phosphates from
Morocco. This administration placed countervailing duties on
fertilizer ingredients coming from Trinidad and Tobago. What
can you do to help lower the cost of imported fertilizer
components?
Ambassador Tai. Ranking Member Moran, I know how important
agricultural production is to the U.S. economy, but also how
important our agricultural production is to the world economy,
and to food security, frankly. And I am also keenly aware of
the exacerbations on global trade and supply that Russia's
decision to invade Ukraine has inflicted on all of us.
With respect to fertilizer trade and supply, and what USTR
can do about it, let me say this: I consider Secretary Vilsack,
our agriculture secretary, to be one of my most important
partners in the administration, and frankly one of my closest
friends, personally. We have been working together very closely
on food security issues, writ large, but also specifically on
the fertilizer pinch that we are all in.
We have been working closely with USDA, both between myself
and the Secretary, and also our teams, to encourage feedback
from a variety of our stakeholders on USDA's American-made
fertilizer initiative, that provides a $250 million grant for
domestic production of fertilizer.
USTR is also working with the inter-agency to encourage
multilateral development banks, the FAO, the Food and
Agriculture Organization, and the International Fund for
Agricultural Development to finance projects to expand
fertilizer production, as well as increase the efficient use of
fertilizer and precision agriculture.
Both areas where American farmers are, frankly, at the
leading and cutting edge of practice in the world, and we will
continue to work internally within the administration, and with
our allies and partners to find additional ways to mitigate the
global fertilizer shortage, and prevent similar shocks in the
future.
The additional thought that I would offer you in your
description of the pinch that we are in is--and I think that
this is an issue that presents itself across the board in many
different areas, and I will be glad to highlight them--is one
of the biggest challenges that we have right now is how to
responsibly and effectively react to, respond to the current
economic challenges and shocks that we have, but with an eye to
ensuring that we are building towards a future system that is
more resilient, that does not throw us back into the crisis
that we are encountering today.
Senator Moran. Ambassador I know Secretary Vilsack well,
myself, and I have encouraged him to be a voice for
agriculture, for agricultural producers throughout this
administration, so I appreciate that you are consulting and
working with him, and he is working with you.
But your answer, it seemed to me, was a list of things that
we are attempting to do but did not include anything on that
list about actually eliminating the tariffs or the
countervailing duties that have been imposed on the phosphates,
and other fertilizer components that come into the United
States.
Ambassador Tai. If I may respond to that specifically, the
anti-dumping countervailing duty programs are run out of
Commerce. And your specific question is: ``What can we do at
USTR'', and that was the filter through which I was responding.
Senator Moran. And so is the answer that you have nothing
to do with eliminating those countervailing tariffs and duties
at the Department of Commerce?
Ambassador Tai. They are not my programs, but I am happy
[speak] with Secretary Vilsack to have those conversations with
the Commerce Secretary.
Senator Moran. Please do. I have had those conversations
with the Secretary, myself.
Madam Chair, I don't think I have the time for another
question.
Senator Shaheen. Thank you. Senator Coons.
Senator Coons. Thank you, Chair Shaheen, Ranking Member
Moran.
Great to be with you, again, Katherine. U.S. Trade
Representative Tai, I appreciate your time before our
subcommittee, and look forward to working with the Chair to
pursue our directives to the administration, and our
prerogatives.
I am grateful for the work that you are doing, and your
accomplishments. I am particularly encouraged to hear the
progress on IUU fishing, your openness to working together on
promoting Delaware's chicken exports, our favorite protein,
which for those who have other proteins they really care about,
I am happy to go to bat with anyone about why chicken is the
low-fat, high protein, low cost, low environmental impact
protein that the world needs today.
Senator Shaheen. No commercials here; come on.
[Laughter.]
Senator Moran. Your reputation for bipartisanship, you are
exceeding your capabilities here.
Senator Coons. Thank you for what I think was a marathon
WTO Ministerial in Geneva, and for your work there. And you
know, frankly I have just two quick questions. But I would love
to hear what you see as the path forward in our trade relations
with China, and in trying to make the WTO relevant and
effective in some way.
China, my understanding, has agreed to exclude itself from
the TRIPS waiver for COVID vaccines. Is that an enforceable
commitment in any way?
Ambassador Tai. We see it as a legally binding commitment
that they have made at the WTO, yes.
Senator Coons. And I would be interested in what you see as
the path forward for plurilateral and bilateral negotiations. I
have a bill with Senator Portman, the Trading System
Preservation Act, which would authorize the President to
negotiate sector-specific agreements with like-minded partners
within the WTO system, an area that I think may be fruitful for
work.
And we are introducing today, the Special Relationship Act,
Senator Portman and I; that would authorize a bilateral FTA
negotiation with the U.K. I understand that market access isn't
on the table, in the Indo-Pacific Economic Framework, but I am
encouraged that the IPF has been launched. Should we be
negotiating to open foreign markets to U.S. producers? And what
are your priorities for these negotiations?
Ambassador Tai. Senator Coons, that was a number of issues.
Senator Coons. It was.
Ambassador Tai. Well, I am going to work backwards, because
your last question is the one that is freshest in my mind. On
the Indo-Pacific Economic Framework it is true that market
access is not on the table in these negotiations.
What I would like to say on that is, when we talk about
market access in trade terms and trade terminology, we are
talking specifically about tariff liberalization, and that is
what is not on the table. Nevertheless, in our trade
agreements, and our trade arrangements, and everything that we
do in trade it is about markets, and it is about how we work
together.
So, the Indo-Pacific Economic Framework is about market
access. What I would say though is that it is not about tariff
liberalization. It is about ensuring and building partnerships,
and confidence in each other's markets, through our regulators,
through these conversations, and looking at assuring the
quality of the access that we have granted to each other,
through existing rules on tariffs, but also looking at new sets
of rules that frankly go beyond goods trade.
Digital economy issues have not that much to do with
tariffs. What is crossing borders, bits and bytes, but also
what is crossing borders is a set of values, and a desire to
build confidence in how we connect, how we are interconnected
in today's economy. So, I think that this is one of the most
important initiatives that we have ongoing, and also incredibly
important that we are doing it with our partners in the Indo-
Pacific region.
Senator Coons. And what do you think might be our path
forward in U.S.-China trade negotiations?
Ambassador Tai. That is a question about which I,
personally, and my agency spends a lot of our time thinking
about, and working on. What I would like to say is that the
public debate recently has been very, very fixated on the issue
of the tariffs.
What does it mean to remove the tariffs? What does it mean
for our leverage? Let me say this, there are a set of
challenges that we are facing right now, collectively, in our
global economy. We need to look at the tools that we can use to
address that. And I know this Committee has spoken with respect
to tariff exclusions, and the tariff exclusion process.
I just want to be clear, and put this in context, tariff
exclusion is a temporary and targeted relief from existing
tariffs, it does not remove the existing tariffs. That is an
important distinction that has been lost in the public debate.
But also the other piece of what has been lost in the
public debate is, whatever we need to do for ourselves, in this
relationship, around the world to get through the set of
challenges that we are facing today, we will one day find
ourselves on the other side of these challenges, and I think it
is very important that what we do now, not undermine the need
that we have to make ourselves more competitive, and to defend
our economic interests in a global system that, for the past
several decades, has eroded our leadership in many, many
different areas in the economy.
Senator Coons. Thank you. Thank you, Madam Chair.
Senator Shaheen. Thank you Senator Coons. Senator Collins.
Senator Collins. Thank you. Good morning, Ambassador. In
2018 China imposed a 25 percent retaliatory tariff on U.S.
lobsters, which obviously affects the State of Maine more than
any other State in the Nation. Before the tariff China was the
second-largest importer of American lobster in the world.
During the first month under the new tariffs, however, live
lobster exports to China declined by 64 percent.
Now the 2020 Phase One Trade Deal required China to
purchase more than $500 billion of U.S. exports in 2020, and
2021. I worked very closely with your predecessor to make sure
that lobster was specifically included in that agreement.
According to reports, however, China purchased only $289
billion worth of exports, nowhere near the $500 billion figure
that was committed to.
Now, what is frustrating to me, is I raise this exact issue
with you when you appeared before this subcommittee last April.
Then in February of this year I sent you a letter asking you to
hold China accountable for the purchase commitments it made
under the Phase One Trade Agreement. You did not even respond
to my February letter.
So I am going to try for the third time to get answers from
you. What actions are you taking to hold China accountable to
fulfill its U.S. lobster purchase commitments?
And more broadly, what specific actions are you taking to
respond to China's dismal purchasing record, its overall
performance under the Phase One Trade Agreement?
Ambassador Tai. Senator Collins, let me begin by saying, I
am very sorry if I have not responded yet to your February
letter. I will go home, back to my office, and rectify that
immediately and let you know that we will do better. And you
have my commitment with respect to correspondence with you,
your office, and with the Congress in general.
On China's Phase One commitments, specifically with respect
to lobster, which I know is very important to you and your
constituents in the State of Maine; let me, if you will allow
me, put that in the larger context of China's purchase
commitments in Phase One, because those are the most public-
facing of the commitments that they made in the Phase One
Agreement, and the ones that are most easily checked, and
visible to everyone who has access to public trade data.
It has been very clear to us that China did not hit its
targets in a number of areas, including with respect to
lobsters in the Phase One commitments that they made to the
United States Government.
We have spent several months, starting in October, having
discussions with China around how they are going to fulfill
those commitments now that we see that the numbers do not match
up. I thought it was well worth having that conversation with
China, because I have always perceived, and seen, in my
experience with China, that China does care about its
international credibility.
What we have seen, however, through these conversations, is
that that has not been enough to motivate China to make good on
these purchase commitments in particular. That is what is
leading us to conclude that it is time to turn the page on the
old playbook. We do need to enforce our rights with respect to
China, and we do need to defend the interests of our entire
economy including our lobster people, lobster men, and lobster
women, our manufacturers, our workers, our ranchers, our
producers.
And I feel very strongly that we need to take a new and
more comprehensive look at enforcing those rights, and
defending those interests with respect to China. And that is
what we are doing right now at USTR.
Senator Collins. I look forward to getting more specificity
from you, in writing.
Madam Chair, I know my time has expired, so I would ask
unanimous consent that additional questions that I have, one
supporting the point that both you and the Ranking Member made
on 301 tariffs exclusions, and the other on Softwood Lumber
Agreement which is very important, be submitted for the record,
and I hope I will get answers.
Senator Shaheen. Without objection.
Senator Collins. Thank you.
Senator Shaheen. Senator Hagerty.
Senator Hagerty. Thank you, Chair Shaheen, and Ranking
Member Moran for holding this hearing. Ambassador Tai, it is
good to see you today. I would like to talk with you about the
China tariffs that were put in place by the previous
administration, and specifically, I would like to talk about
the negotiating leverage that those tariffs provide.
I can tell you from personal experience that when those
tariffs were imposed on China that it was felt around the
world. It demonstrated, particularly to Japan, the third
largest economy in the world, that we were serious about
leveling the playing field for American producers. It helped us
open significant new markets for American agriculture, and
importantly, it allowed us to establish a very high standard
digital trade agreement.
Ambassador Tai, I understand that China is not living up to
the commitments that it has made under Phase One, you have
talked about that at length. My question for you is: Wouldn't
removing these tariffs simply encourage more bad behavior? What
kind of message would it send to China?
Ambassador Tai. I appreciate that question very much,
Senator Hagerty, because at USTR we are responsible for the
formulation of American trade policy, and guiding the U.S.
economy through challenges, and opportunities that are
presented today, but really to set up the American economy for
success in the future. The China tariffs are, in my view, a
significant piece of leverage, and a trade negotiator never
walks away from leverage.
The question for us, and this is something that we have
done in the Biden administration, with respect to a number of
different Section 301 investigations, and tariff actions is:
How do you convert this leverage into a strategic program that
will strengthen American competitiveness and defend our
interests in a global economy in which China will continue to
play?
We need to use our tools more effectively. We need new
tools. We need to bring an entirely new approach. And I think
that all of those things are built on the back of the tools
that we have in our hands right now.
Senator Hagerty. I certainly think sustaining leverage from
the standpoint of a business person, which I have been on my
life, is a critical factor here. I hear the argument that it
will have an impact on inflation. Look, inflation didn't take
off when the tariffs were imposed it stayed, you know, at or
below 2 percent when the tariffs were originally imposed. So I
think that is a false argument. And I appreciate the fact that
you appreciate the leverage that you have, and encourage you to
use it.
I would like to turn now to the Indo-Pacific Economic
Framework, the so-called ``IPEF''. You have met with
representatives from the 13 countries that participate in the
Indo-Pacific Framework, and many experts have argued that the
IPEF is too vague, it lacks substance, and perhaps that was the
price of convincing more countries to join the framework.
But as you focus on making IPEF more substantive, I urge
you to build on the successes of our Nation's prior engagements
in Asia. And specifically, I would like to talk about my
experience when I was U.S. Ambassador to Japan, as we
negotiated the U.S. Japan Digital Trade Agreement. It is
comprehensive, it is a high standard agreement that addresses
digital barriers, and I think it holds great potential.
So Ambassador Tai, I would like to ask you your thoughts on
whether you have considered looking at the U.S.-Japan Digital
Trade Agreement, and perhaps using its provisions, parts
thereof, that have been fully negotiated, as a standalone
sector-specific trade agreement in the region?
Ambassador Tai. Well, Senator Hagerty, thank you so much
for sharing your experiences. I think that in this
administration we are picking up on those relationships, and I
do agree that there is a lot of energy in this region, and also
worldwide, for trade conversations and trade work to be done
with respect to the digital economy, how we can work together,
how we can formulate rules, how we can establish common
understanding to facilitate the growth in this part of our
economy.
So, that is absolutely a part of the Indo-Pacific Economic
Framework that we are working on. I think what I would like to
say with respect to the standalone sectoral approach, however,
is that we are actually much more ambitious about what we can
accomplish, and what we should accomplish, with respect to our
partners in this region.
And so, while digital will be an integral part of what we
are bringing to the negotiations and the conversation in the
Indo-Pacific, it will not be the only one because digital
itself implicates so many aspects of our economy, so many of
our stakeholders. It needs to be, itself, a comprehensive and
robust approach to digital economic and trade relations.
Senator Hagerty. I think it will present a good example.
Ambassador Tai. And also be part of a larger package.
Senator Hagerty. And I look forward to working with you on
that. But one last point, I would like to discuss a very
worrying development that is occurring in Mexico. And Mexico is
one of the United States most important international partners,
and it is our closest neighbor to the south. There are many
difficult issues that we are trying to deal with Mexico, but
our robust economic relationship should provide a firm
foundation to strengthen and stabilize our efforts with an eye
toward our future relationship there.
But actions over the past year by the government of the
current President, Andres Manuel Lopez Obrador, have weakened
that bond, and are threatening the economic ties of our two
nations.
Last month, nine of my colleagues joined me to send a
letter to President Biden to address the Mexican Government's
aggression toward U.S. companies, particularly the arbitrary
and punitive actions recently taken against Vulcan Materials.
Vulcan Materials is a strategic supplier, particularly to the
southeast part of the United States because of how we build our
infrastructure.
So Ambassador Tai, we have yet to hear back from President
Biden. I know you have weighed in on this topic with the
Minister of Economy in Mexico. We can't tolerate our nearest
neighbor to the south, basically, nationalizing American
companies' assets. It is extremely damaging to our Nation's
working relationship. And I hope that you will commit to taking
an immediate action to help address these illegal actions.
Ambassador Tai. Senator Hagerty, are you speaking with
respect to Mexico's energy policies specifically, or across the
board?
Senator Hagerty. No. I am speaking to the fact that Mexico
has nationalized a piece of a mining operation that is
responsible for sending aggregate into the Gulf of Mexico, and
basically we are dependent on it, not only in Florida, but all
the way through the southeast.
Ambassador Tai. Thank you for that clarification. Let me
assure you that one message that I hope is conveyed very, very
clearly through my participation in this hearing, is the
commitment of the USTR to the enforcement of all of our trading
rights. And I want to assure you that my team is working on all
aspects of these issues.
And I can assure you that we will not rest. Enforcement is
a critical piece, and we are working on the challenges that we
have in Mexico.
Senator Hagerty. Yes. I appreciate. Yes, I appreciate your
diligence there.
Ambassador Tai. Thank you.
Senator Hagerty. I have heard it also strongly from the
energy community as well, that this is also an issue for them.
Ambassador Tai. Thank you, Senator Hagerty.
Senator Hagerty. Thank you.
Senator Shaheen. Senator Feinstein would be next, but this
is her birthday, so we are going to give her plenty of time to
settle in, and get ready, and go to Senator Braun.
Senator Braun. Thank you, Madam Chair.
One of the great successes of the Trump administration I
think was reorienting Washington's focus on national security,
economic threats posed by the Communist--China Communist Party.
The way I look at, in the geopolitical landscape, they are
playing with a chessboard, and we seem to be very reactive.
Everything I see that they are doing is incrementally building
up their military capabilities, but I really think they intend
to win economically. Day-by-day, month-by-month, year-by-year,
to where when that day comes, when they probably will
inevitably be a larger economy than ours, they have certainly
become skilled state capitalists, will wonder: Did we make the
right moves along the way?
I am concerned that they have the ability, they are
patient, I view them as a saving, and investing country, their
Road and Belt Program tells you that. I think they are hedging
their bets there, as they increasingly do things that make them
less than a handshake business partner. I won't repeat all of
it, but the intellectual property issue that they seem to go
after with impunity, they way over produce, look at our steel
industry, they have got half the world's capacity, dump the
gluts on the market.
We have got to be careful. Ideally, in a world that works
right you have the ability to have free trade, in places where
it is not fair and free, we had better be careful.
President Trump's 301 tariffs were successful in bringing
the CCP to the table, put real pressure on the Chinese
Government. Moving forward, I think they help us reduce
reliance on the Chinese market, and by the way, they are a
trading economy. We are not, but we accommodate them mostly for
our propensity to import, consume, and spend.
All kind of abstract considerations that, to me, they are
getting the winning end of the bargain at this point. That is
why I am concerned about the one tool, to limit USTR's
flexibility with restrictions on 301, that tool there, we can't
do that.
Do you agree that the USTR must have the flexibility to
design an exclusion process that also maintains sufficient
economic pressure to go along with it?
Ambassador Tai. Senator Braun, I absolutely agree with
that.
Senator Braun. Well, that is great because I think the
proof will be in how we practice it. Would you care to
elaborate in some detail how you see our relationship with
China evolve over the next half-a-decade to a decade, and what
your main concerns are, about how they are playing the game,
versus how we are reacting to it?
Ambassador Tai. Thank you so much for this opportunity,
because I think that this is absolutely the question that we
need to focus on with respect to positioning the American
economy today for the future, and for future success.
Let me begin by saying this, unless we define the problem
there is not going to be a good way for us to assess whether or
not we are solving it, whether or not we are being effective. I
think that----
Senator Braun. Are you doing well at defining it now?
Ambassador Tai. Well, the Section 301 investigation that
was launched by the Trump administration that you referenced
addressed a very legitimate and deep problem that we have had
with Chinese economic practices, which is with respect to
intellectual property rights and forced tech transfer
practices.
But that is not the sum total of the challenge that we
have, and I think that in your comments you have started
getting at the contours of the challenge that we have, which is
a fundamental economic incompatibility between a very, very
market-based economy that we have here in the United States and
very strict division between the State and the private sector,
and a Chinese economy through which the Chinese State's
interests and control and direction extend.
To your point about, you know, it would be great if we
could have free trade?
Senator Braun. Mm-hmm.
Ambassador Tai. But you have to know who you are competing
against. I always come back to the David Ricardo, ``Econ 101'',
where you have comparative advantage. And if you have got, you
know, two islands, both of them producing bananas and making
boats, but one of them has the conditions for producing
bananas, and the other one, say, has more engineers. The logic
is that, you know, you should have one focus on making boats,
and the other one make bananas. They can trade and everybody is
better off.
The problem is that that is not the world that we live in,
and especially if you expand out that economic model and you
say it is not just two products that our economies make, but
let us say there are 25 products that our economies make, and
then you look at the theory of comparative advantage, and then
you realize the advantages are not always natural.
When you are--when you are working with another economy,
even in the simplistic model, where that economy is not--is a
state capitalist model, that economy is going to be able to
target and take over entire industries and create advantages
that the market-based economy doesn't have.
That is the fundamental challenge that we have, and unless
we start focusing on identifying that as the problem, and
thinking through how we address it, I think that we condemn
ourselves to repeating cycles of experiences that we have had
from steel and aluminum, to solar. Right now, the Chinese
Government, the PRC, is looking very closely at semiconductors,
and a number of other strategic industrial areas that are going
to be critical for our future, and our future competitiveness.
And so, from me to you, my answer is, we need to be keeping
our eye on the ball on this bigger picture, and with respect to
all of the economic challenges and the pinches that we and
Americans are experiencing right now, it is our responsibility
to do what we can to provide that relief.
But I will just be very, very clear, with respect to
tariffs and trade tools, we can impact the design of our
competition, and we can impact the competitiveness of our
economy in the medium and the long term. With respect to short-
term challenges, there is a limit to what we can do with
respect to, especially inflation.
Senator Braun. I agree. Thank you.
Senator Shaheen. Thank you, Senator Braun.
Senator Braun. The long run is always the bigger
consideration, and it is tough to navigate correctly through
the short run. But it sounds like you got a handle on it. Thank
you.
Senator Shaheen. Thank you, Senator Braun. Senator
Feinstein.
Senator Feinstein. Thank you very much. I am really
delighted to welcome you here. And I wanted to talk a little
bit about China and China trade. When I became Mayor of San
Francisco one of the first things I did was develop what was
called a ``sister city relationship'' with Shanghai.
And over the years we had some 50 different trade efforts,
ongoing, leading from San Francisco and other areas in
California, and I think, particularly when Jan Zeman (ph.)
became President that was sort of a heyday for us.
So the relationship has always been a very positive and
good one. You have said that the United States must enforce
terms of the Phase One Agreement, and you have outlined
principles for a multilateral trade approach to China, and the
discussions with China are taking place.
It would be really helpful for me to hear more of the
detail about what concrete steps are being taken to move this
relationship forward. I say this as a Californian. We believe
it is the Century of the Pacific, and that these relationships
are extraordinarily important.
Ambassador Tai. Thank you so much, Senator Feinstein. And
let me add my congratulations to Chair Shaheen, on the occasion
of your birthday.
Again, the U.S.-China relationship, as I have said before,
because it is true, is one of profound consequence. We are the
two largest economies in the world, and how we relate to each
other affects----
Senator Shaheen. Ambassador Tai.
Ambassador Tai. Yes.
Senator Shaheen. Can we ask you to put the mic a little
closer. Thank you.
Ambassador Tai. Absolutely. How we relate to each other
affects not just workers and businesses, communities,
businesses large and small in our own economies, but how we
relate to each other impacts the entire world. And that is
very, very clear for all of us to see.
And so, in terms of the realignment that we talk about in
the Biden administration that we know that the United States
needs to have with China in trade and economics, it means that
the status quo and the way things have been cannot--cannot
continue.
In order to be able to compete, in order for our workers
and our businesses to have an opportunity to thrive, we need to
fundamentally adjust how we relate to each other, and we need
to expand the set of tools that we use, we need to expand the
way that we use our tools----
Senator Feinstein. May I be so rude as to interrupt you.
How would you do this? That is the question. And what parts of
the government? Because it has seemed to me that over the years
that China works very differently than the United States does;
and you really start with personal relationships, and then you
build them into business relationships, which is sort of
contrary to how we trade. But that is what I have learned in my
interaction as Mayor of San Francisco and trying to build trade
for California.
Ambassador Tai. You are absolutely correct. Personal
relationships, whether they are in the U.S. Congress or they
are in international economic relations, do define possibility.
I will share with you that over the course of the past, almost
year-and-a-half of my time in my position, that I think that
the U.S.-China relationship has really suffered from the COVID
pandemic, and policies that the Chinese Government has taken
with respect to managing COVID.
There have been very, very few in-person interactions
between members of our administration, and the members of the
Chinese government. I think that those conversations are very,
very important, but what I also want to make clear is that in
those conversations we, as the United States, have to be
extremely clear and extremely clear-eyed, and unrelenting about
our interests.
We do not need to get emotional about the challenges that
we have, but it is absolutely incumbent upon us to be as tough
as we need to be in order to navigate a future where the United
States, and China are economies in this world that need to be
able to compete on fair terms.
Senator Feinstein. Thank you. Thank you.
Senator Shaheen. Thank you, Senator Feinstein. Senator
Murkowski?
Senator Murkowski. Thank you, Madam Chair.
Ambassador Tai, welcome, good to see you. I am looking
forward to your visit to Alaska next week. And in that vein, I
wanted to broaden the discussion here, obviously a great deal
of focus on China, where we are with the Section 301 tariffs.
Our reality, though, is that China is now importing 50 percent
more seafood than it did in 2017.
Unfortunately, China is sourcing this seafood from other
nations. Our producers are not fairly able to access the
growing market due to tariffs--you understand, above everyone,
the background on this.
In 2020 and 2021, China's seafood purchases of U.S. seafood
product were down--44 and 38 percent respectively, relative to
the 2017 baseline. So you are going to be North next week, you
are going to be talking with folks in the resource sector, but
particularly those in the seafood sector. You will have an
opportunity to go out and be on the ground, and see what it
really means to these local and regional economies.
So the question that I would ask you this morning is, what
are you going to share with them, in terms of what efforts this
administration is making to help address these tariffs that
have been so, so harmful to the U.S. seafood industry, and more
specifically, to the Alaska industry?
And as you respond to this question, recognize that beyond
China the reduction of trade barriers to seafood markets in
Japan, the European Union, and the U.K., these are all also
priorities for us. So can you speak to the Alaska seafood
issues, and the tariffs that that folks have been operating
under for far too long?
Ambassador Tai. Well, thank you Senator Murkowski. And I am
also looking forward to the trip to Alaska, which follows on
the invitation you extended me at this hearing last year. I
have never been to Alaska before. But even more, the reason why
I am looking forward to this is precisely to have the types of
conversations that you have just outlined are awaiting me in
your home State. Every time I travel out into the United
States, especially places I have never been before, and have
these conversations, I learned something new.
And I will just share with you. In mid-April, I made a trip
out to Oregon and the Oregon Coast and met with some fishermen
at Senator Wyden's invitation. Senator Merkley was there as
well. Those conversations really helped to inform me, with
respect to the real world, the real impact on real members of
our communities, in the WTO fisheries subsidies negotiations
that we just had last week, and how important it is to engage
in establishing rules for ensuring that in fisheries, that we
have a sustainable approach, and we have fair parameters for
the world's fishermen to engage in.
Senator Murkowski. Let me let me go ahead and interrupt,
because I have one more question that I want to ask. You will
get an earful. You will get an earful, and you will see it for
yourself, and our hope and the reason for the invitation, not
only for myself, but Senator Sullivan, is so that we can see
action in this area.
I wanted to shift just very briefly here with regards to
Arctic, and our friends in the Arctic, most notably Iceland.
Iceland is a great friend of ours. We have got good strong
relationships through Arctic strategy, and transatlantic
relations. U.S. is the fifth largest import and export market
for Iceland.
Iceland has made tremendous gains in its renewable energy
sector, we have got a--we have got a great relationship again.
China, a non-arctic Nation on the other side of the globe, has
recently signed a free trade agreement with Iceland. The people
in Iceland are saying: Why not us? Why not us? You run risks I
think when we discourage countries from doing business with
autocracies, whether it is China and Russia. But then we don't
offer them any viable alternatives.
We say we will be there for you, but we are not going to
enter into the free trade agreement. Your comments to why this
has not been addressed, at least in a significant way. I know
the ask has been out there for some time because I have been
part of those discussions, so any update that you might have on
an Iceland Free Trade Agreement?
Ambassador Tai. So unquestionably, Iceland is an important
trading partner. In fact, I met my Icelandic counterpart in
Geneva last week at the WTO. I think that all the reasons that
you have raised in terms of enhancing our collaboration with
Iceland economically are entirely valid. And Iceland, is an FTA
country, so with respect to our build and rebuild of our
relationship with the EU, that those do have positive
implications for our relationship with Iceland as well.
I am ready and willing to show up and to engage with all of
our partners. I take your point on the strategic aspects. I
guess what I would say with respect to what you have just
presented to me, is that the fact that Iceland has just signed
a free trade agreement with China will make us thoughtful about
how we--the parameters of the kinds of collaborations that we
build with Iceland, to ensure that.
And I think this is very true in terms of our approach the
Indo-Pacific as well, to ensure that what we are doing is
providing our partners with choice, with more choices. It is
providing us with more choices as well, but it is not
entangling us further into a version of globalized supply
chains that is going to undermine our ability to build for more
resilience.
And I think that with respect to China and the Chinese
market, and this goes back to your fishermen as well, we have
seen China use its leverage, with respect to its market, to
push countries on politically--political and sovereign
decisions that China has found that it doesn't like. We are a
very, very large economy, and we experience it differently, but
this is the version of that coercion that we experience. It is
not coercive, but it is very painful.
I think that this is absolutely something that we are
focused on addressing in the U.S.-China relationship, which is
the reliability and confidence that we have in each other, and
to the extent that we don't have it, all of the collaborations
that we need to have with our other partners and allies to
ensure that we provide each other with resilience.
Senator Feinstein. I appreciate that. I know that it would
mean a great deal to Iceland, and it doesn't take much from us.
So I look forward to exploring these conversations further.
Thank you, Madam Chair.
Senator Shaheen. Thank you, Senator Murkowski. Senator
Reed.
Senator Reed. Thank you very much, Madam Chair.
I know you will enjoy Alaska because I have been to Alaska
with Senator Murkowski, and it was terrific. I just want to
warn you though, the way they measure things in Alaska, it is
how many times bigger it is than Rhode Island. So just be
prepared for that, okay.
[Laughter.]
Senator Reed. I just came from the Banking Committee
Hearing with Chairman Powell, the Federal Reserve. You know, we
are facing an issue of inflation which is significant with
multiple causes, but one that everyone admits to is the supply
chain, and normally with a task force in place. Can you tell us
what progress we are making on rearranging our supply chain?
And just one other comment is that we build and took for
granted a global supply chain built on efficiency and speed
without sustainability, or the ability to reconnect quickly.
With the pandemic, that has been broken, and I don't know if
that will be put together again. But what are you doing in the
task force on supply chain?
Ambassador Tai. Senator Reed, thank you for this question.
I wish that I also were able to visit Chairman Powell's
hearing, because I know how much inflation is impacting our
economy, and our people, and how concerning it really is. And I
agree with you.
I think that with respect to supply chains, the
bottlenecks, the disruptions that we have had these last couple
years that they have been a significant disrupter in our
economies. And significantly eroded our confidence, and
``our'', I mean collectively, our American and worldwide
confidence in the global economic system, which is why working
towards a version of globalization that is built for beyond
efficiency, resilience and sustainability is our guiding
principle in terms of our engagements with all of our partners
in our initiatives that are ongoing right now.
Let me say this on supply chains in particular. I had a
really eye-opening conversation with a CEO and Chairman earlier
at the early parts of this year, who is in the banking
industry, and we were talking supply chains, and he said to me,
``You know, as I have been looking at the supply chain
challenges, what strikes me is that I would never have designed
these supply chains to look like this.'' And at the time I
didn't quite understand what he meant by that, and I thought
about it through the lens of a banker, and what has struck me
is, what I think is an important perspective, which is our
supply chains have not taken into account risk.
They have been all about efficiency, and in terms of what
we can contribute from trade, to building supply chains that
are more resilient I think a key part of this is incorporating
into our work on trade beyond tariff liberalization, is how we
can incentivize countries and more specifically, our firms to
calculate in the risk of their supply chain design, as they
make their business decisions.
And this is one of the key issue areas that we are raising
with our trading partners and all the initiatives we have going
on right now.
Senator Reed. I think that is a sensible approach. Can you
give us any sense of tangible progress in this regard, of
rationalizing the supply chains, as you say, make it more
robust and resilient?
Ambassador Tai. USTR is tasked with heading the supply
chain task force on an inter-agency basis. We have a list of
all the work that we have done over the course of the last
year, which I won't go into, and I will refer you to our
website and let you know that it is there. But I think that the
most important work is yet to come and has really got to be on
an international basis.
How do we connect our economies together, and how do we, in
a very, very clear-eyed way, identify the things that we have
to do to correct for a set of supply chains and a version of
globalization that is built only for efficiency right now? And
so just let you know that whether it is in the Indo-Pacific,
whether it is our initiative with Taiwan, the initiative that--
on the future of Atlantic Trade that we have going on with the
United Kingdom, the EU Trade And Technology Council, and all of
these different arrangements, we are laser-focused on this
issue of our supply chain resilience.
Senator Reed. Thank you very much.
Thank you, Madam Chair.
Senator Shaheen. Thank you Senator Reed. Senator Van
Hollen.
Senator Van Hollen. Thank you. Thank you Madam Chair. And
it is great to see you Ambassador Tai.
I want to turn to the recently announced U.S.-Taiwan
Initiative on 21st Century Trade. If you could just quickly
identify the top priorities that you expect to come out of that
agreement, and tangible changes in terms of trade with Taiwan
that you hope to see?
Ambassador Tai. Certainly. Thank you, Senator Van Hollen.
And I appreciate your interest in this particular relationship
and this issue.
In our announcement kicking off this particular initiative
we identified 11 areas where our initiative will be focused,
seven of those areas are the same or similar to the ones that
we have announced in the Indo-Pacific Economic Framework. Those
go to the digital economy, and digital trade, labor,
environment, trade facilitation, science-based and evidence-
based regulatory practices, when it comes to trade for
agricultural products. In the category of the additional areas
where we will be focused with Taiwan in our initiative, I think
that they are a very interesting set of conversations around
non-market economy challenges that we share, State-owned
enterprises. And the other two, I am going to have to look at
my notes, but they are also on our website.
But I think that they are particularly relevant and
consistent with what I just said to Senator Reed. They are
looking at how we can work together with our partners on
building resilience, sustainability, and then the other piece
that is really critical to us is inclusiveness as we build out
into an economic recovery. How do we bring as many in the world
in our own communities as we can into prosperity?
Senator Van Hollen. Well, Thank you Madam Ambassador. As
you know, there was some concern including shared by many in
the Senate that Taiwan was not part of the Indo-Pacific
Economic Framework, but I am glad that you have developed this
initiative, and look forward to working with you on both those
fronts.
So on another committee, the Senate Foreign Relations
Committee, I chair the Subcommittee on Africa, and interested
in what you, at USTR, are doing with respect to U.S. trade and
investment in Africa, which in my view is good for U.S.
businesses, good for U.S. workers, good for partners in the
region. And I think it is worth noting that in the next 30
years the population of the entire Continent is expected to
double, and one-quarter of the world will live in Africa by the
year 2050.
So it seems to me that we need to really keep our eye on
the ball here, and do better than we have. Obviously some of
our chief adversaries and competitors like China are very much
engaged in Africa. What are you doing at USTR? And are you
working with the Prosper Africa Initiative folks to make sure
that we combine our resources in a smart way?
Ambassador Tai. Absolutely, USTR is an active participant
in the Prosper Africa efforts within the administration. And I
agree with everything you have said, Senator Van Hollen, about
the opportunities, and frankly the necessity of the United
States to amp up our engagement with Africa, for all the
reasons you have listed. And also, I think one of the most
interesting, and awesome, frankly, data points is also the
number of young people that are in Africa.
And that goes to the growing population that the youth of
the world are largely in Africa, and this is really about our
collective future. Let me say this with respect to U.S. Africa
Trade. AGOA is a foundational trade program that we have had
with the African Continent. It expires in 2025, and there have
been a lot of conversations with my African counterparts around
what is going to happen to AGOA after 2025. I know that there
are a lot of leaders, thought leaders on this issue within the
U.S. Congress, and I will let you know that USTR is engaging
and stands ready to engage across the board, on what a vision
is for AGOA going forward.
But I will also let you know, it is my--it is my view that
AGOA is not enough. AGOA has been around for a long time, and I
think AGOA can do better. But also, I will just share with you
in the context of the World Trade Organization, 12th
Ministerial Conference that just concluded last week, that with
respect to the Intellectual Property Rule changes that were
made for COVID vaccines, for a limited period of time, to
address the covid pandemic that I found most powerful.
My African counterparts who asked the United States to lean
in and get that effort across the finish line because it is
going to, in their view, allow the African Continent a foothold
into a very important supply chain, that they do not have
access to. And I think that it is through new efforts, and new
initiatives also, that we have got to push ourselves to think
about how we can be a better partner to the entire African
Continent.
Senator Van Hollen. Well, thank you, madam Ambassador. I
look forward to continuing the conversation about AGOA and
updating it, upgrading it. As I am sure, you know, about 90
percent of our non-energy imports under AGOA, in 2020, came
from just five countries. And you know, clearly we have got to
expand the benefits of AGOA, along with engaging with Africa on
the African Continental Free Trade Area and see what kind of
mutual benefits we can draw. So I look forward to continuing
that conversation.
Thank you, Madam Chair.
Senator Shaheen. Thank you, Senator Van Hollen.
Ambassador Tai, I think I, and I think Senator Moran also,
we have a couple more questions. So we would like to do another
round with you.
And I would like to go back to Russia. And I think that the
actions that you and the President engaged in leading up to
Russia's War in Ukraine have been very important in helping to
unite the allies, and present a united front, and being able to
put in place a series of sanctions that, while they are taking
some time, they are having a real impact.
In April, Congress passed a bill revoking Russia's
permanent normal trade relations status. This law gives you
additional authority to sanction Russia in other ways. I wonder
if you can give us some insights into what you are thinking,
and how you might be using this authority.
Ambassador Tai. Chair Shaheen, I want to begin by thanking
you and the entire U.S. Congress for speaking with such
conviction, and resolution on the issue of Russia. Earlier this
year, the United States Government being able to respond with
one voice; was incredibly powerful, and enabled us to take a
real leadership role in responding to Russia's aggression in
Ukraine.
As a result of the bill that Congress passed, and that the
President signed into law earlier this spring, the United
States has, with respect to trade, suspended permanent normal
trade relations with Russia, and that means that we have
imposed non-MFN tariffs on imports from Russia, and that action
alone has increased tariff rates on over 75 percent of U.S.
imports from Russia.
We are continuing to engage in the administration through
our conversations with other partners and allies to look at how
we can use this new authority to impose additional consequences
on imports from Russia. I think what I would really also like
to note here that we have talked a lot about tariffs in the
course of this particular hearing, and I just want to note that
I think about tariffs a bit like--tariffs are like two-by-
fours, they can be used for lots of different purposes.
With respect to Russia, these tariffs are punishment. We
are using these two-by-fours as a kind of a weapon, but in
other areas, right, our tariffs are used to build platforms.
They are used as weapons to level the playing field. They are
used as encouragement to create enforcement and incentivize
compliance.
So, in this particular area, you know, I also feel that it
is important, from the USTR perspective, to note that these
tariffs we are using in a particular way which is appropriate,
and which is focused on changing Russia's behaviors.
Senator Shaheen. Well, thank you. I certainly agree with
that, and agree with your sentiment that it has been very
important for Congress to be united in responding to Russia's
unprovoked war. And it has sent an important signal not just to
Russia but to our other adversaries who are really looking
closely at what we are doing here, and how we are responding.
I want to--so just to follow up, so then I would urge you
to think about every way possible, as you say; that we can
penalize Russia for what they are doing. And if you see ways in
which this subcommittee can be helpful with that, or that
Congress can do more, I hope you will share that with us.
You mentioned in your opening remarks the importance of the
legislation that is currently in the Committee of Conference,
whether it is America COMPETES, or the U.S. Innovation and
Competition Act. So much of the discussion at this hearing has
been about China, and the threat that China poses. Can you talk
about--I mean, one of the motivating--the main motivator behind
that legislation, I think, is to try and level the playing
field for the United States with China.
Can you talk about what it will mean if we are not able to
bring that legislation across the finish line; and what kind of
a disadvantage that will put the United States at against
China?
Ambassador Tai. I would be delighted to, Chair Shaheen.
With respect to realigning our relationship with China, there
is a set of--there is both defense and offense that we have to
play, and frankly, when I look at tariffs, I see the tariffs
mostly as defense. But if our goal, with respect to China--and
frankly every other non-market economy that our businesses, and
our workers have to compete with--defense isn't enough, we have
also got to play offense.
And I think that in terms of what is in the conversation
around the Bipartisan Innovation Act--it goes by many names--it
is a combination of defensive tools and offensive tools. And
what I mean by ``offensive tools'' are those are the tools to
really invest in ourselves to give our industry, and our
workers the boost to take their talents, and resources, and
assets, and allow them to shine in a competitive field, that we
have not considered fair in a very long time, and which is
really critical to our success in the future.
So, the way I look at what is before our Members of
Congress right now, in this conference, is really things that
we need to do that are necessary, but by themselves not
sufficient for putting the American economy on the strongest
footing possible. And I think that there is a lot more work for
us to be doing together, the administration and Congress. And I
am committed to doing that work with all of you.
General Scobee. Well, thank you. I appreciate that. And
hope that all of the conferees will hear that statement today.
Senator Manchin?
Senator Manchin. Thank you. Thank you Madam Chair.
And thank you for being here, and doing the job that you
do, and we are very hopeful in your accomplishments.
Let me just ask the question here. I have got two of them.
The State-backed companies that are circumventing U.S. trade
laws, by a variety of methods including transshipment and
dumping. Transshipment of goods through third countries to
evade anti-dumping duties undermines the integrity of our trade
laws, and puts domestic manufacturers at risk from unfairly
traded products; in a nutshell, what happens.
And I was just at a little company in West Virginia that
makes a lot of products for the solar industry, and they are
now competing with dumping parts, and they know it is coming
from China, but it is coming through different vessels, if you
will.
So I applaud yours, and Secretary Raimondo's inclusion of
annual audits of steel producers owned by and operated by
Chinese parent companies. And the recently struck trade
agreement with the U.K. And I encourage you to continue to
pursue the audits in any future trade agreements. So given its
inclusion in the recent U.K. Trade Agreement, how likely is it
that you all will pursue similar audit provisions, whether it
be for steel or other products, and future trade deals?
Ambassador Tai. Well Senator Manchin, I am always delighted
to talk about U.S. manufacturing, and how we can make the
American economy create more opportunities, and be a rosier
place for our manufacturing.
Senator Manchin. We are just asking for a level playing
field.
Ambassador Tai. A level playing field, absolutely. Your
specific question goes to our interest in incorporating audit
provisions in our arrangements with our trading partners, to
ensure that the playing field remains level.
Senator Manchin. I think basically----
Ambassador Tai. I am very interested in this issue of
audits. And I am interested in expanding it beyond anti-dumping
and countervailing----
Senator Manchin. When you have a U.S. company identifies
that they know they are getting dumped on, and all they are
asking for is an audit from the country--and look, just pick an
Indonesian country anywhere, pick one, and we know it is being
funneled through China, to have that audit show that they
didn't--they don't have the production facilities, they can't
do it there, so they have to be funneling from somewhere else.
I think we could determine that pretty easily. And then
classify them for anti-dumping.
Ambassador Tai. I think that audits and verification go to
the heart of the integrity of our trade tools. And I agree with
you entirely.
Senator Manchin. Okay. The other one is the relationship
between U.S. and China, I know we have been talking a lot about
that, has been tumultuous over the years. I think basically we
probably had progress by 2019 having a trade deal with them,
but then with COVID coming up and China failed on a number of
their purchase agreements, and while it is important to note
that the initial phase occurred during the pandemic, they have
made no efforts to reassure the United States they are
committed to making good on the terms that they agreed to.
So given the 2020 Phase One Trade Agreement between us and
China, ultimately did not produce its desired outcomes, what
avenues are being explored right now to ensure that fairness,
in any future trade agreements between China and ourselves?
Ambassador Tai. This is absolutely one of the most
important questions that we are grappling with right now, and
one of the most important issues to determine what our economic
future looks like in this globalized economy.
Senator Manchin, I have talked quite a bit about China.
Last October I gave a speech about the Biden administration's
approach to the U.S.-China trade relationship. We spent several
months focused on China's performance under the Phase One
Agreement, and as we turned the corner into 2022, and we were
able to look at full-year trade data for 2020 and 2021. We
absolutely saw gaps between the purchase commitment levels, in
particular, that China had committed to, and also where the
purchases actually were.
Let me just say this also. In the speech that I gave in
October, we also reviewed our approach to the China Trade and
Economic Relationship over the course of the past several
administrations. And it is very, very clear certainly to me at
this point that it is time for us to turn the page on the
playbook that we have had with China, which has been a
combination of negotiating agreements on one hand----
Senator Manchin. Do you have enforcement mechanisms; any
enforcement mechanisms available to you all to be used with
this agreement?
Ambassador Tai. Absolutely, we do.
Senator Manchin. Are you all going to use them?
Ambassador Tai. Yes.
Senator Manchin. Okay. And let me ask you on the first
question too, both of them. Is there something that we need to
do to help you basically, you know, tighten down on some of
this, because they are just running amok playing us, just
playing us really. And it is a shame.
We keep talking about, and I will tell you my biggest peeve
right now is the whole thing with the EVs, the batteries,
chips, and all the different things, rare earth minerals
processing, anodes, cathodes everything that we need. And if we
are ever going to get this industry up and running and be self-
sufficient in North America, then we have to make sure that
they can't dump on us.
And right now we are about ready to put our whole eggs in
one basket, thinking EV is the way to go, and we are going to
be absolutely so taken advantage of, to the point where we are
going to be held hostage by the foreign supply chain that China
has the grip on. I just, I just can't believe that we are even
thinking about going down that path. And I am gonna do
everything I can to stop it, because I think it is stupid,
because we are not able to protect our investments in the
country.
Because if Jerry Moran in Kansas wants to start a new
company, and he is up and running, and they start dumping, he
can't compete. He can't go out and get financing, he has no--
you know, the markets aren't going to basically respond to him.
And we just--we are just held at a disadvantage because of the
economy that we have, and the way we administer our economy.
But we depend on you all to crack hard and crack them down as
tight as you can.
We talk about border adjustment. I don't know if you have
talked about that, Madam Chair; if you all talked about border
adjustments. The reason that we have Democrats and Republicans
talking about border adjustment, we think that is the only
level playing field we might have. They are not paying
attention to any of the agreements they sign, and we have no
penalties to them.
But at border adjustment we would have that product coming
in and we proved it came from a country, but it really came
from China, via other countries. So that is my frustration.
I am sorry to vent. I thank you for giving me a chance to
do that.
Senator Shaheen. Thank you, Senator Manchin.
Ambassador Tai, would you like to briefly respond to
Senator Manchin?
Ambassador Tai. Senator Manchin, you began that by asking
what you can do, and to help, and I think that what you have
just conveyed is absolutely, I want to let you know, loud and
clear, and well received by me sitting in this chair.
Senator Shaheen. Thank you very much. Senator Moran.
Senator Moran. Chair, thank you.
In this setting, and with the Secretary of Commerce, both
the Chair and I, and other Members of the Committee have had
ongoing conversations about lumber particularly as they relate
to home building, home prices, we are still absent this
agreement with Canada. Can you provide me an update on any
progress that has been made in a long-term resolution of this
issue with Canada on softwood lumber?
Ambassador Tai. Yes. Senator Moran, I would be happy to
provide you with an update. I talk lumber almost every single
time I have seen my Canadian counterpart, and I have seen her
quite a bit in these last several months. I have indicated that
we are open and interested in addressing lumber through another
agreement which we had in place several years ago, that
requires the Canadian Government to be willing to address the
fundamental challenges that we have with respect to an unlevel
playing field for our industry, with respect to how they govern
their harvesting and their industry, which has the impact of
subsidies, for our competitors.
When and if Canadian industry and the Canadian government
are ready to address those issues, we stand ready and willing
to enter into negotiations to see if we can, once again, come
to some kind of an agreement with Canada.
Senator Moran. Leverage has been a theme of the
conversations this morning. Is there leverage with Canada in
that regard to induce them to do so?
Ambassador Tai. Senator Moran, I like the way you think.
And I would be happy to have a follow-up conversation with you
around how we might examine that question.
Senator Moran. All right, thank you. One of the more recent
developments in home building, and in home ownership has
developed as a result of the lack of grain-oriented electric
steel needed to build transformers. And so there is a shortage
in Kansas, and I assume the country in getting the transformer
necessary to build a new home or to have a new home, have a
connection with utilities.
I know that we increased tariffs on imported steel, I know
there was a Department of Commerce investigation that
subsequently found no corresponding increase in domestic
manufacturing to meet U.S. demand; this type of steel remains
under Section 232 Tariffs. Any thoughts of what USTR can do to
solve this problem of lack of transformers?
Ambassador Tai. Senator Moran, let me go back to USTR and
check the facts, because I have had two sets of conversations
on grain-oriented electric steel of late. One is around the
need to access more of them, or more of this type of steel for
transformers. The other one goes to some of your colleagues
here in the Senate, and then also in the house who represents
States and districts where there is one lone producer in the
United States left.
Senator Moran. And producing the transformers----
Ambassador Tai. And in my mind the fact is that GOES is not
subject to 232. But let me come back to you with better facts.
Senator Moran. Okay.
Ambassador Tai. Let me just say this--these conversations
really break my heart because, they are similar to the
conversations we have on solar. We litigated several cases at
the WTO against China on their approach to cornering the market
on grain-oriented electric steel, and our loss of our own
industry. And what I find time and time again, is whether it is
with respect to GOES, or solar, that once we have lost the
better part of our industry, we find ourselves totally over a
barrel, domestically, and also with our other trading partners
around how we can--how we can have reliable access to these
types of industrial products, where we have confidence in their
integrity.
And so let me just say this bottom line is: let me go back
to USTR and do some homework and follow up with you.
Senator Moran. Finally, again, on this conversation of
tariffs being utilized as leverage, it seems to me that if we
are creating a circumstance in which we want and have leverage,
the result would be that we would be negotiating additional
trade agreements, bilateral, multilateral. But the
administration has not requested trade promotion authority.
That is one thing. What new agreements, trade agreements is the
administration pursuing that then justifies the use of tariffs
to be leveraged?
Ambassador Tai. I think that in terms of the China tariffs,
that is with respect to leverage vis-a-vis China.
Senator Moran. Mm-hmm.
Ambassador Tai. And it has been a very long time since we
have looked at negotiating what I would call a traditional
trade liberalizing agreement with China. I think the last
effort that we had was the Bilateral Investment Treaty. And
that was way back in 2015 and 2016, and I don't think this may
be when they come out of the woodwork. I don't think anyone has
asked me to re-engage with that particular issue.
At USTR I had an agency that is built for two things, and
it is on a spectrum. These two activities are not mutually
exclusive. One is trade negotiations, and the other one is
trade enforcement. And so, we have every interest, and we are
actively pursuing negotiations every single day, and enforcing
every single day.
Your question about TPA, I am happy to engage in the
conversation with Congress. And this is the larger issue around
how we orient U.S. trade policies in negotiations separate from
the enforcement side, to further our national interests. And I
think that our focus right now really is on sustainability and
resilience.
That means a modification; and a course correction for the
approach that we have taken in the past. In particular, around
trade liberalization; and I think it is an important
conversation to have, and I would like to let you know that I
am happy to engage in it with the Congress.
My main point being, however, that we have got to bring new
thinking to how we think about trade agreements, and trade
agreement negotiations. We have to take into effect the really
painful experiences that we have had these couple of years, and
figure out how we do things differently to remain connected
with the rest of the world, in a way that is good for the
American economy, and that is built for resilience in the long
term.
Senator Moran. I appreciate your answer. I am not going to
ask more questions, Chair.
[Laughter.]
Senator Moran. I appreciate your answer, and I would
highlight, at least from my take, I like that you put on par
with negotiations of agreements, enforcement of agreements, it
seems to me for a long time we celebrate. We do the high five
when the agreement is signed, but when the results don't occur
there seems to be less than adequate follow-through. So I
appreciate that.
I also think that you were segmenting China and leverage in
a different way than other trading, or potential trading
partners, around the globe. And I think that is a--an
appositive, and it is a necessary attitude to have with China.
And finally, I would say that the WTO is broken, its
appellate body, it seems to me, no longer really function--
membership so broad that agreements appear impossible. And I
would just encourage the--trying to fix those problems but as
equally important trying to find friendly countries around the
world to institute smaller successes than appears to me we
would get in work with WTO.
Does that make sense? Did I say anything that doesn't make
sense? That was a question.
Senator Shaheen. No. No further questions, Senator Moran.
Senator Moran. Well, I don't know that I want the answer,
but----
Ambassador Tai. All of it makes sense.
Senator Shaheen. Oh. Thank you, Senator Moran. And actually
you have made a very good argument for why we need to fund
USTR's budget, right, Ambassador Tai.
ADDITIONAL COMMITTEE QUESTIONS
Senator Shaheen. If there are no further questions this
morning, Senators have until June 29 to submit additional
questions for the official hearing record, and we would request
the agency's responses within 30 days.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Dianne Feinstein
Questions Submitted to Ambassador Katherine Tai, U.S. Trade
Representative
Question 1. As you may know, I opposed the former president's
escalatory trade wars. The costs of the tariffs we put into place on
many countries have been paid almost exclusively by U.S. families and
businesses. I also believe they strained our international
relationships and were not part of a thoughtful strategy.
I realize that the Biden Administration inherited these tariffs,
and I thank you for having reduced them in some cases. I also recognize
that imposing tariffs can be useful in certain cases. China, for
instance, has engaged in numerous unfair trade practices and we should
be serious about trying to change its behavior.
--Ambassador Tai, when and how does the Administration believe
tariffs should be used, and when are other tools more
appropriate? What are we asking our trade partners to do in
exchange for reducing or eliminating current tariffs? How
specifically do you assess whether or not tariffs are achieving
our desired goals?
Answer. Tariffs are a legitimate tool in the trade toolbox. The
Biden-Harris Administration is continually reviewing the China Section
301 tariffs; this process is a key part of the Administration's
deliberative, long-term vision for realigning the U.S.-China trade
relationship around our priorities and making trade work for American
workers and businesses, which have been unfairly targeted by China's
non-market policies and practices. As part of our review, we have
initiated and completed two separate exclusion processes--one on COVID-
related products, and one addressed to over 500 previously-extended but
expired exclusions. In the latter process, we reinstated exclusions
where American workers, farmers, and domestic producers would benefit.
The statutory 4-year review also provides an opportunity to assess the
tariffs. Furthermore, we are continuing to consider additional
modifications and exclusions processes, as warranted.
Question 2. As you know, China is the world's second-largest
economy and is likely to someday surpass U.S. GDP. While it is a
lucrative market for many U.S. companies, China has also engaged in
many unfair trade practices, including intellectual property theft,
heavy subsidization of key industries, and preferential treatment for
state-run businesses.
The Biden Administration inherited numerous tariffs on imports from
China, along with the ``Phase One'' trade agreement. China has not
fulfilled its end of that agreement, including promised purchases of
U.S. agricultural products, which of course are important to
California. You have said that the U.S. must enforce the terms of the
Phase One agreement and outlined principles for a multilateral approach
to fair trade with China. You also have said that discussions with
China are taking place, but it would be helpful to me to hear more
details about what concrete steps are being taken to move this
relationship forward.
--Ambassador Tai, what specific steps has the Administration has
asked China to take to improve trade relations with the U.S.?
What specific negotiations with China have taken place or are
planned? What has been China's response, and what is China
asking of us?
Answer. In October 2021, we launched a direct dialogue with China
regarding China's failure to fulfill the purchase commitments made in
the U.S.-China Economic and Trade Agreement, commonly referred to as
the ``Phase One Agreement.'' We are also engaging in technical level
discussions with China regarding its incomplete implementation of its
agriculture and intellectual property- related commitments. We also
have been raising our concerns relating to China's harmful non- market
policies and practices that were left unaddressed by the Phase One
Agreement, particularly China's state-directed industrial targeting,
which has had devastating impact on American workers and businesses as
well as on our allies and partners.
While we continue to keep the door open to conversations with
China, including on its Phase One Agreement commitments, we also need
to acknowledge the Phase One Agreement's limitations, which did not
focus on some of China's most harmful practices, namely economic
coercion and non-market practices. Going forward, our strategies will
also include vigorously defending our values and economic interests
from the negative impacts of China's unfair, non- market policies and
practices. At the same time, we are not solely relying on bilateral
engagement. We are actively reaching out to and enhancing our
engagement with like-minded trading partners, both directly and through
multilateral institutions, as we seek to develop and execute joint or
coordinated strategies for addressing the unique challenges posed by
China.
As part of this effort, we are prepared to use whatever trade tools
we have that may be necessary to protect U.S. interests. That includes
working with Congress to develop new trade tools that take into account
the realities of what trade looks like today.
Question 3. Earlier this year, you said that while free trade
agreements are in the U.S. toolbox for negotiating trade relations,
they are ``a very 20th century tool.'' Since opening markets and the
principle of free trade have been a central feature of U.S. trade
policy for decades, I'd be interested in hearing a bit more from you on
that issue.
--Ambassador Tai, your earlier statement implies that free trade
agreements are in some way outdated. In what sense do you
believe they have become so? And given that you said that free
trade agreements should still be a tool in our toolbox, in
which circumstances do you think they would make sense?
Answer. The Biden Administration is using our trade tools to create
new opportunities for American agriculture, including using our
existing Trade and Investment Framework Agreements (TIFAs) and Free
Trade Agreements (FTAs) to eliminate tariff and non-tariff barriers to
U.S. agricultural products. Last year, we secured a number of wins that
will provide more certainty for U.S. farmers, ranchers, and food
producers around the country, including: removal of retaliatory tariffs
due to resolution of the EU aircraft dispute and a historic agreement
on steel aluminum; removal or aversion of tariffs due to agreements
with four European trading partners on Digital Services Taxes; new
access to the Indian market for U.S. pork following the U.S. India
Trade Policy Forum; favorable outcomes on products such as pork, beef,
rice, wheat, corn and grape juice in negotiations with the United
Kingdom and the EU on tariff rate quotas resulting from Brexit;
Vietnam's approval of pending biotech events following TIFA engagement;
MFN duty reductions in Vietnam for corn, wheat, and frozen pork; and
regaining access to the EU market for our shellfish producers. We are
also committed to strong enforcement of our agreements, as our recent
win on Canada dairy illustrates, to promote predictability and level
the playing field in agricultural trade.
Question 4. As you know, Trade Promotion Authority, legislation
that Congress has previously passed several times to make it easier for
the Administration to negotiate trade agreements, expired on July 1,
2021.
A number of members of Congress have said that they would like to
renew Trade Promotion Authority. You have said Congress should renew
Trade Promotion Authority, but with an updated set of priorities.
However, there has been little indication that the Administration
considers renewing it to be a priority.
--Ambassador Tai, do you believe that Congress should renew Trade
Promotion Authority? If so, how do you think it should look
different than previous Trade Promotion Authority that Congress
has passed? What actions has the Administration taken to move
forward on legislation to renew it? If you do not want to renew
Trade Promotion Authority, why not?
Answer. There are strong views on both sides of the Trade Promotion
Authority issue, and I look forward to working with Congress should you
decide to advance TPA legislation.
Question 5. In the past month, the Administration has introduced
its frameworks for trade in the Pacific Rim and South Asia and for
North and South America.
I thank the Administration for moving forward with trade relations
in these regions that are critical to California's economy. And, I
agree with the principles that the Administration has enumerated,
including clean energy and infrastructure, strengthening our supply
chains, and fighting corruption.
However, one principle notably missing from these frameworks is
increasing access to markets, which is a priority for many U.S.
producers to secure in other countries, and also what many countries
want most from the United States.
--Ambassador Tai, is the Administration willing to negotiate market
access with other countries despite it not being included in
its trade frameworks? If so, why was it not included as a
pillar in these frameworks?
Answer. This Administration takes a strategic approach when
engaging our partners worldwide. As each partner is different, we have
and will continue utilizing all our trade policy tools to come up with
innovative arrangements, whether in the context of a large trade
arrangement or through other formats that would secure market access
and provide the greatest economically meaningful outcomes for the
United States.
President Biden recently announced the launch of an Indo-Pacific
Economic Framework (IPEF) to promote inclusive growth for U.S. workers
and businesses and support our competitiveness going forward. USTR is
leading IPEF's trade pillar, where we are pursuing high-standard
commitments. While the Administration is not currently considering
tariff liberalization, IPEF will enhance market access for American
exporters by knocking down regulatory barriers and establishing rules
that facilitate market access.
______
Questions Submitted by Senator Christopher Coons
Question 1. The WTO Ministerial decision on TRIPS states: ``No
later than 6 months from the date of this Decision, Members will decide
on its extension to cover the production and supply of COVID- 19
diagnostics and therapeutics.'' In light of the Administration's
position that any waiver should deal only with vaccines, will USTR
engage in these negotiations?
Answer. In the interest of achieving consensus across the 164
Members of the WTO, Members focused on securing an outcome with respect
to COVID-19 vaccines, with the potential to expand to COVID-19
diagnostics and therapeutics within 6 months. We are starting our
domestic consultations on whether to extend the Decision to cover the
production and supply of COVID-19 diagnostics and therapeutics and look
forward to continuing to engage with Congress and all relevant
stakeholders on this topic.
Question 2. In October, you announced a reengagement with the PRC
on trade; in your testimony, you noted ``several rounds of difficult
discussions'' with the PRC following that announcement and stated that
the United States must ``turn the page on the old playbook'' with
respect to its engagement with the PRC on trade issues. What will be
USTR's strategy for engagement with the PRC on trade, going forward?
Answer. In October 2021, we launched a direct dialogue with China
regarding China's failure to fulfill the purchase commitments made in
the U.S.-China Economic and Trade Agreement, commonly referred to as
the ``Phase One Agreement.'' We also have been raising our concerns
relating to China's harmful non-market policies and practices that were
left unaddressed by the Phase One Agreement, particularly China's
state-directed industrial targeting, which has had a devastating impact
on American workers and businesses as well as on our allies and
partners.
While we continue to keep the door open to conversations with
China, including on its Phase One Agreement commitments, we also need
to acknowledge the Phase One Agreement's limitations, which did not
focus on some of China's most harmful practices, namely economic
coercion and non-market practices. Going forward, our strategies will
also include vigorously defending our values and economic interests
from the negative impacts of China's unfair, non- market policies and
practices. At the same time, we are not solely relying on bilateral
engagement. We are actively reaching out to and enhancing our
engagement with like-minded trading partners, both directly and through
multilateral institutions, as we seek to develop and execute joint or
coordinated strategies for addressing the unique challenges posed by
China.
As part of this effort, we are prepared to use whatever trade tools
we have that may be necessary to protect U.S. interests. That includes
working with Congress to develop new trade tools that take into account
the realities of what trade looks like today.
______
Questions Submitted by Senator Jerry Moran
Question 1. Given that current vaccine supply already exceeds
demand, how will agreeing to waive US intellectual property lead to
higher vaccination rates?
Answer. The WTO Ministerial Decision on the TRIPS Agreement is one
part of a holistic approach to getting as many safe and effective
COVID-19 vaccines to as many people around the world as possible. The
Biden-Harris Administration continues to work with the private sector
and all possible partners to expand sustainable vaccine and critical
medical supplies manufacturing and distribution around the world, an
important component of strengthening our global health security. The
uncertainty around the virus, including variants, means that the
pandemic is not over. The goal of this Decision is to facilitate
production among WTO Members who do not have that ability and to
diversify vaccine production. The Decision could help some developing
country Members, such as South Africa, on such efforts. Developing
distributed manufacturing capacities will foster regional self-
sufficiency on vaccine production.
Question 2. The United States has never in its history agreed to
such a broad waiver of intellectual property. What does USTR see as the
costs of this waiver and how did you weigh them in arriving at the
decision to consent to the IP waiver?
Answer. During a previous global health crisis--the HIV/AIDS crisis
in 2002--WTO Members agreed to a waiver in connection with the
implementation of paragraph 6 of the Doha Declaration on TRIPS and
Public Health. The pandemic is another global health crisis that calls
for WTO Members to respond. The Administration believes strongly in
intellectual property protections, but in service of ending this
pandemic, supported a waiver of those protections for COVID-19
vaccines.
Question 3. In agreeing to the TRIPS IP waiver, WTO agreed to
consider in 6 months whether to extend the IP waiver to therapeutics
used to treat COVID.
--Will USTR support this broader waiver?
--What factors will USTR weigh in reaching a decision?
--Is USTR concerned that the prospect of a future waiver, even if
it's not enacted, could have a significant chilling effect on
investment into new COVID therapeutics that could potentially
save lives and improve health outcomes?
Answer. We are starting our domestic consultations on whether to
extend the Decision to cover the production and supply of COVID-19
diagnostics and therapeutics and look forward to continuing to engage
with Congress and all relevant stakeholders on this topic.
______
Questions Submitted by Senator Susan Collins
Question 1. Since the Softwood Lumber Agreement expired in 2015,
the U.S. and Canada have been locked in a trade dispute that has
resulted in the U.S. imposing both countervailing and antidumping
duties on Canadian softwood lumber imports. These tariffs are very
harmful to Maine businesses, many of which work closely with Canadian
sawmills right across the border. High lumber prices also affect the
availability of affordable housing for millions of Americans. We need
long-term certainty and stability in the softwood lumber market, and
particularly amid rampant inflation.
In November 2017, Canada appealed the Commerce Department's
original determination to impose duties on Canadian lumber. NAFTA rules
that apply to this appeal require that a panel be established and reach
a final decision within 315 days of the appeal being made. It has now
been over four and a half years, or almost 1,700 days, since Canada
requested this review and yet a panel has not been established.
--Ambassador Tai, when will the panel be established so that it can
reach a decision, which is long overdue?
--Do you plan to meet with your Canadian counterparts to negotiate a
new Softwood Lumber Agreement?
Answer. USTR is engaged with our Canadian counterparts regarding
the important task of composing panels. The United States has proposed
candidates to complete NAFTA panel composition, but Canada has not
acted on our proposals.
I continue to discuss softwood lumber with my Canadian counterpart
in every meeting. The United States is open to resolving our
differences with Canada over softwood lumber, but it would require
Canada to address its policies that create an uneven playing field for
the U.S. industry. Unfortunately, to date, Canada has not been willing
to address these concerns adequately.
Question 2. As you know, Section 301 tariff exclusions for imports
from China expired in December 2020. In March of this year, USTR
announced that it would reinstate 352 exclusions that were previously
granted, and that these reinstated product exclusions would apply
retroactively to October 12, 2021 and extend through December 31, 2022.
One Maine company, Hussey Seating, located in North Berwick, is a
family-owned business that designs, manufactures, and sells spectator
seating systems around the world. I appreciate that USTR granted all
three of Hussey Seating's product exclusion requests, at my urging.
Making these product exclusions permanent, however, would provide much
more certainty to Hussey and other companies that rely on certain
imports.
--Has the USTR given any consideration to making these Section 301
product exclusions permanent, rather than going through the
lengthy and uncertain process of assessing and extending them
again?
--I understand that the USTR does not currently have a process in
place to accept new exclusion requests. Is the USTR considering
restarting a process to permit businesses to apply for
exclusions?
Answer. The Biden-Harris Administration is continually reviewing
the China Section 301 tariffs; this process is a key part of the
Administration's deliberative, long-term vision for realigning the
U.S.-China trade relationship around our priorities and making trade
work for American workers and businesses. The statutory 4-year review
also provides an opportunity to assess the tariffs.
In addition, we are continuing to consider additional modifications
and exclusions processes, as warranted.
______
Questions Submitted by Senator John Boozman
Question 1. What is USTR doing to ensure the second dispute
initiated under USMCA on Canada's dairy tariff rate quota
administration will result in a different outcome than the first
dispute, including measurable increases in US access?
Answer. We are carefully considering next steps to ensure that the
United States gets the full benefit of the market access for American
dairy workers, farmers, and exporters that Canada committed to under
the USMCA.
Question 2. Are you aware, higher energy costs, supply chain
disruptions, Russia's invasion of Ukraine along with other geopolitical
tensions, and additional duties on imported fertilizers have resulted
in significant price increases on fertilizer and other agricultural
inputs for U.S. producers. A recent report by economists at the
Agricultural and Food Policy Center (AFPC) at Texas A&M University
found nitrogen prices alone have increased 133 percent in the last
year. What actions have you taken to help alleviate the surging global
prices for fertilizer and other agricultural inputs? What actions are
you taking to engage China to restore its exports of phosphate and urea
in the global marketplace?
Answer. USTR has been working closely with USDA on various food
security issues. USDA is making $500 million available through a new
grant program this summer to support independent, innovative and
sustainable American fertilizer production to supply American farmers.
The new program will increase competition in a concentrated market;
create good-paying jobs at home while reducing the reliance on
potentially unstable or inconsistent foreign supplies; and improve upon
fertilizer production methods to jump start the next generation of
fertilizers produced here in the United States.
USTR is also working with the interagency to encourage multilateral
development banks, the Food and Agriculture Organization, and the
International Fund for Agricultural Development to finance projects to
expand fertilizer production, as well as increase the efficient use of
fertilizer and precision agriculture throughout the world to lessen the
global dependence on Russia. We will continue to work internally within
the administration and with our allies and partners to find additional
ways to resolve the global fertilizer shortage and prevent similar
shocks in the future.
Question 3. The Phase 1 Economic and Trade Agreement requires the
trajectory of Chinese imports of U.S. products to continue beyond 2021,
what actions are you taking to ensure China continues to meet the
purchasing goals set forth in the agreement?
Answer. It is apparent that China did not fully implement its Phase
One Agreement purchase commitments, and we have been discussing with
our Chinese counterparts how China plans to rectify the purchase
shortfalls. We continue to consult with China on this and other trade
matters, and all options remain on the table in dealing with China's
compliance failures. We also need to acknowledge the limitations of the
Phase One Agreement and past approaches to dealing with China. We are
prepared to use all available tools, and by exploring possible new
tools as necessary, to defend our economic interests in the face of
China's unfair policies and practices. We are also working more closely
with like-minded trading partners on issues of shared concern and new
potential strategies.
Question 4. Thank you for your work in protecting U.S. farmers at
the WTO-standing strong against India's ploys to expand their
agricultural subsidies and public stockholding programs. As you know,
rice is an important commodity in Arkansas and our farmers have been
operating at a competitive disadvantage to India for years because of
their trade distorting policies. Myself and 17 colleagues sent you a
letter to this effect in December 2021. Can you commit to taking action
to address India's behaviors and hold them accountable at the WTO?
Answer. I share your concerns regarding India's domestic support
policies and am committed to holding our trading partners accountable
to their international trade commitments. I also appreciate the
reference to your letter of December 2021, which highlights that U.S.
agricultural producers and exporters, particularly in the rice and
wheat industries, are disadvantaged as a result of Indian domestic
support policies.
India is a notable competitor for U.S. farmers, including Arkansas
rice farmers, in third-country markets, and its agricultural policies
impact our ability to export grains and other products both to India
and globally. USTR and USDA staff are closely reviewing India's
domestic support measures, and we are considering all options to ensure
that U.S. exports can compete on a level playing field. In addition,
the United States is working closely with a sizeable and growing
coalition of World Trade Organization (WTO) Members in Geneva who share
our concerns regarding India's domestic support policies. In May, the
United States and other concerned WTO Members initiated technical
consultations with India under the Bali Decision on Public Stockholding
for Food Security Purposes.
Additionally, at the 12th Ministerial Conference of the WTO in
June, I am pleased that we were able to uphold important WTO
commitments on agriculture by standing up to India's demands that its
public stockholding programs be exempted permanently from WTO limits on
trade- distorting agricultural subsidies.
Question 5. Can you elaborate on USTR's China strategy? Does USTR
plan any tariff relief, and will USTR initiate a new 301 investigation
into Chinese subsidiaries?
Answer. A major component of the Biden-Harris Administration's
trade agenda is the realignment of the U.S.-China trade relationship.
Since last year, we have launched a direct dialogue with China, and
have pressed China to live up to its commitments under the Phase One
Agreement. We have also raised concerns regarding China's state-
directed, non-market policies and practices that were not addressed in
the Phase One Agreement. Several rounds of difficult discussions made
clear the limits of China's interest in delivering on those
obligations. And that is why it is time for us to turn the page on the
old playbook. China's non-market policies and practices unfairly target
U.S. workers, businesses and key sectors. We have to use all available
tools and develop new tools to defend our economic interests and
values. President Biden recognizes that market economies must act in
concert to confront policies that are fundamentally at odds with the
modern trading system. And that is why we have also brought a renewed
focus to engagement with our partners and allies, who also are
negatively impacted by China's unfair trade and economic practices.
The Administration is continually reviewing the China Section 301
tariffs, as a key part of our deliberative, long-term vision for
realigning the U.S.-China trade relationship around our priorities. As
part of this process, in March, we reinstated exclusions where American
workers, farmers, and domestic producers would benefit. The statutory
4-year review also provides an opportunity to assess the tariffs. We
are continuing to consider additional exclusions processes and
modifications, as warranted.
Question 6. As you know, the Administration has launched a number
of non-trade, trade agreements, including IPEF, TCC, and Latam. How
does USTR intend to link these together? That is, if you are focusing
on trade facilitation in all three, are there best practices that
should be common to all three?
Answer. We are developing a worker-centered trade policy that
benefits U.S. workers and consumers, and ensures that U.S. companies
can continue to innovate and create new economic opportunities both in
the United States and abroad. Our initiatives are linked by a common
goal of trade arrangements that include high standard commitments in
the areas of labor, environmental sustainability, transparency and good
regulatory practices, and trade facilitation. This Administration takes
a strategic approach when engaging our partners worldwide. As each
partner is different, we have and will continue utilizing all our trade
policy tools to come up with innovative arrangements, whether in the
context of a large trade arrangement or through other formats that
would secure market access and provide the greatest economically
meaningful outcomes for the United States. We look forward to continued
close coordination with Congress on these initiatives.
______
Questions Submitted by Senator Shelley Moore Capito
Question 1. I brought up this question last year during the fiscal
year 2022 hearing. However, I still have concerns surrounding Jingye
Group, a Chinese steel and iron manufacturer, had purchased British
Steel--a steel manufacturer with facilities across the UK and Europe.
As we continue to place focus on China's trade practices, I worry that
acquisitions such as these could lead to the circumvention of U.S.
trade law. My staff has reached out to USTR more than a few times to
get a better understanding how the quotas and auditing process will
work under the new agreement without receiving a sufficient response.
--Are the quotas in the Trade Rate Quotas (TRQs) with the EU and the
one being negotiated with the U.K. divided out by Harmonized
Tariff Schedule (HTS) code or is it just a lump sum of all
steel tonnage?
--Can you elaborate on how the ``melted & poured'' requirement in the
EU deal will be policed? What penalties will be levied for
breaking the rules of the agreement?
--Will the results of the annual audits under the U.S. and U.K. be
published for review?
Answer. The U.S. announcement of actions on EU imports under
Section 232 provides that the aggregate annual import volume under the
steel TRQ is set at 3.3MMT under 54 product categories (HTS codes for
these product categories are listed in Annex 1 of the U.S. announcement
https://ustr.gov/sites/default/files/files/Statements/
US%20232%20EU%20Statement.pdf). This annual volume is allocated by
product category on an EU member state basis in line with the 2015-2017
historical period.
The U.S. announcement of actions on UK imports under Section 232
provides that the aggregate annual import volume under the steel TRQ is
set at 0.5 MMT under 54 product categories (HTS codes for these product
categories are listed in Annex 1 of the U.S. announcement https://
www.commerce.gov/sites/default/files/2022-03/UK232-US-Statement.pdf).
This annual volume is allocated by product category in line with the
2018-2019 historical period. The U.S. Customs and Border Protection, in
consultation with the Department of Commerce, administers the TRQ.
With regard to the annual audit, the U.S.-UK joint statement
provides that, upon completion, the results of the annual audits will
be made available to the United States. The statement also provides
that the United States will protect any audit properly identified as
containing proprietary information from public disclosure to the extent
permitted by U.S. law.
Additional information on the administration of the TRQ or the
annual audit may best be obtained from the Department of Commerce.
Question 2. As part of the Phase One Agreement with China, Chinese
leaders committed to buying an additional $200 billion worth of
American goods and services over 2017 levels by the end of 2021.
However, analysis\1\ of the trade data published in March 2022 founds
that China only bought 57 percent of the U.S. exports they committed to
make by the end of 2021.
--Do you anticipate whether there will be a phase two of the
agreement?
--Will there be an effort taken by USTR to enforce China's compliance
with the energy provisions that are part of the Phase One
Agreement?
Answer. It is apparent that China did not fully implement its Phase
One Agreement purchase commitments, and we have been discussing with
our Chinese counterparts how China plans to rectify the purchase
shortfalls. We additionally continue to press China to implement other
commitments of Phase One, including those relating to agriculture and
intellectual property. We continue to consult with China on these and
other trade matters, and all options remain on the table in dealing
with China's compliance failures. We also need to acknowledge the
limitations of the Phase One Agreement and past approaches to dealing
with China. We are expanding our strategies beyond exclusively pressing
China for change or for compliance with past commitments. We are
prepared to use all available tools, and by exploring possible new
tools as necessary, to defend our economic interests in the face of
China's unfair policies and practices. We are also working more closely
with like-minded trading partners on issues of shared concern and new
potential strategies.
Question 3. As a result of the pandemic and indefinite work from
home policies, many Americans are considering the option to move to
rural areas, like my state of West Virginia. However, lumber prices
have more than tripled since last spring and are further increased by
tariffs on Canadian softwood lumber.
--Is your team working on a new softwood lumber agreement with
Canada?
--Will you make this a priority?
Answer. I understand your concerns about spikes in lumber prices
over the past year and a half, which have been followed by a downward
trend due to changes in supply and demand as our economy recovers from
the pandemic.
I continue to discuss softwood lumber with my Canadian counterpart
in every meeting. The United States is open to resolving our
differences with Canada over softwood lumber, but it would require
Canada to address its policies that create an uneven playing field for
the U.S. industry. Unfortunately, to date, Canada has not been willing
to address these concerns adequately.
---------------------------------------------------------------------------
\1\ https://www.piie.com/blogs/realtime-economic-issues-watch/
china-bought-none-extra-200-
billion-us-exports-trumps-trade.
______
Questions Submitted by Senator John Kennedy
Question 1. Thank you for your work in protecting U.S. farmers last
week at the WTO--standing strong against India's ploys to expand their
agricultural subsidies and public stockholding programs. As you know,
rice is an important commodity in Louisiana and our farmers have been
operating at a competitive disadvantage to India for years because of
their trade distorting policies. Myself and 17 colleagues sent you a
letter to this effect in December. Can you commit to taking action to
address India's behaviors and hold them accountable at the WTO?
Answer. I share your concerns regarding India's domestic support
policies and am committed to holding our trading partners accountable
to their international trade commitments. I also appreciate the
reference to your letter of December 2021, which highlights that U.S.
agricultural producers and exporters, particularly in the rice and
wheat industries, are disadvantaged as a result of Indian domestic
support policies.
India is a notable competitor for U.S. farmers, including Louisiana
rice farmers, in third-country markets, and its agricultural policies
impact our ability to export grains and other products both to India
and globally. USTR and USDA staff are closely reviewing India's
domestic support measures, and we are considering all options to ensure
that U.S. exports can compete on a level playing field. In addition,
the United States is working closely with a sizeable and growing
coalition of World Trade Organization (WTO) Members in Geneva who share
our concerns regarding India's domestic support policies. In May, the
United States and other concerned WTO Members initiated technical
consultations with India under the Bali Decision on Public Stockholding
for Food Security Purposes.
Additionally, at the 12th Ministerial Conference of the WTO in
June, I am pleased that we were able to uphold important WTO
commitments on agriculture by standing up to India's demands that its
public stockholding programs be exempted permanently from WTO limits on
trade- distorting agricultural subsidies.
SUBCOMMITTEE RECESS
Senator Shaheen. So thank you very much, Ambassador Tai.
This hearing stands in--subcommittee stands in recess until the
call of the Chair.
[Whereupon, at 11:12 a.m., Wednesday, June 22, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]