[Senate Hearing 117-]
[From the U.S. Government Publishing Office]
COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2022
----------
WEDNESDAY, APRIL 28, 2021
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Jeanne Shaheen (Chairwoman)
presiding.
Present: Senators Shaheen, Van Hollen, Moran, Murkowski,
Hagerty, Collins, and Braun.
OFFICE OF THE U.S. TRADE REPRESENTATIVE
OPENING STATEMENT OF SENATOR JEANNE SHAHEEN
Senator Shaheen. Good morning, everyone. Welcome to today's
Commerce, Justice and Science and Related Agencies Subcommittee
Hearing to review the activities and fiscal year 2022 funding
priorities of the Office of the U.S. Trade Representative.
We're especially pleased today to have Ambassador Katherine
Tai with us, our United States Trade Representative. I look
forward to hearing what you have to say and to hearing the
questions that we have. So, welcome. Congratulations on your
historic nomination and unanimous confirmation. I know that I
speak for everyone on the subcommittee when I say that we're
excited to have you testify on the topics of importance to the
country and to all of our constituents.
The Office of 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. And I think it's no
exaggeration to say that these responsibilities affect every
American in every facet of our lives, from protecting American
workers, helping American businesses thrive, and enhancing
national security, to building a world with clean air and
water, while preventing catastrophic climate change.
In order for USTR to succeed, Congress and, in particular,
this subcommittee, must ensure it has sufficient resources to
carry out its important mission. And to that end, the fiscal
year 2021 Omnibus Spending Bill included $70 million for the
Office of USTR. While the President's initial fiscal year 2022
request did not include a top line proposal for USTR, we look
forward to learning more today about your funding requests.
And while we consider these funding needs, it's important
to consider the new administration's trade policies and
strategy. In 2018 and 2019, the previous administration imposed
a series of wide-ranging import tariffs the likes of which this
country has not seen in years.
The repeated use of tariffs, the crudest form of trade
instruments, and the predictable tit-for-tat retaliatory
tariffs that followed wreaked havoc on global supply chains,
and, by extension, on too many businesses and working people in
my State of New Hampshire, and throughout the country.
New Hampshire's a small business State, but it's also an
exporting State. And in a previous life as Governor of the
Granite State, I personally led the first overseas trade
mission to Europe, and that was followed by several others to
bring more investment into the State and to help businesses tap
into new export markets. People in my State understand what's
at stake in trade negotiations.
One small business I've heard from is Walkin' Pets, a 35-
person pet supply company in Amherst, New Hampshire. The
company signature product, a wheelchair for dogs, is produced
in China, and is subject to tariffs. Now, the company believed
that the tariff was a mistake on its business, so they retained
a lawyer to help navigate the Byzantine exclusion process.
Unfortunately, the company wasn't able to get an exclusion
because of an imprecise classification.
Now, after hiring a lawyer, and having braved the exclusion
process, the company is still at square one, stuck with the
tariff, and struggling to stay afloat.
So, understandably, there is still a great deal of concern
about the Section 301 tariffs especially now that, as of the
end of calendar year, exclusions are no longer an option. I'm
eager to learn more about your plans for Section 301 tariffs,
and I'm pleased that in your confirmation hearing, you
committed to further engagement of reunilateral action. You
also committed to using all the tools at your disposal, not
just more and more tariffs, to advance USTR's critical mission.
In my view, taking a tough, but more thoughtful, approach
will help level the playing field for American workers, while
allowing the United States to once again set the rules of the
road for global trade. Your successful negotiation of USMCA is
proof positive that this is a winning playbook. Trade done
right is a race to the top instead of a race to the bottom, as
you know.
Finally, let me conclude my opening statement by noting
that I was very pleased that you used your first major policy
address to embrace USTR's critical role in protecting our
environment and addressing climate change. Trade policy, in my
view, can't be divorced from environmental policy as our future
prosperity is tied to tackling climate change.
Ambassador Tai, we clearly have a lot to discuss this
morning. I look forward to hearing your testimony, and the
opportunity to engage with you and your thoughts about what we
should be doing with respect to trade.
So, thank you again for being here, and now I'd like to
turn it over to my Ranking Member, Senator Moran, from Kansas,
for his opening remarks. Senator.
OPENING STATEMENT OF SENATOR JERRY MORAN
Senator Moran. Senator Shaheen, thank you very much for
convening this hearing. Ambassador Tai, welcome and
congratulations on your unanimous confirmation. I always
wondered if I was nominated for something whether I could get
my colleagues in total to vote for me, and I doubt that's the
case, so congratulations. It's a significant accomplishment in
this environment. And I certainly appreciate you being here.
Thank you for the moment that we had to visit in the hallway.
You're stepping into your role at USTR at a time in which
trade policy and trade enforcement has arguably never been more
important, and perhaps more challenging. The Trump
administration pursued and effectuated an aggressive and
sometimes untraditional trade strategy, and it now falls to you
and others in the Biden administration to carry our trade
policies forward.
Due to their importance to my home State of Kansas, I'm
very interested in USMCA, and the Phase One China Trade Deal. I
always remind myself and my constituents that Kansas is
dependent upon our exports, and our economic future rests with
feeding and supplying the rest of the world. Trade and exports
is how many Kansans make a living, and Mexico, Canada, China,
and many other countries are very important to us, but those
three are consistently at the top of our list.
That's why I believe it's so important for us to ensure
that these trading partners live up to their commitments
codified in USMCA and in the Phase One Deal. This is the first
USTR-specific hearing this subcommittee has held since these
trade agreements were entered into, and I'm eager to receive an
update from you about current compliance with those agreements.
Ambassador, you're also inheriting the responsibility, as
Senator Shaheen said, of managing a full suite of 301--Section
301 investigations, including ongoing investigations into
digital services, taxes, and overseeing active tariffs
targeting billions of product. That is a significant challenge
but a very important one for the outcome to our Kansas
manufacturers and American manufacturers. In today's
environment, a most common conversation I have with Kansans is
about the expense of buying a home, and the expense of building
a home, and the lack of supply chain in regard to lumber and
steel.
While those trade agreements are important, and tariffs
Section 301 is a huge issue for you, I remain concerned about
the harm that tariffs have caused to U.S. families, to
businesses, farmers, manufacturers, and workers. This concern
is what caused this subcommittee on a bipartisan basis to
require--we did this during fiscal year 2019 Appropriations
Bill--that USTR execute an exclusion process for all rounds of
Section 301 China tariffs.
I don't think that was a necessary expected outcome when
the tariffs were put in place, but this subcommittee, in doing
its work, insisted on an exclusion process, and we've lived
with that exclusion process, its ups and downs, ever since. We
continue to carry that requirement in all subsequent CGS
appropriation bills, and I will continue to ensure that this
direction is carried out as long as the China tariffs remain in
place.
I also believe that USTR ought to begin a process to
consider renewing expired exclusions and restart the process
for companies to apply for those exclusions. Ambassador Tai,
you've already heard from me on this matter via a letter, and I
look forward to working with you to ensure that businesses have
continued opportunities to petition their government for relief
from tariffs.
In addition to the many legacy responsibilities that I've
highlighted, I'm mindful that the Biden administration has also
developed in its early stages of--and is in its early stages of
pursuing its own trade strategies. As we consider USTR's
funding needs for fiscal year 2022 during this hearing today,
I'm looking forward to learning more about President Biden's
trade strategies and priorities, and also a better
understanding of what level of resources USTR requires to
perform its growing responsibilities.
To this end, Ambassador, I was surprised that the
administration's, quote, ``skinny budget'' released on April 9
contained no information about fiscal year 2022 request for
USTR. I hope this omission is nothing more than a result of
this year's budget development process, and not a reflection
upon any suggestion that trade policy is going to take a back
seat to other domestic administration priorities.
USTR's mission and its pursuit of free and fair trade
opportunities for U.S. businesses is a domestic priority, and I
hope that the Biden administration continues to view it as
such.
Ambassador, I thank you for joining us this morning. I look
forward to hearing your testimony today, and I, even more
importantly, look forward to working with you in a very solid
and, hopefully, valuable way for both of us for years to come.
Thank you very much.
Senator Shaheen. Go ahead, Ambassador.
STATEMENT OF HON. KATHERINE TAI, AMBASSADOR, U.S. TRADE
REPRESENTATIVE
Ms. Tai. Thank you, Chairwoman Shaheen, Ranking Member
Moran, and Members of the subcommittee for inviting me to
testify before you today. It is a great honor to be here, just
as it is a great honor to return to USTR and lead the dedicated
public servants who carry out this agency's important mission
on behalf of the American people.
We are working hard to support the Biden-Harris
administration's efforts to end the pandemic and recover from
the economic crisis. The American Rescue Plan, passed by
Congress, has already helped get shots in arms and money in the
pockets of millions of Americans.
While we're seeing the economic benefits of that quick
action, more needs to be done. Our goal is not a return to the
economy we had before the pandemic, but to seize this
opportunity to set America on a strong and clear path to a
competitive future. That's why President Biden proposed the
American Jobs Plan that would make bold investments and build a
better foundation for decades of economic growth and good-
paying jobs for this generation of Americans and future
generations.
This is why USTR is developing and implementing what we are
calling a worker-centered trade policy that complements and
supports the domestic investments in the American Jobs Plan.
The President's trade agenda will foster broad-based, equitable
growth that increases innovation and enhances this country's
competitive edge and--that's crafted with workers at the table.
For the first time, we committed to using trade policy to
address racial equity and to support underserved communities.
Through thoughtful, sustained engagement and utilizing hard
data, the Biden administration will develop a better
understanding of how proposed trade policies affect all
Americans as people and in their communities, especially
communities of color. And we will consider those impacts as we
make our policy decisions.
As part of our whole of government approach, I recently
outlined my vision for leveraging trade tools, and how USTR
will enthusiastically embrace our responsibility to create
opportunities to lead in creating new clean-energy technologies
and new jobs, while averting an unfolding economic crisis and
protecting our planet. We will meet this moment by working
collaboratively with our trading partners, with Congress,
underrepresented communities, and other key stakeholders to
find creative solutions that create good-paying jobs and
incentivize that race to the top.
In my first conversations with my foreign counterparts, I
have made clear that the United States will rebuild our
international alliances and partnerships while reengaging
global institutions.
In just a few short months, USTR has already delivered
results for American workers. In March, USTR announced a 4-
month suspension of tariffs with both the United Kingdom and
the European Union related to our long-running WTO dispute over
certain large civil aircraft subsidies. This was a bold step
towards finally resolving the issues that have impacted the
U.S. industry and its workers.
Earlier this month, USTR helped to resolve a significant
dispute between two South Korean companies that make electric
vehicle batteries in America. This settlement builds confidence
in these companies' reliability and responsibility as suppliers
to the U.S. auto industry, and it puts our country in a
stronger position to drive innovation and growth of clean
energy technology envisioned in the American Jobs Plan. The
settlement is the type of trade policy that I believe we need.
It supports a larger strategy for creating jobs and investing
in innovation and manufacturing leadership by bolstering
sustainable renewable energy supply chains, levelling the
playing field, and discouraging regulatory arbitrage.
As we continue to pursue the President's trade agenda, we
will promote and defend our values of democracy, human rights,
and economic opportunity in service of producing a more
inclusive prosperity. USTR will be directly involved in
assembling what the President has termed a united front of U.S.
allies, and I will carry the strength and creativity of this
agency into every room that I enter.
I want to close by thanking the talented public servants at
USTR for their sacrifice and professionalism during this
unprecedented time. They have been tested in ways that we could
not have imagined, but they have continued to rise to the
occasion with determination and integrity. I am so proud to
represent them here today and appreciate the robust support of
this subcommittee. Thank you, and I look forward to answering
your questions.
[The statement follows:]
Prepared Statement of Hon. Katherine Tai, Ambassador, U.S. Trade
Representative
Thank you Chairwoman Shaheen, Ranking Member Moran, and Members of
the Committee for inviting me to testify before you today.
It is a great honor to return to USTR and lead the dedicated public
servants who carry out the agency's important mission on behalf of the
American people.
We are working hard to support the Biden-Harris administration's
efforts to end the pandemic and recover from the economic crisis. The
American Rescue Plan passed by Congress has already helped get shots in
arms and money in the pockets of millions of Americans.
While we're seeing the economic benefits of that quick action, more
needs to be done. Our goal is not a return to the economy we had before
the pandemic, but to seize the opportunity to set America on a strong
and clear path to a competitive future. That's why President Biden
proposed the American Jobs Plan that would make bold investments and
build a better foundation for decades of economic growth and good-
paying jobs for this generation of Americans and future generations.
This is why USTR is developing and implementing a worker-centered
trade policy that complements and supports the domestic investments in
the American Jobs Plan. The President's Trade agenda will foster broad-
based, equitable growth that increases innovation and enhances the
country's competitive edge and that's crafted with workers at the
table.
For the first time, we committed to using trade policy to address
racial equity and support underserved communities. Through thoughtful,
sustained engagement and utilizing data, the Biden administration will
develop a better understanding of how proposed trade policies affect
all Americans as people and their communities, especially communities
of color. And we will consider those impacts as we make policy
decisions.
As part of our ``whole-of-government approach,'' I recently
outlined my vision for leveraging trade tools and how USTR will
enthusiastically embrace our responsibility to create opportunities to
lead in creating new clean energy technologies and new jobs while
averting an unfolding economic crisis and protecting our planet. We
will meet the moment by working collaboratively with our trading
partners, Congress, underrepresented communities and other key
stakeholders to find creative solutions that create good-paying jobs
and incentivize a race to the top.
In my first conversations with my foreign counterparts, I have made
clear that the United States will rebuild our international alliances
and partnerships while re-engaging global institutions.
In just a few short months, USTR has already delivered results for
American workers. In March, USTR announced a four-month suspension of
tariffs with both the United Kingdom and the European Union related to
the long-running World Trade Organization (WTO) dispute over certain
large civil aircraft subsidies. This was a bold step towards finally
resolving the issues that have impacted the U.S. industry and its
workers.
Earlier this month, USTR helped resolve a significant dispute
between two South Korean companies that make electric vehicle batteries
in America. The settlement builds confidence in these companies'
reliability and responsibility as suppliers to the U.S. auto industry.
And it puts our country in a stronger position to drive innovation and
growth of clean energy technology envisioned in the American Jobs Plan.
The settlement is the type of trade policy I believe we need: it
supports a larger strategy for creating jobs and investing in
innovation and manufacturing leadership by bolstering sustainable
renewable energy supply chains, leveling the playing field,
discouraging regulatory arbitrage.
As we continue to pursue the President's trade agenda, we will
promote and defend our values of, democracy, human rights, and economic
opportunity in service of producing a more inclusive prosperity. USTR
will be directly involved in assembling what the President has termed
``a united front of U.S. allies.'' And I will carry the strength and
creativity of this agency into every room I enter.
Conclusion
I want to close by thanking the talented public servants at USTR
for their sacrifice and professionalism during this unprecedented time.
They have been tested in ways we could not have imagined, but they have
continued to rise to the occasion with determination and integrity. I
am proud to represent them today and appreciate the robust support of
this committee.
Thank you, and I look forward to answering your questions.
Senator Shaheen. Thank you very much. I just want to, at
the start, remind everyone that this is a hybrid hearing and
that some of our colleagues may be joining remotely. So we're
going to do our best to try and keep people informed of the
order of questioning, but, as we know, that doesn't always go
the way we hope. So, that's just a warning that--I'm going to
ask Senator Moran to go first. He has a mark-up and another
committee in a few minutes, and I know he wanted to ask some
questions before he has to leave. So, Senator Moran.
Senator Moran. Ambassador--Chairman, thank you for your
courtesies. And Ambassador, I will return. I hope the mark-up
of two bills of mine is non-controversial, and I'll be back
shortly, because I do want to hear what you say in response to
other Members' questions.
Let me start with something you mentioned in your opening
statement. I applaud you, Ambassador, for the goal of resolving
the number of long-running trade disputes. Kansas is an
aviation State. Those large aircraft--civil aircraft
manufacturers call Kansas home, and we are very encouraged by
the announcement that the tariffs related to WTO's dispute
would be paused for a period of 4 months in order to create
space for a negotiated settlement. We're about a month into
that pause. Can you provide me with an update of the status of
those discussions and the likelihood that an agreement would be
reached during that 4-month period?
Ms. Tai. I would love to engage with you on this question,
Senator Moran. We are about a month into the 4-month period. I
am very serious when I say that it is time for us to resolve
these disputes. They've been going on for 16 years, and as you
know, these disputes aren't born on the day that we file them.
They come out of a couple years of incubation, as well, so,
these are 20-year-old disputes.
They're disputes between the United States and the European
Union. We're both strong manufacturers in this industry, and
we're both facing increasing competition from other parts of
the world. We need to figure out how to resolve our differences
in order for us to come together to meet the challenges that we
have today, and that we will have tomorrow. And so, I am very
committed, USTR is committed to making the most of this 4-month
period to close out a chapter of our relationship and our
tensions with the European Union.
I have been in touch with my counterparts in both the
United Kingdom and the European Union. Our teams are in touch.
I am, at this point, very motivated and hopeful that we will
get the traction that we need with our trading partners, and
very much hope that they see this opportunity as I do, as one
that we really need to seize to prove to ourselves and to the
rest of the world that we can move on because we have to.
Senator Moran. I'll take that answer as you are working
hard to accomplish that goal, and you are hopeful to achieve
that during that 4-month period. I wish you well.
Ambassador, I don't know of any score card that's out there
in regard to China's compliance with Phase One. How would you
rate or grade the Phase One Agreement compliance? What has
happened and what hasn't happened?
Ms. Tai. Well, that's a very important question, and one
that I know there's a lot of interest up here in the Senate, in
the House, on the Hill, in general with stakeholders in our
entire economy, and certainly one of the questions that is at
the forefront of my mind coming in as U.S. Trade
Representative.
I would like to just take a step back and look at the
contours of this U.S.-China trade and economic agreement. It
has a number of parts. There's a lot of focus on the purchase
commitments that China made as part of this agreement. There
are also a set of rules related to intellectual property,
financial services, services access, biotech approvals that
China also committed to, and we are drilling down at USTR using
the usual discipline that we have to look at the overall
compliance picture, and to examine China's performance under
this agreement in all of its component parts.
What I would share with you right now, Senator Moran,
because we are still in the middle of this review, is that the
picture is more nuanced than you might think by just looking at
the trade data. And so, I look forward to coming back to you
with a better picture, and with a more clear sense for where we
need to drive harder with our Chinese counterpart.
Senator Moran. I think that's a fair answer for this point
in your tenure at USTR, So, thank you. At least you know the
importance it has, and it's good for you to remind me of not
just the agricultural commodity purchases, which are hugely
important to Kansas, but also those trade and intellectual
aspects of the agreement as well.
In the 30 seconds I have left, let me see if I can get an
additional question in. Steel and lumber prices, they're at
record highs. The Biden administration is proposing
infrastructure investments. I assume that will increase the
demand for those items. I'm thinking about the absence of
softwood lumber agreement with Canada, and the associated
tariffs, as well as the Section 232 tariffs on steel and
aluminum. Where do negotiations stand with Canada on softwood
lumber, and what's the administration further considering to do
to increase the affordability of two very important components
to infrastructure and housing?
Ms. Tai. Well, on softwood lumber, let me say this. I think
that it will always be a component of the conversation between
the U.S. Trade Representative and her or his Canadian
counterpart. In my initial conversation with my Canadian
counterpart, Minister Ng of Canada, we did raise our bilateral
issues, the longstanding ones especially. They're ones that
require maintenance and care and attention. So, what I would
say to you, Senator Moran, is softwood lumber will always be in
my sights in the conversation with Canada.
We have a lot of tools. We have traditionally used them
robustly. I intend to continue to do so, and to continue to
raise the concerns that we have. And try to engage our Canadian
counterparts in some out-of-the-box thinking, on this issue and
others, in terms of how we manage longstanding differences that
we have that really make an economic impact for our
stakeholders and our economy.
The other question that you've asked is on the steel
tariffs in particular. What I would say here is that we
continue to have a global overcapacity problem that is
distorting the international market. But what we have right now
in the Biden administration is a team of people who are intent
on looking for solutions that come through cooperation with our
close partners and allies. So, on that, what I'd like to convey
to you is I and others in the administration, including
Secretary Raimondo at Commerce, are working hard on
conversations with the Europeans in particular to examine how
we address the problems that the 232 tariffs have raised in
particular in our relationships, while keeping our eye on the
overall steel and aluminum market problems that we really need
others' help to address.
Senator Moran. I wish you well, and I look forward to
working with you.
Ms. Tai. Thank you.
Senator Shaheen. Thank you, Senator Moran. Hopefully,
you'll be able to get back to join us. I should have announced
when I pointed out this is a hybrid hearing that we will
therefore take Members in order of seniority on the
subcommittee so that--since we don't know who will have shown
up first online.
I want to follow up with Senator Moran's question about the
Phase One Trade Deal with China, because I understand that the
deal included the creation of Bilateral Evaluation and Dispute
Resolution Office. Is that office up and running, and can you
describe to us how you expect that to work?
Ms. Tai. Well, thank you for the question, Senator Shaheen.
I think the office is not a--it's a--I think it stands for a
flow----
Senator Shaheen. A process, maybe?
Ms. Tai. Organization of process, thank you. Looking for
that word. And so, we have had continued contact at the
designated official's level to continue to push and examine
performance of this agreement. Right now, we are looking at the
agreement holistically through the lens of an overall China
strategy.
And so, what I would say to you right now is we are looking
at the tools that we have across the board, in particular in
this agreement. It is a tool that looks a little bit different
from our other agreements or traditional agreements, but we're
interested, as I will always say, open-minded and interested in
out-of-the-box and new tools.
So, I feel like the bottom line here. We are very focused
on this agreement, which is the agreement that we have, and
testing its utility, and maximizing our use of the tools that
are included in this agreement.
Senator Shaheen. So, once that process is up and running,
do we expect companies and individuals to be able to actually
make use of that process when they have a concern or dispute
that they want to get negotiated?
Ms. Tai. So, I would say that one of USTR's functions is to
be open to, and we traditionally have been very open to the
engagement with the public, with our stakeholders.
Increasingly, we are trying to expand out the circle of
stakeholders who are used to interacting with USTR. So,
absolutely, our stakeholders are part of that process.
Senator Shaheen. Right. And I understand that the Phase One
Agreement also included a provision for USTR to meet every 6
months with the Chinese Vice Premier. Is that--that meeting's a
little overdue. Has that been scheduled?
Ms. Tai. It has not yet been scheduled, Senator Shaheen. I
will be having my first contact with my Chinese counterpart,
which I'm looking forward to, at the right time, and I expect
to be able to come back to you with an update in the near term.
Senator Shaheen. Great, thank you. I want to go back to the
301 tariffs on imported goods because, as I said, that has been
a real concern that I've heard from New Hampshire businesses.
So, can you give us any sense of how the administration is
going to approach the existing section in the near term, and
what your view is about how to use that authority?
Ms. Tai. Senator Shaheen, I know very directly, and I know
this as a strong fact, that the tariffs and the exclusion
process really do touch a very wide swath of our economy, our
businesses, both large and small. So, this is very much on my
mind. At my confirmation hearing, Senator Portman asked me for
a commitment which I was very ready to make. To undertake a top
to bottom review on China, at USTR in particular. And he
recommended it as something that he had done in his time as
U.S. Trade Representative.
So, the tariffs, this agreement, the exclusion process will
be very critical parts of this top-to-bottom review, and I am
looking forward to kicking it off and being able to come back
to you with a thoughtful and strategic recommendation in terms
of how we will proceed from there.
Senator Shaheen. Well, thank you. Do you have any sense of
how long this is going to take, your review?
Ms. Tai. It is something that we are looking at in our
design right now, and I do know that time is of the essence.
Senator Shaheen. Okay, thank you. Well, and then, just to
follow up a little bit on the exclusion process, which, as you
know, has been very opaque. It's been challenging for companies
to figure out. How do you expect to--will the review include
that exclusion process, as well?
Ms. Tai. Yes, it will.
Senator Shaheen. Thank you. Let me now go to Senator
Murkowski.
Senator Murkowski. Ambassador, thank you. Appreciate it.
You need to know that you were the subject of conversation in
Kodiak, Alaska, this weekend. Everyone is pinning their hopes
on our trade representative when it comes to seafood issues.
So, I want to raise that with you. As you know, we've seen
some good news for U.S. agriculture commodities, corn and
soybeans, under the Phase One Agreement, but when it comes to
seafood, the fact of the matter is China is not meeting those
commitments.
In 2020, its imports of U.S. seafood were below the 2017
baseline, and yet at the same time, what we're seeing is that
China is increasing their imports from other areas. Non-U.S.
imports up 89 percent in 2019 compared to the 2017 baseline.
Still up by 35 percent in 2020, despite the pandemic.
So, the question that the fine folks in Kodiak had is,
what's going on? Basically, what is happening? Why do we
continue to see this shortfall by China in terms of its seafood
purchases? Does USTR recognize what this is doing to our U.S.
seafood competitiveness, and more importantly, how can we hold
China accountable for failing on its commitments? And so, if
you can please address this for me and for all these fishermen
in Kodiak that are quite anxious about what we've seen.
Ms. Tai. Senator Murkowski, thank you. I have been advised
and informed of the excellence of the seafood product that is a
hallmark of Alaska. I don't know that I've ever had the
opportunity to experience the full aspects of what Alaska has
to offer, but the reputation of Alaska's seafood precedes it,
really. And----
Senator Murkowski. You are invited, by the way, to come
north.
Ms. Tai. Thank you very much. I was definitely maybe a
little bit fishing for that invitation. But----
[Laughter.]
Senator Murkowski. We will accommodate.
Ms. Tai. The seafood is certainly in our sights in terms of
the commitments that the Chinese made in this agreement.
They're really, really important for a number of reasons.
Economically, they're important to us, but they're also
important as commitments that China undertook of its own free
will to make, and that we need to ensure that their promises
are worth the paper that they are written on.
So, let me just assure you and the fishermen in Kodiak, I
hear you loud and clear. And in our engagement with China on
this particular agreement, we will need to engage with China
across the board in our trade and economic relationship, but
this is the agreement that we have, and this is the agreement
that needs to stand up. So, please let your fishermen know that
I care deeply about their livelihoods, about the integrity of
this agreement, and that we will be making use of the tools
that we have and really pushing the tools that we have on
their--for their benefit.
Senator Murkowski. Well, I appreciate that, and I'm
probably not going to need to report back to them because
they're probably watching this hearing, even though it's just 6
o'clock in the morning. So, I appreciate that commitment, but
again, you have pointed out this was part of their deal.
They've seen fit to make better on their word when it comes to
other products, but seafood is a glaring example of where they
have failed. So, if we can just be aggressive in that area.
Another area, in addition to our seafood, that has seen
impacts because of tariffs is what we have seen with regards to
some of our timber products. This is a part of the State that
has seen particular devastation as a result of drop-off in
tourism traffic, so the economy in southeast is really
depressed right now. But they're also seeing the impacts of a
25 percent tariff rate on Alaska spruce and hemlock. And under
the Phase One Agreement, there was a waiver for the timber
tariffs, but Alaska spruce exports to China, which is our
primary buyer of spruce, flatlined over the past couple years,
and the future is not very good. So, hoping that you can help
us work through these tariff issues, as well, on the timber
export side.
Ms. Tai. Absolutely. I hear you loud and clear on the
timber, as well.
Senator Murkowski. Thank you. Thank you, Madam Chairman.
Senator Shaheen. Thank you. I believe we have Senator Van
Hollen on the line.
Senator Van Hollen. Yes, thank you, Madam Chairman, and
thank you, Madam Ambassador for your leadership. I have some
questions on the solar panel tariffs that were imposed by the
Trump administration. Back in 2018, they imposed tariff rates
on the import of solar cells and modules, under Section 201.
That was in addition to the preexisting duties that applied to
these products. The tariff was set at over 30 percent, and then
declined by 5 percent over the years.
In 2020, so just last year, the Trump administration moved
to increase the 2021 tariff from 15 percent, which it had come
down to, to 18 percent. That's what it is today. These tariffs
have hit workers in Maryland hard, especially in the clean
energy industry, costing us many jobs. People laid off because
solar panel installers were no longer able to do it at a
competitive price, and nationally, according to the Solar
Energy Industries Association, these Trump tariffs have cost
62,000 American job opportunities.
The Biden administration, as I understand it, you've said
is going to be reviewing these tariffs. This one is scheduled
to expire in February of next year, and I listened carefully to
the President's statement about jobs and clean energy jobs here
in the United States. Have you heard and looked at the reports
of how those solar panel tariffs have hurt jobs here in the
United States?
Ms. Tai. Thank you, Senator Van Hollen. The issue of the
solar tariffs are very much on my mind, both in terms of the
impacts and the dilemmas that they present to our economy right
now, and the different stakeholders in our economy specific to
the solar tariffs, the role that solar panels play in a future
where we are running cleaner energy, but also for me, the story
of the solar panel industry in the United States really gets at
a fundamental issue that we need to confront in our competition
with China.
First thing that I'd like to say is Section 201 is--and
this particular Section 201 set of tariffs, were sought by an
industry here in the United States, so that there are producers
who petitioned for relief from the United States Government.
And today, we have a sole producer left in the United States
for solar panels, when 10, 12 years ago, we had quite a few in
this burgeoning industry. Given the role that we think these
types of products are going to play, it's actually a very sad
story that we are in right now, where we are struggling with
the application of these tariffs that are meant to save maybe
the last producer that we have here in the United States.
And so, stepping aside a little bit, what I would say is
that I recognize the nuance and the complexity that is
presented by the solar tariffs question in particular. I do
want to raise the profile of the overall, bigger picture so
that we don't lose it, which is if we don't keep our eye on the
ball, we will continue to experience these types of fights over
the last scraps of an industry that we have lost to a
competitor, and in particular to the Chinese.
It is a pattern that we see over and over again. I will say
that steel and aluminum are a leading contender here, solar.
And we can see where this pattern will play out again and again
if we are not ready to anticipate the loss of industries to
anti-competitive practices and massive subsidies that are
coming from our biggest competitors.
Senator Van Hollen. Right. Madam Ambassador, I appreciate
that, and you know, my time is running out. I--we all--I
strongly support the American Jobs Bill, and we need to be
investing a lot more in developing these capabilities here at
home, but that should not come right now at the cost of
thousands and thousands of jobs in Maryland and other places
with respect to installing solar panels. We should be able to
do two things at one time. You know, the president has talked
about his clean energy goals. These tariffs have resulted in
the equivalent of seven coal plants, or five point five million
automobiles being put back on the road because of the fact that
the solar panel installation industry was made less competitive
here at home.
So, we have big issues that you mentioned, in terms of our
own domestic capacity, but we should not do one at the cost of
the other. We need to make those investments here at home, but
not be harming those who are trying to make people's homes more
efficient.
So, Madam Chairman, I see the time is up. I am going to
submit some questions for the record with regard to the
enforcement of the USMCA, and I look forward to your responses
in writing. Thank you, Madam Ambassador. Thank you, Madam
Chairman.
Senator Shaheen. Thank you, Senator Van Hollen. Senator
Collins.
Senator Collins. Thank you, Madam Chairman. Ambassador,
welcome. The Maine lobster industry has been hard hit by the 25
percent retaliatory tariff that China imposed on the U.S.
lobster industry in 2018. The Phase One Trade Agreement between
the U.S. and China was a first step toward regaining Chinese
market share, and indeed inspected growth--expected growth in
that market share. Before the tariff, China was the second
largest importer of U.S. lobster, purchasing $128 million worth
in 2017. During the first month under the new tariffs, however,
live lobster exports to China declined by 64 percent, and
indeed, one lobster exporter in Maine saw a 90 percent decrease
in exports to China.
Your predecessor made real progress by securing a
commitment from the Chinese to match or exceed their pre-tariff
purchase levels. And at first, there really was progress under
the agreement. We saw sales to China start going up. But now
that's not carried through into this year, into 2021. And
currently, the totals are nowhere near the promised purchase
levels or the pre-tariff levels.
What steps is the administration planning to take to ensure
that China lives up to its promise and its purchase agreements
that it made in the Phase One Agreement?
Ms. Tai. Senator Collins, thank you for that. The lobster
exports from Maine and from the United States are very much at
top of mind given the strength of our industry in our ability
to supply other markets. And I'm very aware of the story of the
hit to our exports, and then the hope and the promise that the
Chinese have made.
What I would say to you is that, with respect to the
purchase commitments that the Chinese made in the U.S.-China
Trade Agreement, we are in the process of examining their
performance, and are scrutinizing all of the aspects of what
they have done, and what they have yet to do, and what they
have not done at the levels that they promised.
Your raising it with me here today is one of the most
powerful ways of showing how much of a priority these promises
and China's ability to keep them are to us in managing our
relationship with China. So, I would like to assure you that
this is going to be--is a priority as we are examining
performance and will be a priority for us as we examine our
options for engagement with China and all of our enforcement
options.
Senator Collins. Thank you. As a result of the worldwide
Section 232 steel and aluminum tariffs, which my colleagues
have all mentioned today, the European Union is said to double
retaliatory tariffs to 50 percent on certain imported products,
including recreational boats, on June 1st. This would have an
adverse impact on boat builders in the State of Maine. Is the
administration working with the UE to prevent this increase
from taking place?
Ms. Tai. Senator Collins, yes, across the board on Section
232, this administration is committed to working on the larger
issue of the global overcapacity and glut in steel and aluminum
production capacity, but with our allies, in particular, with
the European Union. So, we are engaging with our European Union
counterparts that is from my perspective and also, I know
Secretary Raimondo at the Commerce Department. And the point, I
think, is that we find ways to work together with allies like
the European Union on an overall problem that we actually
share. So, yes, my bottom line answer is yes, we are working on
this.
Senator Collins. Thank you. And I only have 5 seconds left,
so I will submit my rest of my questions for the record. But
let me just say that I agree with my colleagues on the need for
there to be a negotiation with Canada to renew the softwood
lumber agreement. We've seen lumber prices go sky high. We
obviously prefer domestic sources, but when domestic sources
can't meet the demand, as is the case right now, and prices are
so high, we desperately need a new agreement to be negotiated
so that we're not involved in imposing under failing and anti-
dumping duties on Canadian softwood lumber imports.
We want Canada to play by the rules, but we need a new
agreement. So, I just wanted to reinforce what my colleagues
have said, and I'll submit my question for the record. Thank
you, Madam Chairman.
Senator Shaheen. Thank you very much, Senator Collins. And
let me just add my voice to Senator Collins with respect to
lobster. That is--we don't have as many in New Hampshire as
Maine does, but it is also an issue for us, and we have seen a
devastation in the market from companies that were sending
lobsters to China. And that market doesn't exist anymore. So,
Senator Hagerty. Oh, no. I'm sorry. Do we have anybody online?
So, Senator Hagerty.
Senator Hagerty. Well, Chairman Shaheen, thank you very
much for holding this hearing. And Ambassador, I want to
congratulate you. Your reputation is excellent. We've talked
about that, and I look forward to working with you. I also want
to thank you for the negotiations you undertook with SK and LG
in electric batteries. Tennessee is an automotive-producing
State. We're at the cutting edge of automotive production, and
having that capacity nearby is going to be absolutely critical
for us to move into the next stage of automotive excellence.
So, I applaud the actions that you've taken. It's going to have
a very significant impact on the supply chain that's so
critical to the automotive industry in our State.
I'd like to talk about another industry, though, that's
critical to our State. You know that I'm from Tennessee, and
I'm sure you're not going to be surprised at this question. But
as my colleague, Ranking Member Moran mentioned, there's been a
4-month hiatus that's taken place to negotiate between
airlines, aircraft frames. There have also been a number of
beverages included in that hiatus on those tariffs. But what's
missing is American whiskey. American whiskey remains subject
to a 25 percent tariff, and that tariff is going to go up to 50
percent in June if something isn't done about it.
American whiskey is critical to Tennessee's industry. More
important, it's critical to our brand as a nation. I think you
could go anywhere in the world, and ask people about my home
State of Tennessee, and they could tell you that whiskey is a
big part of our culture. People abroad aren't going to be able
to buy our whiskey at a 50 percent tariff rate, so I'm
interested in what you'll be able to do to take on the problems
of American whiskey being taxed at 50 percent.
Ms. Tai. Senator Hagerty, you are--it's very nice to see
you in person, and you're right. Whiskey, bourbon from
Tennessee--Kentucky, also, I know is a big producing State--are
very much on our minds, and we hear from these stakeholders
directly about their concerns from these EU retaliatory
tariffs.
What I would share with you is this. So, first, I want to--
I want you to know I think a lot about this, and we are working
on this. But let me just frame this up a little bit in terms of
the tariffs that the Europeans have on our whiskey, which is
they're part of the Section 232 suite of tariffs. This is where
we are, and this is actually, in terms of enforcement, using
tariffs for enforcement, this is actually the logic for how
they're supposed to work. We impose them, our counterparts,
when they have the right, will impose them back. And it's not
for the sake, usually, of just hitting each other with tariffs.
It's usually to motivate the two sides to get at resolving the
issue.
In the case of the 232s, the issue that we need to resolve
is the global overcapacity problem. And so, here I'm using a
slightly different set of words and tact to convey to you, but
the same message, that we really do need to work with others,
especially the European Union, on the overall steel
overcapacity problem. And so, what I am hoping is that they see
that problem, and they see it to be as serious a challenge to
our ability to produce and compete in steelmaking as we see it,
and that, working together, we will be able to resolve these
sets of tariffs so that we can join forces on the bigger
picture.
So, that's how I'm approaching these conversations. I know
that there are others in the administration who are working on
this, as well, and we will be working together to get at more
effective solutions to the problems that we have.
Senator Hagerty. As you can imagine, I don't want Tennessee
whiskey or Kentucky bourbon to be a casualty of this. Certain
beverages have been included. Others have not. I'm not certain
the logic of how one was chosen, the other was not, but our
situations are similar. In fact, maybe even more important
given the identity associated with Tennessee whiskey and our
brethren in other States, and it's critically important to our
State. So, I appreciate your attention to that.
I'd like to turn, if I could, to the role that you play
with the World Trade Organization and talk about something that
has deeply concerned me and I'm sure many Members of the
subcommittee. And that's the way China is treated at the WTO.
They enjoy preferential treatment. They take on weaker
commitments, and they've done a very good job of doing this in
a number of multilateral organizations. I'm sure you're aware
of the disparate treatment that they receive, and I would be
very interested in hearing your thoughts on that, and what we
might be able to do about rectifying the situation.
Ms. Tai. Senator Hagerty, I know I'm running out of your
time, so let me try to be succinct here. It is very concerning,
the rules at the WTO that allow for countries to designate
themselves as developing and to allow them to have
dispensations from the rules, and this is something that we
will continue to work on at the WTO, and work with others on.
We are making some progress, and I am hopeful that we will be
able to make a difference at the WTO.
Senator Hagerty. If I can help in any way, I know some
other nations that I think feel the same way we do, and I'd be
happy to work with you on that.
Ms. Tai. Thank you.
Senator Hagerty. Thank you. Thank you, Ms. Chairman.
Senator Shaheen. Thank you, Senator Hagerty. And I just
want to clarify something. The Ambassador is not suggesting
that there is an oversupply of whiskey in the world, are you?
[Laughter.]
Ms. Tai. I'm sorry if I--that wasn't clear. Okay.
Senator Hagerty. I got it.
Senator Shaheen. Just wanted to clarify that.
Senator Braun. Nobody would complain.
[Laughter.]
Senator Shaheen. Senator Braun.
Senator Braun. Thank you, Madam Chair. Good to be talking
with you. Indiana is a top steel-producing State in the U.S. As
a result of repeated surges in steel imports, the Trump
administration implemented Section 232 tariffs, which helped
kind of stabilize the domestic steel industry, allowed steel
makers to invest billions of dollars in new facilities and
upgrades to existing mills. I think nearly half of the world's
excess steel capacity is housed within China. These efforts
saved thousands of jobs.
As you know, the tariffs are designed to protect against
that global overcapacity, and you've got some anti-market
policies that go along with the glut, so it really creates a
condition to where you can get predatory actions that don't
play by the rules necessarily.
I know that a number of foreign governments are pressing to
have the tariffs lifted, but I remain concerned, because I
don't know that any of the underlying practices are going to
change, and I think certainly that capacity's going to be
there. Very tempting to try to use it. What assurances can you
provide that the Biden administration will preserve the steel
tariffs program to prevent a new surge of imports, and to use
it as a tool until you see real change happening within the way
the Chinese handle this excess capacity?
Ms. Tai. Senator Braun, that is a really critical question
because the 232 tariffs are very much on everyone's minds,
because of the tariffs themselves, and also because of
retaliatory actions that our trading partners have taken,
including on Tennessee whiskey, as we just heard from Senator
Hagerty.
I want to assure you that I understand, see and fully
accept that there is a global overcapacity problem with the
steel market, and that the tools that have been used, the 232
tariffs, have had an impact on steel production here in the
United States, a positive one. But they have also carried with
them costs. And so, for the Biden administration, as the U.S.
Trade Representative, my focus is to figure out how we improve
and the effectiveness of the tools that we use in support of
American steelmaking, but to try to address some of the
unintended consequences, I think, in terms of the frictions
that this has generated with our trading partners.
And so, solutions that we come to with our trading
partners, I believe, in my core, really have to address the
larger issue around the overcapacity in the market.
Senator Braun. In your conversation with Senator Van
Hollen, you said keep your eye on the ball. Be watchful. Cited
maybe other industries. Steel is so important to Indiana. What
would be the top two or three, in order of concern, other
industries that you think we can have similar issues dealing
with the Chinese?
Ms. Tai. Senator Braun, I want to be careful here in terms
of prioritizing because all of our industries, they're like our
children. They're important. They're important to all of us.
But let me say this. I think that if you look at trend lines in
industrial sectors, and you also look at the ambitions and the
policies that China has put forward in its plans, made in China
2025, its 13th 5-year plan, 14th 5-year plan, you can mark and
see where trends are going to go. And so, some of them are
because of overcapacity. Some----
Senator Braun. Could you name a few, not necessarily
putting them in order that you might be concerned with?
Ms. Tai. I can provide a couple examples. I think that we
also see with cement, for example, that there is domination by
China in the global market. Vitamin C, actually, had been a
subject of an international antitrust case here in the United
States, getting at the Chinese market dominance in this area.
So, those are a couple examples that have been around, and if
there are others, and this is of interest to you, I'd be very
happy to continue this conversation with you.
Senator Braun. Thank you.
Senator Shaheen. Thank you very much, Senator Braun.
Ambassador, we don't have anyone currently on the line or any
other people in the queue, but I have some more questions, so,
I'm going to do a second, maybe a third round here.
I want to go back to climate change, and to your remarks. I
mentioned this in my opening statement. I was very encouraged
by the--your comments around climate change in your Earth Day
policy speech, and one of the things you talked about, you
said--and I think I'm quoting you accurately--is that, ``Our
trade system itself creates an incentive to compete by
maintaining lower environmental standards, or worse yet, by
lowering those standards even further.''
Given the President's recent announcement about further
slashing our greenhouse gas emissions by 2030, and the
commitment of the Biden administration to climate change, can
you talk a little bit about how you see trade policy helping us
to address climate change?
Ms. Tai. I would be delighted to, Senator Shaheen. As I
discussed some in those remarks, we have wanted to expand out
the disciplines in our trade agreements, in our trade policies,
in our trade conversations beyond tariffs and these border
rules. And we have done so very successfully in a number of
areas. If you look at the WTO agreements, it evolved from the
general agreement on tariffs on trade to get at other types of
issues that impact trade.
But even in the WTO agreements, despite a very bold and
really poetically written preamble that talks about standards
of living, full employment, and the preservation of our natural
resources for a sustainable economic future, there aren't any
disciplines there. And I think that what is really important
about the moment that we are in right now is here in the United
States, we have made tremendous progress from 25 years ago,
where our trade agreements, as a matter of course now, on a
bipartisan accepted and supported basis, include labor and
environment provisions. Full chapters that indicate that the
terms of worker protections and environmental protections,
these are economic issues. They impact the terms of trade. They
impact how our economy is run.
And we've made a lot of progress just in the last 4 years,
in terms of building out enhanced rules, enhanced enforcement
mechanisms, to ensure better terms of competition in terms of
worker protections and labor as an input into our economy.
Now is really the time to focus on increasing and
improving, building out these environmental provisions, because
it is very clear to the world right now that climate and the
environment are not just policies in and of themselves for
their own goods, but they're also public health policies, and
then more fundamentally, they are economic policies. They are
going to be critical to our ability to be the strong economic
power that we are so used to, and so lucky to have been. And
they're going to be critical to our ability to compete and lead
as we go into the next decades of our future.
Senator Shaheen. Well, I think one place where the
importance of trade agreements in addressing that was USMCA,
and your involvement in, I think, and Democrats' involvement in
trying to improve that agreement were significant. It's
something that we pay a lot of attention to in New Hampshire,
because we do a lot of trade with China and with Mexico. And
one of the real concerns as the first phase of--the first draft
of that agreement was rolled out was the lack of those
environmental policies that meant that we were not competing on
a level playing field.
So, can you talk about how you see USMCA now actually
implementing some of the climate opportunities that we have as
we're looking at trade?
Ms. Tai. Well, I really appreciate this question. USMCA
does actually have, and I think it does set the bar right now
for the environmental provisions in our trade agreements. And
while there isn't explicitly built out climate provisions,
there are a lot of provisions in here that do impact the
climate, chief among them, conservation provisions, enforcement
provisions that are intended to enhance our enforcement and our
coordinated enforcement against trade in illegally harvested
timber, illegally taken wildlife, and all of these do impact
the climate.
So, I think that USMCA is an important base to build off
of, but we shouldn't be afraid to be more bold, and to demand
more from our trading partners, given that environmental
issues, like our health issues, are ones where we are actually
need to be working with others in order to make a difference
for ourselves and for the world.
Senator Shaheen. And so, are you feeling pretty confident
if there are disputes that exist that the mechanisms that are
there to try and resolve those will be able to work?
Ms. Tai. That's a great question. I so appreciate that
you've asked me this question. My view is that we did our very
best to put in the most effective tools for enforcement that we
know how. And they may not be perfect, but we're not going to
know how effective they're going to be if we don't use them.
And so, I am very committed. I am not afraid to use the
enforcement tools. Some of them are cooperative, some of them
are more confrontational, some are a mix, but I really think
that in order to do the USMCA justice, and in order to do the
partnership that we've renewed with Mexico and Canada, give
them the respect that they deserve, we need to use all of these
tools to see if they work. And then improve them, and improve
our use of them, because that is the point of doing a trade
agreement. It's not to put it on the shelf and look at it. It's
to make sure that it works.
Senator Shaheen. So, we don't have any examples yet of
using the dispute resolution mechanisms to see how companies
are responding to that?
Ms. Tai. We do have one example. Actually, there are two
examples of where USTR has initiated the first steps in an
enforcement tool. So, the first one was done under the Trump
administration by Ambassador Lighthizer. He requested
consultations with Canada on dairy.
And the other initiation we undertook earlier in, I think
it was late March or early April, we activated a customs
verification cooperation agreement that we have with Mexico,
seeking information from Mexico, Mexican customs, on leads that
we have that there is illegal wildlife or timber traffic that
is happening through the Mexican ports, and we are expecting to
hear back from Mexico on that soon.
But absolutely we have taken the first steps, and we will
continue to make sure that we've used every one of the tools
that we have.
Senator Shaheen. That's good to hear. I look forward to
hearing more about how those mechanisms are used, and how, I
don't think pleased is the right word, but how companies feel
after they've had a chance to use those.
The other concern that I've heard from New Hampshire
companies about with respect to USMCA, and again, they were
very pleased when it got done, but one issue has been the de
minimis thresholds, which of course, those are very important
for small businesses that export. In New Hampshire, most of our
businesses are small, so they are paying real attention to
what's happening there.
Can you talk about what USTR is doing to ensure that Mexico
is following the agreement when it comes to de minimis
thresholds?
Ms. Tai. Absolutely. I was going to say that I would be
happy to remind my Mexican and Canadian counterparts how
disappointed stakeholders are in the United States with where
they were willing to commit themselves on, their de minimis
thresholds. But with respect to Mexico, let me say this. There
are a number of concerns that we have with Mexico's performance
of its commitments under USMCA.
I want to recognize here, maybe a little belatedly, and
this probably applies to our review of our own performance, but
also the performance of our trading partners under our
agreements. The last year has not been a normal year, and I do
want to recognize that COVID-19 has impacted all of us in lots
of different ways.
So, my conversations with Mexico. I am very cognizant of
the challenges that they are facing, just as we are facing
challenges. But that doesn't stop us from wanting to make sure
that trade is still happening and that promises are being
fulfilled. So, I have raised bilateral issues that we have with
Mexico. My counterpart in Mexico, Secretary Clouthier, she was
not shy about raising Mexico's concerns about what we are doing
here in the United States.
On USMCA, I am looking forward to a free trade commission.
This is sort of the annual get-together to review performance
and to take care of the agreement. We will be setting that up
in the coming weeks, and I will be happy to report back to you
after that takes place.
Senator Shaheen. Well, thank you, and thank you for adding
Canada to that, because obviously Canada is also an issue. I
had the opportunity several years ago to raise the--our
concerns about their de minimis thresholds with the foreign
minister, and he was very responsive. I think when he got back
to the government, they were less so. So, I do recognize that
this is an issue in both participants with USMCA.
Finally, I just want to ask how the pandemic has affected
your agency's operations. I know it's really been hard on
everyone. And are there costs that the agency has incurred that
we should be paying attention to as we're looking at the budget
that's presented both by the administration and as we're
thinking about what we need to do for the next year?
Ms. Tai. I so appreciate that question, because, being a
returnee to USTR, and having spent some very formative years
there, I care very much about the people who make USTR work,
and what I would say in terms of the costs of the pandemic, I
would say that the costs are probably more to morale and more
personal, in terms of the uncertainty and in terms of the
difficulties that it has imposed on people.
And, you know, workers at USTR are not alone. I know that
for families with children, especially young children, for
colleagues who are single, that they are some of the ones who
have been hit the hardest by the reality of needing to work
through the pandemic. So, what is interesting is as we look at
the USTR as an agency, and the impact of the pandemic, what I
would say is mostly it's that we have not spent our funds at
the rate that we expected because of pandemic restrictions, and
because we are placing the health and safety of our colleagues
and those of our counterparts really at the priority of what we
are doing.
So, that's probably my message to you in terms of the
pandemic's impact on USTR, which is most of our budget is
dedicated to travel and to personnel. We are a small but mighty
machine, and in a pandemic, it is hard to travel, and unsafe.
And it is also hard to replace personnel and recruit personnel.
So, those are probably the largest impacts of the pandemic that
I have to share with you.
Senator Shaheen. Well, I hope you will stay in touch with
this subcommittee as you're continuing to work on your budget,
because the more information we have, the better job we can do
in trying to address what your needs are.
Ms. Tai. Understood.
Senator Shaheen. Senator Moran.
Senator Moran. Chairman, I know you're disappointed that I
made it back, but----
Senator Shaheen. Oh, I'm so glad. I was out of questions.
Senator Moran. Thank you very much for--again for
conducting this hearing. Ambassador, thank you for being here.
Let me go back to a topic that I raised with you in my earlier
questions and in my opening statement.
I mentioned to you that I have joined 39 of my Senate
colleagues, so 40 of us have written to you urging that you
restart the exclusion process for imports from China, subject
to tariffs under Section 301. Again, this subcommittee on a
bipartisan basis led the effort to persuade the prior
administration to set up exclusion process. I'm not sure that
was their intention when we started that effort, and I remain
in my strong belief that Americans ought to continue to have
that opportunity to petition their government for relief from
tariffs. The question is more specific. Do you agree with that
sentiment? Do you agree with me that Americans should continue
to have that opportunity to find exclusions under Section 301?
Ms. Tai. Senator Moran, I would say that in general, yes, I
do agree. And I don't want to raise any consternation here, I
just want to be--have the opportunity to fill in a little bit.
At my confirmation hearing, Senator Portman, who I believe is
also on that letter, had asked me to commit to a top-to-bottom
review at USTR, and he really recommended it to me as something
that he had done when he was USTR. And this is a top-to-bottom
review specifically on China.
And at the time when Senator Portman was U.S. Trade
Representative was 2005, 2006, China had been in the WTO for
about four or 5 years, and it was actually I think a really
excellent idea to do that top-to-bottom review and to think
strategically about that particular relationship.
Well, it's 2021 now, and we are in a different place in our
own economic history and in our relationship with China. And
certainly, China has changed a lot since that last review was
done. So, I very readily committed to Senator Portman to
undertaking a top-to-bottom China review at USTR, and we will
be looking at the full picture, but the tariffs themselves we
will be looking at, as well as the exclusion process.
And part of that will also be reviewing how the exclusions
were done before, the logic behind the tariffs, the logic
behind the exclusions, and so, my answer to you is I am very
interested in this. I'm very interested in how we make our
trade policies across the board more effective and more
strategic. I think that every challenge is also an opportunity,
that Ambassador Lighthizer has presented me with many
opportunities, which I am embracing, and I would like to build
on the gains that we have made over the past many years and
make our trade policy work better.
So, this question about the tariffs and the exclusions I
know are on the minds of many, and are very consequential to
stakeholders large and small, and we will be undertaking this
responsibility with that sense of gravity.
Senator Moran. Do you think you can complete that review
and make a decision, and if it is to have an exclusion process,
that that exclusion process can be in place before
circumstances are such that the damage is being done to--
particularly to American manufacturers?
Ms. Tai. I want to convey to you that I am keenly aware of
how much time is of the essence, in particular in this current
economic environment.
Senator Moran. We're delighted to have you here so early in
the appropriations process, but it gives you the opportunity to
defer to a point in time in which you have the opportunity to
have reviewed, which is not what I'm really complaining about,
only smiling about. So, we'll be back in touch.
Let me ask one more question. This was in regard to Mexico
and USMCA. The president of Mexico recently issued a decree
that would ban glyphosate and biotech corn in Mexican diets by
2024. This announcement comes on the heels of Mexico also
imposing certain regulatory barriers to agricultural imports,
their approval. These actions threaten to cause significant
trade disruption, undercut the commitments our nations just
agreed to in USMCA. My question is, are you aware of these
issues, and can you--if so, can you provide me with an overview
what USTR intends to do or plans to do in addressing them?
Ms. Tai. I'm very aware of these issues, and I have raised
them with my Mexican counterpart, just as I raised our Canadian
issues with my Canadian counterpart. I just conveyed to Chair
Shaheen that there will be a Free Trade Commission convening
under the USMCA in the next few weeks, and that will give us an
opportunity to--at my level, to again raise concerns. But I
want to let you know that I am committed to using all the tools
that we have in the USMCA toolbox, and there are a lot. And
there are some of them that are new, and these issues are
absolutely on a fairly full radar of areas and concerns that we
are hearing from Senators, from the stakeholders themselves
about how the agreement is not operating the way that we would
like it to.
So, we have our teams that work on this day in and day out.
We are looking at it in terms of what our options are to
resolve these issues soon, and also what other options are if
we're not able to resolve them in the near term.
Senator Moran. Ambassador, thank you for your answers. I've
been impressed by you and the answers as well as the future
answers I expect to get. So, thank you, thank you very much for
your leadership.
Ms. Tai. Thank you.
Senator Shaheen. Thank you, Senator Moran, and we can
always invite Ambassador Tai back, so, I think we should assume
that.
Senator Moran. I appreciate you saying that, and welcome
that opportunity.
Senator Shaheen. Thank you. Well, I also want to thank you
very much, Ambassador, for your appearance here, for your
testimony, and for your willingness to work with the
subcommittee, and Members of Congress on the challenges that we
face going forward with trade.
ADDITIONAL COMMITTEE QUESTIONS
If there are no further questions this afternoon, Senators
may submit additional questions for the subcommittee's official
hearing record. We ask that USTR respond within 30 days of
receiving those questions, and the subcommittee will stand in
recess. Thank you.
[The following questions were not asked at the hearing, but
were submitted to the U.S. Trade Representative for response
subsequent to the hearing:]
Questions Submitted to Ambassador Katherine Tai
Questions Submitted by Senator Patrick Leahy
a review of the activities and fiscal year 2022 funding priorities of
the office of the u.s. trade representative
Question 1. On March 30, I sent a letter to the President, with
Senator Tillis, requesting that the administration prioritize the
appointment of critical intellectual property officials, including the
Chief Innovation and Intellectual Property Negotiator at USTR. As noted
in that letter, IP-intensive industries are poised to continue to be an
engine for growth during this time of economic recovery, which is why
focusing on promoting and protecting IP-related jobs and economic
output must be a key priority. Unfortunately, this position at USTR has
not been filled since its creation in 2016.
1a. Do you agree that filling the position of Chief Innovation and
Intellectual Property Negotiator at USTR must be a priority for the
Administration?
1b. Does the administration intend to put forward a nominee for
this position? If so, when do you expect the nomination will be sent to
the Senate?
Answer. As you note, the Chief Innovation and IP Negotiator
position has not been filled since it was created by Congress. The
issue of intellectual property is one where there are strong views on
both sides, and I will keep that in mind as we consider the path
forward for filling it.
______
Questions Submitted by Senator Joe Manchin, III
Question 1. For decades, the world's biggest companies have flocked
to the United States, attracted by our skilled workforce, expansive
consumers and legal protections. These companies have created millions
of good American jobs and revitalized many communities, especially in
rural States like West Virginia. According to the recent government
data, international companies created 80 percent of all new U.S.
manufacturing jobs from 2013 to 2018. The Toyota plant in Buffalo, West
Virginia employs over 2,000 West Virginians in Putnam County. There,
Toyota continues to provide the economic engine for the area.
Nonetheless, the United States runs a trillion-dollar annual trade
deficit because it has lost most of its manufacturing industries.
Although we created all the industries of the digital age, they have
predominately migrated overseas.
1a. What opportunities do you see for new manufacturing jobs in
the United States?
1b. How do we ensure that our trade policies benefit economically
depressed and rural areas?
1c. How can we ensure that manufacturing jobs do not get
offshored?
Answer. The Biden-Harris Administration believes a strong U.S.
manufacturing base is critical both for U.S. national security and a
strong recovery from the COVID-19 shock. The new investments in both
U.S. infrastructure and the U.S. industrial base will be critical to
creating the new manufacturing jobs the United States needs.
The American worker is at the center of the Biden Administration's
trade agenda. President Biden has made it clear that his first priority
is new domestic investments, not new trade deals. Those investments,
including in infrastructure, are needed to enable American workers to
compete effectively for the jobs of the future. The President has made
his commitment to ``Buy American'' clear, including through the
creation of a Made in America director within the Office of Management
and Budget to link Federal procurement with domestic manufacturing. The
American Jobs Plan recognizes the importance of creating good-paying
jobs in rural America. Further, the work that emerges from the Biden
Administration's Executive Order 14017 on America's Supply Chains will
generate additional recommendations for how to strengthen the
resilience of U.S. supply chains in four vital product areas--critical
materials, advanced batteries, active pharmaceutical ingredients and
semiconductors--as well as key sectors in the U.S. industrial base. The
Biden Administration's foreign economic policy for the middle class
recognizes that trade policy must support domestic economic efforts.
The Biden Administration is also committed to ending the incentives
in the U.S. tax code that have encouraged the offshoring of U.S.
manufacturing jobs. The Treasury Department is actively working with a
number of our key trading partners in the G-20 and the OECD on a
multilateral agreement to end a race to the bottom on tax rates.
At USTR, we are reviewing our trade commitments to identify ways in
which trade agreements can do more to help strengthen U.S.
manufacturing. We will continue to work to ensure that American workers
can compete on a level playing field, not one where our trading
partners gain false competitive advantages through lax labor and
environmental standards.
Question 2. It is no secret that the Biden Administration is
looking to transition our Nation's fleet of gas vehicles to primarily
electric vehicles. In the Administration's infrastructure plan, it was
made very clear when they sought $174 billion to support electric
vehicle manufacturing. I am very concerned about some of the
questionable mining practices, both on the humanitarian and
environmental side, in places like the Democratic Republic of the
Congo, which holds 50 percent of the world's reserves of cobalt, which
has also been developed in large part by China. I am also concerned
about our reliance on a small list of countries to provide the
materials we need to manufacture lithium-ion batteries. If those supply
chains were interrupted or cut-off entirely, we wouldn't have any
alternatives at this point. If we are going to build up the EV market
in the United States, I believe we need to make sure we are sourcing
these battery materials responsibly and domestically wherever possible
or looking for sustainable alternatives.
2a. As U.S. Trade Representative, how do you plan on shoring up
domestic supply chains and reducing reliance on foreign materials for
production of goods, especially in EV production?
Answer. I share your concerns about the supply chain for the
critical materials needed for electric vehicle (EV) battery production.
The full supply chain for advanced batteries is being examined as a
result of President's Executive Order (EO) on America's Supply Chains.
The recently released 100-Day reviews, ``Building Resilient Supply
Chains, Revitalizing American Manufacturing, and Fostering Broad-Based
Growth,'' pursuant to that EO examine this issue in further detail.
Those reviews assert, in part, that ``the United States should take a
mineral-by-mineral approach to look for opportunities to sustainably
produce and refine domestic minerals for key battery materials. For
battery materials where the United States does not have strong deposits
suited for economic extraction, the best pathway to getting a stable
material supply in the near-term is through allies and trading partners
with responsible environmental and labor standards, and in the long-
term by capturing and recycling the supply of materials in end-of-life
batteries from EVs and storage. Both extracted and recycled materials
and minerals will require refining and processing, and refining and
processing capacity should be scaled up domestically to utilize this
supply, capture an important stage of the supply chain that fuels
downstream battery manufacturing, and avoid the need to export raw
materials and re-import processed components.'' I will work to ensure
America's trade policies support the recommendations that emerge from
these supply chain reviews.
Question 3. In 2017, the Office of the United States Trade
Representative initiated an investigation to determine whether certain
Chinese ``laws, policies, practices or actions are unreasonable or
discriminatory and may be harming American intellectual property
rights, innovation or technology development.'' Because of this
investigation, USTR imposed tariffs under Section 301 of the Trade Act
of 1974. However, in doing so, they also created an exclusion process
in which certain businesses and entities could request an exclusion
from the tariffs for certain goods that were not readily available in
the United States. Unfortunately, many of these exemptions expired on
December 31, 2020, and there has yet to be a process for Section 301
tariff exemptions put back in its place.
3a. Does USTR plan to reinstate an exclusion process for these
tariffs and if so, when can we expect to see that process start?
Answer. At the request and recommendation of Senator Portman, I
have committed to doing a top-to-bottom review of our China trade
policy, with the goal of making our trade policies more effective and
more strategic. As part of that review, we are looking at the China 301
tariffs and the exclusions process. Our plan to re-examine the tariffs
provides us with important opportunities to craft thoughtful and
effective responses to China's unfair trade practices.
Question 4. As I have stated numerous times, I have been supportive
of the efforts to expand steel and aluminum tariffs under Section 232
of the Trade Expansion Act of 1962. In my State of West Virginia, steel
and aluminum producers are still struggling to survive because of
foreign traders who circumvent our trade laws and evade duty payments
by transshipping products through third party countries. While I
appreciate the Biden Administration's commitment to review the
effectiveness of existing tariffs, many of my constituents and
businesses are asking when a decision will be made on the tariffs put
in place by the prior administration.
4a. Given your examination of current trade policies, do you
believe that the current tariffs on steel and aluminum are effective?
4b. When can we expect an announcement on the future of section
232 steel and aluminum tariffs?
Answer. With respect to the section 232 tariffs on steel and
aluminum, we have a very significant problem in the global steel and
aluminum markets that is driven primarily by overcapacity in China and
other countries, particularly in Southeast Asia and the Middle East.
The Administration is working to address the market distorting measures
in economies that have led to overcapacity in the global steel and
aluminum industries and the resulting national security threats.
In addition to the thorough review of the section 232 measures and
product and country exclusions that is currently underway by the
Department of Commerce, the Administration is also consulting closely
with various domestic stakeholders and like-minded partners around the
world sharing similar national security interests to address market
distorting measures in non-market economies that pose a serious threat
to the market-oriented U.S. steel and aluminum industries and the
workers in those industries. On May 17, 2021, the United States and the
European Union (EU) announced the start of discussions to address
global steel and aluminum excess capacity and the market distortions
that result from this excess capacity. The Administration is committed
to working with the EU and other like-minded partners to address excess
capacity, ensure the long-term viability of our steel and aluminum
industries, and strengthen our democratic alliance.
______
Questions Submitted by Senator Chris Van Hollen
Question 1. The USMCA implementing legislation established the
Independent Mexico Labor Expert Board (IMLEB) for the purpose of
monitoring and evaluating the implementation of Mexico's labor reform
and compliance with its labor obligations. The Board also advises the
Interagency Labor Committee (co-chaired by the USTR) with respect to
capacity building activities needed to support such implementation and
compliance.
On December 15, 2020, the Board submitted an interim report to
assist the Interagency Labor Committee and the Congress in their
assessment of the efforts of Mexico to implement Mexico's labor reform,
and the manner and extent to which labor laws are generally enforced in
Mexico. While the first phase of implementation of the new labor
institutions established under the 2019 reform was delayed until
November 18, 2020 (due to the Covid-19 pandemic), the Board identified
a number of serious concerns with Mexico's labor law enforcement
process that it believed must be addressed promptly. In addition, the
Board identified issues affecting capacity building activities needed
to support the implementation of Mexico's labor reform and compliance
with its labor obligations that also require immediate attention.
Ambassador Tai, the USMCA imposed new stringent labor standards
that we hope will become the model for future trade agreements. But
without effective monitoring and enforcement mechanisms, these labor
provisions will be toothless.
1a. Based on this report from the Independent Mexico Labor Expert
Board (IMLEB), can you tell us what concrete actions the USTR will be
prepared to take to address their recommendations, either alone or in
conjunction with other agencies such as the Department of Labor?
Answer. USTR has carefully considered the information and
recommendations included in the IMLEB report, including by integrating
that information into our monitoring. We are engaging with the
Government of Mexico on a regular basis to press for progress and
support their efforts to implement the reforms required by the USMCA,
including on issues raised by the IMLEB. USTR hosted the first Free
Trade Commission meeting under the USMCA on May 17 and 18, and plans to
hold a Labor Council meeting soon. On May 12, USTR submitted the first
ever USMCA Rapid Response Labor Mechanism (RRM) request for review to
Mexico. The request asked Mexico to review whether workers at a General
Motors (GM) facility are being denied the right of free association and
collective bargaining. This self-initiated action shows the Biden-
Harris Administration's serious commitment to workers and a worker-
centered trade policy. In addition, the Department of Labor has
launched several significant technical assistance projects to support
the Government of Mexico in its labor reform and to strengthen workers'
ability to exercise their labor rights. USTR collaborates closely with
the Department of Labor. We look forward to continued reporting from
the IMLEB.
1b. Do you anticipate that an increase in funding will be needed
to adequately carry out these activities?
1c. Or does the funding provided under the USMCA implementing
legislation provide sufficient funding?
Answer. USTR is using the funding provided under the USMCA
implementing legislation, which runs through 2023, to dedicate current
staff and hire additional staff to support the monitor and enforcement
activities under USMCA. I look forward to working with members of this
subcommittee to ensure that USTR has adequate resources to fully
implement and enforce USMCA.
Question 2. The Rapid Response Mechanism was a novel innovation of
the USMCA, which ensured that workers could receive relief through
facility-level enforcement of USCMA labor violations. The USTR's 2021
policy agenda notes that the Biden Administration is committed to self-
initiating and advancing petitions under this mechanism.
2a. Ambassador Tai, could you tell us a little bit more about what
the USTR has (or intends to do) on this front to initiate petitions?
Answer. On May 12, USTR submitted the first ever USMCA Rapid
Response Labor Mechanism (RRM) request for review to Mexico. The
request asked Mexico to review whether workers at a General Motors (GM)
facility are being denied the right of free association and collective
bargaining. This self-initiated action shows the Biden-Harris
Administration's serious commitment to workers and a worker-centered
trade policy. Working with the Department of Labor, USTR engages in
monitoring efforts, and we will not hesitate to self-initiate
additional matters when we become aware of facts that warrant such
action. Additionally, the Interagency Labor Committee for Monitoring
and Enforcement (ILC), which I co-chair with the Secretary of Labor,
receives and reviews USMCA labor petitions from the public. If the ILC
determines, in response to an RRM petition, that there is sufficient,
credible evidence of a denial of rights enabling the good-faith
invocation of enforcement mechanisms, I will submit a request for
review to Mexico.
2b. How are you monitoring individual facilities, and do you
believe you have the resources that you need to fully carry this out?
2c. If not, what additional funding, resources, or authority would
be needed to successfully undertake these activities?
Answer. USTR is using the funding provided under the USMCA
implementing legislation, which runs through 2023, to dedicate current
staff and hire additional staff to support the monitor and enforcement
activities under USMCA. I look forward to working with members of this
subcommittee to ensure that USTR has adequate resources to fully
implement and enforce USMCA, including the labor chapter.
______
Questions Submitted by Senator Lisa Murkowski
Question 1. Ambassador Tai, as we discussed during the April 28
hearing, China continues to fall short of its seafood purchase
commitments as outlined in Chapter Six of Phase One of the Economic and
Trade Agreement between the U.S. and China. This is in spite of the
fact that China has purchased increasing quantities of U.S. livestock
and other agricultural exports under the Phase One agreement. This
seafood-specific failure has resulted in significant economic losses
for certain fisheries in Alaska and across the Nation, and I urge you
to take action to alleviate these losses and push China to honor its
seafood purchase promises. One potential strategy is to secure a
commitment from China to apply a blanket tariff exclusion on U.S.
seafood imports. This option would eliminate any difficulties around
obtaining individual temporary tariff waivers.
1a. Will USTR consider pursuing a blanket tariff exclusion to
restore the Chinese market for American seafood companies?
Answer. During meetings held under the Phase One Agreement to
review China's implementation progress, the U.S. side has frequently
raised concerns about the slow pace of China's purchases of U.S. goods,
including seafood. While China has established a tariff exclusion
process that makes tariff exclusions available for U.S. goods like
seafood that are covered by Chapter Six of the Phase One Agreement, we
understand from U.S. industry that this tariff exclusion process has
not been working well for goods in certain industries where the
practice is to enter into long-term contracts or where importers tend
to be small, private companies reluctant to make use of the available
tariff exclusion process as opposed to large State-owned enterprises.
We have been raising this issue with the Chinese side, and we agree
with you that a blanket tariff exclusion for these types of goods would
help to promote increased purchases by Chinese companies.
Question 2. Ambassador Tai, on top of the devastation that
Southeast Alaska is seeing from a lost tourism season, we also continue
to suffer from the impacts of a 25 percent tariff rate on Alaska spruce
and hemlock. Although the Phase One agreement signed by the Trump
Administration created a waiver for timber tariffs, Alaska spruce
exports to China--our primary buyer of spruce--flatlined the last 2
years, and the future remains uncertain.
2a. What specific actions are you taking to help us work through
this tariff?
2b. Is there anything that you need from Congress to help on this
front?
Answer. During meetings held under the Phase One Agreement to
review China's implementation progress, the U.S. side has addressed
China's tariff exclusion process, and specifically Alaska spruce and
hemlock, with the Chinese side. We understand that China's tariff
exclusion process has been regularly used to secure tariff exclusions
for goods that are covered by Chapter Six of the Phase One Agreement.
In addition, for Alaska spruce and hemlock, we have clarified that
China makes tariff exclusions available for these products for 1 year
from the date that a tariff exclusion has been granted, subject to
periodic updates on the purchases being made. We have also communicated
this information to U.S. industry.
______
Questions Submitted by Senator Susan Collins
Question 1. In February, Sen. Sinema, Sen. Kelley, and I led
several of our colleagues in writing to President Biden to urge him to
remove the Section 301 tariffs that had been levied on food and
beverage imported from the EU since October 2019 due to the large civil
aircraft subsidies dispute. A few weeks later, on March 5, the White
House announced that these tariffs would be suspended for an initial 4
months. I greatly appreciate that the Administration heeded our call
since these tariffs have been extremely detrimental to small businesses
in Maine. Is the Administration working with the E.U. to make this
suspension permanent?
Answer. USTR is engaging intensively with the EU and the UK in an
attempt to reach a balanced settlement to the large civil aircraft
disputes that will ensure a level playing field and address the harms
to our workers and businesses. We are also seeking a joint vision with
the EU and the UK to address the challenges posed by non-market
economic practices of China and other new entrants to the large civil
aircraft market.
______
Questions Submitted by Senator Lindsey Graham
Question 1. What will be the impact on small and medium sized
domestic remodeling/renovation businesses if tariffs are imposed on
building materials such as flooring and countertops as a response to
Turkey's Digital Services Tax (DST)?
Answer. USTR recently requested public comments and held a hearing
on a proposed Section 301 action arising from the investigation of
Turkey's Digital Services Tax on May 7, 2021. In determining what
action, if any, to take, USTR will carefully consider the potential
impact on small and medium sized businesses.
______
Questions Submitted by Senator John Boozman
Question 1. I have always been supportive of holding our trading
partners accountable, especially in the agriculture sector. As you
know, India is often at the top of the list of employing tariff and
non-tariff trade barriers as well as providing their domestic
agriculture producers with support that far exceeds their WTO
commitments.
Arkansas grows over half of the U.S. rice crop, and in the past
decade, rice imports from India have soared, displacing U.S. production
that simply cannot compete with the generously subsidized Indian rice.
In late March, USTR announced proposed action against India, among
other countries, for an investigation into digital services taxes
imposed by those countries. Part of the list of proposed retaliatory
duties to be imposed is a 25 percent duty on brown Basmati imports.
However, rice producers would like to see USTR expand the proposed
retaliatory duties to all other rice and rice products imported from
India.
USTR is currently taking comments on this issue, and I know there
are plans to hold hearings in May to determine final retaliatory duties
later this year.
I cannot stress enough the importance of expanding the proposed
retaliatory duties to apply to all rice and rice products imported from
India.
Ambassador Tai, I appreciate you taking into consideration my
comments and those of the U.S. rice industry. Can I count on you to
give this matter your full consideration and support?
Answer. USTR recently requested public comments and held a hearing
on a proposed Section 301 action arising from the investigation of
India's Digital Services Tax on May 10, 2021. In determining what
action, if any, to take, USTR will carefully consider your comments
regarding the inclusion of rice and rice products on the final product
list.
Question 2. Since the United Kingdom (UK) formally left the
European Union (EU), the UK offers a significant market for our farmers
and ranchers. In particular, two of the top ag products from my home
state--poultry and rice--have significant potential to gain market
access through a UK Free Trade Agreement.
Before Brexit, the UK was tied to the EU's practices of employing
tariff and non-tariff trade barriers. For poultry, it is an
unscientific ban on products treated with certain pathogen reduction
treatments, and for rice, it was protectionist tariffs meant to prop up
EU rice farmers elsewhere in the EU. Now that the UK is free to make
their own trade deals, I have been supportive of a Free Trade Agreement
with the UK that is rules-based, mutually beneficial, with standards
rooted in science.
What are your plans for a Free Trade Agreement with the UK that
includes more market access for U.S. farmers and ranchers?
Answer. As part of the Biden-Harris Administration's focus on the
Build Back Better agenda and supporting a worker-centric trade policy,
it is currently reviewing the objectives of the negotiations with the
United Kingdom that were begun under the prior Administration.
Agricultural exports, including poultry and rice, are important U.S.
exports and potential access to the UK and other markets will factor
into decisions on how best to deepen our trade relationships with key
partners.
Question 3. Historically, the European Union (EU) has been an
important market for U.S. peanut production.
Unfortunately, since 2018 the US peanut industry has lost
approximately $160 million in the EU market due to non-tariff trade
barriers regarding additional aflatoxin testing protocols above and
beyond the testing done in the US.
The U.S. peanut industry has engaged with both USTR and USDA and is
eager to find a solution to this issue. What further steps need to be
taken to remedy this situation?
Answer. We recognize the importance of the European market for U.S.
peanut production, and the challenges that concern the industry. We
will continue to work closely with USDA and the industry to address
this issue, including pursuing a solution with the Europeans.
______
Questions Submitted by Senator Shelley Moore Capito
Question 1. Last week, I joined Senator Portman and a group of 38
bipartisan Senators to echo support for the Administration to continue
efforts to address unfair Chinese trade practices while also restarting
the Section 301 Tariff Exclusion Process. Doing so would provide
domestic manufacturers with much needed relief.
1a. Can you provide and update on where things stand on this
matter at USTR?
1b. When can manufacturers expect this process to be up and
running?
Answer. At the request and recommendation of Senator Portman, I
have committed to doing a top-to-bottom review of our China trade
policy, with the goal of making our trade policies more effective and
more strategic. As part of that review, we are looking at the China 301
tariffs and the exclusions process. Our plan to re-examine the tariffs
provides us with important opportunities to craft thoughtful and
effective responses to China's unfair trade practices.
Question 2. Last summer, it was brought to my attention that 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.
2a. Are you aware of this matter or similar instances?
Answer. USTR is aware of the acquisition of British Steel by Jingye
Group and is monitoring this development closely. We will continue to
raise concerns about the foreign investment activities of Chinese steel
producers in fora such as the OECD Steel Committee and the Global Forum
on Steel Excess Capacity, and bilaterally with those countries
affected. In addition to this acquisition, we are also aware of recent
cross-border and joint venture investments by Chinese steel enterprises
in the UK and in countries such as Indonesia, Malaysia, the
Philippines, Cambodia, and others. USTR will continue to consult with
domestic stakeholders and work closely with like-minded partners, such
as the UK and the EU, to find creative and effective responses to
prevent further job and technology losses in sectors China is
targeting.
2b. Can you commit to addressing these concerns during your
continued negotiations with the United Kingdom?
Answer. The Administration is currently reviewing the objectives of
the negotiations with the United Kingdom. We intend to work closely
with the UK and other like-minded partners to address excess capacity
and market distortive measures through all the appropriate mechanisms
and engagements we have with these partners.
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.
3a. Is your team working on a new softwood lumber agreement with
Canada?
3b. Will you make this a priority?
Answer. I discussed softwood lumber with my Canadian counterpart in
our first USMCA FTC meeting and we agreed to keep in touch on the
issue. The United States is open to resolving our differences with
Canada over softwood lumber, but it would require addressing Canadian
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 4. The Phase One Agreement with China addressed key trade
imbalances between our two nations, such as forced tech transfer, IP
theft, and currency manipulation.
4a. Do you intend to continue to build upon the framework of the
Phase One deal to further solidify China's commitment to uphold the
changes agreed upon?
Answer. With regard to the Phase One Agreement, we are committed to
ensuring China's implementation of its obligations under the Agreement.
We will continue to make use of and push the tools that we have for the
benefit of U.S. farmers, ranchers, manufacturers, service suppliers,
and small businesses.
The Administration is currently engaged in a comprehensive and
coordinated review of U.S. strategy for addressing the many challenges
that China poses, both for the United States and the world. USTR is
actively participating in the development of this strategy, which will
encompass all policy areas, including trade policy.
4b. What additional areas do you believe should be addressed/
targeted?
Answer. With regard to the Administration's trade policy toward
China, USTR is currently conducting a top-to-bottom review of the U.S.-
China trade relationship, with a view toward ensuring that our trade
policy supports and complements the Administration's broader China
strategy. A key focus of this effort is on China's non-market and
unfair policies and practices that are inadequately disciplined by the
WTO or the Phase One Agreement, such as industrial subsidies, excess
capacity, forced technology transfer, and State-owned enterprises. The
results of this review, as well as our ongoing engagement with allies
and like-minded partners, with whom we share values and interests, will
inform our thinking of how we proceed.
______
Questions Submitted by Senator John Kennedy
Question 1. As you know we are still under a declared national
public health emergency and we continue to have supply chain challenges
particularly related to Personal Protective Equipment (PPE). Recently
United States Customs and Border Protection seized imports from the
world's largest rubber glove manufacturer, Top Glove in Malaysia, for
sufficient evidence of its use of forced labor. This underscores the
need for domestically manufactured PPE. We need to stand up and support
US-based PPE manufacturing and as part of that provide Section 301
exclusions for essential manufacturing equipment and raw materials
needed to establish and support domestic PPE production.
1a. Given the ongoing public health emergency and resulting need
for PPE, would you consider having a separate fast-track Section 301
exclusion process for essential manufacturing equipment and raw
materials needed to establish and support domestic PPE production?''
Answer. In March 2020, USTR established a process in which U.S.
stakeholders could provide comments on possible modifications to remove
the additional 301 duties from medical-care products. Medical-care
products included products directly used to treat COVID-19 or to limit
the outbreak and products used in the production of needed medical-care
products. Based on the comments received, in December 2020, USTR
published a list of exclusions for products to combat COVID-19.
Currently, these exclusions are scheduled to remain in effect until
September 30, 2021.
As you are aware, I have committed to doing a top-to-bottom review
of our China Trade policy. As part of that review, we are reviewing the
China 301 tariffs and the exclusions process, including the exclusions
for products to combat COVID-19.
Question 2. Do you believe China is a ``developing country?''
Answer. In the World Trade Organization, Members are currently
permitted to self-declare as ``developing countries'' to take advantage
of certain flexibilities in WTO rules. However, WTO Members recognized
at the time of China's accession to the WTO that China should not be
able to avail itself of flexibilities afforded to other developing
countries. China was permitted to negotiate only a limited set of
flexibilities at the time of its accession. The United States believes
that China is an advanced, wealthy and influential Member of the WTO
that can negotiate the flexibilities it may need in any future WTO
negotiation, and that China should not be able to avail itself of any
blanket flexibilities reserved for developing countries.
Question 3. Do you believe, like the last administration declared,
that China is committing crimes against humanity towards the Muslim
Uyghur population?
Answer. Secretary of State Blinken has made clear that China is
committing genocide and crimes against humanity. In the 2020 Country
Reports on Human Rights Practices, issued on March 30, 2021, the State
Department declared that ``[g]enocide and crimes against humanity
occurred during the year against the predominantly Muslim Uyghurs and
other ethnic and religious minority groups in Xinjiang.'' I agree with
this assessment. China should immediately end these atrocities and
respect the human rights of Uyghurs and all others across China.
Question 4. How do you intend on preventing the import of goods
made with forced labor and the export of technologies used for
repression?
Answer. I commit to utilizing the full range of trade tools at my
disposal to combat forced labor and the export of technologies used for
repression. This includes ensuring President Biden's Build Back Better
agenda promotes a trade agenda that respects the dignity of work and
pursues a fair, rules-based international trading system and does not
undermine our core values. A fair international trading system is one
in which individuals are not forced to work against their will, and
products made out of forced labor do not enter the global trading
system. I will champion trade policies that support good jobs that are
protected by robust and enforced labor laws, including laws that
prohibit forced labor in traded goods.
One recent example of our commitment is that in the first Free
Trade Commission of the United States-Mexico-Canada Agreement (USMCA),
held just this month, the United States, Mexico, and Canada discussed
our shared obligation to ensure the Agreement's forced labor import
prohibition and continued our collaboration to bolster each other's
efforts in this regard. The USMCA includes a ground-breaking forced
labor provision that obligates all Parties to ``prohibit the
importation of goods into its territory from other sources produced in
whole or in part by forced or compulsory labor, including forced or
compulsory child labor.''
In addition, USTR uses the worker rights eligibility criteria of
its trade preference programs to address labor issues, including the
elimination of forced labor. For example, we recently closed a review
of Uzbekistan's GSP eligibility after trade engagement on this issue
encouraged the Uzbek government to eliminate the systematic use of
forced labor in its annual cotton harvest. Utilizing our trade tools to
combat forced labor is also a part of the White House's National Action
Plan to Combat Human Trafficking. Our agency is an active member of the
President's Interagency Task Force on Trafficking and the Forced Labor
Enforcement Task Force, as well as various other interagency committees
to coordinate efforts to combat forced labor.
USTR is also engaged with other agencies to ensure that the U.S.
technology is not exported for use in repression overseas. We are
active participants in discussions over the full range of existing
tools, including investment screening and export controls such as the
Entity List and the Military End-User (MEU) List maintained by the
Department of Commerce.
Question 5. China's fallen back on its word to purchase $468
billion worth of U.S. goods, as they agreed to during the ``Phase One''
agreement. How do you intend on holding them to their word?
Answer. China's purchases shortfall is certainly in our sights.
These commitments are important to the United States economically, but
they are also important as commitments that China undertook of its own
free will to make. We will work to ensure that these commitments are
implemented, and where they are not, we will utilize the tools
available, including those under the Phase One Agreement, to stand up
for U.S. farmers, ranchers, manufacturers, service suppliers, and small
businesses.
Question 6. Prior to the lack of quorum under the Trump
Administration the World Trade Organization faced significant criticism
because of its sluggish dispute settlement process.
6a. Is the administration committed to maintaining an active role
in reforming and upgrading the World Trade Organization, or does it
intend to allow for the revival of the dysfunctional appellate body?
Answer. The Biden Administration shares longstanding bipartisan,
bicameral concerns about the WTO's dispute settlement system. Dispute
settlement overreaching, including by the Appellate Body, undermines
support in the U.S. for the international trading system. The
Administration will actively engage in efforts to reform the WTO,
including dispute settlement, in order to build a more fair trading
system and support the WTO as a forum for discussion and negotiations
where countries come together to find joint solutions to common
problems.
Question 7. Do you intend to purse Free Trade Agreement talks with
Iceland?
Answer. The Biden Administration highly values our economic and
security relationship with Iceland. However, as the President has made
clear, we will not be engaging in new trade agreements before we make
the necessary investments at home.
Question 8. Do you believe China is actively trying to build a
presence in the artic?
Answer. Yes. China is actively trying to build a presence in the
Arctic and has publicly announced its intent to increase its
investments there, including through the development of research and
observation platforms, arctic shipping routes, and enhanced operational
capabilities, such as icebreakers. In addition, China has sought to
create economic leverage and gain a foothold and in the region through
direct investments in land and infrastructure. Beijing includes the
Arctic region in its ``Polar Silk Road,'' as part of President Xi's
signature Belt and Road Initiative.
Question 9. Is it a priority of the administration to enhance
security cooperation in the artic to combat increased Chinese and
Russian influence?
Answer. Yes. We are working with and through our allies and
partners to enhance U.S. presence and influence in the Arctic. The
United States continues to participate in Arctic exercises and training
to deepen military interoperability with allies and partners. The
Administration currently discusses security and defense challenges in
the High North through NATO, bilateral dialogues, and regional
consultations with like-minded Arctic states. We intend to work with
Arctic states to uphold international law and standards in the long-
standing spirit of cooperation among Arctic nations in the region. We
will not hesitate to hold any state accountable for actions that run
counter to these commitments, or the interests of the United States,
its allies and partners.
Question 10. Do you intend to purse Free Trade Agreement talks with
New Zealand?
Answer. The Biden Administration highly values our economic and
security relationship with New Zealand. We are working in close
connection with New Zealand on trade issues as it hosts and chairs APEC
(Asia Pacific Economic Cooperation). However, as the President has made
clear, we will not be engaging in new trade agreements before we make
the necessary investments at home.
Question 11. Will you prioritize our expanding trade relations with
both countries?
Answer. Yes, our trade relations with both countries are important
priorities. We regularly engage Iceland and New Zealand bilaterally,
including through our Trade and Investment Framework Agreements (TIFA),
to explore ways to expand and enhance our trade ties.
Question 12. Given recent claims by the Mexican government that
Mexico's hydrocarbons resources are not covered under USMCA, can you
state your position regarding how hydrocarbons should treated with
regard to USMCA?
Answer. Our view is that the USMCA applies to Mexico's energy
sector; this is very clear in the USMCA text.
Question 13. The natural gas and oil industry has experienced
significant regulatory challenges in Mexico by Mexican regulators
attempting to complicate and delay investor operations in Mexico to the
advantage of PEMEX, Mexico's state-owned oil company.
13a. Can you detail how you and USTR would ensure that American
and other foreign investors in Mexico are treated fairly and ensure the
USCMA provisions on fair treatment will be enforced?
Answer. We have raised our concerns with Mexico's treatment of U.S.
energy investors frequently, including during bilateral meetings with
Mexico on May 17 and during the inaugural meeting of the USMCA Free
Trade Commission on May 18.
Question 14. Investor State Dispute Settlements or ISDS, is an
integral part of USMCA and many other FTA's that the U.S. has around
the world.
14a. Can you please state how you and USTR would prioritize the
enforcement of ISDS under USMCA and the inclusion of strong ISDS
provisions in other FTA's the U.S. may pursue?
Answer. I am committed to enforcing the USMCA agreement, including
the provisions in the Investment Chapter. Regarding other FTAs,
President Biden has stated that he does not believe corporations should
get special tribunals in trade agreements that are not available to
other organizations and that he opposes the ability of private
corporations to attack labor, health, and environmental policies
through the investor-state dispute settlement.
Question 15. Can you please state your view on how the current Sec.
301 tariffs on imported goods from Mexico and Sec. 232 tariffs on steel
and aluminum will be handled under your leadership at USTR?
Answer. I have committed to doing a top-to-bottom review of our
China trade policy, with the goal of making our trade policies more
effective and more strategic. As part of that review, we are looking at
the China 301 tariffs and the exclusions process. Our plan to re-
examine the tariffs provides us with important opportunities to craft
thoughtful and effective responses to China's unfair trade practices.
With respect to the section 232 tariffs on steel and aluminum, we
have a very significant problem in the global steel and aluminum
markets that is driven primarily by overcapacity in China and other
countries, particularly in Southeast Asia and the Middle East. The
Administration is working to address the market distorting measures in
economies that have led to overcapacity in the global steel and
aluminum industries and the resulting national security threats.
In addition to the thorough review of the section 232 measures and
product and country exclusions that is currently underway by the
Department of Commerce, the Administration is also consulting closely
with various domestic stakeholders and like-minded partners around the
world sharing similar national security interests to address market
distorting measures in non-market economies that pose a serious threat
to the market-oriented U.S. steel and aluminum industries and the
workers in those industries. On May 17, 2021, the United States and the
European Union (EU) announced the start of discussions to address
global steel and aluminum excess capacity and the market distortions
that result from this excess capacity. The Administration is committed
to working with the EU and other like-minded partners to address excess
capacity, ensure the long-term viability of our steel and aluminum
industries, and strengthen our democratic alliance.
Question 16. Natural gas and LNG have been instrumental in reducing
GHG emissions around the world and have served as a strong enticement
to help the U.S. achieve policy goals and partnerships with other
countries. That leverage should only be strengthened and improved in
coming years to maintain and grow U.S. leadership abroad.
16a. Can you please elaborate on how USTR under your leadership
will support and encourage growing US energy exports, particularly that
of LNG around the world?
Answer. USTR is committed to the Biden-Harris Administration's
whole-of-government approach to reduce GHG emissions and reach our net
zero economy objectives. USTR will work hard to ensure all U.S. exports
are competing on a level playing field in the global market.
______
Questions Submitted by Senator Bill Hagerty
Question 1. The price of building or renovating a home has recently
sky-rocketed, and demand for lumber has reached record highs. Lumber
futures for delivery in May 2021 are at an all-time high and roughly
four times the typical price for this time of year.\1\ Forestry in
Tennessee provides more than 98,000 jobs and has an annual economic
impact of more than $24 billion.\2\ Most of Tennessee's lumber
production has been hardwood lumber.\3\ The U.S. hardwood lumber
industry relies heavily on exports; over the last decade, China has
imported about a quarter of all boards produced by U.S. hardwood
sawmills.\4\ These exports of U.S. hardwood have an effect on reducing
the massive trade deficit with China. China has extended the exclusion
of tariffs on U.S. hardwood, but that exclusion is set to expire on
September 16, 2021.
1a. What is USTR doing to ensure our continued ability to export
Tennessee lumber to countries like China?
Answer. During meetings held under the Phase One Agreement to
review China's implementation progress, the U.S. side has frequently
pressed China to increase the pace of its purchases of U.S. goods. At
times, the U.S. side has also raised concerns related to China's tariff
exclusion process. With regard to hardwood lumber, as you have noted,
the blanket exclusion for this product expires on September 16, 2021.
Given China's past practice regarding extensions of existing
exclusions, we do not expect China to extend the blanket exclusion for
hardwood lumber until shortly before its expiration.
Question 2. I am very concerned about threats that Americans faces
from the Chinese Communist Party (CCP) and their persistent attempts to
steal American business secrets and proprietary information. Far too
many nations and international organizations refuse to hold the CCP
accountable.
---------------------------------------------------------------------------
\1\ Ryan Dezember, Lumber Prices Break New Records, Adding Heat to
Home Prices, Wall St. J. (May 3, 2021), https://www.wsj.com/articles/
record-lumber-prices-lift-sawmills-while-homeowners-do-it-yourselfers-
pay-up-11620034201.
\2\ Andrew Muhammad & Adam Taylor, Implications of COVID-19 on
Tennessee Exports of Forest Products, UT Extension Inst. of
Agriculture, at 3, https://extension.tennessee.edu/publications/
Documents/W913.pdf.
\3\ See, e.g., Rhonda M. Mathison & Doug Schnabel, Tennessee's
Timber Industry--An Assessment of Timber Product Output and Use, 2007,
USDA--Forest Service, https://www.srs.fs.usda.gov/pubs/rb/
rb_srs152.pdf.
\4\ Peter Buxbaum, China Trade and COVID-19, Am. J. of
Transportation (May 26, 2020), https://ajot.com/premium/ajot-china-
trade-and-covid-19-a-one-two-punch-hitting-us-hardwood-producers.
2a. Does the Biden Administration and USTR have an overall
strategy to challenge China's aggressive and unfair trade efforts
around the world?
2b. What role will your office play in the Administration's
broader strategy toward China?
2c. Are you confident that other countries will join our efforts?
What will it cost the United States to get other countries onboard?
2d. How is USTR approaching China's compliance with the U.S.-China
Phase One Agreement?
Answer. The Administration is engaged in a comprehensive and
coordinated review of U.S. strategy for addressing the many challenges
that China poses, both for the United States and the world. USTR is
actively participating in the development of this strategy, which will
encompass all policy areas, including trade policy.
With regard to the Administration's trade policy toward China, USTR
is currently conducting a top-to-bottom review of the U.S.-China trade
relationship, with a view toward ensuring that our trade policy
supports and complements the Administration's broader China strategy. A
key focus of this effort is on the many harmful and unfair trade
policies and practices pursued by China that currently evade discipline
by WTO rules.
The United States has shared values and interests with like-minded
partners across the world. Addressing China's non-market and unfair
practices is critical for U.S. and our partners' workers and citizens,
and for the world trading system. We need to be creative and find
effective responses, to prevent further job and technology losses in
sectors China is targeting.
The Phase One Agreement is the agreement that we have, and we are
committed to ensuring China's full implementation of its obligations
under the Agreement. We will continue to make use of and push the tools
that we have for the benefit of U.S. farmers, ranchers, manufacturers,
service suppliers, and small businesses.
SUBCOMMITTEE RECESS
[Whereupon, at 10:48 a.m., Wednesday, April 28, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]