[Senate Hearing 117-486]
[From the U.S. Government Publishing Office]
S. Hrg. 117-486
THE PRESIDENT'S 2021 TRADE POLICY AGENDA
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HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
MAY 12, 2021
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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
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U.S. GOVERNMENT PUBLISHING OFFICE
49-526-PDF WASHINGTON : 2022
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COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
MARIA CANTWELL, Washington CHUCK GRASSLEY, Iowa
ROBERT MENENDEZ, New Jersey JOHN CORNYN, Texas
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
BENJAMIN L. CARDIN, Maryland RICHARD BURR, North Carolina
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania TIM SCOTT, South Carolina
MARK R. WARNER, Virginia BILL CASSIDY, Louisiana
SHELDON WHITEHOUSE, Rhode Island JAMES LANKFORD, Oklahoma
MAGGIE HASSAN, New Hampshire STEVE DAINES, Montana
CATHERINE CORTEZ MASTO, Nevada TODD YOUNG, Indiana
ELIZABETH WARREN, Massachusetts BEN SASSE, Nebraska
JOHN BARRASSO, Wyoming
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Crapo, Hon. Mike, a U.S. Senator from Idaho...................... 3
.................................................................
ADMINISTRATION WITNESS
Tai, Hon. Katherine C., United States Trade Representative,
Executive Office of the President, Washington, DC.............. 5
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Crapo, Hon. Mike:
Opening statement............................................ 3
Prepared statement........................................... 49
Tai, Hon. Katherine C.:
Testimony.................................................... 5
Prepared statement........................................... 50
Responses to questions from committee members................ 52
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 95
Communications
American Chemistry Council....................................... 97
American Farm Bureau Federation.................................. 101
Americans for Free Trade......................................... 102
Association of Equipment Manufacturers........................... 106
Center for Fiscal Equity......................................... 107
Engine Advocacy.................................................. 111
U.S. Global Value Chain Coalition................................ 113
(iii)
THE PRESIDENT'S 2021 TRADE
POLICY AGENDA
----------
WEDNESDAY, MAY 12, 2021
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 9:30 a.m.,
via Webex, in the Dirksen Senate Office Building, Hon. Ron
Wyden (chairman of the committee) presiding.
Present: Senators Stabenow, Menendez, Carper, Cardin,
Brown, Bennet, Casey, Warner, Whitehouse, Hassan, Cortez Masto,
Warren, Crapo, Grassley, Cornyn, Thune, Portman, Toomey,
Cassidy, Lankford, Daines, and Barrasso.
Also present: Democratic staff: Sally Laing, Senior
International Trade Counsel; and Joshua Sheinkman, Staff
Director. Republican staff: Gregg Richard, Staff Director;
Mayur Patel, Chief International Trade Counsel; and John
O'Hara, Trade Policy Director and Counsel.
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The Finance Committee will come to order.
This morning the Finance Committee is pleased to welcome United
States Trade Representative Tai for our annual hearing on the
President's trade agenda. In 2021, just about every major trade
policy needs to be based on a straightforward proposition: out-
competing China for jobs and economic growth. The reality is,
too often, the Chinese Government has feasted on weaknesses in
the global trading system to the disadvantage of American
workers.
The Finance Committee examined many of the key issues in a
hearing last month. American factories and plants have shut
down because of unfair subsidies and overproduction in China.
American websites and digital service providers are blocked by
the Great Firewall, and they watch as homegrown Chinese firms
rip off their ideas and grow into tech giants intolerant of
free speech. American workers cannot and must not ever have to
compete against forced labor, which is an atrocity on its own,
regardless of what it means for international trade.
The bottom line is, our country has been playing catch-up
ball in the competition with China for too long. It is going to
take higher standards and stronger enforcement policies as a
key component to move faster, to have more American jobs and
growth, particularly in our smallest businesses. The older,
slower approach--the one that responds to China's rip-offs long
after the damage is done--clearly has not worked.
The committee is working now on bipartisan legislation to
address these challenges directly. We are going to have
progress to announce on that bill in the days ahead, and I am
looking forward to discussing these issues with Ambassador Tai
today.
Now, apropos of showing what tough, quick-moving trade
enforcement looks like in practice, there are two brand new
examples that have been making some news this week. The AFL-CIO
announced Monday that it was bringing forward the first major
complaint dealing with labor rights under the new USMCA rapid
response mechanism. And as Ambassador Tai is going to tell us
shortly, USTR announced just this morning that it has self-
initiated the first rapid response action to protect workers'
rights to organize and collectively bargain. Senator Brown of
Ohio and I proposed this new system some time ago because the
Trump administration's version of the new NAFTA deal simply was
not strong enough to ensure enforcement to protect American
jobs.
The new petition and action announced this week are taking
on what really are classic labor violations in Mexico, such as
firing or harassing workers who try to organize, and failing to
ensure a legitimate vote on bargaining agreements. That sort of
abuse is a threat to workers everywhere, including in my home
State of Oregon and across the country, because it is part of
the race to the bottom on worker's rights.
The committee is going to have questions, as I know the
Ambassador expects today, and there will be questions on other
areas of trade enforcement implementation.
Finally, USTR is also going to be leading negotiations
dealing with intellectual property and the COVID-19 vaccine.
Entering negotiations on the IP waiver was the right decision.
The Biden administration is working hard to get shots in arms
across the country, and COVID-19 cases are dropping in many
areas. However, new coronavirus variants still clearly pose a
danger to Americans as long as there are terrible outbreaks
around the world.
My view is, our system ought to include IP protections and
exceptions that promote the common good, and it is
unquestionably in the common good to squash the virus as
quickly as possible around the world.
The waiver negotiations are an important step, but as the
Ambassador and I have talked about, the waiver alone does not
unlock a vaccination miracle; there is more to do. That
includes manufacturing capacity, it includes building out
supply chains; it could also include making sure other
countries are actually going to be able to afford the vaccine.
So we have a lot to talk about today. We want to welcome
you again, Ambassador Tai. We are going to have, first your
testimony, then questions and answers.
And now we will hear from our friend Senator Crapo.
[The prepared statement of Chairman Wyden appears in the
appendix.]
OPENING STATEMENT OF HON. MIKE CRAPO,
A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you very much, Mr. Chairman. And
welcome, Ambassador Tai. Senator Wyden and I are in strong
agreement about how critical it is for us to step up our game
in trade, particularly in terms of dealing with China. And I
appreciate the opportunity for us to visit with you about that
here today, Ambassador.
The President's 2021 trade policy agenda opens with two
objectives: one, ending the COVID-19 pandemic; and two,
strengthening the economy.
Significant progress is being made on the first, with
record vaccine development thanks to Operation Warp Speed and
continued efforts by the Biden administration to get shots in
the arms.
Unfortunately, with regard to the second objective,
progress is disappointing. Last month the United States added
only 266,000 jobs--far less than the 1 million jobs that
economists predicted.
President Biden's response is that we have a long way to
go. Yes, we do. In fact, more Americans are out of work at the
moment than during the worst point in the Great Recession.
Of course, Americans have crossed unimaginable distances
before--and they will do so again. But why counsel Americans to
be patient? It is not in their nature. What we need to do right
now is to speed up the journey for everyone by fully reopening
our economy and executing an ambitious and sound trade policy.
According to President Biden's trade agenda, exports
facilitate greater productivity and wages. In fact, President
Obama's White House determined that every billion dollars in
increased annual exports supports between 5,300 and 7,300 jobs.
If the Biden administration wants a worker-centered trade
policy, then the logical--and only sensible course--is to adopt
a trade policy that creates as many high-paying jobs as
possible.
That kind of successful trade policy requires at least
three components. First, enforcement must be a priority. The
trade agenda notes there will be comprehensive enforcement of
the labor and environmental obligations in our free trade
agreements. I support that, because America's businesses,
workers, and farmers need to compete on a level playing field.
We can do that, and also stand up for them by challenging
other market access barriers at the same time. Enforcement in
these areas is complementary, not exclusive.
Make no mistake, there is a great deal to enforce. For
example, the United States-Mexico-Canada Agreement, the USMCA,
contains groundbreaking market access commitments. These
commitments are particularly important to our farmers, who have
faced a decline in demand from restaurants, school systems, and
hotel customers.
We must make sure American farmers get the access to our
trading partners to which they are entitled. But the story on
enforcement must become better.
An important U.S. tariff-rate quotas case against Canada
remains stalled in the USMCA process. It is time to see
progress on it, or the United States must proceed with a
dispute settlement panel so that American farmers, ranchers,
and businesses can enjoy the benefits they bargained for under
the agreement.
Mexico is adopting a host of measures that undermine our
agricultural rights, including restrictions on biotech crops,
glyphosate, and unreasonable food packaging labels.
Ambassador Tai, I encourage you to press for action on
these barriers at the meeting of the USMCA Free Trade
Commission later this month. If our partners should refuse, you
must use the enforcement tools at your disposal.
The second component of an effective trade policy is
negotiating new rules and market access opportunities. To that
end, I support the Biden administration's call to work with
allies. Yet, the President's trade agenda is silent on whether
we will continue to negotiate with the United Kingdom and
Kenya.
I encourage you to work with the United Kingdom--one of the
United States' oldest allies--and with Kenya, which can serve
as a replicable model for future trade deals in a country where
China has failed to get an FTA, and that will also establish
our commitment, over China's, to the people of Africa.
Furthermore, we must deepen our engagement in the Asia-
Pacific, or risk losing U.S. allies there to China's predation.
While I understand you believe the Trans-Pacific
Partnership is dated, I see value in an agreement with new
disciplines, including on digital trade. However, that means we
must start thinking about how to modernize the TPP, or what
other structures we can use for U.S. engagement in the Asia-
Pacific. We cannot simply take a ``time-out'' from the region.
Last month, Japan ratified the Regional Comprehensive
Economic Partnership, which is China's model for what trading
relationships in the region should look like. In the absence of
U.S. leadership in the region, our allies will have to look
elsewhere. If the United States is to pursue a worker-centered
trade policy, we need to be mindful that American workers lose
when China writes the rules.
The final but most important component of a successful
trade policy is consultation. The Supreme Court noted 60 years
ago that the President is strongest when he acts pursuant to an
authorization of Congress--and is potentially powerless when he
acts in defiance.
The administration must be strong when it comes to trade
policy, and that requires a close partnership between Congress
and the U.S. Trade Representative. We recently had a test of
that partnership: the administration's decision to support a
waiver to the intellectual property protections in the WTO
TRIPS Agreement.
The WTO TRIPS Agreement was approved by Congress. The law
says Congress's approval can only be withdrawn, quote ``if and
only if'' Congress enacts a joint resolution to that effect.
Last summer, during the height of the pandemic, both houses of
Congress declined to act on such a resolution. Yet without any
consultation with this committee, you announced via a tweet
that the administration unilaterally supports waiving the
patent obligations of the TRIPS Agreement.
Chancellor Merkel of Germany asserts the problem with
vaccine distribution is not patents, but manufacturing capacity
and production standards. Albert Bourla, the CEO of Pfizer,
said the decision will ``categorically create more problems for
vaccine distribution.'' He added that it will ``disincentivize
anyone else in the future from taking a big risk'' like Pfizer
did, laying the groundwork for classic moral hazard.
Iconic American innovators, like Bill Gates, have also said
the decision will not advance vaccine distribution. In short,
these observers assert a TRIPS waiver will undermine the very
objective on which I said the administration showed some
progress; ending the pandemic.
Conversely, Vladimir Putin, in fact, supports this decision
to pursue a waiver. Neither did it surprise me that a bureau
chief for one of China's propaganda outlets replied to your
tweet by asserting that ``global pressure works.''
You may, of course, have your own good reasons, but to date
you have not offered an adequate explanation. You will hear
more on this subject from me and my colleagues.
Ambassador Tai, I know that you like the expression that
``USTR can walk, chew gum, and play chess at the same time.''
But what we need is a USTR that can enforce, negotiate, and
consult at the same time. The American people and members of
Congress, including myself, are counting on you to prove that
is the case.
Thank you, Mr. Chairman. I look forward to the testimony
from our witness.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. Thank you, Senator Crapo; and I look forward
to working with you.
Ambassador Tai, welcome. Please go ahead.
STATEMENT OF HON. KATHERINE C. TAI, UNITED STATES TRADE
REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON,
DC
Ambassador Tai. Thank you, Chairman Wyden, Ranking Member
Crapo, members of the committee, for inviting me to testify on
the President's trade agenda.
Our worker-centric trade policy is a key part of the Biden-
Harris administration's effort to Build Back Better. We are
making real strides towards ending the pandemic. There are
pockets of progress and hope, but we still have a lot of work
ahead.
I want to thank Congress for passing the American Rescue
Plan, which has already helped gets shots in arms and money in
the pockets of millions of Americans. We are seeing the
economic benefits of that quick action here in the United
States; we are on track for a full economic recovery. More
needs to be done.
The American Jobs Plan and the American Family Plan would
combine to make the United States a healthier, safer, more
prosperous, fairer, and a more competitive nation. They would
make full investments that build a better foundation for
decades of economic growth.
These extraordinary times demand extraordinary leadership
and creativity to defeat COVID-19. The announcement last week
that the United States will not let intellectual property
rights get in the way of saving lives is just one part of the
administration's global effort.
We will pursue text-based negotiations at the WTO, which
may take time, but I am encouraged that other countries have
already announced that they will roll up their sleeves and join
us.
We will also continue to ramp up our efforts working with
the private sector and other partners to expand vaccine
manufacturing and distribution around the world. This
comprehensive effort will not only save lives but also help
heal the economy.
And as we reengage the world from a position of strength,
support from Congress gives us more authority and opportunity
to deliver results for the American people. We want a fair
international trading system that promotes inclusive growth and
reflects America's universal values. For too long, we have
overlooked the effect of our trade policies on individual
workers, who are human beings living in a community trying to
survive and to thrive.
The worker-centered trade policy outlined in the
President's trade report will foster broad-based equitable
growth, increase innovation, and give workers a seat at the
table.
Last week, I announced our transparency principles and the
appointment of our Chief Transparency Officer, whom Chairman
Wyden knows well. Together they show our commitment to
comprehensive public participation, and they are just the
starting point.
For the first time, the President's trade agenda included
the goal of racial equity. Our thoughtful, sustained engagement
will help us better understand how our proposed policies affect
all communities, and we will consider those effects before
making policy decisions.
Trade policy must also help protect the environment and
fight climate change. For too long, we have seen a race to the
bottom, but we can use trade tools to incentivize a race to the
top and build a cleaner and brighter future with high-paying,
quality jobs.
Our farmers, ranchers, fishers, and food processors will
also benefit from our new approach. We are turning the page on
erratic trade policies and looking to expand global market
opportunity while enforcing global trade standards and ensuring
that trade partners live up to their commitments.
Sustained American leadership and reengagement with our
allies, trading partners, and economic competitors will be key.
The Leaders Climate Summit in April showed that we can rally
the world to tackle big challenges. We will work with the World
Trade Organization's new Director General, Dr. Ngozi Okonjo-
Iweala, and like-minded countries to reform the WTO's rules and
procedures so they can be a relevant force for good in the 21st
century.
We are also working to resolve the ongoing Boeing/Airbus
dispute and addressing the real problem of overcapacity in the
steel and aluminum sectors coming primarily from China.
These talks will take time, but I believe a resolution is
possible. We will not hesitate to call out China's coercive and
unfair trade practices that harm American workers, undermine
the multilateral system, or violate basic human rights. And we
are working towards a strong strategic approach to our trade
and economic relationship with China.
We welcome fair competition, and if China cannot or will
not adapt to international rules and norms, we must take steps
to level the playing field.
Closer to home, we are using every tool available to make
sure our existing agreements work and have a positive impact on
real people. The USMCA gives me confidence that this approach
is worthwhile.
USMCA is a starting point for future efforts in the region
that will explicitly acknowledge climate change, aggressively
address global forced labor issues, and expand the benefits of
trade to women and historically underserved communities.
I will enforce the new standards, follow through on our
commitments, and use the agreement to ensure that Canada and
Mexico do too. This week you have seen that we are committed to
using these tools. The innovative rapid response mechanism will
allow us to address longstanding labor issues in Mexico. Today
I am proud to announce the inaugural use of this mechanism in
our request that Mexico review whether workers at a General
Motors facility are being denied the right of free association
and collective bargaining. I commend the Government of Mexico
for stepping in when it became aware of voting irregularities
earlier this year.
I am proud to partner on this shared goal of helping both
Mexican and American workers prevent a race to the bottom.
As you can see, we have our work cut out for us, but I am
confident that we can walk, chew gum, and play chess at the
same time. The professional and dedicated public servants at
USTR are working hard to implement the President's trade
agenda, and I am proud to carry the strength and creativity of
our small but mighty agency into the room today.
Thank you for your time, and I look forward to your
questions.
[The prepared statement of Ambassador Tai appears in the
appendix.]
The Chairman. Thank you, Ambassador. And when we think
about you, we think particularly about your mighty role in
particular.
Thank you also for the good news with respect to the
stepped-up effort on transparency, on trade enforcement in
particular, where Senator Brown and I have put a lot of sweat
equity into doing that. So that is good news.
What I would like to start with--you heard Senator Crapo
and I talk about our joint efforts with respect to China. The
bottom line here is, we've got to out-compete them, and we can
do that on a level playing field.
Now China has not exactly been secretive about its
aspirations; they have all these plans: 5-year plans, 10-year
plans, this plan, that plan. The fact, however, is that their
bottom line is, they are targeting industries today that we
care deeply about--that Senator Crapo and I care deeply about
in the Pacific Northwest--semiconductors, the question of
solar. These are hugely important to our part of the country
and the United States.
My first question to you is, are there tools that you need
this committee to give you now so that you can better ensure
that we have that level playing field for American companies,
both at home and abroad?
Ambassador Tai. As I turn on my microphone here, this is
one of the most important questions that we face, which is how
we make use of the tools that we have; and as we survey the
landscape in 2021 in terms of the economic challenges that we
have and the competitive challenges, what tools do we still
need? I appreciate the spirit of this question tremendously.
Let me just offer one example. We do need new tools, in my
opinion, and I think that this is an area where the
administration and this committee and the Congress can really
make strides towards strengthening our trade enforcement, our
leveling of the playing field.
The steel and aluminum tariffs that have really roiled our
economy but were necessary to address a global overcapacity
program, driven largely but not solely by China--one of the
awkward aspects of the use of these carrots is the section 232
authority that I know so many members of this committee have
really been studying and focused on reforming over the past
several years. What I would like to offer is this thought, that
for my predecessor and the Trump administration, they did the
best that they could, given the tools that we have existing on
the books.
Section 232 is a statute from 1962, I believe it was,
created at a very different time, certainly created long before
the WTO was founded. And what I would observe is that part of
the tensions that have arisen over this important trade remedy
is the discordance between the authority provided and the
nature of the problem we are dealing with now.
What I would propose is that we need 2021 tools for
addressing the 2021 challenges we have, rather than relying on
1962 tools and retrofitting them for the challenges we have
now. So I think that there is a lot of opportunity here for us
to look at the problems and challenges that we are facing and
to devise tools here in the United States, but also to work
with our allies and our partners on tools that we can
coordinate using, to address really what should be shared
interests on our part.
The Chairman. I very much appreciate your interest in
updating that particular area of trade policy. I can tell you,
and I think my colleagues would agree--I think colleagues on
both sides--not a day goes by when I do not have a Senator talk
to me about 232, and particularly this idea of modernizing the
statute. That is what trade is all about: having a tool box
that we can use to deal with our challenges. So we will look
forward to working with you on that.
Let me, in my remaining time, just touch on a question with
respect to the TRIPS waiver and the situation with the
vaccines.
I like your point about multitasking, where you are saying,
``Hey, look, we can walk and chew gum, we can do all of this
simultaneously.'' We are going to need some guiding principles
with respect to the full issue, and let me submit three and
kind of get your reaction.
First, we have to have a balanced vaccine IP waiver that
spurs timely manufacturing safely and ensures deployment.
Second, we need to deal with any kind of potential
restrictions, questions with export restrictions, non-tariff
barriers, regulatory hurdles, tariffs; the kinds of things that
slow down manufacturing would be the second kind of principle.
And third, we have to engage with other countries in the WTO to
understand what obstacles we may see in the WTO process.
That would be my take of how USTR--and our conversation is
going to be working with other agencies and other officials.
These are all areas where it seems to me your office can lead,
and with your expertise, strike me as a solid set of principles
we can begin with.
What is your take on that?
Ambassador Tai. Chairman Wyden, I had prepared a slightly
different set of words, but they essentially track your three
principles, and so let me just reflect to you the way I have
been thinking about it, but I think that they match up quite
nicely.
The first one is to educate, really, around the waiver
proposal and the way the WTO works. Our expression of support
for the waiver is an endorsement and an exercise of U.S.
leadership at the WTO to begin a process, and to encourage all
164 members of the WTO to roll up their sleeves and come
together. It is a process, and if we are going to succeed at
the WTO in making the WTO relevant here in responding to the
needs of our people worldwide and our economy, it will
necessarily be something that has to be supported by all 164
members of the WTO. We see our role as critical to facilitating
that conversation and process.
The second point I wanted to make was that there is
precedent of a temporary waiver of intellectual property rights
at the WTO, and the earlier incident happened in the early
2000s around the HIV/AIDS epidemic. And what happened was
effective in addressing the needs, especially on the African
continent.
The third point I wanted to make was the need for
partnership. That is across the administration--certainly with
Congress--I am here today to consult. I will consult, and I
always have; I have made that commitment. We will need a
partnership at the WTO and here in the United States to be able
to make the kind of difference that will allow us to have the
ability to get through the pandemic to an economic recovery.
The Chairman. I am well over my time.
Senator Crapo?
Senator Crapo. Thank you very much, Mr. Chairman.
And I would like to follow up on that very same line of
questioning with regard to TRIPS.
Ambassador Tai, are you saying that there is authority,
there is precedent for waiving the TRIPS process without
approval of Congress? As I indicated in my opening statement,
the law says that that can be waived only if Congress agrees.
Do you disagree with that?
Ambassador Tai. So, Senator Crapo, I think it is incredibly
instructive to look at the early 2000s, the leadership of
President George W. Bush, working with the Congress across the
board. The TRIPS piece was just one piece of what has become
PEPFAR. I believe it stands for the President's Emergency
Program For AIDS Relief.
I think that was really a remarkable model of
bipartisanship and leadership by the United States to address a
problem that had really become untenable in terms of the
ability of those suffering most acutely from HIV-AIDS to get
access to the life-saving medicines that were----
Senator Crapo. Well, I understand that, but because of
time, I want to get right to the question.
Do you believe that you have the authority to waive the WTO
TRIPS provisions without congressional approval?
Ambassador Tai. Senator Crapo, let us put it this way: I
believe I have the authority to negotiate at the WTO, and I
think that what I would say is, the provision that you cited
earlier really has more to do with withdrawing the United
States from the WTO as opposed to the authority of the United
States to participate at the WTO as a full member.
Senator Crapo. Well then, I do not agree with that, but
given that, will you commit that in these negotiations in
Geneva to discuss the waiver--will you commit to this committee
that you will oppose allowing any waiver to be extended to
China and Russia?
Ambassador Tai. Senator Crapo, I think that what I want to
make clear right now is, in terms of the objective of the
waiver, it is to remove intellectual property restrictions as
an obstacle to the ability to get the world vaccinated.
And what I would draw your attention to is that the
proponent, the main proponents are India and South Africa. And
if you look at where vaccine inequity is most striking, it is
on the African continent.
So let me just say this, that I am committed to a full,
good faith effort at the WTO, but the focus really is on
promoting vaccine equity. And we will have to address the
concerns of all parties involved, and those whose partnership
we require in order to come to a kind of resolution at the WTO.
Senator Crapo. Now, if I understand what you are saying,
let me ask you this. At a minimum, can you confirm that this
committee will see the text of any proposal you are dealing
with or negotiating well in advance of you tabling it to the
other trading partners?
Ambassador Tai. Senator Crapo, I commit to consulting with
this committee; that is why I am here, that is why I will be
here when you ask me to come; that is why I will pick up the
phone and pick up any call that is ever made to me.
Let me put it this way in terms of the process that we are
embarking on: it will require engagement in groups collectively
and on a bilateral case basis with WTO members. I commit to
keeping this committee fully informed of how those
conversations develop.
Senator Crapo. Finally, on this issue, I would just note to
you, I think that this all shows that it is really important
for the administration to promptly name nominees for the Chief
IP Negotiator and for Ambassador to the WTO.
Do you agree with that?
Ambassador Tai. Senator Crapo, I take staffing at USTR very
seriously. Right now, I am the leader at USTR. Having USTR
staff up is going to be incredibly helpful to me, and obviously
those positions that you just identified are ones that will
have to come through this committee, and we are working on
those issues right now.
Senator Crapo. Well, I encourage you to try to press for
that quickly.
I see I only have a few seconds left, so let me get my last
question in, and it is going to relate to the UK and Kenya.
Your experience allows you to make sure that trade is not
on the back burner; you have great experience. And to me it is
imperative that we reengage with the UK and Kenya. I mentioned
in my opening remarks why that is so important in both places.
Where is the USTR in its review of these negotiations, and
when do you reasonably expect them to conclude?
Ambassador Tai. Well, Ranking Member Crapo, I think that,
given the level of intensity and the conversations I expect to
have today, that it should be clear that trade is not on the
back burner.
For your question specifically on the UK and Kenya, I think
it was in my first 2 weeks on the job that I had conversations
with my counterparts in both countries, and we at USTR are
working through the process of assessing the progress and
thinking through how these engagements will support goals on
both sides, including on our side to support the Build Back
Better agenda.
So we are very much engaged in a review, and I look forward
to coming back to you and to our trading partners on next
steps.
Senator Crapo. Can you commit to any timeline there?
Ambassador Tai. Senator Crapo, I understand that--let me
say this: in terms of Building Back Better, first we have to
get through the pandemic. Second of all, we need to be engaging
on all fronts. I want to convey to you the degree to which all
engines and all thrusters are on go at USTR right now.
Senator Crapo. All right; thank you.
The Chairman. We are going to go now to Senator Stabenow
and then to Senator Grassley.
Senator Stabenow is on the web.
Senator Stabenow. Well, thank you very much, Mr. Chairman.
Really important hearing. And welcome back, Ambassador Tai. It
is wonderful to have you with us, and obviously there are so
many issues on your plate that are critical to all of us.
From my perspective in Michigan--we are an exporting State.
We also are very concerned about having a level playing field
when it comes to trade, and making sure that we also have that
supply chain that the President is talking about all the time,
here in the United States.
And I want to follow up with part of what the chairman was
talking about in terms of a level playing field, but ask you
specifically relating to something that is a really serious
issue for us right now in Michigan and in the country, and that
is the fact that we have such a serious global shortage of
semiconductor chips and wafers. And this has had a cascading
effect on, not only the auto industry, but other industries as
well. We have idled plants and we do shifts; we have laid off
workers right now. We are working to make significant
investments in semiconductor chip fabrication facilities now at
home, to stop the overreliance on overseas fabrication in the
long run. And frankly, if we are investing significant taxpayer
dollars in R&D, in production, then we need to ensure these
investments are going to our key industries: auto and aerospace
and defense and so on.
But could you talk about any tools right now that the USTR
has to address this semiconductor supply chain issue in the
short run as well as the long term? What are ways that you can
help us get through this right now?
Ambassador Tai. Senator Stabenow, the chips issue is very
much on our mind, both for itself and the industries most
directly impacted by the shortage, but also in the bigger
picture, as you highlighted: the short-term and the long-term
question.
I want to emphasize the importance on our side in terms of
the whole government approach to this particular issue. I know
how very much semiconductors strategically are on the minds of
you and your colleagues on this committee.
There is currently a supply chain review that is going on,
that is focused on four areas; semiconductor chips is one of
them. I want to indicate to you that the Department of Commerce
is a lead agency on the chips issue, and that I speak to
Secretary Raimondo quite often on this. I would reinforce her
comment on the short-term issue, which is: there is no silver
bullet that will solve this problem in the short term.
But in terms of the longer term, strategically thinking
about chips and harnessing the policy power of the U.S.
Government, I actually have a lot of confidence in this area,
because I know how much leadership there is in the Congress, on
this very committee, and how much motivation there is on our
side to look at resilience in supply in this area.
Senator Stabenow. Thank you. Another key piece of this is
the whole clean energy economy and how we move, again, to
compete internationally, particularly with China, which is
heavily invested in using massive subsidies, frankly, and
predatory practices also.
And so we know for example, China holds almost three-
fourths of the world's manufacturing capacity for lithium ion
battery cells, which are a critical component for a lot of
things, including our capacity to move forward on electric
vehicles.
So we are all working on the committee, the chairman,
myself, on a bipartisan basis on a number of different issues,
tax policy issues, other ways to be able to again have American
competitiveness put us and keep us at the front of the line on
that.
So what is the USTR doing to help our manufacturers better
compete in the clean energy markets that are so integral to the
future? What kind of a role do you see USTR playing?
Ambassador Tai. Well, Senator Stabenow, thank you for
raising the issue of batteries, which are critical to the
supply chain for clean energy and critical, frankly, to the
clean energy economy, new industry jobs that we need and that
we have such great potential for building here in the United
States.
I wanted to reference--I think this is now maybe a month,
month and a half ago--the resolution of a section 337
International Trade Commission dilemma that pitted intellectual
property enforcement against investments that have been made
here in some of our important southern States that are part of
the auto industry supply chain. And in that instance, I am very
happy to report that there really truly was a classic win-win
solution that came out of that exercise at the end of the 337
process that is going to make the U.S. footprint in battery
production even stronger.
To your question about USTR's role, let me say this. I was
very proud to make the topic of my first trade policy speech
one about harnessing trade tools to support environmental
protection, but even more importantly, the building of a clean
energy economy here in the United States. And I think it is all
about designing our trade rules to push that race to the top as
opposed to the race to the bottom, where countries try to
compete with each other to lower their standards in order to
attract investment and to promote their economies.
What we really need at USTR is the promotion of trade
policies that will create a race to the top.
Senator Stabenow. Absolutely: I could not agree more. And
final question, let me turn to agriculture. With my agriculture
hat on, frankly, I do not think we have an economy unless we
make things and grow things; that is what we do in Michigan as
well as across the country.
But when we look at--you know, Michigan is second in
diversity of agricultural products, second only to California.
So we have some 300 different commodities, and exports are a
serious, important driver for all of us, and I share Senator
Crapo's comments about the importance of agriculture.
So our producers, a lot of them particularly in specialty
crops, are concerned that these crops are increasingly facing
unscientific sanitary and phytosanitary and other technical
barriers to trade; SPS, as you know. And I am wondering about
how you intend to focus in support on these export markets when
we are looking at these barriers that we continue to see.
Ambassador Tai. Well, the plan is that you address these
concerns by engaging; and I know that there are concerns about
these types of barriers, and a lot of different economies will
depend on them. And whether or not we are using free trade
agreement tools, regional trade agreement tools, or WTO tools,
that is what the game is about. It is about engaging in order
to resolve problems, in order to create the policies and the
policy solutions that will empower the U.S. economy and our
growers and our workers.
Senator Stabenow. Thank you. I look for the Chief
Agricultural Negotiator coming on board soon, so we can work
with them on these issues as well as with you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Stabenow.
Senator Grassley?
Senator Grassley. I have so many questions, I am going to
have to submit some for you to answer in writing. I am going to
start with the fact that we try to keep countries from stealing
our intellectual property, and lately this movement towards
giving some of it away bothers me, particularly when it comes
to how we were able to have Pfizer and other companies through
the platform mRNA develop quickly these pharmaceuticals; and
then they are going to have a broader application than just to
COVID.
So other countries have long tried to steal these
innovations and undermine our competitive edge. How are you
going to limit the forced transfer of these advanced
technologies just to COVID, and have you evaluated how forced
technology transfers under the proposed waiver would affect
U.S. competitiveness in advanced life sciences?
Ambassador Tai. Yes. Senator Grassley, you raise very
important issues, and they are ones that are very much on our
mind. The waiver that has been proposed at the WTO is a
temporary waiver that is seeking to ensure that intellectual
property protections, these IP rights, do not obstruct our
ability to save lives, to have more vaccines produced, to have
the vaccines equitably distributed so that there can be a
global economic recovery.
Let me try to take apart some of the main components of
your question as I have heard them. Let me also try to
distinguish what I think the proposal is intending to do at the
WTO. I think this is less about stealing technology; it is more
about the impact of our trade policies on intellectual property
protections on regular people.
Right now there is nothing more directly impactful on the
hope of regular people to be able to resume their lives, to
become active members of their economies, than their ability to
get a vaccine. And that is what I understand to be driving the
proponents of the waiver proposal at the WTO.
So you know, in terms of weighing the balance of rights to
intellectual property, the need to have incentives for
innovation--absolutely, those are critical. But I think that in
terms of this particular proposal and this question that has
been posed at the WTO, it is about how we get through this
moment in our global economic history so that there will be
still a world and people here to innovate and to enjoy those
innovations.
Senator Grassley. Yesterday I met with the Iowa Association
of Home Builders. They told me lumber prices have skyrocketed
tremendously. They gave me a figure of 300 percent since April
2020. I heard in Iowa last week so many times, big percentage
increases, not quite that bad, but increasing the price of a
home by about $36,000.
Have you had conversations within the administration on
what can be done to lower the 9-percent tariff on Canadian
lumber?
Ambassador Tai. Senator Grassley, this is not just
something we have been talking about within the administration
but something that I have raised directly with my Canadian
counterpart. And I have certainly heard a lot from members of
Congress about this as well.
I want to assure you that I will be raising this again with
my Canadian counterpart at the Free Trade Commission meeting of
the USMCA, and I will continue to push for solutions to the
lumber pricing issues that we are experiencing.
Senator Grassley. This will have to be my last question in
person. Mexico was the top market for U.S. corn exports, valued
at $3 billion last year. Iowa farmers have been some of the
strongest advocates for the USMCA; however, they are concerned
that Mexico is erecting non-tariff trade barriers, like
rejecting imports of glyphosates and stopping the approval
process for biotech products. In December, the Mexican
President issued a decree banning glyphosates and GMO corn in
Mexican diets by 2024.
What do you think of that? Will you raise these concerns at
the upcoming USMCA meeting and pursue enforcement actions if
these issues remain unresolved?
Ambassador Tai. Yes.
Senator Grassley. Okay.
The Chairman. Thank you, Senator Grassley.
Senator Cornyn is next.
Senator Cornyn. I want to start by thanking the chairman
and ranking member for their work on this hearing, and also the
bipartisan negotiations on the Finance Committee trade title
that I hope will be included in the larger Senate package that
we are dealing with, the so-called China package. And I hope
this package will include important provisions and priorities
that, first, identify foreign censorship as a trade barrier,
especially in digital trade. It prevents foreign governments
from restricting free speech in the United States, which
follows on my work with Senator Casey on the subcommittee last
year and the ITC investigation to quantify the effects of this
practice on U.S. businesses.
I also hope it will include review of critical supply
chains--which has been a very constant theme here recently,
particularly post-pandemic--through the creation of a committee
to examine trade in essential supplies and also to codify the
tariff exclusion process for those experiencing severe economic
harm, and keep our States open for business while not letting
up on China's unfair trade practices.
And also to extend the Generalized System of Preferences to
incentivize job creators for moving their supply chains away
from China, especially to the Western Hemisphere.
Also to provide additional tariff relief through inclusion
and authorization of the Miscellaneous Tariff Bill, expressing
support for reform and not removal of the World Trade
Organization, and finally to create an Inspector General for
the USTR--the only Ambassador in the Cabinet not covered--as
trade policy increasingly plays an important role in the life
of everyday Americans, and as the USTR gains more
responsibility.
Additionally, I hope to continue to work with our
colleagues on creation of an ex parte national security
critical hold order under a new section of the Tariff Act of
1930; and I want to ask the Ambassador about that in a moment.
I look forward to continuing to work on reengagement on a
regional trade agreement with our Asia-Pacific trading
partners, which I am working on with Trade Subcommittee chair
Carper, as well as the larger committee.
A number of us have talked about the TPP, whether in some
revised and updated form, but the geopolitics of that seem very
obvious, as well as the economic benefits. The one thing that
we have in the United States that China does not have is
friends; and I think it will do nothing but enhance our
national security and our economic security by banding together
with like-minded countries in the region.
I also look forward to reforming the authority for the
imposition of national security tariffs with Senator Toomey,
which the Ambassador has talked about, and to continue working
on a whole-of-
government targeted review of outgoing investment to China,
again with Senator Casey.
And finally, coordination with our allies over the rare
earth minerals critical supply chain issue, working with
Senator Lankford on that.
Finally, before I ask the question, I also want to join
with Senator Crapo and Senator Grassley in expressing concerns
about the waiver of intellectual property rights, not just in
an effort to provide additional vaccines to nations that do not
have enough, or because of logistics are not getting it in the
arms of the people who need it the most; but this has broad
implications, including the use of U.S. Government funds to
develop a vaccine, and obviously the detriment to the taxpayer
and intellectual property rights in general.
It is because of strong intellectual property rights in
America that we see huge investment into cutting-edge,
innovative lifesaving therapeutics and vaccines, so I am very
concerned about that.
So finally, let me get to the question, Madam Ambassador. I
have been exploring the creation of an authority to put in
place a temporary restraining order, or a national security
critical hold order under a new section of the Tariff Act of
1930, that would block the importation of goods on an ex parte
basis--importation of goods, ex parte, created through secret
theft by a foreign government or state-owned enterprise.
This would provide a quick action or response mechanism
that would create a deterrent and a chilling effect on future
trade secret theft by foreign states.
Can you briefly, because I know my time is running out,
could you briefly talk about, are there any existing mechanisms
in trade statutes that allow for that sort of ex parte
preemptive injunction of imports that contain theft of
intellectual property rights? Are there any existing
protections?
Ambassador Tai. Senator Cornyn, I am not aware of any, but
obviously I would be happy to go and do our research on this. I
suspect that you and your staff have looked at this. I would be
very interested in talking to you more about this.
The Chairman. Okay.
I want to say to colleagues, we are seeing a particularly
hectic morning in the Senate. We are going to try to be fair to
everybody, and we have people coming shortly.
And Senator Portman, you are next.
Senator Portman. Thank you, Mr. Chairman. And, Ambassador
Tai, it is good to see you again, as always.
Your opening statement focused a lot on China, saying, ``We
welcome competition, but competition needs to be fair.'' And a
level playing field is not there with China now. I want to
focus on how we can get tough on China by encouraging trade,
and I do not think that those two are countering one another.
In fact, I think that they are complementary. I think the ideal
trade policy is one that is pro-trade and yet anti-cheating.
In our WTO resolution, Senator Cardin and I proposed the
United States pursue centrist Pacific trade agreements with
like-minded countries; in other words, plurilateral agreements.
The best example of that would be the WTO agreement on
procurement, the GPA, Government Procurement Agreement.
And basically what you do is, you ensure the benefits only
flow to those parties to the agreement rather than the typical
Most Favored Nation approach. My concern is that right now
China is able to get a free ride, often; and they are getting a
free ride on the global trading system, and they are often a
spoiler as to the negotiating progress at the WTO. And the WTO
is constrained right now; since negotiation is not successful,
they are turning to judicial activism, which typically hurts
America's interests.
So I do believe that we have an opportunity here to change
our approach and focus on these plurilateral agreements. You
have spoken possibly about that; we have talked about it, in
fact, in response to some questions I asked after the last
hearing.
Let me ask you today, are you ready to pursue those kinds
of agreements? Do you agree that specific plurilateral
agreements without MFN are an effective way to work with
allies, but also to put pressure on China?
Ambassador Tai. Senator Portman, I think that this is a
very promising set of parameters in terms of how to support the
WTO as a negotiating forum, to spur the kind of strategic trade
that we want to have.
To your example about the Government Procurement Agreement,
I think that one of the things that is really special about
that plurilateral that addresses the free riding concern that
you have is that our market is inherently closed to competition
here, and it requires opening, and that you can do that opening
on a country-by-country basis.
That is something we should think about, and I would be
very interested in talking through with you whether or not that
framework holds for other types of policies and where we do
have a natural fit for that kind of agreement.
Senator Portman. Great. I think we have some other ideas in
addition to government procurement that I think could be quite
effective. But I appreciate your openness to it and your
willingness to commit to exploring other types of agreements.
On the UK agreement, as you know, I am disappointed it was
not noticed last month so we could have gotten it under current
TPA. But I think it is a really important agreement for us to
complete. Senator Coons and I, as you know, cochair the UK
trade caucus. I think it would put us on track toward not just
getting back into trade agreements and expanding trade, but
also put pressure on China.
Can you tell us where you are on the UK negotiations? And
given the fact that we were not able to get it under the
current TPA because we did not notice it by April, are you
prepared to extend TPA authority, to ask us here in Congress to
extend it, to be able to include at least the UK agreement,
which is so close to being completed?
Ambassador Tai. Senator Portman, I am glad you asked me
about the UK agreement and the UK in general. I know how
important this topic is to you, and this partnership.
Let me say this. In terms of the agreement not being
noticed already, I will share with you that, in my review of
the progress made in the negotiations, there have been five
rounds. The very critical issue areas are still open in terms
of those negotiations. So there is still quite a road to go
there.
There are so many ways in which we are engaging with the
United Kingdom right now. On the agreement itself, let me say
this. From my perspective, it is really important for us to
think through the objectives for this agreement now that we
have some of the issues settled with the UK's exit from the
European Union. I will note that I hear a lot of concerns from
members of Congress around the situation in Northern Ireland;
that is something that we are keeping our eye on in terms of
steps forward with the UK on an agreement.
But most importantly I think--and I will get to the end
here so you can follow up--we want to think through how we
devise this agreement so that it supports the significant
domestic investments that this administration wants to make
with Congress so that we have an agreement that is supporting
the competitiveness and the growth of the U.S. economy, and
will also serve the UK's interests.
Senator Portman. Can we look forward to the exclusion
process going forward, as we talked about in our letter from
Senator Carper and myself?
Ambassador Tai. So I am really glad you asked this
question. I am sorry that--I am running out of time here.
Per your request and your recommendation at my confirmation
hearing, we are undertaking----
Senator Portman. Setting up a new exclusion process?
Ambassador Tai [continuing]. A top-to-bottom review on
China at USTR. And the tariffs and the exclusion process will
be a critical component of that review, through which we will
be soliciting robust feedback from the public, from Congress,
and from everyone who is affected by these.
Senator Portman. Thank you, Ambassador.
Thank you, Mr. Chairman.
The Chairman. Senator Menendez is next, and then Senator
Lankford.
Senator Menendez. Thank you, Mr. Chairman.
Ambassador Tai, good to see you. Thank you for your work in
addressing the large civil aircraft dispute, and New Jersey's
food and wine importers certainly appreciate the 4-month pause
in the tariffs. But since we are now about halfway through that
suspension, I want to get a better understanding of the status
of the path forward.
How are negotiations with the EU and UK progressing on this
issue?
Ambassador Tai. They are progressing, and I----
Senator Menendez. The question is, how are they
progressing?
Ambassador Tai. I understand. I understand.
I am encouraged. I have made clear that we are interested
in resolving these disputes in this 4-month period. And I would
very much like for us to make the kind of progress between now
and July that will bring us to that resolution.
Senator Menendez. So would you expect that you will get
it--July; let us see, it is May--in the next 2 months or so?
Ambassador Tai. We are halfway through the 4-month period.
Senator Menendez. If not, do you expect the tariffs to go
back into place, or will the pause be extended until an
agreement can be reached?
Ambassador Tai. What I have told my counterparts is that we
are very serious about this 4-month deadline. So let me put
that out there--we would like to have, we really need to have
these disputes resolved.
Senator Menendez. Well, I really hope you get an agreement,
too; but if you do not, I would urge you to avoid hitting
restaurants and food and wine importers again with tariffs.
They were not particularly successful in bringing a resolution
to the dispute. I know you need leverage, but I just call that
to your attention. Hopefully you can be successful.
As you know, I have a longstanding concern with the current
lack of oversight over U.S. trade policy, which precedes this
administration. And the announcement last week that the United
States would back a TRIPS waiver negotiation highlights to me
how important better oversight is to ensuring that we have
transparent trade policy with appropriate congressional
consultation.
During your confirmation hearing you said you would commit
to, quote, ``close negotiations with the Senate Finance
Committee on trade negotiations,'' and would work closely with
the committee to identify ways to, quote, ``improve the flow of
information and development of trade policy.''
Yet, at least from my perspective, we were not closely
consulted on this announcement, which is a good example of why
we think it is critical that we establish an Inspector General
for USTR to provide independent oversight, transparency, and
accountability--and ultimately help USTR develop better trade
policy.
I appreciate that the chairman at this point has that in
the bill, and I strongly support it, and we are working with
the administration on refining it to make sure that it
ultimately can be agreeable.
So can you commit to briefing the committee on the status
of the negotiations, both before and after each negotiating
session?
Ambassador Tai. Senator Menendez, the negotiations just in
general, or are you talking about TRIPS specifically?
Senator Menendez. TRIPS, specifically.
Ambassador Tai. Sure; yes.
Senator Menendez. Okay. Now let me ask you: it is clear
that if the United States is going to successfully diversify
away from China, we need to deepen our trading relationships
with our neighbors in the Western Hemisphere.
Last week you said you wanted to reexamine the CAFTA-DR
agreement and find out why it has not stimulated economic
development in the region, and to the extent that many people
expected. I certainly appreciate your taking a look at it.
What are your initial thoughts on why the agreement has not
panned out the way we would have hoped for? And what is your
timeline for your review?
Ambassador Tai. Senator Menendez, my initial thoughts are
that, you know, there is often a disconnect between all of the
energy that we have in getting an agreement across the finish
line and then giving the agreement the care and attention and
maintenance that it requires over the years.
In terms of the timeline, I do not have a particular
timeline. I would be very interested in the views of this
committee, certainly Congress. I know that there is a certain
member of this committee who probably knows more about this
agreement than I ever will, and that would be Senator Portman,
who was the U.S. Trade Representative who got the CAFTA-DR over
the finish line. And I think that we all want our trade
agreements to succeed.
But let us give all of them, not just the USMCA, the care
and attention that they require.
Senator Menendez. Well, I appreciate that. I would just
simply say, obviously when we are facing the challenges with
Central America that we are facing right now, in terms of those
who are fleeing those countries, it is critically important to
look at every leverage of government in order to meet the
challenge. Economic development is a critical part of that. If
CAFTA-DR is failing for some reason, we should know what its
shortcomings are at the end of the day.
And I will submit a question to you about whether you are
working on the new softwood lumber agreement with Canada. I
keep hearing from housing people that it is incredibly
challenging.
Ambassador Tai. Thank you.
The Chairman. Thank you, Senator Menendez.
Senator Lankford?
Senator Lankford. Mr. Chairman, it is incredibly
challenging right now, with a lot of supply and demand issues.
A lot of our manufacturers here domestically are having a hard
time getting labor--and that is a conversation for a different
day--but the labor folks in my State say over and over again it
is an issue of the additional unemployment benefits that are
there. They are having a hard time getting enough labor to
provide supply, but that is a different conversation for a
different day.
As I read through the 2021 trade agenda, a lot of things in
there I like; I am grateful you are engaging in them. Some
glaring things are missing that are a big deal in Oklahoma.
Oklahomans are always looking for what new markets we are going
after to be able to continue to expand our markets. I do not
find a lot of conversation there about pursuing new free trade
agreements, adding new countries. Is that coming in the 2022
trade agenda, or why is that not in this trade agenda?
Ambassador Tai. Well, Senator Lankford, I think that the
trade agenda report--there are two reports that come out. I
believe that they were at the very, very beginning of my time
or may have even predated my confirmation. Just because they
are not in the trade agenda report doesn't mean that issues,
certainly ones that you are raising here, are not important.
And I think that with respect to agricultural market access,
our work is focused on looking at, creating, maintaining
reliable, transparent, sustainable market access for our
agricultural producers.
Senator Lankford. Great. We are always looking for new
markets. Obviously, existing markets are facing competition. We
want to know there is another market that is out there we can
continue to pursue if other markets fall through.
One of the folks who deals with steel in my State asked a
very interesting question of me. His question is, he has got a
lot of capital that he wants to invest into what they are
doing, but they have a very hard time planning right now
because they do not know what to count on with the 232. Is it
still going to be there for another 6 months, 6 years, 60
years? There is no way to be able to plan for the expanse for
him.
So give us a good idea, give him a good idea of how you are
trying to be able to plan for this for the future of what
happens with 232.
Ambassador Tai. So I think there are two levels to this
question. One is, what is going to happen to 232 as a tool. The
other one is whether or not the administration has a commitment
to supporting steel production here in the United States.
And let me take that second question. Yes, clearly we have
a commitment to being a strong country that produces and is
able to produce steel for itself. In terms of the tools and the
policies, you know, I am open to improving and perfecting the
tools that we have to make them more effective.
Senator Lankford. Right. Being more predictable would be
helpful in the process, and that is--just people need to know
how to plan. They have been there for multiple years; they just
want to know how to plan.
Senator Portman brought up the issue about 301 exclusions;
that also continues to be a big issue. I know you are in the
process of studying it. In reviewing this, can I ask you a
simple ``when'' question? When can we anticipate some kind of
response coming out about what the plan is? Because this is
obviously not new; this has gone on for several years. Folks
are not thinking about the reset of a new administration; they
are thinking about what is happening right now and has been
happening for months. When can they expect an answer?
Ambassador Tai. As soon as we can, and ensure that what we
are doing has been thought through and is strategic and has a
clear objective. So there is a push-pull here a little bit. I
know that there is a lot of desire for us to act quickly. We
definitely feel that pressure. We want to be able to act
quickly and to make some of these decisions, but we are also
very, very mindful of the need to not just be reactive, to not
be chasing our tails, but to have a vision that we are working
towards.
And so we are trying to balance that to be as effective as
possible.
Senator Lankford. Sooner is better than later on that. Is
it December that would come out? Is that July that would come
out? Is that next July? Give me a ballpark.
Ambassador Tai. Oh, goodness, I think December would be way
too late.
Senator Lankford. I would hope, yes.
So earlier is better than later on that. We will watch for
that.
Intellectual property we have already had a conversation
on, dealing with the vaccines. I understand we have a worldwide
pandemic; I understand trying to be able to get the whole world
vaccinated will be very important to be able to help global
economic activity.
Here is the challenge: just giving away the intellectual
property does not solve the problem. J&J outsourced some of its
manufacturing to a location. They had the connection to it, and
the manufacturing failed for the vaccine, and they threw out
whole batches with millions of doses that are there.
So just giving away intellectual property does not solve
the issue if the manufacturing does not have good oversight.
We also have other vaccines that are coming on the market
right now, like malaria. That is what we would be talking about
if we were not talking about the COVID vaccine, finally a good
malaria vaccine coming on the market. That is also a global
issue, and the concern is for cancer, for Alzheimer's research,
for Parkinson's, for so many issues that are out there. If
every pharmaceutical company suddenly gets a pause in
investment thinking, ``I am going to get a breakthrough, but
the intellectual property is going to be given away because it
is also a global issue,'' that becomes a challenge of getting
future investment.
So what I am trying to figure out is twofold here. How do
we protect the integrity of the vaccine as it goes out? It is
typically done with good oversight in the generic market or
whatever it may be, rather than just giving away the formula.
We lose that ability to have good oversight on it, so we may
not have good batches coming out, as we have already seen. Or,
how do we make sure that we are still continuing to protect
future innovation here for vaccines like malaria that are
coming on the market right now? Is there any assurance from the
administration they are not going to also give the intellectual
property rights away for that?
Ambassador Tai. Oh, Senator Lankford, let me just say that
the questions that you are asking are actually critical
questions; they are really important questions.
They are ones that I have discussed with the heads of all
of the manufacturers who are manufacturing or soon will be
manufacturing for the U.S. market. Over the course of April, I
think I had over a dozen consultations that I provided
transparent read-outs of.
So that is all to say that I know how important this issue
is; I know what the stakes are in terms of global economic
recovery, and also in terms of these intellectual property
protections.
And I look forward to continuing this conversation with
you, because it is so important for us to get this right, and
it is so important for us to be able to show that the WTO can
produce results that are effective and relevant to people's
lives.
Senator Lankford. Thank you.
The Chairman. Thank you, Senator Lankford.
Our next two Senators are going to be Senator Cardin, then
Senator Toomey.
Senator Cardin. Thank you, Mr. Chairman. And let me thank
the Ambassador for her service.
I understand that you are reviewing the 2021 trade agenda
for promoting equitable growth around the world, and secondly
to make sure our trading partners live up to their commitments.
So first you are reviewing the existing trade programs to
evaluate their contributions to equitable economic development;
and secondly, enforcing the rules as it relates to labor and
environment. I strongly support that formula for the review of
our trading agreements and where we need to move forward.
I was disappointed I did not see in the enforcement agenda
the enforcement dealing with good governance and
anticorruption. We talked about that during your nomination
process, and there was a strong commitment by the Biden
administration to embrace one of our principal trade objectives
of good governance.
Can you reassure me that, in your evaluations, governance
and anticorruption could be a similar goal as to what we are
trying to accomplish?
Ambassador Tai. Senator Cardin, yes; good governance,
addressing corruption, having anticorruption efforts and using
trade tools to advance those goals is absolutely critical. Let
me just say that some of our programs do have very useful tools
in this regard.
There are more tools that we need, and I look forward to
working with you and members of this committee to ensure that
we are able to build those tools in to make for really
comprehensive efforts that we can undertake as the U.S.
Government to create that race to the top, in terms of
incentives for our trading partners to abide by good governance
and to have anticorruption programs that are effective.
Senator Cardin. I will just caution you that language is
very important, so at every opportunity, I would hope that you
would reinforce that. We see a significant backsliding in
Central America today, and around other of our traditional
trading partners.
So I would hope that we would always underscore the
importance of good governance as we do on labor and
environment.
I want to talk about two areas where I would hope we would
expand trade opportunities. One is very close to home, the
Caribbean, where we see China expressing a great deal of
interest. It does not take too much effort to see a stronger
U.S. presence in the Caribbean island states, and it could go a
long way to helping us not only with their economies and their
stability, but also having closer allies in international
organizations or in regional organizations.
The second is Mongolia, which is in a very difficult part
of the world. It is the most recent member state of the OSCE,
and one which we have developed a pretty strong relationship
with, and one that we can nurture through trade to help us with
a strategic partner against China.
So I would hope that you would give a careful look to
expanding opportunities in these two areas as part of our
strategic agenda.
Ambassador Tai. Thank you, Senator Cardin. I hear you loud
and clear, and I think that you have raised good points, and
good partners for us to be engaging with.
Senator Cardin. I look forward to working with you on both
of those areas. In those circumstances, there is bipartisan
interest on our committee to deal with both of those regions.
There are obviously complications whenever we open up issues;
there was some concern about Kashmir as related to Mongolia,
but I would hope that we could work through this and strengthen
our ties.
I can tell you, there is a great deal of interest in that
region, as you know. Our China policy is one that will be on
the floor of the Senate, we hope as early as this month, and
the trade issues are also part of dealing with our concerns
about China. You heard that in the enforcement discussion by
members of our committee.
But it is also important that we expand our trading
opportunities with countries in that region. We are not a
member of the Trans-Pacific Partnership; we find China
extremely engaged.
So what is our strategy to deal with China's influence? Let
us start first in the Asian-Pacific area. What is our strategy
in order to try to counter what China is doing, recognizing
that we are not part of the Trans-Pacific Partnership?
Ambassador Tai. Well, this is really a critical question,
Senator Cardin. I spent a lot of time thinking about this, and
I know there is a lot of energy here on the Hill, and that is
going to be important for us to work together on these issues.
In terms of our strategy, first of all I think that we need
to be engaging with the rest of the world--and certainly in
this part of the world--from a position of strength. And so
first of all, I think that the investment that our economy
needs will be first and foremost, that position of strength
that we are looking for.
The second piece is to work with others, and to your point,
there are a lot of others, good partners, partners that are
very interested in engaging with U.S. leadership again. That
will be done.
I think third, from my perspective, is to ensure that, as
we are taking steps, that we are thinking through the strategy
to make sure that we are effective and that we are pursuing a
vision that is well-supported here at home on a very strong and
robust bipartisan basis.
So those are some of the components that I am thinking
about, but obviously the conversation and partnership with
Congress is going to be critical.
The Chairman. Thank you, Senator Cardin.
Next is Senator Toomey.
Senator Toomey. Thank you, Mr. Chairman.
Ambassador, thank you for joining us. Let me start with
just a quick point. I would strongly push back on the idea that
we should leave the 232 trade policy as the status quo. Look,
we know for a fact the previous administration abused this
authority and claimed national security when it was not in fact
the case; Canadian and Mexican steel is not a threat to
American national security. It was used as a way to coerce a
more restrictive trade agreement under USMCA. That is what the
purpose was.
And the idea that we should leave it around, available for
other administrations to similarly abuse this power until such
time as some other greater latitude is passed, I think would be
a big mistake. This is a responsibility the Constitution
assigned to the Congress; we should reclaim that
responsibility.
But I really want to talk about the TRIPS waiver. I have to
tell you, I was shocked and very disturbed to see that the
administration is going to be supporting waiving the
intellectual property rights of American companies for COVID-19
vaccines. And let me just tell you, I am aware of no evidence
whatsoever that this step is going to enhance vaccine
availability in developing countries. In fact, it could quite
possibly be the contrary.
Senator Lankford alluded to several of the concerns; there
are many safety concerns, for instance, facilities around the
world that just do not have the technology to make this
properly. There are dangers of access to inputs for this.
Frankly, I think it undermines our ability to deal with the
next crisis, including the possibility of the next iteration of
this crisis.
I mean, I think there would be very broad support in
Congress to devoting whatever resources would be necessary to
gear up production as much as we can and shift vaccine to
countries that need it. But the idea that we would give away
our intellectual property--the White House Chief of Staff
himself, Ron Klain, said on May 2nd that, and I quote,
``Really, manufacturing is the biggest problem,'' end quote.
The CEO of Pfizer said, and I quote: ``Entities with little or
no experience in manufacturing vaccines are likely to chase the
very raw materials we require to scale our production, putting
the safety and security of all at risk,'' end quote.
There are serious logistical and distributive challenges
like how you move these sensitive, unstable materials in
climate-controlled conditions. It is not at all clear that all
these companies have that capability, not to mention whether
they have sufficient front-line workers who have the training
to get this done.
So there are limiting factors here, but there is no
evidence that it is access to American intellectual property.
And that we ought to be giving away to foreign countries
American intellectual property as a way to solve this is just
completely wrong. It is incredible to me that while we are
spending so much time and effort trying to figure out how we
limit Chinese theft of U.S. intellectual property, here we have
an administration proposing ``we will just give it to them.''
It is unbelievable.
Now it is likely that this will never take place, because,
of course, all WTO countries would need to agree. And
fortunately for us, it looks like the Germans understand the
value of intellectual property better than the American
administration does at the moment, and we may be able to count
on the Germans to save us from ourselves.
But what message does it send to American companies,
especially companies that are in industries that are intensive
intellectual property industries, when their government is
offering to essentially give away their intellectual property?
That is what the Biden administration is proposing here.
This is one of the most important industries we have; the
U.S. leads the world in pharmaceuticals and medicines, and it
is extremely intellectual property-intensive.
What is the limiting factor here? Are we going to start
taking the IP for important medicines? What about basic
chemicals? Medical devices? Who knows what other products would
be valuable in other parts of the world?
This is shocking to me, and I think a terrible idea. Here
is my question for you. All else being equal, on the margin can
you actually believe that this policy, the policy of supporting
the TRIPS waiver, is going to encourage more investment in U.S.
R&D, including in the pharmaceutical industry?
Ambassador Tai. Senator Toomey, you have given 20 seconds
to reply, and there is so much that I want to say.
Senator Toomey. I hope the chairman will indulge you and
give you a little bit more time.
Ambassador Tai. I hope that too. I hope that too.
First, on 232, I just want to say I am not quite sure if
you are reacting to something you thought I said, but I want
you to know that your views on the 232 statute and its use are
very, very clear.
You have also made very clear your position on the TRIPS
waiver. Thank you for allowing me the opportunity to reply on
this. You know I respect you a very, very great deal, and so I
look forward to continuing this conversation.
But let me just be clear. I think, in terms of the message
to American companies, we collectively have an obligation to
help to save the world right now, and these companies have done
incredible work in coming up with these vaccines that are
effective and are safe. The issue is, the message I want to
give to them is, ``you can be a hero here.''
And I also want to be clear about this, that what we are
trying to accomplish is the saving of lives. That is going to
be the first step to any longer-term trade policies and the
opening of markets that we are going to work on. Unless we are
able effectively to bring the rest of the world's economy back
on line, there is not a lot of upside for us in what we are
going to be doing.
The Chairman. The time of my colleague has expired.
Just so we are clear about the record, my colleague said
that the Ambassador was for the status quo on 232. I think the
transcript will show that she made it clear she was for an
updated policy and she wanted to modernize trade tools. So I
just wanted to make that clear.
Next will be Senator Cassidy, and then Senator Brown. I
believe they are both on the web.
[Pause.]
The Chairman. Is Senator Cassidy out there in cyberspace?
Senator Cassidy. Yes; can you hear me?
The Chairman. Senator Brown?
Senator Cassidy. Can you hear me?
The Chairman. Is that Senator Cassidy? We cannot hear you.
Senator Brown. I can hear Senator Cassidy, and I am on too.
The Chairman. Okay; we will go with Senator Cassidy next,
and then Senator Brown.
Senator Cassidy. Madam Ambassador, I will echo what all my
colleagues have said about the TRIPS waiver, but you did not
answer his question as regards what would be the perspective of
a future venture capitalist as to whether or not they would
fund research to find a cure rapidly for the next pandemic. Of
course the answer is, they will not. Nor will they do it for
Alzheimer's, because the same excuse will be given then; it is
about saving lives.
Why don't you just pay Pfizer a lot of money to expand
their production capacity and let them produce the vaccine that
then can be shipped around the world? This is a march-in of
intellectual property, something that folks from the left have
been advocating on various other things, and this is a way to
excuse a march-in of intellectual property.
You do not have to respond to that because you have been
kind of responding to that already, but I will just say that
for the record.
Let me ask you about something which is important for
Louisiana. USTR has published a list of potential retaliatory
tariffs against Indian imports of shrimp. One of the categories
listed is cold water shrimp, but cold water shrimp are not
harvested in India because of its geography. Cold water shrimp
are harvested from the ocean floors of the North Atlantic and
the Arctic.
Putting duties on cold water shrimp would be ineffective;
they would just flip their shrimp back to the warm water and
avoid the tariff. So stakeholders tell me that they believe
that the cold water shrimp entering the U.S. from India are
actually warm water, mislabeled to avoid antidumping tariffs.
So what are your thoughts? How do we ensure that the U.S.
has taken appropriate action to protect Americans from
consuming shrimp farmed by an industry overseas which has faced
disease outbreaks, chemical overuse, illegal and unreported,
unregulated activities, phytosanitary, et cetera; how do we
more effectively address that?
Ambassador Tai. Senator Cassidy, on your question on
shrimp, thank you for raising this. As you may know, those
digital services tax, section 301 actions are still open, and
these types of comments are very helpful in our work to refine
the list that will come out from this process.
I think the other part of your question really has to do
with Customs enforcement, to catch the kind of avoidance that
you were talking about, and that is something that we are
always interested in working on and improving. And it is an
area where USTR traditionally and will in this administration
work closely on with the CBP at the Homeland Security
Department.
Senator Cassidy. Thank you. At the outset, I heard you
mention how the U.S. is asking Mexico to enforce labor
protection. I fully agree with that; that is an appropriate
thing to do.
One thing you have heard me say before, though--and I think
I have somewhat of agreement--the fact that China does not
enforce such labor protections allows them to effectively
subsidize the cost of production, lower the cost of production
of a given product in China vis-a-vis other countries.
I am concerned about CAFTA. Clearly, we need our Central
American countries to be doing better economically so that
folks are more likely to stay in Central America as opposed to
migrating and attempting to enter the United States illegally.
I understand Senator Menendez asked you about this. But as
we consider near-shoring products out of China for national
security purposes, CAFTA is a logical place to go; Central
America is a logical place to go because their cost of labor is
so much less.
There are some things that we just cannot compete with,
given our cost of labor. Tell me again what we are doing to
kind of address the fact that China effectively subsidizes, by
having lax or slave labor, for example--the ultimate example--
that undermines the ability of these countries to prosper, and
what can we do to increase their ability to prosper as a way to
address our immigration crisis?
Ambassador Tai. So you have two questions: one on China,
one on Central America. Let me take the China question first.
Obviously, when it comes to forced labor, we have an incredibly
powerful tool, a United States statute that bars the
importation of products that are produced using forced labor.
Senator Cassidy. If I may say, there are other lax labor
standards aside from forced labor.
Ambassador Tai. That is right. And on that piece, let me
say to you, Senator Cassidy, I know what your views are on
this, and I look forward to working with you on other tools
that we can use, potentially new tools that we can devise.
So I hear you loud and clear; it is a very, very critical
concern. It has been an unfair competitive advantage that we
need to level the playing field for.
On Central America, we are engaging in an administration-
wide effort here, and USTR has tools within the CAFTA-DR as it
is structured; but I also want to reinforce that, in the
executive order that was issued on this administration-wide
effort, USTR specifically has been charged with making sure
that efforts that we take do not undermine labor protections in
those regions and in those countries.
And on this as well, I am very interested in working with
you on how we can do more to raise the standards for workers
and their protections in this region.
The Chairman. Thank you, Senator Cassidy.
Senator Brown is next.
Senator Brown. Thank you, Mr. Chairman. And, Ambassador,
welcome back; good to see you. Thanks for all your team has
done in the first--there has not been a Trade Rep in American
history who has come out doing the smart, engaging things you
have done so quickly. Thank you on what you did with TRIPS; you
are going to put shots in people's arms around the world. It is
an opportunity, it is our duty; you have support on this
committee for that. At least a couple of us on this committee
have written letters to you asking you to step in there.
So please call on me and my staff--and I know the chairman
is engaged in this, and many of the rest of us--for what we can
do to support your efforts at the WTO in this.
Let me talk about what you would expect we would ask about:
the Brown-Wyden rapid response mechanism. During your
confirmation hearing, you committed to fully enforcing the
USMCA agreement with Brown-Wyden. Today under your leadership,
for the first time, USTR self-initiated an enforcement case
under that mechanism. Thank you for that. We have now two
Brown-Wyden cases, as you know.
I would like to ask you two or three questions. I will ask
them together, just get you talking a little more about Brown-
Wyden, to explain it to people, how it is working, a sense of
how many cases we might expect under this mechanism, some sort
of ballpark estimate. Talk to me about how the hotline works,
if you would, how do workers file complaints; do you take tips
that come in through the hotline seriously; and tell me what
this full use of the Brown-Wyden mechanism will look like to
you in the months and years ahead.
Ambassador Tai. Thank you very much, Senator Brown, for
your kind words.
On the Brown-Wyden rapid response labor enforcement
mechanism, let me just distinguish a little bit between the two
announcements this week. The first one was a petition that was
filed by the AFL-CIO in partnership with several other labor
organizations. That is the very, very beginning of a petition
process, and as constructed, there is a 30-day period during
which USTR, working with the Department of Labor, will review
that petition for whether follow-up is needed and whether USTR
should then request Mexico to review whether a denial of rights
has happened.
In the second case that has been initiated today, that was
self-initiated; and as you have noted, that is USTR initiating
the request to Mexico today that will start the next timeline
under the mechanism that has been created.
In terms of the tips and the hotline, and taking in
information from people with experience of what is happening on
the ground at some of these facilities, absolutely we take that
information extremely seriously.
And, Senator Brown, if there are other questions that you
asked that I have not responded to specifically, I ask you to
remind me of them.
Senator Brown. Well, we will follow up with the latter,
because I want to get to something else. But thank you for
just, in such a fulsome way if you will, approaching this and
doing what you need to do.
There are a number of us on this committee--I see most
prominently Senator Casey and I--whose States have been
victimized by bad trade policies for decades, and I would like
you to come to Ohio, if you would be willing to, once the
pandemic is over--so you can travel safely--and get you with
some people to talk about Brown-Wyden and what is next, and how
we enforce trade policies that actually work for our
manufacturers.
So I guess I would ask you publicly now: would you at some
point be willing to come to my State to do that?
Ambassador Tai. Absolutely, Senator Brown. It would be my
honor, and I would be delighted to do it. It will be so
important for us in formulating our trade policies to be
talking to people, regular Americans who are impacted by our
policy.
Senator Brown. Thank you. And if you come to northeast
Ohio, maybe you can spend 12 minutes in Pittsburgh or something
too. But do not overdo that part of it. [Laughter.]
One last question. We see now corporations that prioritize
profit maximization over accountability are leading a race to
the bottom that has resulted in that hollowing out of economic
security for families all over this country. Brown-Wyden is
intended to make sure corporations cannot violate worker rights
in Mexico to make a profit. But, in addition to putting workers
back at the center of our policies, we need to do more to
ensure corporate accountability.
We are looking at ways--and I look to the chairman of this
committee for this, and his leadership--in conjunction with my
committee to do that across the financial industry as part of
my work on the Senate Banking and Housing Committee. Senator
Cortez Masto is on that committee; Senator Warner is also on
Banking and Housing.
Would you work with us on corporate accountability, trade
policies that help prevent the race to the bottom, and
financial services also?
Ambassador Tai. Absolutely, Senator Brown.
Senator Brown. Okay; thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Brown.
And I also want to note for colleagues that, obviously,
there are tremendous differences between the State of Ohio and
the State of Oregon in terms of economics, and it was a
pleasure to work with Senator Brown to try to bring the
Congress together around enforcement issues. And I just really
appreciate all of the leadership.
Senator Bennet?
Senator Bennet. Thank you, Mr. Chairman. And thank you,
Ambassador Tai, for your service and for being here today.
If our experience with 5G has taught us anything, it is
that we cannot afford to play catch-up on technologies that are
critical, fundamental, foundational to our economic security
and our national security. For years the Chinese Government
subsidized companies like Huawei and ZTE to achieve a dominant
market share for 5G internationally, and we have been
struggling to catch up ever since; we are still struggling to
catch up.
And it is a similar story, as you said earlier, for
semiconductors and many other critical supply chains, and I
think we all want to make sure that we are not letting what
happened to 5G happen again. And I just wonder, in your mind,
what do you see as the next 5G--in other words, a technology or
technologies that experts tell us are going to make an enormous
difference for our security and our competitiveness? And feel
free, if there is more than one, to give a sense of what that
landscape looks like.
Ambassador Tai. Certainly. Thank you, Senator Bennet, for
the question. I think it is absolutely critical to be thinking
ahead in so many areas in terms of technology, and also in
terms of manufacturing as well.
But your question is focused on the technology. And I would
say you just look at the Chinese planning documents and they
have talked about AI, quantum computing--you know, the new
technologies, new energy technologies. These are all about
cornering the market of the future economy, and we absolutely
have to be lighting the fires underneath ourselves, making the
investments that are going to capitalize on the strength that
we have in terms of innovation, in terms of workforce, in terms
of speed and agility, to allow us to compete and compete
effectively, because we can. But we need to focus our energies
there.
Senator Bennet. I hope you are hearing--I think it is
interesting--almost unanimity, I think, from this committee
today, saying that if you look back over the last 30 years or
so, in many ways our approach has really been an abject
failure. And it is not just--as you say, it is not just about
trade; it is a question of our investment in our own critical
technologies in this country, and if we continue to do that for
the next 5 years, I think we are going to be in real trouble.
So the committee is going to want to know how the
administration is working together--not just with its trade
policy, but all of its policies--to make sure that we turn the
corner here with respect to China.
I think that when you and I were speaking about your
nomination, one of the things you said to me--and I hope you do
not mind--was that it is wrong to think of China as taking over
the world; they are pursuing a China-first policy. The question
is, do we want to be collateral damage? And we do not want to
be collateral damage. Which means, I think, we have to have a
much more robust diplomatic and trading relationship with other
folks around the world who have similar equities with respect
to the Chinese Government's mercantilist, authoritarian
approach to the world.
And I wonder, in the remaining moments--in the 20th
century, American trade policy was a powerful lever for free
markets and competition and the rule of law around the world as
a counter to Soviet communism. How should we think about an
American trade policy in the 21st century that promotes those
values as well as democratic values like privacy and free
speech, especially when compared to the Chinese regime?
Ambassador Tai. Certainly. I think that we were guided for
a very long time by the principle that more trade is better,
and more trade would lead to a better world, and in some ways
it has gotten us very far. The world today is very different
from the one 70 years ago. But I think that what these policies
have also shown us is that we need to also be trading smart; we
need to be trading strategically, knowing the challenges and
the competition that we are up against.
We have to have more effective and thoughtful policies that
get us beyond just ``more is better,'' but we also need to be
asking, ``How do we do this smartly?''
Senator Bennet. Thank you, Mr. Chairman. With the last 5
seconds I have, I just wanted to call your attention to a
recent Mexican Supreme Court decision on potatoes. Finally,
finally, finally, after all these years we have the opportunity
to open access for the potato farmers in the San Luis Valley in
Colorado, and I just hope that you are aware of that decision
and that we are working hard with Mexico to achieve that
access.
Ambassador Tai. I am very aware of it, Senator, and I am a
little surprised that Senator Crapo has not mentioned it also.
Senator Bennet. Well, I mention it on his behalf.
Senator Crapo. I appreciate you covering me on that. That
is a very important point.
The Chairman. We all care about potatoes up here.
Next is Senator Casey.
Senator Casey. Thank you, Mr. Chairman. And, Ambassador
Tai, great to be with you. And again, I want to congratulate
you on an overwhelming confirmation, I guess now about 2 months
ago, but we are grateful for your continuing commitment to
public service at a time when public service can be pretty
difficult.
I also want to thank you as well for some of the work you
have already begun. I know it is early in your tenure, but I
want to thank you for the work you have done, continuing to
work on issues that relate to steel and aluminum overcapacity,
as well as the ongoing issues and concerns that I have and I
know many have regarding electrical steel. And I hope you will
continue to support efforts to protect our last domestic
electrical steel manufacturer, which is AK Steel, recently
acquired by Cleveland-Cliffs.
I just have two questions; one is on climate and trade, and
the other is about our supply chains. I am breaking new ground
talking about climate, but maybe we do not talk enough about
the impact that climate has on trade.
We know that climate change is a threat to human life; it
is a challenge we have to confront. I think we are just
beginning to get to that, but as urgent as it is, we also have
to remember that workers can be both left behind and exploited
if we do not pay attention to their concerns as we address
climate change.
For a long time we have had this fixation, across the
world, on cheap goods, and that ignores conditions under which
those very cheap goods are produced--whether it is distorted
markets or poor labor conditions or a disregard for the
environment.
So if democracies ignore how goods and commodities are
produced, we perpetuate these authoritarian regimes that thrive
on repressing their own citizens as well as workers around the
world.
So can you discuss how your office, your team, will ensure
that workers and labor rights are central to your efforts to
combat climate change?
Ambassador Tai. Absolutely. Senator Casey, you have put
your finger on it completely, which is that for a very, very
long time our trade policies have driven protections and
standards for workers and for the environment lower and lower
to facilitate the attraction of trade and investment
opportunities.
And what we need to do right now--knowing that our goals
are to work towards a robust, clean energy jobs economy and
just a cleaner environment for us to have an economic future--
is that we are going to need to really focus on trading harder
and ensuring that the trading rules that we put in place and
that we agree to with other countries, and especially our
fellow democracies, as you say, are going to be driving
incentives that put a premium on standards and protections for
the environment and workers, as we stimulate our own
competitive position in this world and the industries of the
future.
Senator Casey. Well, I appreciate that.
And I wanted to raise one additional issue in the remaining
time I have. I do not think you need to be an expert on the
pandemic or PPE to realize how dependent we were on non-market
economies like China for something as simple as PPE, protective
equipment that folks needed. And at the same time we are
dependent, we have very little visibility on the
vulnerabilities that exist right now with respect to production
dependencies that we have in other sectors.
I have worked in a bipartisan way with Senator Cornyn and
Senator Stabenow to try to focus on providing more visibility
on these vulnerable supply chains and to review outbound
investment, just like we reviewed for the last 40-some years
inbound investment with regard to critical capabilities that
foreign adversaries and non-market economies are connected to.
So I hope we can continue to engage with you and your team
as we work to both secure and diversify these supply chains.
Ambassador Tai. Absolutely, and this is an issue of concern
across the administration, and you will have good partners in
other parts of the administration to work on this as well.
Senator Casey. Well, thanks very much. And just to rebut
Senator Brown, Pennsylvania is on the way to Ohio, so you can
spend a lot more time in our State; we would love to have you.
Thanks.
Ambassador Tai. Thank you.
The Chairman. They are friends, even though we are having
this sparring between Ohio and Pennsylvania.
Senator Carper?
Senator Carper. Thanks, Mr. Chairman. I cannot pass this
up. Before William Penn arrived in Pennsylvania, he stopped off
in Delaware. Later he was asked why; he said, ``Because it is
the home of tax-free shopping.'' And he had a wonderful 2 days
there.
Ambassador Tai, Lucy Xiao sends her best. Some of you heard
me say before--Lucy is a member of our staff, and now she is
our Legislative Director. She was good enough to say to me
before President-elect Biden had nominated anyone for the Trade
Rep, ``You know, there is a great person who works over there
for Richie Neal, Congressman Neal in Ways and Means, who helped
us a lot on the environmental provisions of USMCA. Her name is
Katherine Tai, and you should take a look at her.'' And we did,
and I was pleased to, as you know, suggest that you be
considered for the position. Thrilled that they nominated you
and thrilled that you are sitting before us today.
I want to thank you and welcome you again to the hearing
before this committee, and thank you for testifying before us
as well and for the leadership you are now providing.
I would like to quote an old African proverb that goes
something like this: ``If you want to go fast, travel alone. If
you want to go far, travel together.''
Many of my colleagues today have expressed their concerns
about China's growing influence. I believe that one of the best
ways to counter China's rise and their anti-competitive trade
practices is to work together with our allies, to work together
with our trading partners, to constructively write and, in some
cases, rewrite the global rules of trade.
Recently, I had the privilege of leading a letter with one
of our colleagues, Senator Cornyn of Texas, emphasizing the
need for strategic engagement in the Asia-Pacific region,
similar to what the Trans-Pacific Partnership sought to
achieve.
I wonder if you might take a couple of minutes, if you will
this morning, to share with us your thoughts on the benefits of
taking a multilateral approach to trade in order to remain
competitive with China. Please.
Ambassador Tai. Well, Senator Carper, I just want to offer
my response to that question, which is: yes, I think we should
work in multilateral ways, in multilateral forums, to compete
with China and to compete with China effectively.
Senator Carper. All right. In your view, is there a
possibility that negotiations can resume on TPP in some form?
Ambassador Tai. I know this is a question on a lot of
people's minds, especially those who were around during the
negotiation of TPP. So I thank you for this opportunity to talk
a little bit about this.
What I would say is this. In advancing a worker-centric
trade policy on behalf of the Biden-Harris administration,
really a focus of this is to examine our trade policies and put
the worker at the center of our policy formulation, and to
create a discipline so that we think through what the impacts
of our policies are going to be on individual human beings and
their communities.
So that translates into a desire to formulate trade
policies that enjoy really broad bipartisan support. And in
terms of your question on the TPP, I think that we have seen
through our recent history that, while there was bipartisan
support for TPP, there was also bipartisan opposition for TPP.
And really what we are looking for are trade policies,
multilateral ones, looking at China competition, that are going
to have the kind of broad bipartisan support that we need.
Senator Carper. Yes. I will go to my grave wondering why in
the world we walked away from a trade agreement that allowed us
and 11 other nations, in this hemisphere and across the globe,
that together create about 40 percent of the trade that is
going on on our planet, why we would walk away from that
agreement that would leave China on the outside because of
their bad behavior. Why we would walk away from that agreement
is beyond me. And I will continue to raise this issue.
Ambassador Tai, if you could, one last quick question. I
was happy to hear about your speech last month where you
elevated the importance of combating climate change in U.S.
trade policy. The Finance Committee is working on legislation
that will bolster U.S. competitiveness and ensure that we are
able to compete with China, as you know.
As part of this legislation, we are working to reauthorize
the Generalized System of Preferences program, GSP, for
developing nations. I understand that we have a key opportunity
to include environmental criteria in GSP, giving this
administration another tool in its toolbox to combat climate
change through trade.
Would you be supportive of including environmental criteria
in GSP, and what additional opportunities exist for advancing
environmental enforcement measures in future trade deals?
Please.
Ambassador Tai. Absolutely. Yes.
Senator Carper. That was the kind of answer I was hoping
for; crisp and to the point. Thank you so much.
The Chairman. A one-word win. Thank you.
Senator Carper. My time has expired.
The Chairman. All right.
Senator Barrasso?
Senator Barrasso. Thank you very much, Mr. Chairman and
Ranking Member Crapo, and thank you, Ambassador Tai; nice to
see you again.
The President has called for waiving intellectual property
rights for vaccines. He has called for that, he said, because
we have a global health crisis. I disagree with that decision
by the President; I want to be very clear on that.
At the same time, he has made it very clear that this
administration believes that we are facing a world climate
crisis. As a matter of fact, on April 22nd, the President
called on countries to step up, take further action on climate
change in order to, quote, ``overcome'' what he described as
``the existential crisis of our time.''
He did not say that coronavirus was the existential crisis
of our time; he said climate change is the existential crisis
of our time. But the President is willing to waive intellectual
property rights on something that is less than the existential
crisis of our time.
So how do you square that? Do you think we should waive
intellectual property rights on green energy technology to
combat climate change? Where is this administration going, and
you as the Trade Rep? I do not see how you can support the one
without the other, and is all of it out the window?
Ambassador Tai. Well, Senator Barrasso, I respect your
opinion and where you are on the waiver issue.
Let me say this. I do not think we think about our
challenges in a kind of a totem poll hierarchy. But with
respect to the COVID-19 pandemic, all you need to do is open a
newspaper or turn on the TV and see the scenes in India and
appreciate the reality that we are not through this pandemic,
and that even for those countries that think that they are in a
good spot, things can really turn on a dime if you are not
careful.
So with respect to COVID-19, I would say that for the
people of India, for all of the people who live in countries
where there is less than 2 percent access to vaccines as of
today, that that is an existential crisis today.
Once we are through this pandemic--God willing, knock on
wood that it will be sooner rather than later--the climate
crisis will still be with us. And so let me just say that; let
me put in context or acknowledge that we can have more than one
crisis at a time, but also really put a point on the issue
around the vaccine and how it impacts individual people and
their access to hope that they will be able to have a future,
and that their kids will be able to have a future.
Senator Barrasso. So we can have more than one crisis at a
time; does that mean this administration has really very little
respect for intellectual property rights? And as long as the
administration can describe four or five or six crises, that
anyone who has done work, to spend time, effort, research, has
no protection?
I am just going to go with what you had said during your
confirmation process. I asked you the following question: ``How
does the U.S. Trade Rep intend to pursue a trade agenda that
protects American intellectual property abroad and ensures that
our trading partners value the important contributions of
America's innovative industries?''
You said: ``If confirmed, I commit to using the trade tools
at my disposal to ensure that American workers and innovators
are able to reap the benefits of their innovation, including
overseas.''
So that was my question to you and your answer. So I just
ask, how and why has your position with respect to U.S.
intellectual property protection evolved since that hearing and
the vote on your confirmation?
Ambassador Tai. I guess the answer is, it really has not,
Senator Barrasso, and I would direct your attention to the
statement that we put out. By the way, we put that statement
out through an e-mail; we also tweeted it out--just referring
to an earlier comment by Senator Crapo that it was just a
tweet.
But that statement really was carefully crafted as a
statement of our values: that saving lives is absolutely
important and that intellectual property protections, as long
as there are partners at the WTO who feel so strongly that
intellectual property protections are getting in the way of
their ability to access vaccines and to save their
populations--that is absolutely worth our engaging with.
Senator Barrasso. So I guess the question is, why would we
expect American innovators to make massive new investments in
medical research, in carbon capture, in clean energy, in
advanced technologies, if they risk losing intellectual
property during the next thing that is truly a global crisis?
Ambassador Tai. Well, I guess I would just say in terms of
the acute nature of what we are experiencing right now, the
entire health infrastructure of India, for example, being
overcome--that that is distinguishable from the kind of crisis
that we are facing with respect to the climate.
And so I would just say I disagree with your analogy that
one necessarily leads to the other, that there is a slippery
slope here.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Next is Senator Warner. Is he out in cyberspace?
Senator Warner. Ambassador Tai, first of all, it is great
to see you.
Can you hear me?
The Chairman. Senator Warner, I can hear you, I believe.
Senator Warner. Ron, can you hear me, see me?
The Chairman. Gotcha; go.
Senator Warner. Thanks so much.
Let me first of all just say, having just heard the last
exchange, I spent a whole career in venture capital and valuing
American intellectual property. I think it is a very close
call, what the administration has done.
But I also want to give--Ambassador Tai, I think,
acknowledged that this is a moment in a global pandemic, and as
I think you laid out very clearly, starting something as a WTO
process is a long way from coming to some kind of overall
consensus, the way the WTO works. And as cochair of the U.S.-
India caucus, I think the humanitarian crisis in India requires
extraordinary actions.
I also think there is no more significant long-term
geopolitical strategy in Asia than building strong ties with
India; and I think that taking a once-in-a-century action on a
once-in-a-century pandemic is not an indication of some retreat
of protecting intellectual property rights in this country. I
again differ with some of my colleagues.
I also want to point out--I think somebody else has raised
this issue as well, and I wanted to weigh in. Semiconductors, I
think most of this panel knows, are the key to virtually any
electronic device, and it is absolutely critical that we make
sure we have that domestic supply of semiconductors.
Next week, Senator Cornyn and I and a number of others will
be introducing a bipartisan amendment to the Endless Frontier
Act to commit $50 billion to both advance where America is
ahead on semiconductors and also hopefully lead to the domestic
construction of eight to 10 new fabrication facilities,
fabrication facilities that will do memory chips, that will do
logic chips, that will do cutting-edge chips, that will help
ensure manufacturing legacy chips are still in the supply
chain.
I hope my colleagues will support this.
Right now, we have no new fabrication facilities being
built. Taiwan creates 63 percent of all the chips made in the
world. That is a supply chain vulnerability, as well as the
fact that we need to continue to make, design the equipment,
the packaging, and I appreciate very much the administration's
support of this effort, and again I hope it will enable us to
get it done.
Let me get to a question. I am concerned--when you think
about allies, one of our strongest allies is Australia,
particularly as they grapple with the challenges coming from
China. They are a front-line nation. It is one of the reasons I
have been concerned that some of USTR's practices around
digital trade have frankly involved at times siding
disproportionately with the platforms in terms of some of the
recent debate--internal to Australia--about the news flow,
where many American companies actually sided with the
Australians.
I just hope, Ambassador Tai, that you can say that, around
digital trade efforts, we ought to try to work to be more in
concert with allies like Australia, with some of our European
allies. And let me just say, the fact that we have seen many of
our European friends put on hold some of their ongoing trading
relationships with China as they reassessed, particularly, the
Chinese treatment of the people of Hong Kong and the Uighurs,
this opens up an opportunity, I think, around these digital
issues, both in terms of Australia and in terms of our European
friends, to find greater levels of cooperation and
collaboration. If you could speak to that, I would appreciate
it, knowing I have taken up 4 minutes and 30 seconds getting to
the question.
Ambassador Tai. Senator Warner, I appreciate your question;
it is an important one, especially in terms of thinking about
formulating the trade rules that are going to be relevant today
and far into the future.
I hear you. I think that we do need to be in concert with
our trading partners. And on the types of issues you are
talking about, USTR will need to be in concert with Congress
over these important issues too.
Senator Warner. A great short answer. You got me done even
within my 5-minute time period.
Back to you, Mr. Chairman.
The Chairman. Thank you, Senator Warner. Important issue.
Senator Thune is next, and is he out there in cyberspace?
Okay, I believe Senator Thune is coming in person, which
would make Senator Whitehouse next, and he too, I think, is on
the web.
Senator Whitehouse. I am here, Mr. Chairman.
The Chairman. Great.
Senator Whitehouse. Ambassador Tai, welcome. I am delighted
that you are here.
There is a famous description of Senators by the Pulitzer
Prize-winning author, William S. White: ``A Senator of the
United States is an ambulance converging point for pressures
and counter-
pressures of high, medium, and low purposes.'' And if there is
anybody who is more of a converging point for such pressures
and counter-pressures than a U.S. Senator, it is the U.S. Trade
Representative. And in the midst of all of that, I would like
to focus a little bit on the marine ocean plastic problem,
because there is not much of an organized pressure or counter-
pressure on ocean plastic.
And the U.S. has had a very unfortunate role recently,
despite nominal support from President Trump, Secretary Pompeo,
and Ambassador Lighthizer. We came out of the Nairobi
conference with press reports saying that the U.S. had not only
been weak, but it actually tried to weaken proposals that
everybody else was trying to agree to. In Geneva, we were, I
guess, unhelpful with regard to the Basel Convention, which we
are not even a part of.
So we do not have a great record on this. But there is
bipartisan support for stronger action here in Congress, and I
want to recognize Senator Dan Sullivan of Alaska, who has done
so much good work in this area.
Our original Save Our Seas bill encourages the Trade
Representative to consider in our trade agreements the impact
of land-based waste from countries that contribute most to
marine debris. That was an encouragement; that was the best we
could do the first time.
In our bigger, stronger, better Save Our Seas 2.0 bill, it
directs the executive branch, including the Trade
Representative, to lead and coordinate efforts to implement
U.S. policy on marine debris and support plastic waste
mitigation; it directs the U.S. representatives to appropriate
international bodies and conferences to push for plastic waste
progress; and it directs the President to consider marine
debris issues when negotiating new international agreements.
And of course you would be in the middle of that chain, between
the President and those agreements.
So I am hoping that you can tell me something good about
what has happened, how you are staffed up, what is going to be
done to implement these congressional directives with regard to
ocean plastic waste, when they could easily fall through the
cracks of the pressures and counter-pressures you are facing on
so many other issues.
Ambassador Tai. Well, I think we do have a good, very good
story here--and a lot of it leads back to the USMCA--which is,
as part of the USMCA implementing act and its passage, there
were supplemental appropriations that were provided. So,
between enhanced rules on the environment and also the
appropriations, what we have is an infrastructure that we are
building out that enhances the integration between USTR and
partner agencies within the administration to coordinate and to
work on environmental issues, including marine ocean debris.
So that is a very good place to start. We have
environmental attaches who have been deployed in Mexico; we
have a committee that has been created to enhance our work and
cooperation here in Washington; and I would say there is room
for us to build out here. And I would certainly be interested
in working with you on directions for us to build on how we can
strategically expand out our focus on this issue.
Senator Whitehouse. Who is in charge of the ocean plastic
waste issue in your office?
Ambassador Tai. Our environmental office leads on this
issue, and they work closely with NOAA.
Senator Whitehouse. And who is the person we should be in
touch with?
Ambassador Tai. I will have my people send the name to your
people, if that is okay with you.
Senator Whitehouse. That is okay; I would have felt better
if that name was top of mind for you----
Ambassador Tai. Oh, I am happy to name our staff,
absolutely, if that is what you would like.
Jamila Thompson is one of my senior advisers, who leads on
environmental issues, and she works closely with----
Senator Whitehouse. She would be the ocean plastic contact?
Ambassador Tai. Absolutely. Absolutely.
Senator Whitehouse. Great. All right. Well, I am going to
keep pressing on this, because I know there are, as I said,
lots of pressures and counter-pressures on you from a whole
variety of industries, and the ocean does not have much of a
voice of its own. So I hope you do not mind if I continue to
pursue this.
Ambassador Tai. I look forward to it.
The Chairman. Thank you, Senator Whitehouse.
Next is Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman. And to the
Ambassador, thank you for being here today. Thanks for all of
your hard work so far.
Let me start with an issue--again, you talked a little bit
about this--the 301s and 232s. I am curious about the exclusion
process, because I have met just recently, when we were home on
recess, with a company that is interested in moving to Nevada.
It is Haas Automation, and they are building a new
manufacturing facility in Henderson, and they have committed to
creating 2,000 new jobs for workers in my home State.
These workers will make machine tools that require cast
iron components, which, as you well know, there is a limited
domestic supply for. And so I guess my question to you is--
based on the conversation that I have heard today around this
subject--can you reassure the businesses, not just in my home
State but across the country, that you are working towards a
viable solution to address the tariffs and reopen a stable and
responsive exclusion process once again?
Ambassador Tai. Senator Cortez Masto, I am happy to
reiterate my commitment to USTR's top-to-bottom China review
that will have as an important component the review of existing
tariffs and also the exclusion process. And it will be built
around a robust engagement process where companies like the
ones that are talking to you will be able to engage and tell us
exactly what their concerns are and what their plans are, so
that we can take them into account as we are conducting our
review.
Senator Cortez Masto. Thank you. And then again, will you
work with Secretary Raimondo in your whole-of-government tariff
review to address the underlying issues as well that relate to
232?
Ambassador Tai. Absolutely. Secretary Raimondo and I speak
quite often, and the section 232 issue is one area where USTR
and Commerce have and will continue to work closely together.
Senator Cortez Masto. Thank you, Ambassador. I know you are
also familiar with section 201, the solar tariffs. And I
support the President's effort to bolster the domestic clean
energy manufacturing, but we do not have the domestic solar
panel production capacity to meet current demand, and it is
going to take time, resources, and the same commitment to build
this capacity.
I recognize that you have to balance a variety of concerns,
but can you assure me that, as you deal with the section 201
solar tariffs, you will take into account the concerns of
domestic solar stakeholders who deploy the solar projects we
need to meet our climate and job-creation goals while we ramp
up our domestic production capabilities?
Ambassador Tai. Senator Cortez Masto, I appreciate your
recognition of the balance that we are trying to create to
ensure that there are reliable sources of domestic supplies,
but also reliable sources for imports to address the gaps
between what our domestic supply can produce right now to
respond to our demand.
So yes, absolutely. We hear from both sides, both from the
stakeholder community, but also from members of Congress. So
absolutely, this is important to get right, and we are
cognizant of the interests on both sides of this issue.
Senator Cortez Masto. Thank you.
And then finally--you mentioned this in your opening
statement--as Congress and the administration engage in
revising and renewing trade preference programs, can you
discuss the importance of prioritizing womens' interests in
national trade policies?
Ambassador Tai. Absolutely, Senator Cortez Masto. Women
make up half of the world's population; I think that maybe the
statistics are more than half. Economies, in order to realize
their potential, have to provide for opportunities for their
women. There is so much potential to unlock, and this is such
an important area for all of us to work on.
Senator Cortez Masto. Thank you, Ambassador. Thank you so
much for joining us today.
The Chairman. Thank you very much to my colleague from
Nevada.
Senator Thune?
Senator Thune. Thank you, Mr. Chairman. Ambassador, nice to
have you here; welcome.
I understand that the question of intellectual property and
the issue surrounding whether or not that ought to be waived
with respect to dealing with the coronavirus has been talked
about at some length already, but I would associate myself with
the comments, I think, of a number of my colleagues here, that
that is an issue that we cannot--in my view at least, what we
need to address is the production capability, manufacturing,
scaling that up big time here, rather than giving away our IP
from our pharmaceutical companies and the important work that
they do, the R&D work that they do to continue to come up with
solutions to treat these types of pandemics when they come up.
I wanted to ask you, one of the things I hear repeatedly
back home--and if you have been asked this already today,
perhaps I should apologize as well--but the home builders, the
realtors, everybody in my State is talking about the cost of
lumber and how that is driving up housing costs in this country
and really curtailing new construction, just pricing homes in a
way that is outside the reach of a lot of families in this
country.
And one of the issues they consistently raise are the
tariffs on lumber coming from Canada. Could you speak to that
issue, and what is being done to address that and the impact
that those tariffs have on the cost of lumber in this country,
and ultimately on the cost of housing?
Ambassador Tai. Certainly. The issue of lumber--I think
there are probably volumes of books written about the U.S.-
Canada disagreement over our lumber policies. And what I would
say is this: that this is an issue that we have worked on for
it feels like as long as time with Canada. Our trade remedies
are there to address unfair practices in terms of Canada's
production and its structure for lumber production.
We will raise our concerns with Canada, but there are
obviously needs for us to really be honest about with the
Canadians in addressing ways of resolving some of these
concerns.
So let me center myself a little bit here in terms of
focusing on your question. The Free Trade Commission, which is
required to meet within the first year of the USMCA, is meeting
next week, and I will be raising our concerns with the
Canadians. But obviously I look forward to continuing this
conversation with you and the many other members of Congress
who have raised concerns about this on both sides of the issue.
Senator Thune. Let me just follow up. What is the
administration doing to prioritize a new softwood lumber
agreement between the U.S. and Canada?
Ambassador Tai. So in order to have an agreement, in order
to have negotiations, we need to have a partner. And thus far,
the Canadians have not expressed interest in engaging. So on
that, I would also welcome your intervention right now in terms
of raising the profile of how important this is to the United
States.
Senator Thune. Well, it is having a tremendous impact on
the ground, I can tell you that, on the economy out there.
On agriculture, you have not yet announced--or the
administration I should say, has not announced a nominee for
USTR Chief Ag Negotiator. It is an important role when it comes
to representing our agricultural interests, in particular
expanding market access for producers, products in trade
negotiations.
So I ask you when we can expect to have a nominee for that
position. And then secondly, TPA expires July 1st, and I think
when asked in February whether you support TPA renewal, you
stated in your QFR responses that you would consult closely
with Congress and work to pursue trade policies that receive
bipartisan support. All of that is welcome, but we need
leadership in the administration in order to move TPA forward
to grow jobs and exports.
And so, a lot of questions in there, and I am out of time,
but if you could also address if there is any discussion in the
administration about rejoining TPP. Because many of us here
thought that was a good agreement that went a long ways towards
expanding access into markets in Asia, and were disappointed
when the previous administration withdrew from it.
So I know there are several questions in there, but if you
could speak to those issues, it would be appreciated.
Ambassador Tai. Senator Thune, let me try to be particular
and responsive at the same time. Our Chief Ag Negotiator, this
is a priority for the administration, this is a priority for me
in terms of wrapping up at USTR, so I hope soon.
On TPA and TPP--maybe I will take both of them and give you
a bottom-line response here, which is, my interest in engaging
with Congress is primarily going to be focused on a version of
TPA and a version of working with others in the Asia-Pacific
with shared interests that is going to take the form of
something that is going to have robust bipartisan support. And
if there is a way that we can accomplish these that can achieve
robust bipartisan support, that is the key to what we are
looking to accomplish in this administration.
Senator Thune. Thanks.
The Chairman. I thank my colleague.
Senator Daines, I believe, is next. Is he out there?
Senator Daines. Yes. Can you hear me?
The Chairman. Go ahead.
Senator Daines. Thank you. Ambassador Tai, thanks for
coming here today. Congratulations on your new role.
The importance of expanding access to important markets
around the world and assuring that our Montana small
businesses, workers, our farmers, our ranchers are able to
compete on a level playing field in this global committee,
frankly cannot be overstated.
It is also very essential that the U.S. make badly needed
investments in the research into next-generation technologies,
protecting IP so that we can run faster, create better jobs,
and win this race against China to be more competitive and to
be more innovative.
As you know, China has been a long serial abuser of IP, and
the China Phase One trade deal made progress in that space. Our
focus, I believe, needs to be on fully and aggressively
enforcing that deal. We need to strengthen and enforce IP
protections, not weaken or waive them.
I am very concerned that the recent decision to support
waiving vaccine IP protections will harm U.S. innovation; it
will harm our leadership in vaccines; it will provide a
windfall for adversaries such as China and Russia, as well as
not necessarily expedite vaccination globally.
My question is, what kind of message do you think it sends
to China, when under pressure from foreign competitors and
international interest groups, we are willing to cave and
disregard WTO IP commitments?
Ambassador Tai. Senator Daines, let me say this. In terms
of the U.S. support for the waiver at the WTO and the U.S.
support for the waiver proponents, the message that I think it
sends is that the United States is back to exercise leadership,
and the United States cares about saving lives.
And so I hope that is the message that everyone is
receiving, in particular the waiver's primary proponents, which
are India and South Africa. And let me just say one word; India
right now is going through a crisis of unimaginable scale and
experiencing human tragedy. South Africa is strategically
situated in Africa to speak up for the fact that Africa as a
continent does not have vaccine production capacity and will
need to have that to get through this pandemic and future
epidemics and pandemics.
So that really is the focus of the message that is
motivating me and this administration in supporting the
beginning of a process at the WTO to respond to a collective
and humanitarian tragedy that we are all experiencing right
now.
Senator Daines. Well, I appreciate that response. I would
probably respectfully disagree. There is no doubt that we need
to work as fast as we can to save lives. At the same time, we
need to protect these IP rights so we continue to foster the
innovation that allowed these breakthroughs to occur to get
these effective vaccines out to market as quickly as we did.
I think we should be prioritizing fighting the pandemic
internationally by getting more shots in arms in countries who
need them without transferring this critical technology to
China and Russia and really undermining our global leadership
position. It is sending a chilling message for future
innovation, and I think we could actually accomplish both by
protecting IP and in accelerating production by working with
those who have the IP.
Ambassador Tai, while in the Senate, I have urged both the
Trump and Biden administrations to reengage in the Trans-
Pacific Partnership. Senator Thune talked about that a minute
ago. I led a letter in fact to President Trump then with
Senators supporting reengaging in the TPP. Given China's
growing economic and geopolitical influence, it is essential we
work in a strategic manner with our allies and our partners in
the region in more of a multilateral approach.
In your nomination hearing, you referenced that TPP was a,
quote, ``sound formula,'' but it is a different world than 2015
or 2016. Notwithstanding any improvements you may view as
necessary, would you agree that the geopolitical and strategic
benefits of pursuing a multilateral approach like TPP as a
counter to China still remain?
Ambassador Tai. Yes, a multilateral approach working with
like-minded countries on a shared competitive challenge like
China, is a sound equation. And I think that, as with all
things in trade--which I live and breathe--the devil is in the
details. And my focus will be on formulating trade policy here
to find a path that has broad bipartisan support that is going
to be effective and not allow for free ridership on what we put
together with our partners.
The Chairman. Thank you, Senator Daines.
We have a vote on the floor. We are going to have to
finish, because we have a series of votes, I believe.
Senator Warren is next.
Senator Warren. Thank you, Mr. Chairman.
So COVID-19 has already infected over 156 million people;
it has killed more than 3 million people globally. It is great
that companies have developed safe and effective vaccines, but
we cannot seem to make them quickly enough to stop the global
spread that threatens all of us. The world needs more vaccine.
Part of the problem is that the drug companies own the
recipes even if taxpayers paid for the research. And the drug
companies are using exclusive intellectual property rules that
they lobbied for in order to keep others from making more of
these lifesaving products.
Ambassador Tai, I was glad to see you announce last week
that the United States supports waiving some of the
international intellectual property rules to help end the
pandemic. But I have some questions about how this waiver is
going to work.
I am concerned that your announcement last week committed
only to negotiating a waiver on IP rights for COVID-19
vaccines. As you know, testing, treatment, PPE are also vital
to combating this virus. Drug companies can use patent
protections to block countries from making their own versions
of these products as well.
So, Ambassador Tai, does the administration also support a
TRIPS waiver for COVID-19-related diagnostics, therapeutics,
and PPE in addition to a waiver on vaccines?
Ambassador Tai. Senator Warren, thank you for paying
attention to that statement, and for your words on framing what
we are encountering right now as a reality to many of us.
Let me just say this. We are focused right now on the
intellectual property waiver at the WTO with respect to
vaccines. I know your question is broader, but for my efforts
at the moment, it is a focus on access to vaccines and
inequality in terms of the access to vaccines----
Senator Warren. So I am hearing you not rule out that we
will also focus on waivers for these other products?
Let me ask the question differently if that helps. Do you
agree that the U.S. should be doing everything it can to help
other countries ramp up their testing, treatment, and PPE
production?
Ambassador Tai. Sure.
Senator Warren. We will go there for right now.
You know, testing, treatment, PPE are critical, and that is
why India and South Africa asked 7 months ago for the world's
help to make those items without running a risk that a drug
company was going to sue them.
So I believe that the U.S. should be backing these
countries on this point too and not try to wiggle out of
helping. Time is also of the essence here; millions of people
are dying; millions more will die if it takes another 7 months
to reach any kind of meaningful agreement.
The special protections for drug companies are an even
bigger issue than COVID-19 alone. For years the U.S. Government
has let giant corporations write the rules of our international
trade system; so it is no surprise that when drug companies
draft our trade agreements, they include provisions protecting
pharma monopolies and putting profits ahead of the lives of
people all around the world.
We are fighting over a waiver to rules, rules that never
should have existed in the first place. Ambassador Tai, as you
negotiate new trade agreements, or as you revisit some outdated
ones, do you agree that it is time to eliminate provisions that
drive up drug prices for consumers by strengthening monopoly
protections for big pharma?
Ambassador Tai. Senator Warren, thank you so much for the
question. I am committed to reviewing everything about how we
have done trade agreements and looking at them through the lens
of what we have experienced, in particular the negative impacts
our trade agreements have had, especially on individuals,
workers, and communities.
Senator Warren. Well, I am glad that Congress forced the
previous administration to strike a part of the USMCA that
never should have been drafted, but I think it is time now for
our trade negotiators to take leadership and actively set rules
that lower drug costs for American families instead of focusing
on boosting profits for drug companies.
Drug companies are kicking and screaming about this waiver
over the COVID vaccine because they are worried that the
Federal Government may finally have the spine to lower drug
prices through global trade agreements and here at home.
So the U.S. Trade Rep's commitment on the waiver is a good
first step, but I am very much expecting you, Ambassador Tai,
to follow through at the negotiating table.
I have also urged President Biden to take executive action
to lower drug prices for tens of millions of American families
by allowing the generic production of products like insulin and
EpiPens. I am glad that the drug companies are worried that
their enormous profits may shrink. I am going to keep pushing
the administration to take more steps to put patients ahead of
drug company profits.
Thank you for being here today, Ambassador Tai.
And thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warren.
We are going to get Senator Hassan in, and then we are
going to have to run and vote.
Senator Hassan. Well, thank you so much, Mr. Chair and
Ranking Member Crapo, for this hearing. And, Ambassador Tai,
welcome and thank you. You have put in a very long morning, and
I greatly appreciate it.
The President's ongoing strategic review of critical supply
chains is a necessary step to strengthening our economic
security and out-competing China. Another important step would
be passing the bipartisan Endless Frontier Act, legislation led
by Senators Schumer and Young, which I cosponsored. And it
would invest in U.S. leadership in science and technology
innovation.
Ambassador Tai, what role has USTR played in the
President's supply chain review, and how does USTR plan to use
trade policy to promote our leadership and competitiveness in
advanced technology?
Ambassador Tai. Senator Hassan, USTR is doing our part to
support and participate in, and bring our expertise to the
ongoing critical supply chain review, and we will continue to
do so.
In terms of what we can do with our trade policy, I think
it really is about reexamining the trade policies that we have
pursued and thinking about how we devise a different approach
to trade policy that does not simply prioritize the lowest cost
and the lowest levels of protection so that we are creating
supply chains that are going to be driving a race to the top,
but that are also going to be resilient and have in mind that
crises happen, and that our supply chains need to be strong and
reliable.
Senator Hassan. Thank you. I am working on a bipartisan
basis to promote domestic R&D, including through bipartisan tax
legislation with Senators Young, Cortez Masto, Portman, and
Sasse.
Because, again to the point you just made, promoting R&D
investment in the U.S. is key to out-competing China. The
Chinese Government uses trade restrictions, tax incentives,
direct subsidies, and other policies to try to drive R&D
investments into China.
Ambassador Tai, how does USTR plan to use trade policy and
coordinate with other agencies to help promote domestic R&D?
Ambassador Tai. Well, I think there are two ways. One is to
continue to push for leveling of the playing field, calling out
and holding others to account when we see practices and
measures that are inconsistent with the norms and rules that
have been set out there.
The other is to really support and to reimagine trade
policy as supporting our domestic investment policies, as
opposed to undermining them. That is going to be so critical,
and I would just add that it is not just the R&D; the R&D is
critical to our competitiveness, and that is absolutely the
right area to focus on.
But we should also focus on that chain that translates R&D
into production, into manufacturing. As we have seen, without
that ability to produce the scalability, the ability to pivot,
we remain really vulnerable.
So I would just say that USTR stands ready to work with you
and your colleagues on the R&D and investment pieces, and also
the pieces to build out the supply chain.
Senator Hassan. Thank you.
Last question, because I would like to have follow-up on an
issue we discussed at your confirmation hearing regarding the
small business chapter of the bipartisan U.S.-Mexico-Canada
agreement.
In addition to cutting red tape for small exporters, the
agreement created a committee to give small businesses a voice
in shaping our trade policy. In implementing the USMCA,
including the provisions cutting red tape for small businesses,
how has USTR coordinated with this committee and the small
business community generally?
Ambassador Tai. Well, Senator Hassan, I have started
conversations with Small Business Administrator Guzman about
partnering on the USMCA, and we have the great fortune that she
has background in this area, and brings with her to her job an
understanding of where the synergies are between the SBA and
USTR.
With respect to working with this committee, my door is
open. I am so excited about working with you, your colleagues
on this committee, on the Small Business Committee here, to
really capitalize on the opportunities that we have in the
USMCA.
Senator Hassan. Well, I thank you for that, and I
specifically look forward to working with you to bolster the
committees that the USMCA created, to really make sure the
voices of small businesses are heard. So I look forward to
that.
Thank you, Mr. Chair.
The Chairman. I thank my colleague, and particularly for
closing with the emphasis on small business.
Ambassador, it has been a long morning, and with you, they
are always productive sessions. We thank you, and let me just
give a couple of quick thoughts.
First, I think it was clear--you heard from Senator Crapo,
you heard from myself, you heard from Democrats and Republicans
on the Senate Finance Committee--that we are laser-focused on
this proposition of being able to out-compete China. We
understand this is the economic challenge of our time, and for
me, priority one is to stop China from feasting on the
weaknesses of the global trading system. And in various ways,
my colleagues made essentially that kind of point.
And what it really comes down to, and I think you recognize
this, is that this is going to take more than vague calls for
reform. This is going to take decisive action in two areas:
one, the question of enforcement, and we are pleased--Senator
Brown and I have both discussed it today--that you all came out
of the gate so quickly on enforcing USMCA under the law that we
authored.
And second, modernizing those trade laws that are simply
outdated. We need to have modern policies, we need to have
modern policies in our trade toolbox, and at the end of the day
it comes down to something you and I talked about in our first
conversation, and that is to get more workers in that winner's
circle.
So I think this has been a productive morning. We look
forward to working with you; and as I and a number of Senators
indicated, you let us know what we need to do to modernize
those trade tools, update those trade tools. We will be working
with you, and I think you saw evidence of strong bipartisan
interest in that.
Colleagues, for those who are still following this, and
staff of course, questions for the record are due Monday, May
17th. And with that, the Finance Committee is adjourned.
[Whereupon, at 12:15 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Hon. Mike Crapo,
a U.S. Senator From Idaho
The President's 2021 trade policy agenda opens with two objectives:
``[1] ending the COVID-19 pandemic and [2] strengthening the economy. .
. .'' Significant progress is being made on the first, with record
vaccine development thanks to Operation Warp Speed and continued
efforts by the Biden administration to get shots in arms.
Unfortunately, with regard to the second objective, the progress is
disappointing.
Last month, the United States added only 266,000 jobs--far less
than the 1 million that most economists expected. President Biden's
response is that ``we have a long way to go.'' Yes, we do. In fact,
more Americans are out of work at the moment than during the worst
point of the Great Recession.
Of course, Americans have crossed unimaginable distances before--
and they will do so again. But why counsel Americans to be patient?
It's not in their nature. What we need to do, right now, is to speed up
the journey for everyone by fully reopening the economy, and executing
an ambitious and sound trade policy.
According to President Biden's trade agenda, exports facilitate
greater productivity and wages. In fact, President Obama's White House
determined that every billion dollars in increased annual exports
supports between 5,300 and 7,300 jobs. If the Biden administration
wants a worker-centered trade policy, then the logical--and only
sensible--course is to adopt a trade policy that creates as many high-
paying jobs as possible. That kind of successful trade policy requires
at least three components.
First, enforcement must be a priority. The trade agenda notes there
will be comprehensive enforcement of the labor and environmental
obligations in our free trade agreements. I support that, because
America's businesses, workers, and farmers need to compete on a level
playing field. We can do that--and also stand up for them by
challenging other market access barriers at the same time. Enforcement
in these areas is complementary, not exclusive.
Make no mistake, there is a great deal to enforce. For example, the
United States-Mexico-Canada Agreement (USMCA) contains groundbreaking
market access commitments. These commitments are particularly important
to our farmers, who have faced a decline in demand from restaurants,
school systems, and hotel customers. We must make sure American farmers
get the access to our trading partners to which they are entitled. But
the story on enforcement must become better.
An important U.S. tariff-rate quotas case against Canada remains
stalled in the USMCA process. It is time to see progress on it, or the
United States must proceed with a dispute settlement panel so that
American farmers, ranchers, and businesses can enjoy the benefits they
bargained for under the agreement. Mexico is adopting a host of
measures that undermine our agricultural rights, including restrictions
on biotech crops, glyphosate, and unreasonable food packaging labels.
Ambassador Tai, I encourage you to press for action on these
barriers at the meeting of the USMCA Free Trade Commission later this
month. If our partners should refuse, you must use the enforcement
tools at your disposal.
The second component of an effective trade policy is negotiating
new rules and market access opportunities. To that end, I support the
Biden administration's call to work with allies. Yet, the President's
trade agenda is silent on whether we will continue to negotiate with
the United Kingdom and Kenya.
I encourage you to work with the United Kingdom--one of the United
States' oldest allies--and with Kenya, which can serve as a replicable
model for future trade deals in a country where China has failed to get
an FTA, and that will also establish our commitment to the people of
Africa.
Furthermore, we must deepen our engagement in the Asia-Pacific, or
risk losing U.S. allies there to China's predations. While I understand
you believe the Trans-Pacific Partnership (TPP) may have become dated,
I see value in an agreement with new disciplines, including on digital
trade. However, that means we must start thinking about how to
modernize TPP, or what other structures we can use for U.S. engagement
in the Asia-Pacific. We cannot simply take a ``time-out'' from the
region.
Last month, Japan ratified the Regional Comprehensive Economic
Partnership (RCEP)--which is China's model for what trading
relationships in the region should look like. In the absence of U.S.
leadership in the region, our allies will have to look elsewhere. If
the United States is to pursue a worker-centered trade policy, we need
to be mindful that American workers lose when China writes the rules.
The final--but most important--component of a successful trade
policy is consultation. The Supreme Court noted 60 years ago that the
President is strongest when he acts pursuant to an authorization of
Congress--and is potentially powerless when he acts in defiance. The
administration must be strong when it comes to trade policy, and that
requires a close partnership between Congress and the U.S. Trade
Representative.
We recently had a test of that partnership: the administration's
decision to support a waiver to the intellectual property protections
in the WTO TRIPS Agreement. The WTO TRIPS Agreement was approved by
Congress. The law says Congress's approval can only be withdrawn ``if,
and only if'' Congress enacts a joint resolution to that effect. Last
summer, during the height of the pandemic, both Houses of Congress
declined to act on such a resolution. Yet, without any consultation
with this committee, you announced via a tweet that the administration
unilaterally supports waiving the patent obligations of the TRIPS
Agreement.
Chancellor Merkel of Germany asserts the problem with vaccine
distribution is not patents, but manufacturing capacity and production
standards. Albert Bourla, the CEO of Pfizer, said the decision will
``categorically'' create more problems for vaccine distribution. He
added that it will ``disincentivize anyone else in the future from
taking a big risk'' like Pfizer did, laying the groundwork for the
classic moral hazard problem. Iconic American innovators, like Bill
Gates, have also said the decision will not advance vaccine
distribution.
In short, these observers assert a TRIPS waiver will undermine the
very objective I said the administration was making progress on: ending
the pandemic. Conversely, Vladimir Putin, in fact, supports your
decision to pursue a waiver. Neither did it surprise me that a bureau
chief for one of China's propaganda outlets replied to your tweet by
asserting that ``global pressure works.''
You may, of course, have your own good reasons. But to date, you
have not offered an adequate explanation. You will hear more on this
subject from me and my colleagues.
Ambassador Tai, I know that you like the expression that ``USTR can
walk, chew gum, and play chess at the same time.'' But what we need is
a USTR that can enforce, negotiate, and consult at the same time. The
American people--and members of Congress, including myself--are
counting on you to prove that is the case.
______
Prepared Statement of Hon. Katherine C. Tai, United States Trade
Representative, Executive Office of the President
Thank you, Chairman Wyden, Ranking Member Crapo, and members of the
committee, for inviting me here today to testify on the President's
trade agenda.
Our worker-centric trade policy is a key part of the Biden-Harris
administration's effort to Build Back Better. We are making real
strides towards ending the pandemic. There are pockets of progress and
hope. But we still have a lot of work ahead.
I want to thank Congress for passing the American Rescue Plan,
which has already helped get shots in arms and money in the pockets of
millions of Americans. We're seeing the economic benefits of that quick
action here in the United States. We're on track for a full economic
recovery, though more needs to be done.
The American Jobs Plan and the American Families Plan would combine
to make the United States a healthier, safer, more prosperous, fairer,
and more competitive nation. They would make bold investments that
build a better foundation for decades of economic growth.
We know these extraordinary times demand extraordinary leadership
and creativity to find solutions that can defeat COVID-19. The
announcement last week that the United States will not let intellectual
property rights get in the way of saving lives is just one part of the
administration's global effort. We will pursue text-based negotiations
at the WTO, which may take time. But I am encouraged that other
countries have already announced that they will roll up their sleeves
and join us.
We will also continue to ramp up our efforts--working with the
private sector and all possible partners--to expand vaccine
manufacturing and distribution around the world, including access to
the raw materials needed to produce those vaccines. This comprehensive
effort will not only save lives, but also help heal the economy. And as
we reengage the world, our trading partners, and international
institutions from a position of strength, support from Congress gives
us more authority and opportunity to deliver results for the American
people.
We want a fair international trading system that promotes inclusive
growth and reflects America's universal values. Trade policy must
respect the dignity of work and value Americans as workers and wage-
earners. For too long, we have overlooked the effect of our trade
policies on individual workers, who are human beings, living in a
community trying to survive and thrive. The worker-centered trade
policy outlined in the President's trade agenda builds on progress made
in the USMCA. Our goal is to foster broad-based, equitable growth,
increase innovation, and give workers a seat at the table.
The transparency principles I announced last week reflect the
administration's commitment to comprehensive public involvement in
developing trade policy. The principles, along with the appointment of
our Chief Transparency Officer, are just the starting point.
For the first time, the President's trade agenda included the goal
of racial equity. Our thoughtful, sustained engagement with new--and
all too frequently silenced--voices will give the Biden-Harris
administration a better understanding of how our proposed policies
affect all communities. And we will consider those effects on people of
color, minority-owned businesses, and aspirational entrepreneurs before
making policy decisions.
Trade policy must also help protect the environment and fight
climate change. For too long, we've seen a race to the bottom that
suppressed environmental protection to attract investment. We can use
trade tools to incentivize a race to the top and build a cleaner and
brighter future, with new market opportunities and high-paying, quality
jobs. And by encouraging fresh, collaborative thinking, we can forge
consensus among diverse groups and find solutions that we never knew
existed.
Our farmers, ranchers, fishers, and food processors will benefit
from our new approach, and they are essential to meeting our climate
and sustainability goals. We are turning the page on erratic trade
policies. USTR's goal is to pursue smarter policies that expand global
market opportunities while enforcing global trade standards and
ensuring that trading partners live up to their commitments.
Sustained, American leadership and reengagement with our allies,
trading partners, and economic competitors will be key. The Leaders'
Climate Summit in April showed that we can rally the world to tackle
big challenges. In the early meetings with my counterparts, I have
stressed that the United States will be a constructive partner, and we
welcome the frank and open dialogue.
We will work with the World Trade Organization's new Director-
General, Dr. Ngozi Okonjo-Iweala, and like-minded countries to reform
the WTO's rules and procedures so it can be a relevant force for good
in the 21st-century global economy.
We are also working with the European Union and the United Kingdom
to resolve the ongoing Boeing/Airbus dispute and are having
constructive discussions to address the real problem of overcapacity in
the steel and aluminum sectors coming primarily from China. These talks
will take time, but I believe a resolution is possible and worth
pursuing.
Those two issues underscore the importance of our ongoing
comprehensive efforts to address trade frictions with our allies and
strategic partners so that we can turn to focusing on the challenges
facing us today and tomorrow. We will not hesitate to call out China's
coercive and unfair trade practices that harm American workers,
undermine the multilateral system, or violate basic human rights. We
are working towards a strong, strategic approach to our trade and
economic relationship with China.
We welcome the competition. But the competition must be fair, and
if China cannot or will not adapt to international rules and norms, we
must be bold and creative in taking steps to level the playing field
and enhance our own capabilities and partnerships. I've been encouraged
that our trading partners also recognize this challenge, and they are
willing to find a common approach to our shared concerns. Our security
will depend on diversifying and securing the supply lines for products.
Improving our trade relations with trusted allies and partners will not
only improve our prosperity but our national security.
Closer to home, we are using every tool available to make sure our
existing agreements work and have a positive impact on real people. The
United States-Mexico-Canada Agreement gives me confidence that this
approach is worthwhile. We must invest and commit to the agreement's
full and successful implementation. USMCA is a starting point for
future efforts in the region that explicitly acknowledges climate
change, aggressively addresses global forced labor issues, and expands
the benefits of trade to women and historically underserved
communities.
I will enforce the new standards, follow through on our
commitments, and use the agreement to ensure that Canada and Mexico do
too. The updated agreement now includes the most comprehensive,
enforceable labor and environmental standards of any U.S. trade
agreement--and, I would argue, any trade agreement. And this week,
you've seen that we're committed to using the tools.
The innovative rapid response mechanism will allow us to address
longstanding labor issues in Mexico. Today I am proud to announce the
inaugural use of this mechanism in our request that Mexico review
whether workers at a General Motors facility in Silao, located in the
State of Guanajuato, are being denied the right of free association and
collective bargaining.
I commend the Government of Mexico for stepping in when it became
aware of voting irregularities earlier this year. I am proud to partner
on this shared goal of helping both Mexican and American workers
prevent a race to the bottom. This use of the rapid response mechanism
demonstrates that we will act when workers in certain facilities are
denied their rights under laws necessary to fulfill Mexico's labor
obligations.
As you can see, we have our work cut out for us. But I'm confident
that we can walk, chew gum, and play chess at the same time. The
professional and dedicated public servants at USTR are working hard to
implement the President's trade agenda. And I am proud to carry the
strength and creativity of our small, but mighty agency into the room
today.
Thank you for your time, and I look forward to your questions.
______
Questions Submitted for the Record to Hon. Katherine C. Tai
Questions Submitted by Hon. Ron Wyden
Question. The U.S.-China Phase One agreement has now been in place
for over a year, and the results are mixed. In addition to a number of
commitments on intellectual property rights, trade in agricultural
goods, and services, the deal obligated China to buy $468 billion of
U.S. products and services over 2 years. Unfortunately, China's
purchases in 2020 fell below its commitments and, in many sectors, were
well below 2017 trade levels. At the same time, while China appears to
have improved certain intellectual property practices, it continues to
engage in unfair trade practices and distort global markets through
forced technology transfer, state-
directed investment in sensitive technology, and large-scale industrial
subsidies. Under the Phase One agreement, USTR has a schedule of
meetings with its Chinese counterparts to gauge compliance with the
agreement.
In addition to these regular meetings, what is USTR doing to ensure
compliance with the written obligations made by China in the Phase One
agreement?
Answer. The U.S.-China Economic and Trade Agreement (i.e., Phase
One agreement) is the agreement that we have, and this is the agreement
that needs to stand up as we engage with China across the board in our
trade and economic relationship. We will continue to make use of and
push the existing tools that we have for the benefit of U.S. workers,
farmers, ranchers, manufacturers, service suppliers, and small
businesses. Under the Phase One agreement, the primary mechanism for
reviewing China's implementation progress involves monthly meetings of
the two sides' ``designated officials.'' We continue to hold these
meetings and supplement them with various technical-level engagements.
In addition, on May 26, 2021, I held an introductory call with Vice
Premier Liu He, my counterpart under the Phase One agreement. In that
call, I raised issues of concern and explained that USTR's review of
the U.S.-China trade relationship is ongoing.
Question. The Phase One agreement was named ``Phase One'' because
it reportedly anticipated the further work to be done with China in
addressing forced technology transfer, intellectual property theft, and
other anti-competitive trade practices. Moreover, the section 301
tariffs, which were intended to create leverage to encourage China to
address these issues, are still in place.
What is USTR doing to get China back to the negotiating table? Are
you planning to engage further on the issues underlying the section 301
investigation--forced technology transfer and intellectual property
rights violations--in a meaningful way?
Answer. 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.
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.
Question. The Phase One agreement states in Article 7.4 that
``[t]he Appeal and any information and matters related to it are
confidential and shall not be shared beyond the Bilateral Evaluation
and Dispute Resolution Office, absent the agreement of the Parties.''
Article 7.4 appears to prevent the existence of an ``Appeal and any
information and matter related to the Appeal'' to be disclosed beyond
the dispute resolution office without China's consent.
Is China's permission required for USTR to share information with
members of this committee regarding an appeal under the Phase One
agreement? Will you commit to consult with Congress regarding any
dispute or appeal under the Phase One agreement?
Answer. USTR is committed to remain open and transparent with
members on all relevant information related to the enforcement of the
Phase One agreement.
Question. The United States must ensure that its trade agreements,
including the United States-Mexico-Canada Agreement (USMCA), are fully
enforced. To this day, Canada has not come into compliance on dairy
tariff rate quota (TRQ) obligations, and Mexico is lagging on
implementation of its labor laws. Additionally, the list of trade
issues between our three countries is growing, rather than contracting,
as problematic new laws and regulations on everything from products of
biotechnology to electricity are introduced. It is critical that we
ensure the USMCA is more than a piece of paper. It must be the bedrock
of our trading relationship with Mexico and Canada, and the foundation
on which we make our economy work for American workers, farmers, and
businesses.
What do you anticipate happening over the next 6 to 12 months in
terms of implementation and enforcement of USMCA? In particular, how
does USTR expect to keep the pressure on Mexico and Canada to ensure
the agreement is fully implemented--as it should have been July 1,
2020, prior to entry into force?
Answer. Full implementation of the USMCA, including the labor and
environment provisions, is a top priority for the Biden-Harris
administration. I stressed this with my Mexican and Canadian
counterparts during the first USMCA FTC meeting last month. On the eve
of the FTC meeting, I raised with Secretary Clouthier the importance of
an energy policy that respects U.S. investment and is consistent with
efforts to tackle climate change and an immediate resumption of
authorizations of agricultural biotechnology products, among other
concerning issues.
Regarding Canada's dairy TRQs, on May 25, 2021, the United States
requested and established a dispute settlement panel under the USMCA to
review allocation measures that undermine the value of these TRQs by
limiting access to in-quota quantities negotiated under the USMCA. USTR
will continue to engage on these issues and we have committed to hold a
deputies' meeting before the end of this year.
For additional questions on the state of section 232 tariffs on
steel and aluminum, I would refer you to the Department of Commerce,
which has the statutory lead on section 232.
Question. On June 15, 2020, prior to entry into force, Canada
issued new regulations describing its updated tariff rate quota (TRQ)
administration for dairy products under the USMCA. The TRQ regulations
specify that large portions of the TRQs will be allocated to Canadian
``processors'' who produce competing products and have a vested
interest in limiting imports of competitive products. American
producers of award-winning Oregon cheese and other dairy products have
expressed concerns that Canada distributed the TRQs in a way that
discourages certain American products from entering the Canadian
market.
With regard to Canada's implementation of the dairy TRQs, do you
anticipate a change of approach in Canada's TRQ licensing? If Canada
does not agree to reform its approach to handling USMCA dairy TRQs,
will you continue with the dispute started under the previous
administration? If not, how do you intend to enforce these obligations
under the USMCA?
Answer. On December 9, 2020, USTR requested USMCA consultations
with Canada regarding its dairy TRQ allocation measures and the parties
held consultations on December 21, 2020. However, Canada did not
indicate any willingness in the consultations to address U.S. concerns.
As a result, on May 25, 2021, USTR requested and established a dispute
settlement panel under the USMCA to review Canada's dairy TRQ measures.
A top priority for the Biden-Harris administration is fully enforcing
the USMCA and ensuring that it benefits American workers. Launching the
first panel request under the agreement will ensure our dairy industry
and its workers can seize new opportunities under the USMCA to market
and sell U.S. products to Canadian consumers.
Question. I have been pleased to see both the filing of petitions
and the self-
initiation of a case under the Brown-Wyden rapid response mechanism.
These represent an important test of this critical enforcement
mechanism, which will provide timely relief to workers in Mexico and
raise the standards for workers throughout North America.
In addition to using the rapid response mechanism, what is USTR
doing to ensure Mexico's labor laws as written and as enforced meet the
standard set by the USMCA?
Answer. USTR has taken and continues to take many relevant steps.
We are engaging with the Government of Mexico on a regular basis to
support Mexico's efforts to implement the reforms required by the
agreement. USTR hosted the first Free Trade Commission meeting under
the USMCA on May 18th. At the end of June, USTR, in coordination with
the Department of Labor, plans to hold the first Labor Council meeting
under the USMCA, which will include a public session. USTR routinely
consults with interested stakeholders, including members of the Labor
Advisory Committee for Trade Policy and Negotiation, to support our
monitoring efforts and to help ensure Mexico's laws are enforced on the
ground. We have considered the information and recommendations included
in the interim report of the Independent Mexico Labor Expert Board and
have taken steps in response to the report's recommendations. In
addition, the Department of Labor has launched several significant
technical assistance projects to support the Government of Mexico in
its labor reform and enforcement efforts and to strengthen workers'
ability to exercise their labor rights. USTR collaborates closely with
the Department of Labor. USTR also has identified and posted to Mexico
City an official to serve as Senior Trade Representative, and the
Department of Labor has hired four labor attaches, two of whom have
already been posted in Mexico City. The Senior Trade Representative and
the labor attaches engage with the Government of Mexico and civil
society in Mexico on an ongoing basis on labor matters.
Question. A consistent theme from this administration has been the
need to work closely with our allies to counteract China's trade
cheating. The European Union has long been both an ally and a source of
serious ``trade irritants.'' For this reason, I was pleased to see that
the Biden administration has reinvigorated the negotiations with the
European Union to settle the longstanding Boeing/Airbus dispute and
provided a pause on tariffs.
What concrete action are you taking to engage with your European
counterparts to ensure a meaningful and timely conclusion to this
dispute? And ultimately, what would a positive outcome look like?
Answer. Our negotiations with the EU and the UK have resulted in
agreement to move past the 16-year WTO dispute regarding aircraft
subsidies. We have agreed to suspend tariffs related to the dispute for
5 years, while retaining flexibility for the United States to reapply
tariffs if we're no longer competing on a level playing field. We, the
EU, and the UK have also adopted clear statements on acceptable support
for large civil aircraft producers and a cooperative process to address
support between the parties and overcome longstanding differences.
With respect to China, we pledged to:
Meaningful cooperation on countering (1) investments in the
aircraft sector by non-market actors in our economies to acquire
technology and know-how; and (2) outward investments that involve
moving production into China pursuant to non-market forces.
Identifying where joint work is needed to take parallel action
against other non-market practices.
Sharing information regarding these and other areas in the
large civil aircraft sector.
Question. The EU has also announced that it will suspend its tariff
hike on U.S. products, which was in retaliation for the U.S. section
232 tariffs on steel and aluminum. The U.S. announcement highlighted
the need to address global steel and aluminum excess capacity, as a
means of preserving these critical industries.
What concrete actions can the EU and the United States take in
concert to address global overcapacity?
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, the
administration is also consulting closely with domestic stakeholders
and partners around the world that share similar national security
interests. We seek to address market distorting measures that pose a
serious threat to the 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, and we will be engaging
intensively with the EU in the coming weeks. 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.
For additional questions on the state of section 232 tariffs on
steel and aluminum, I would refer you to the Department of Commerce,
which has the statutory lead on section 232.
Question. I put out a report in 2009 highlighting the opportunities
and challenges for U.S. exports of environmental goods, which have only
become more prominent over the last 10 years. You have spoken about the
development of innovative environmental technologies, goods, and
services, as well as the need to cultivate strategic international
supply chains. Reducing greenhouse gases and turning the tide on
climate change is a key priority for the Biden administration; it is
also an opportunity for U.S. innovators, manufacturers, and workers who
make the technology the world so desperately needs.
What are you and your team currently doing to facilitate trade in
environmental goods? For instance, are you considering revamping the
list of what is considered an environmental good?
Answer. Facilitating trade in particular environmental goods and
technologies is a key component to address climate change and the
transition to a low-emissions future. USTR is actively engaged in
regional and multilateral discussions regarding issues pertaining to
trade in environmental goods. We continue to examine how we can
leverage U.S. companies' innovation and domestic production of
environmental goods to benefit U.S. jobs and increase exports. This may
include updating lists of what is considered an environmental good, to
ensure our objectives for achieving a net zero economy no later than
2050 are consistent with pursuit of trade facilitation of such goods
and technologies.
Question. The COVID-19 pandemic has put significant pressure on
U.S. supply chains for products well beyond personal protective
equipment and medicines. A sudden shift in lifestyle meant products
from office chairs to outdoor furniture have seen booms, while other
goods and services have flatlined. Adding to this distortion are delays
at ports and shortages of containers caused by the pandemic. One item
that has received a lot of attention lately is the high price of
lumber, but other products used in home construction like fixture and
building materials are also subject to higher prices because of the
section 301 or section 232 tariffs.
What are USTR and the Biden administration doing to address the
high price of certain goods attributable to these supply and demand
shocks in the United States?
Answer. Recognizing the supply chain vulnerabilities exposed by the
COVID-19 pandemic and the resulting economic dislocations, President
Biden signed Executive Order (E.O.) 14017, ``America's Supply Chains,''
in which he directed the U.S. Government to undertake a comprehensive
review of critical U.S. supply chains to identify risks, address
vulnerabilities and develop a strategy to promote resilience. The first
of the reports in response to this E.O. was released on June 8th and
focuses on four critical products: semiconductor manufacturing and
advanced packaging; large capacity batteries; critical minerals and
materials; and pharmaceuticals and active pharmaceutical ingredients.
It also recommends the creation of a Supply Chains Disruptions Task
Force that will examine how to alleviate bottlenecks and supply
constraints as the economy recovers.
I am also closely watching the historic movement in lumber prices.
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.
In addition, 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.
For additional questions on the state of section 232 tariffs on
steel and aluminum, including the 232 exclusion process, I would refer
you to the Department of Commerce, which has the statutory lead on
section 232.
Question. The United States is a global leader in innovation and
digital trade. However, the United States is facing increased digital
protectionism around the world, including barriers to digital trade
that modern U.S. trade provisions were designed to prevent.
How is USTR prioritizing digital trade in its broader agenda, and
what steps do you intend to take to counter protectionist trends in
digital policy, especially in the markets of some of the United States'
largest trading partners?
Answer. The administration recognizes the importance of the digital
economy to American jobs, prosperity and security, as well as U.S.
companies' unique competitive advantages in this area. For example,
every year in the last 15 years, the United States achieved a
substantial surplus for trade in ICT-enabled and potentially ICT-
enabled services, with that trade surplus exceeding $100 billion
annually in each of the last 6 years. Trade rules must work to maintain
and advance U.S. strengths in digital trade. USTR will use a wide range
of trade tools to address discriminatory practices that hinder U.S.
workers and firms, including practices that discriminate against U.S.
digital and technology exports.
Question. The WTO has been trying to conclude the fisheries
subsidies negotiations for over a year. I am pleased to see the vigor
with which the negotiations have been pursued, both because they can
demonstrate the utility of the WTO's negotiating function and because
of the critical topic this negotiation covers.
What is the United States doing to push these negotiations toward
an ambitious outcome that applies to countries across the board? What
is the likelihood of coming to an agreement before the rescheduled WTO
ministerial meeting?
Answer. The United States has continued to play a leadership role
in the WTO fisheries subsidies negotiations, seeking a meaningful
outcome that both effectively disciplines harmful subsidies in order to
protect our oceans and fisheries resources, and supports our fishers
and workers. The United States recently submitted a proposal calling
attention to the use of forced labor on fishing vessels. The proposal
urges WTO members to pursue an approach in the negotiations that would
contribute to efforts to address this global problem, including by
agreeing to effective disciplines on harmful subsidies to fishing
activities associated with the use of forced labor. The United States
will continue to engage constructively with other WTO members to
achieve a meaningful outcome. However, if we are to successfully
conclude the negotiations by the 12th Ministerial Conference, members
will need to put aside calls for exclusions and flexibilities, and
focus on agreeing to disciplines that actually improve the status quo
and have a positive impact not just on the sustainability of fisheries
resources but on the lives of fishers and workers.
______
Questions Submitted by Hon. Mike Crapo
Question. Congress granted China and Russia permanent normal
trading relations as part of their accession to the WTO in significant
part because of the commitment made by prior administrations that this
would allow us to hold China and Russia accountable to WTO rules.
Particularly important for many members was the ability to hold China
and Russia to the WTO TRIPs Agreement, given their penchant for
disregarding U.S. intellectual property rights.
China and Russia are engaged in so-called ``vaccine diplomacy,''
albeit with currently less than effective vaccines. I am very concerned
about letting them profit off U.S. funded research on MRNA in order to
develop their own capabilities in this space.
You have referenced text-based negotiations in Geneva to discuss
the waiver. Will you commit to this committee that you oppose allowing
any waiver to extend to China and Russia?
Congress approved the WTO TRIPS Agreement. I have serious
reservations about your ability to renegotiate or suspend it absent
congressional consent. At a minimum, will you confirm that this
committee will see the text of any proposal well in advance of you
tabling it to other trading partners?
In light of these negotiations, do you see the value in the
administration promptly naming nominees for Chief IP Negotiator and for
Ambassador to the WTO?
Answer. In supporting a waiver of intellectual property protections
for COVID-19 vaccines, the administration is committed to starting a
process at the World Trade Organization (WTO) to find a solution there
that is effective and practical in saving lives. We are committed to
working with the WTO members and will be clear-eyed about potential
risks as we enter text-based negotiations.
I am committed to keeping Congress fully informed of developments
in the process in the WTO. With respect to nominees for Chief IP
Negotiator and for Ambassador to the WTO, I take staffing on those and
all positions at USTR very seriously. Those nominations are ones that
will have to come through the Senate Committee on Finance, and we are
working on those issues right now.
Question. One of the reasons I supported your nomination was your
extensive experience. In particular, as Chief Trade Counsel on the
Democratic staff of the Ways and Means Committee, you had the
opportunity to see all of the U.S. negotiating proposals in the UK and
Kenya discussions. Given that, one advantage you have over most people
is that you could hit the ground running--or as you put it during your
confirmation hearing: make sure trade was not on the ``back burner.''
To me, we must reengage with the UK and Kenya. The UK is a massive
market, and one of our most important allies. In Africa, China is
engaged in a number of predatory practices. We need to show we are
engaged economically.
Where is USTR in its review of these negotiations, and when do you
reasonably expect them to conclude?
Answer. The President recently met Prime Minister Johnson and
committed to deepening and strengthening our vital economic and trading
partnership. As a first step, we agreed to move past the 16-year WTO
dispute regarding aircraft subsidies. We have agreed to suspend tariffs
related to the dispute for 5 years, while retaining flexibility for the
United States to reapply tariffs if we're no longer competing on a
level playing field. We and the UK have also adopted clear statements
on acceptable support for large civil aircraft producers and a
cooperative process to address support between the parties and overcome
longstanding differences. Second, the President and Prime Minister
agreed to work closely to identify and pursue opportunities to deepen
our already extensive trade relationship. As part of the Biden-
Harris administration's focus on the Build Back Better agenda and
supporting a worker-centric trade policy, I am continuing my review of
the objectives of the negotiations with the United Kingdom that were
begun under the prior administration.
As I mentioned during the hearing, connecting with my Kenyan
counterpart was one of my first meetings and priorities upon assuming
office. The negotiations launched last year during the pandemic, and
two rounds were completed. My team and I continue to study and consider
how these negotiations could fit into the Biden-Harris administration's
agenda.
Question. When asked about the Trans-Pacific Partnership--or TPP--
during your confirmation hearing, you noted that ``that the world is
very different in important ways from the way the world was in 2015 and
2016.'' One thing not changed is that there are many countries that
share strategic and economic interests with the United States. It is
critical that we partner with these countries to ensure that we write
the rules of trade rather than China. Moreover, in light of RCEP, China
may now have better market access to many TPP countries than the United
States.
What developments, since 2015, do you think in particular are
relevant in evaluating our position with respect to TPP?
Answer. As compared to 2015, we have a better understanding of
China's deep-seated commitment to its economic model, industrial
subsidies, and industrial policy, and of the distortive and harmful
impact of China's policies on U.S. producers and workers. The pandemic
has highlighted supply chain fragility, including a dependence on
production in China that left Americans short of critical goods, such
as personal protective equipment. We are more informed about the
operation of supply chain rules in trade agreements, and how these
rules can allow free-riding by non-parties to the agreements. We have
also seen how certain countries within the Asia-Pacific region continue
to seek to integrate certain supply chains with China, including CPTPP
countries, despite greater awareness of China's economic strategy. In
addition, we have witnessed recent technological developments are
impacting regional patterns of trade and affecting trade's distributive
impact. Finally, there have been other regional developments,
particularly in Hong Kong and Xinjiang, that affect considerations of
technology, supply chains, and trade. All of these factors are relevant
for our analyses on how to proceed.
Question. Chairman Wyden asked, during your confirmation hearing,
if you could provide, within 30 days of taking office, your ideas on
promoting transparency. Promoting transparency and accountability in
trade negotiations is a priority I share with the chairman. Last
Friday, USTR published its transparency principles.
It is not clear what new practices USTR is adopting. For example,
the principles state that USTR will use tools like virtual hearings and
website updates, which has been done by prior administrations.
Additionally, the principles say USTR will adhere to the 2015
consultation guidelines it promulgated--which clearly are not new.
Likewise, the guidelines promise to ensure that its advisory committees
will have an array of perspectives, yet the Federal Advisory Committee
Act has required, since the 1970s, that advisory committees promote a
balance of perspectives.
Can you detail for me what is different or new with respect to
USTR's transparency policies?
Answer. The USTR Transparency Principles published on May 7th
reflect the agency's commitment to comprehensive, two-way public
engagement, including outreach to historically overlooked and
underrepresented communities, as it develops and implements a trade
policy that advances the interests of all Americans. While it is true
that USTR, under prior administrations, has engaged tools such as
virtual hearings and sought to ensure a range of perspectives in
advisory committee membership, it is equally true that those efforts
have not always reached all American communities. The recognition that
our trade agenda will only succeed if it reflects the views, and serves
the interests, of all Americans will inform USTR's implementation of
the Transparency Principles in its day-to-day operations. For example,
under the Transparency Principles USTR will seek public input with
respect to new major trade initiatives when feasible even beyond those
circumstances when it is required by law. It is important to note that
the Transparency Principles are a first step. We will continue to build
on those principles and identify further opportunities for meaningful
engagement with the American public.
Question. The Trade Policy Agenda notes that the administration
will work with ``like-minded trading partners to implement necessary
reforms to the WTO's substantive rules.'' As you know, many of our
allies want to address the situation regarding the WTO Appellate Body.
The U.S. critique of the Appellate Body is well-founded. However, we
have yet to provide a proposal for what reform might look like. Many
members of Congress are interested in this issue, and want to be a part
of this process--as is their right.
Can you share your thoughts on what some elements of resolving
dispute settlement at the WTO might include?
Answer. The WTO dispute settlement system requires fundamental
reform in order to preserve the rights and obligations of WTO members
and to enforce the rules negotiated, drafted, and agreed to by the WTO
members. A well-functioning dispute settlement system should improve
the WTO as a forum for negotiations. We will seek reform of the WTO
dispute settlement system to ensure that it functions appropriately by
assisting parties in resolving their dispute and does not add to or
diminish the rights and obligations of WTO members.
Question. Your time to get outcomes tied to purchases and critical
structural issues under the Phase One deal is running out. There are
also inconsistencies between your domestic and international policies,
and it looks like the prospect of your top-to-bottom review to
deliberate over your China trade policy is going to take even more time
off the clock.
All this, while the administration presses needless subsidies, even
unrelated to infrastructure, together with Buy American and other
policies, that will further reduce U.S. negotiating leverage on
structural issues with China, and other governments, including the EU.
At face value, there seems to be a lot of deliberation and
inconsistency, but little action.
What is your strategy to get results for the American people with
China?
Answer. 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.
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. In addition, the
administration is actively engaged in discussing issues related to
China's distortive economic policies with allies and like-minded
partners, with whom we share values and interests. The results of our
top-to-bottom review, as well as our engagement with trading partners,
will inform our thinking of how we proceed.
Question. During your nomination hearing, five Senators raised
questions about attempts to include liability protections like section
230 of the Communications Decency Act (CDA) into trade agreements. Your
answer indicated that you were still developing your position.
Given the on-going WTO e-commerce negotiations where inclusion of
such liability protections is a matter of contention, when do you
anticipate being in a position to share your position with Congress?
Answer. There is a wide variety of views on this issue. I have
committed to consult with the relevant stakeholders, including
Congress, on this and other provisions of our trade agreements. We are
doing the work and when we have made sufficient progress, we will look
forward to consulting with you and other members.
Question. Japan is once again the largest export market for U.S.
beef due, in large part, to the U.S.-Japan Trade Agreement signed in
October 2019. Strong demand, combined with the tariff reductions for
U.S. beef established under the agreement, caused U.S. beef exports to
surpass Japan's threshold for annual import volumes of U.S. beef
products, triggering a 30-day tariff increase for U.S. beef. The U.S.
is the only country subject to Japan's safeguard on beef imports, and
at the current levels negotiated in the U.S.-Japan agreement, the U.S.
is likely to trigger the safeguard every year over the next 15 years.
The agreement stipulates that Japan will agree to consult with the U.S.
to adjust the safeguard if it is ever triggered.
What is the status of the consultations between the U.S. and Japan?
Is USTR seeking to increase the level of Japan's safeguard on U.S.
beef products?
Answer. USTR is engaged actively in consultations with Japan on the
beef safeguard pursuant to the side letter to the U.S.-Japan Trade
Agreement. The U.S. goal in these consultations is to achieve an
adjustment in the safeguard trigger in order to avoid future
disruptions in U.S. beef exports to Japan.
Question. You told this committee that, if confirmed, you would
review the status of the dispute initiated with Canada late last year
regarding Canada's administration of its dairy tariff-rate quotas
(TRQs). You also pledged to use all of the tools available to you in
doing so.
Has Canada indicated any intention to change course on its dairy
TRQ measures?
If not, when will USTR move forward with formal USMCA enforcement
actions against Canada to ensure our dairy farmers and processors
receive the full benefit of the bargain that was negotiated with Canada
under USMCA?
Answer. On December 9, 2020, USTR requested USMCA consultations
with Canada regarding its dairy TRQ allocation measures and the Parties
held consultations on December 21, 2020. However, Canada did not
indicate any willingness in the consultations to address U.S. concerns.
As a result, on May 25, 2021, USTR requested and established a dispute
settlement panel under the USMCA to review Canada's dairy TRQ measures.
A top priority for the Biden-Harris administration is fully
enforcing the USMCA and ensuring that it benefits American workers.
Launching the first panel request under the agreement will ensure our
dairy industry and its workers can seize new opportunities under the
USMCA to market and sell U.S. products to Canadian consumers.
Question. I am concerned by countries continuing to develop and
implement discriminatory digital services taxes rather than engage
constructively through the OCED/G20 Inclusive Framework, and then
adopting measures that are consistent with that framework. For example,
the European Union continues to move forward with a digital levy that
would apply on top of whatever negotiating governments are achieved
multilaterally. Canada is advancing a digital services tax that would
be effective as of January 1, 2022. India has even further expanded its
Equalisation Levy to retroactively capture otherwise offline
transactions in which only one aspect takes place online. There are
still other jurisdictions that actively adopt and collect these taxes.
What steps are you taking to make clear to these governments--
including the European Union and Canada--that the advancement of
digital services taxes that target U.S. companies is not acceptable?
Answer. The Office of the United States Trade Representative
recently completed its investigations into the digital services taxes
of Austria, India, Italy, Spain, Turkey and the United Kingdom. The
investigations found that these taxes were discriminatory and a burden
on U.S. commerce, and as a result tariff lists have been prepared. To
allow more time for the multilateral tax negotiations, the
implementation of these tariffs has been suspended for 180 days. The
investigation into France's digital services tax resulted in a similar
outcome.
I have raised the United States' concerns about Canada's digital
services tax with Minister Ng, and I would encourage the European Union
to refrain from moving forward with any new digital tax proposals while
the OECD and G20 negotiations are ongoing.
Question. The United States has underscored that the standstill and
rollback of unilateral measures is critical to the success of the
multilateral project to address the tax challenges arising from the
digitalization of the global economy. How are you working with your
colleagues, at the Treasury Department, to identify measures that must
be withdrawn at the time of political agreement?
Answer. USTR has been in close contact with the Treasury Department
throughout the OECD and G20 negotiations. It is critical that any
agreement on OECD's pillar one include a standstill and rollback
provision that provides a clear path to the removal of existing
discriminatory digital services taxes.
______
Questions Submitted by Hon. Debbie Stabenow
Question. Polysilicon trade affects many of the President's trade
priorities: supporting American workers, combating climate change,
enhancing U.S. competitiveness, and confronting China's state-directed
policies.
For years, China's unfair trade and industrial policies have
specifically targeted and threatened the U.S. polysilicon industry. As
a result, China's policies have captured nearly the entire solar supply
chain, putting critical manufacturing in Michigan at risk.
The Chinese Government committed to open its market to U.S.
polysilicon exports as part of Phase One, but that has yet to occur. We
need a long-term solution and smart domestic policies to re-shore the
missing pieces of the solar supply chain in the United States.
What role does USTR play in this process? Do you have the right
trade tools to support reshoring the solar supply chain? What tools do
you need?
Answer. USTR leads the administration's efforts to ensure that
China complies with its Phase One agreement obligations, including with
regard to polysilicon. 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, as well as problematic
practices surrounding the use of forced labor in particular supply
chains. We would expect that review to identify any new tools that are
needed.
Question. Agricultural trade is not only about supporting exports
to customers abroad. Many Michigan fruit and vegetable growers also
face challenges with unfair competition from imports here at home. In
past years growers have struggled with foreign cherries and asparagus
being unfairly subsidized and dumped on the U.S. market.
I continue to hear from Michigan blueberry, squash, cucumber,
onion, and other perishable fruit and vegetable growers concerned that
increased imports at low prices, especially during the U.S. growing
season, are threatening the viability of the domestic produce industry.
How does this fit into the President's agenda to defend U.S.
producers, and do you have any ideas for how we can work to keep our
domestic fruit and vegetable growers in business as they struggle with
import competition?
Answer. The U.S. International Trade Commission (ITC) is currently
conducting section 332 investigations for several seasonal and
perishable products, including squash and cucumbers. I look forward to
receiving the information resulting from the ITC's section 332
investigations. I welcome input and ideas from you and other members of
Congress as to how USTR can further utilize the wide range of tools
that are available to address the challenges facing U.S. producers.
Question. Many countries outside of North America exploit
protections meant for valid geographical indications to limit
competition and block imports. During your confirmation process, you
committed to building on the success in USMCA of beginning to establish
specific protections for common food names used by our food
manufacturers, exporters, and producers and prioritize this issue
during future negotiations.
What steps have you taken to advance this goal with existing Free
Trade Agreement partners and in new trade negotiations under
consideration?
Answer. We are actively engaging with our trading partners--both
those with whom we have existing trade agreements and those with whom
we do not--to ensure that obligations they take on as part of their
negotiations with other trading partners do not impose barriers on
existing and future market access for U.S.-made goods that rely on the
use of common names.
______
Questions Submitted by Hon. Maria Cantwell
Question. I was pleased that in March, the United States, the
United Kingdom, and the European Union agreed to a 4-month suspension
of all tariffs that were authorized by the WTO in the Boeing/Airbus
dispute. The British and Europeans committed to working with the United
States towards a negotiated settlement.
However, if no permanent resolution on the underlying dispute is
reached, American businesses and consumers could once again pay extra
tariffs on European goods and we will continue to face subsidized
competition from Europe.
How close are we to coming to a negotiated settlement on the
Boeing/Airbus dispute? What is the timeline and what are the benchmarks
for progress?
Can you describe broadly what a settlement should entail and what
are the biggest obstacles to reaching that settlement?
We have less than 60 days until we see the reimposition of tariffs.
Will there be an extension of the suspension of all relevant tariffs?
Answer. Our negotiations with the EU and the UK have resulted in
agreement to move past the 16-year WTO dispute regarding aircraft
subsidies. We have agreed to suspend tariffs related to the dispute for
5 years, while retaining flexibility for the United States to reapply
tariffs if we're no longer competing on a level playing field. We, the
EU, and the UK have also adopted clear statements on acceptable support
for large civil aircraft producers and a cooperative process to address
support between the parties and overcome longstanding differences.
With respect to China, we pledged to:
Meaningful cooperation on countering (1) investments in the
aircraft sector by non-market actors in our economies to acquire
technology and know-how; and (2) outward investments into China that
are made pursuant to non-market forces.
Identifying where joint work is needed to take parallel action
against other non-market practices.
Sharing information regarding these and other areas in the
large civil aircraft sector.
Question. Washington State companies have been facing real
challenges after their 301 China tariff exclusions expired. These are
businesses that were previously approved for tariff exclusions by USTR
and are in significant need of tariff relief as their revenues were
seriously impacted by the COVID-19 pandemic.
For example, Rad Power Bikes in Ballard, WA imports electric-
powered bikes. Their tariff exclusion ended in December. They now face
$20 million in estimated tariff-related costs this year if they don't
receive an exclusion renewal. If granted, they plan to hire a couple
hundred new U.S. employees this year. Without a new tariff exclusion,
those new jobs will not happen.
Tariff relief on seafood products caught by Seattle-based fishing
companies expired at the end of last year. These products are sent to
China for additional processing before being imported back into the
United States. We are now paying a 25-percent tariff on seafood
products caught in our own waters.
These companies need relief through exclusions immediately. They
have reached a critical point where jobs are being lost and eventually
businesses may close.
Will you commit to restarting the 301 tariff exclusion process and
to the timely renewal of tariff exclusions for American companies that
have previously been vetted and granted exclusions?
Will you ensure that any new processes for reviewing 301 tariff
exclusions are transparent, consistent, and prioritizes companies that
need immediate relief?
When can my companies expect to get more information from USTR on
what will happen with the 301 exclusions?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. Following your meeting in March with India's Commerce
Minister, USTR announced a commitment to restart the U.S.-India Trade
Policy Forum this year to resolve trade disputes. Apple growers in
Washington State still are struggling with real challenges in India. In
March, the market closed for nearly 3 weeks during peak shipping season
due to India's requirement that apple shipments be certified free of
genetically modified materials.
Meanwhile, U.S. apples still face a 70-percent tariff! U.S. apple
exporters face a 20-percent higher tariff than their foreign
competitors because of retaliatory tariffs that resulted from President
Trump's trade wars.
India was the second largest export market for Washington apples
before the Trump administration's trade war--a $120-million market. It
is now an $11.3-
million market. On average, growers have lost $83 million in exports to
India each year since the trade war started.
Do you plan to raise concerns about tariffs and market access for
American apples in the U.S.--India Trade Policy Forum?
What is the timeline for addressing India's retaliatory tariffs
within the U.S.-India Trade Policy Forum?
How else are you working to end retaliatory tariffs in India that
were imposed because of President Trump's trade wars?
Answer. India is an important market for U.S. apple exports. I am
aware of the tariff and non-tariff barriers facing U.S. apple exports
to India and the challenges faced by U.S. apple growers over the last
several years. We will continue to push India to follow a science-based
approach to agricultural trade policy. In my call with India's Minister
of Commerce and Industry Goyal, we agreed to work constructively to
resolve outstanding bilateral trade issues, including agricultural
issues and tariffs. As we reengage with India through the U.S.-India
Trade Policy Forum, apple market access remains a priority for USTR,
and we look forward to working with you and your constituents on these
important issues.
Question. It was great news that the Mexican Supreme Court ruled
unanimously last month to allow the importation of fresh U.S. potatoes
throughout Mexico. I have been fighting to get fresh potatoes from the
Pacific Northwest into Mexico for more than a decade.
Mexico is the third largest export market for U.S. potatoes and
products--a $270-million market in 2020. The U.S. potato industry
believes that access to the entire country for fresh U.S. potatoes may
have a market potential of an additional $200 million per year.
While Washington State exported $37 million in processed potatoes
to Mexico last year, it only exported about $424,000 in fresh potatoes.
There is a great potential to expand fresh potato exports.
What are the next steps you expect the Mexican Government to take
to reinstate market access for U.S. fresh potatoes to the entire
country?
What is the timeline expected to be? Would the Mexican Government
be able to act rapidly to restore full market access?
Answer. I have stressed the importance of timely access for U.S.
fresh potatoes to all of Mexico with my counterpart Secretary
Clouthier. USTR and USDA continue to work with the Government of Mexico
to bring this longstanding issue to resolution for the benefit of
potato growers in Washington and other States.
Question. A key area where the U.S. is a global leader is in
digital trade. It is essential to American global competitiveness.
U.S. digital services exports are now $517 billion per year,
generating a U.S. digital trade surplus of $220 billion that is shared
by small and large companies and workers far outside the traditional
tech sector.
One in three small and medium-sized businesses report that they
would not have survived the pandemic without digital tools, and two-
thirds of small business employers say that technology can help them
overcome export barriers.
It is clear, especially over that last year that without the
ability to trade digitally, American workers and businesses would have
been put at a significant disadvantage. It is imperative that we create
more opportunities for US exporters to harness digital trade and push
back on the growing threat of digital protectionism.
I believe we need a bold new strategy on digital trade; one that
modernizes our existing Free Trade Agreements, and seeks new bilateral
and plurilateral digital rules that ensure America stays competitive in
the 21st century and our workers and that businesses can compete on a
level playing field.
Beyond dealing with foreign Digital Service Taxes (DSTs), what is
the Biden administration's strategy on digital trade and how do we
create new opportunities for American digital exporters?
Where do the ongoing negotiations at the WTO on e-commerce stand
and how can we increase the pace of the negotiations?
Answer. The administration recognizes the importance of the digital
economy to American jobs, prosperity and security, as well as U.S.
companies' unique competitive advantages in this area. For example,
every year in the last 15 years, the United States achieved a
substantial surplus for trade in information and communications
technology-enabled (ICT-enabled) and potentially ICT-enabled services,
with that trade surplus exceeding $100 billion annually in each of the
last 6 years.
Trade rules must work to maintain and advance U.S. strengths in
digital trade. USTR will use a wide range of trade tools to address
discriminatory practices that hinder U.S. workers and innovators,
including practices that discriminate against U.S. digital and
technology exports. The United States is focused on ensuring that the
plurilateral e-commerce negotiations reflect high-standard rules that
support U.S. workers, innovators, and consumers. The e-commerce
negotiations involve more than 80 WTO Members, and the pace has
reflected the need to find common ground across a range of issues.
Question. Exports are critical to helping support the milk prices
Washington State dairy farmers receive and to offering an expanded pool
of global buyers for our dairy manufacturers. The United Kingdom is a
very large dairy-importing market that would offer tremendous
opportunities if our farmers and dairy manufacturers had a level
playing field there.
The United Kingdom imports approximately $4.5 billion a year, but
virtually all of that comes from European suppliers right now.
Unfortunately, U.S. exporters are at a significant disadvantage to
European suppliers due to the more favorable tariff and nontariff
trading terms the European Union has with the United Kingdom.
U.S. cheese exporters are faced with having to pay steep out of
quota tariffs such as $194 per 100 kilogram, whereas E.U. suppliers pay
nothing. Similarly, U.S. exporters are banned from using generic cheese
terms such as parmesan and feta, and are required to meet excessively
detailed dairy import certification requirements that far exceed the
type of food safety assurances required by other markets.
Where do the U.S.-U.K. free trade agreement talks stand?
Answer. The President recently met Prime Minister Johnson and
committed to deepening and strengthening our vital economic and trading
partnership. As a first step, we agreed to move past the 16-year WTO
dispute regarding aircraft subsidies. We have agreed to suspend tariffs
related to the dispute for 5 years, while retaining flexibility for the
United States to reapply tariffs if we're no longer competing on a
level playing field. We and the UK have also adopted clear statements
on acceptable support for large civil aircraft producers and a
cooperative process to address support between the parties and overcome
longstanding differences. Second, the President and Prime Minister
agreed to work closely to identify and pursue opportunities to deepen
our already extensive trade relationship. As part of the Biden-
Harris administration's focus on the Build Back Better agenda and
supporting a worker-centric trade policy, I am continuing my review of
the objectives of the negotiations with the United Kingdom that were
begun under the prior administration.
Question. Will market access for U.S. dairy and removing tariffs on
dairy exports be priorities?
Answer. I am currently in the process of reviewing both the status
and objectives of the previous U.S.-UK negotiations, and the prospect
of U.S. dairy access will play a large role in any future actions.
Question. How will you ensure that the United Kingdom removes the
dairy tariff and nontariff barriers that impede our exporters' ability
to compete effectively in the UK market?
Answer. I intend to engage with any trading partner to resolve
unwarranted nontariff barriers to U.S. dairy exports that undermine
market access for U.S. products. We continue to encourage the UK to use
science as the basis for its regulatory policies and to provide risk
assessments to justify its sanitary measures.
______
Questions Submitted by Hon. Robert Menendez
Question. USTR has proposed a 25-percent tariff on building
material products in response to digital services taxes being imposed
by some of our European trade partners. I am concerned that this could
negatively impact housing prices by increasing building costs, putting
homeownership further out of reach of low-income Americans.
Furthermore, such tariffs would be harmful to small and medium-sized
construction businesses in New Jersey.
What is the rationale for setting tariffs on building materials in
particular as a response to DSTs?
Has USTR conducted any analysis on how such proposed tariffs will
impact housing affordability, and if so, would you share that analysis
with the committee?
Answer. The final tariff lists for the DST actions reflect the
USTR's judgment of what would be most effective in obtaining a
satisfactory resolution to our concerns over unilateral DSTs. In
determining the final lists, USTR considered the hundreds of written
comments received during the notice and comment period, the testimony
provided during seven public hearings, and advice from other U.S.
government agencies.
Question. Increased lumber prices have exacerbated the existing
housing affordability crisis, causing the price of an average new
single-family home to increase by more than $36,000 since the middle of
last April according to estimates by the National Association of
Homebuilders. Meanwhile the softwood lumber agreement we have with
Canada, our leading trade partner in wood products, expired in 2015 and
has not been renewed since.
Are you working on a new softwood lumber agreement with Canada? Is
this a priority for you?
Answer. I am closely watching the historic movement in lumber
prices. 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. I was pleased to hear back in April that USTR extended
product exclusions for certain products related to medical care.
However, there are many more small businesses that still cannot obtain
extensions of their product exclusions. The administration previously
promised to conduct a full review of section 301 tariffs as part of the
development of a more cohesive China strategy.
Could you give us an update on where this review stands?
In order to minimize the impact these tariffs have on U.S.
businesses, workers, and consumers, do you have plans in place to
reopen the exclusion process or extend previous product exclusions?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. Another aspect of this issue that has gone overlooked is
that some companies may be owed refunds by CBP due to delays in the
section 301 product exclusion process.
Will you work with CBP in order to ensure that companies that were
granted a product exclusion receive a refund for tariffs paid while
waiting for their product exclusions?
Answer. USTR has worked closely with Customs and Border Protection
on all aspects of the implementation of the China 301 tariffs, and will
continue to do so.
Question. As the committee is considering options for renewing the
GSP program, I have heard concerns about USTR's process for the GSP
Annual Product reviews. USTR Regulations (15 CFR part 2007.0 et seq.)
state: ``Requests which conform to the requirements set forth above or
for which petitioners have demonstrated a good faith effort to obtain
information in order to meet the requirements set forth above, and for
which further consideration is deemed warranted, shall be accepted for
review.'' Yet according to the USTR's 2021 Trade Policy Agenda and 2020
Annual Report, USTR declined to review every one of 16 petitions
covering new competitive needs limitation waivers or redesignations. It
also declined petitions for 33 of the 36 requested product additions.
These figures suggest that our constituents may not be receiving the
due process they deserve.
Can you please provide any substantive information used as the
basis for rejecting the aforementioned petitions as part of the 2020
GSP Annual Review?
Answer. Consistent with USTR's regulations, Ambassador Robert
Lighthizer--who served as USTR during the period covered by the 2020
Annual Report--did not consider that the CNL petitions filed in that
year warranted further consideration.
Question. Can you clarify how USTR determines, in the parlance of
the relevant regulation, whether ``further consideration [of a
petition] is deemed warranted''?
Answer. To determine whether further consideration of a petition is
warranted, USTR looks at the relevant provisions laid out in sections
501, 502(c), and 503. Generally, USTR accepts petitions for which we
believe there is a reasonable chance that further examination of the
petition will lead to a recommendation to the President to add products
to, or remove products from, GSP; to grant CNL waivers; or to
redesignate products as eligible for duty-free treatment under the GSP
program.
Question. The regulations also state that ``[u]pon written request,
requests which are not accepted for review will be returned together
with a written statement of the reasons why the request was not
accepted.''
How many such written requests has USTR received in the past 10
years? Has USTR provided a written statement of the reasons why the
request was not accepted in all those cases? If not, please explain why
USTR failed to abide by the regulation. Please also provide copies of
all USTR written statements explaining why requests were not accepted
for the past 10 years.
Answer. USTR does not receive many requests for explanations as to
why petitions were not accepted for review. These discussions typically
occur through verbal exchanges with the requestors. USTR recognizes the
importance of transparency and would welcome the opportunity to work
with your office to ensure that we are providing sufficient information
to stakeholders with respect to these decisions.
______
Questions Submitted by Hon. Thomas R. Carper
Question. Over the past several years, tariffs on China and
subsequent retaliatory tariffs have caused significant economic
disruptions for U.S. businesses and farmers. I have heard from many
constituent companies who have invested significant time, money, and
resources navigating the process for securing an exclusion from these
tariffs. However, unfortunately, these exclusions expired at the end of
last year, and no new exclusion process has opened. Recently, I joined
Senator Portman, and several of my Senate colleagues on both sides of
the aisle, to encourage USTR to re-start an exclusion process.
However, the last exclusion process was far from perfect, and left
many questions about speed, transparency, and fairness. I understand
that the administration is currently engaged in a review of our trade
policy with China, and that a decision whether to restart an exclusions
process has not yet been made.
Could you please provide an anticipated timeframe as to when we can
expect a decision will be made with regard to restarting an exclusions
process?
What criteria will USTR use to determine whether or not to restart
an exclusion process?
Moving forward, in your view, and assuming an exclusions process
will be restarted, what should Congress and the administration do to
reform this process in order to provide greater certainty and
predictability to American companies?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. I think we both acknowledge that the U.S. has a moral
obligation to lead the world in rapidly providing COVID vaccines to
nations in need of these lifesaving shots, even as we provide vaccines
to our own citizens. Quick and efficient distribution of vaccines
around the globe is the best way to stop the spread of the coronavirus
and finally put this pandemic in our rear-view mirror. With that in
mind, I worry that waiving intellectual property protections for these
vaccines may not be the quickest and most efficient way to ensure quick
access to vaccines around the world.
With this in mind, what other U.S. trade policy objectives should
the administration pursue to ensure U.S. manufacturers can rapidly
export our life-saving vaccines around the world?
With regard to the waiver, what guard rails will you seek to
protect intellectual property rights for U.S. manufacturers and our
ability to rapidly produce life-saving vaccines in the event of another
pandemic?
Will you commit to keeping Congress fully informed regarding the
status of negotiations concerning the COVID-19 TRIPS waiver?
Further, concerns have been raised regarding the long-term
availability of raw materials to produce the COVID-19 vaccine in light
of the administration's announcement of its intent to engage in text-
based negotiations over the COVID-19 intellectual property waiver at
the World Trade Organization.
How will the administration help ensure the availability of raw
materials used in manufacturing the COVID-19 vaccine as it pursues
discussion of a waiver for intellectual property rights for the
vaccine?
Answer. The administration's aim is to get as many safe and
effective vaccines to as many people as fast as possible. As our
vaccine supply for the American people is secured, the administration
will continue to ramp up its efforts--working with the private sector
and all possible partners--to expand vaccine manufacturing and
distribution. We will also work to increase the raw materials needed to
produce those vaccines. In supporting a waiver of intellectual property
protections for COVID-19 vaccines, the administration is committed to
pursuing a process at the World Trade Organization (WTO) to find a
solution there that is effective and practical in saving lives. I am
committed to keeping Congress fully informed of developments in the
process in the WTO.
Question. Concerns have been raised about Mexico's recently enacted
electricity reform legislation and its potential to undermine new
private investment in Mexico's renewable energy sector by American
companies and others, and its potential to violate agreements set out
in the United States Mexico Canada agreement.
Will you commit to monitoring this issue and to keeping Congress
informed about any further action needed to address this issue?
Answer. The recently passed legislation, stalled by Mexican courts,
threatens significant U.S. investment in clean energy projects in
Mexico and directly implicates several of Mexico's USMCA obligations. I
made these points clearly to the Mexican Government during the
inaugural meeting of the USMCA Free Trade Commission on May 18th. USTR
will continue to monitor these issues and will keep Congress informed
of our next steps.
Question. As you know, I strongly support adding an environmental
criterion to the Generalized System of Preferences (GSP) program and
was pleased to hear your unequivocal support for this during the
hearing.
What new measures should Congress consider to incentivize countries
to meet the higher standards? What steps can the administration take to
ensure that new criteria lead to improved standards as opposed to non-
compliance or increased GSP country terminations?
Answer. Adding an environmental criterion to GSP would
appropriately recognize the importance of environmental protection to
sustainable development. It would also provide an additional tool for
the U.S. Government to use to support the administration's priority to
improve environmental protection and tackle the climate crisis
worldwide. Beneficiary countries tend to value their GSP designation,
and it incentivizes efforts to comply with the criteria.
How can Congress and the administration work to build capacity
within GSP countries to ensure that they are able to reach, and exceed,
any environmental standards that are added to the GSP program?
Answer. I fully agree that it will be important for Congress and
the administration to carefully consider the capacity of GSP
beneficiaries to ensure that they will be able to reach and exceed any
environmental criterion that is added to GSP. I welcome discussions
with you and your colleagues as to how we can build capacity to support
improved environmental conditions in these countries.
______
Question Submitted by Hon. Robert P. Casey, Jr.
Question. The Chinese Government has a well-established track
record of using unfair practices to acquire U.S. technology and steal
innovation; their efforts related to vaccine technology are no
exception. U.S. security officials have found that Chinese state-backed
hackers have attempted to break in to vaccine manufacturers and
producers in the U.S. and India.
As the administration works to support access to the COVID-19
vaccine in the U.S. and around the world can you discuss how you will
ensure the Chinese government cannot acquire our strategically
important biotechnology? And will you commit to engaging with Congress
as you negotiate on these matters?
Answer. The administration believes strongly in intellectual
property (IP) protections and the importance of safeguarding American
innovation from illicit acquisition. The decision to support a waiver
of IP protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We will be working with the World Trade
Organization members and will be clear-eyed about potential risks as we
enter text-based negotiations. I am committed to keeping Congress fully
informed of developments in the process in the WTO.
______
Question Submitted by Hon. Mark R. Warner
Question. USTR's Advisory Committee process has historically been
an important tool for USTR to get input on trade-related concerns. The
former USTR made limited use of those Advisory Committees.
Does USTR plan to reinvigorate the Advisory Committee process and
get their input?
Answer. The Trade Advisory Committee system and the expertise its
members bring are an important component of creating good trade policy.
USTR plans to regularly utilize this important feedback tool to help
inform our decision-making process to help further the goal of having a
comprehensive worker-centered trade policy.
______
Question Submitted by Hon. Sheldon Whitehouse
Question. The Climate Leadership Council examined the average
carbon intensity of the U.S. economy compared to our major trading
partners (https://clcouncil.org/reports/americas-carbon-advantage.pdf).
It found that the Chinese economy is more than three times as carbon-
intensive as the U.S. economy, the Indian economy is almost four times
as carbon-intensive, and the trade-weighted average of the rest of the
world's economy is nearly two times as carbon-intensive as our own.
Given the significant advantage that the U.S. economy enjoys with
respect to carbon intensity, if the U.S. were to adopt a border
adjustable domestic carbon price, it would also provide a significant
advantage to domestic manufacturers vis-a-vis foreign importers,
correct?
Answer. The impact of a border carbon adjustment (BCA) on imports
would be contingent on a number of policy and technical decisions,
including which products or goods are covered under a BCA, where the
benchmark carbon intensity is set, and how carbon content and price are
calculated. It is unclear if an advantage would accrue to domestic
manufacturers. The purpose of a BCA is to ensure that carbon leakage
does not occur by industries moving production overseas, which would
effectively offshore the U.S. carbon footprint.
______
Questions Submitted by Hon. Elizabeth Warren
Question. As part of their opposition to a waiver of certain
provisions under the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), pharmaceutical companies have
argued that foreign nations have limited technological capacity to
develop COVID-19 vaccines. Qualified manufacturers in countries like
India, however, have asserted that they have the capacity necessary to
produce vaccines.
What specific steps will USTR take, and on what timeline, to
identify foreign manufacturers capable of producing mRNA and other
vaccines? What specific steps, if any, does USTR plan to take to
coordinate communication regarding technological capacity between those
manufacturers and U.S. companies? If USTR does not plan to take these
steps, is USTR aware of which Federal entity will take point on
coordinating these communications?
Answer. Starting in mid-April, USTR began consultations with
interested parties: labor organizations, civil society, public health
advocates, public health experts both inside and outside of the
government, and vaccine manufacturers themselves. USTR, in coordination
with the rest of the administration, will continue to ramp up efforts
to work with the private sector and other partners to expand vaccine
manufacturing and distribution around the world.
Question. In your testimony, you said that USTR was currently
``focused . . . on the intellectual property [TRIPS] waiver at the WTO
with respect to vaccines'' but agreed that ``the U.S. should be doing
everything it can to help other countries ramp up their testing,
treatment, and PPE production.''
Which tests, treatments, and types of personal protective equipment
is USTR considering for future intellectual property waivers at the
WTO? What is USTR's timeline to decide on whether to expand the TRIPS
waiver to these products? If no timeline exists, why not?
Answer. The World Trade Organization is a consensus-based
institution. In supporting a waiver of intellectual property
protections for COVID-19 vaccines, the administration has facilitated a
process for WTO members to devise a solution that is effective and
practical in saving lives. We are actively engaged in discussions of
proposals that have been put forward by WTO members for trade policy
responses to the COVID-19 pandemic to date. Our timeline will be shaped
by the course of those ongoing discussions.
______
Questions Submitted by Hon. Chuck Grassley
Question. Could you share with the committee any progress you have
made on free-trade agreements with the United Kingdom and Kenya?
Answer. The President recently met Prime Minister Johnson and
committed to deepening and strengthening our vital economic and trading
partnership. As a first step, we agreed to move past the 16-year WTO
dispute regarding aircraft subsidies. We have agreed to suspend tariffs
related to the dispute for 5 years, while retaining flexibility for the
United States to reapply tariffs if we're no longer competing on a
level playing field. We and the UK have also adopted clear statements
on acceptable support for large civil aircraft producers and a
cooperative process to address support between the parties and overcome
longstanding differences. Second, the President and Prime Minister
agreed to work closely to identify and pursue opportunities to deepen
our already extensive trade relationship. As part of the Biden-
Harris administration's focus on the Build Back Better agenda and
supporting a worker-centric trade policy, I am continuing my review of
the objectives of the negotiations with the United Kingdom that were
begun under the prior administration.
As I mentioned during the hearing, connecting with my Kenyan
counterpart was one my first meetings and priorities upon assuming
office. The negotiations launched last year during the pandemic, and
two rounds were completed. My team and I continue to study and consider
how these negotiations could fit into the Biden-Harris administration's
agenda.
Question. According to the recent Special 301 report, ``IP
infringement undermines U.S. competitive advantages in innovation and
creativity, to the detriment of American businesses and workers. In its
most pernicious forms, IP infringement endangers the public, including
through exposure to health and safety risks from counterfeit products.
In addition, trade in counterfeit and pirated products often fuels
cross-border organized criminal networks and hinders sustainable
economic development in many countries.''
Have you evaluated the impact the proposed waiver at the WTO would
have on these concerns?
Answer. This is a global health crisis, and the extraordinary
circumstances of the COVID-19 pandemic call for extraordinary measures.
The administration believes strongly in intellectual property
protections, but in service of ending this pandemic, supports a waiver
of those protections for COVID-19 vaccines. We are committed to working
with the World Trade Organization members and will be clear-eyed about
potential risks as we enter text- based negotiations. The United States
is committed to using its leadership to reach consensus at the WTO.
Question. Since any infringement of intellectual property rights
under the proposed WTO waiver would occur outside the WTO and TRIPS
regime, what recourse would an American innovator or the United States
have if that infringement were to occur in ways not contemplated by the
proposed waiver?
Answer. The administration believes strongly in intellectual
property (IP) protections and the importance of safeguarding American
innovation from illicit acquisition. The decision to support a waiver
of IP protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We are committed to working with the
World Trade Organization members and will be clear-eyed about potential
risks as we enter text-based negotiations.
Question. The Special 301 report specifically identifies
``inadequacies in trade secret protection and enforcement in China,
Russia, and elsewhere'' as well as ``troubling `indigenous innovation'
and forced technology transfer policies that may unfairly disadvantage
U.S. right holders in markets abroad.''
Won't the proposed waiver just exacerbate these problems?
Answer. The administration believes strongly in intellectual
property (IP) protections and the importance of safeguarding American
innovation from illicit acquisition. The decision to support a waiver
of IP protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We are committed to working with the
World Trade Organization members and will be clear-eyed about potential
risks as we enter text-based negotiations.
Question. Before the Biden administration made the decision to
support waiving intellectual property rights for COVID-19 vaccines
currently under consideration at the World Trade Organization, were you
aware that Pfizer expects to produce 3 billion doses this year and at
least 4 billion doses in 2022?
Answer. Starting in mid-April, USTR began consultations, including
on issues related to manufacturing capacity, with interested parties:
labor organizations, civil society, public health advocates, public
health experts both inside and outside of the government, and vaccine
manufacturers themselves. USTR will continue to ramp up efforts to work
with the private sector and other partners to expand vaccine
manufacturing and distribution around the world. This comprehensive
effort will not only save lives but also help heal the economy.
Question. Before the Biden administration made the decision to
support waiving intellectual property rights for COVID-19 vaccines
currently under consideration at the World Trade Organization did the
administration know that U.S. drug companies have already voluntarily
entered into dozens of licensing agreements with other manufacturers,
many in low-income countries before?
Answer. Starting in mid-April, USTR began consultations, including
on issues related to licensing agreements, with interested parties:
labor organizations, civil society, public health advocates, public
health experts both inside and outside of the government, and also
vaccine manufacturers. USTR will continue to ramp up efforts to work
with the private sector and other partners to expand vaccine
manufacturing and distribution around the world.
Question. When you are negotiating trade deals, where do you
prioritize climate in these negotiations compared to the economic
impact on Americans of possible reductions in trade due to a border
adjustment?
Answer. USTR has, in the past, faced limitations regarding
inclusion of climate change provisions in trade deals. In pursuit of a
whole of government approach to tackling the climate crisis, I look
forward to using trade tools--including trade deals with trading
partners--to meet the challenge. Regarding border adjustments, at this
stage, it is unclear whether there would be reductions in trade due to
these mechanisms. The impact of a border carbon adjustment (BCA) on
imports would be contingent on a number of policy and technical
decisions, including which products or goods would be covered under a
BCA, where the benchmark carbon intensity is set, and how the carbon
content and price are calculated. In general, I do not see trade and
climate change as competing interests in trade negotiations, but rather
an opportunity to ensure strong and enforceable environmental
obligations protect the interests of U.S. consumers and support our
jobs at home.
Question. I am alarmed by rhetoric from European politicians in
which they advocate for policies to undermine the competitiveness of
U.S. technology companies. EU leaders regularly stress the need for
``digital sovereignty'' while advocating for new unilateral tools to
steal American innovation.
Unfortunately, the EU, which has sat on the sideline for decades on
tech, is now targeting U.S. businesses with an unfair, discriminatory
agenda to try and gain a competitive advantage. I'm am not opposed to
appropriate regulation. But what the EU is proposing is protectionism.
What are you doing to confront this protectionist agenda in Europe?
Answer. I am aware of the concerns that U.S. companies have raised
about digital services taxes (DSTs), other European Commission
regulatory initiatives, such as the Digital Markets Act (DMA), and the
continued free flow of data across the Atlantic. I will consider the
full range of trade tools available to me to address discrimination
against U.S. workers and U.S. companies.
Question. After the United States, Brazil is the world's second
largest producer of ethanol in the world and has also enjoyed nearly
tariff-free access into the United States for a decade. Meanwhile, our
domestic producers face a 20-percent tariff for ethanol heading into
Brazil, creating an extreme, uneven playing field. With new U.S. trade
negotiators coming into place, it provides a chance to reset and
reestablish negotiations with Brazil on ethanol.
What steps will you and the administration take to push the
Brazilian government to remove the tariff on imported American ethanol?
Answer. I understand the importance of this issue to U.S. ethanol
producers. I will emphasize in engagements with Brazil the importance
of more reciprocal conditions for trade in regards to American ethanol.
I will also emphasize the common domestic statutory mandates for
blending ethanol into gasoline that we share and our shared interest in
addressing barriers to trade with third countries.
Question. I sent Ambassador Lighthizer a letter encouraging him to
drop section 230 from the U.S.-UK trade agreement negotiations. We each
also raised concerns about the issue with you during your confirmation
process. To date, though, you've refused to take a position on the
issue. Your boss called for outright repeal of section 230 at one
point. Secretary Raimondo agreed it needed to be reformed during her
confirmation process. The Department of Justice has put forth a number
of concrete reform proposals.
Will you commit to drop this provision from future trade
agreements?
Answer. There is a wide variety of views on this issue. I have
committed to consulting with the relevant stakeholders, including
Congress, on this and other provisions of our trade agreements. We are
doing the work and when we have made sufficient progress, we will look
forward to consulting with you and other members.
______
Questions Submitted by Hon. John Cornyn
Question. In 2012, the U.S. and China entered into a memorandum of
understanding to settle a 2009 WTO case that the U.S. initiated and won
regarding significant market barriers employed by China preventing the
importation and distribution of theatrical films from the U.S. Due for
an update to further open up distribution since 2017 as described in
the original agreement, the bilateral discussions to update the
agreement have so far come up fruitless. However, the ``USTR's 2020
Report to Congress on China's WTO Compliance'' which was released in
January 2021, specifically states, ``The United States will continue
pressing China to fulfill its obligations.''
What is the administration's plan to appropriately update the
existing MOU and address the China's longstanding market access
barriers in the forms of foreign film restrictions and revenue caps?
Answer. The United States will continue pressing China to fulfill
its obligations relating to the importation and distribution of
theatrical films, as set forth in the 2012 memorandum of understanding.
As you have noted, among other things, that memorandum of understanding
calls for China to provide further meaningful compensation to the
United States in terms of the number of films to be imported each year
and the share of gross box office receipts from such films retained by
U.S. enterprises, but China has not yet followed through on those
important obligations. Our view is that China needs to keep the
promises that it has made. Currently, USTR is conducting a top-to-
bottom review of the U.S.-China trade relationship. The results of this
review will inform our thinking as to how we proceed.
Question. What is the administration doing to ensure that foreign
films and digital content are not blocked due to ``censorship''
concerns when they are in fact a barrier to market access?
Answer. China is well aware of U.S. concerns. Over the years, the
United States has repeatedly expressed concerns to China regarding the
impact of its content-
related policies on market access. For example, regarding the online
provision of content, the United States has raised concerns regarding
China's requirement that foreign companies license their content to
Chinese distribution platforms. The United States also has raised
concerns regarding China's other burdensome restrictions on content,
which are implemented through exhaustive content review requirements
that are based on vague and otherwise non-transparent criteria.
Currently, USTR is conducting a top-to-bottom review of the U.S.-China
trade relationship. The results of this review will inform our thinking
as to how we proceed.
Question. While I understand that USTR may still be reviewing
China's compliance with the Phase One agreement, there are a number of
third-party indicators that show China is still behind in meeting the
requirements of the deal.
IP licensing of services purchases are a major component of these
purchasing requirements, correct? What can the U.S. do to see to it
that China meets these commitments in the Phase One deal, particularly
in addressing the IP licensing of services purchasing requirements?
Answer. Under the Phase One agreement, China's purchase commitments
cover calendar years 2020 and 2021 and fall into four broad categories
and 23 sub-
categories of U.S. goods and services. ``Charges for use of
intellectual property'' is one of the services sub-categories. During
meetings held under the Phase One agreement to review China's
implementation progress, the U.S. side has repeatedly pressed China to
increase the pace of its purchases of U.S. goods and services. China's
purchases shortfall in 2020 is certainly in our sights. China's
purchase 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, and we need to ensure that its promises are
worth the paper that they are written on. We will continue to make use
of and push the tools that we have for the benefit of all U.S.
stakeholders, including service suppliers.
Question. While innovative technologies have offered a variety of
new goods and services that benefit consumers and businesses, it also
has proliferated access to copyright infringed content as well. For
example, a 2019 study estimated that global online piracy drains at
least $29.2 billion annually from the U.S. economy and that 80 percent
of copyright piracy occurs via streaming technologies. In addition to
the significant economic harm posed by these technologies, there are
significant malware and fraud threats posed to U.S. consumers by
streaming piracy websites identified by the Federal Trade Commission
and Department of Homeland Security. How do these evolving threats to
US-based copyrights and intellectual property in general impact the
United States' economic and strategic competitiveness? What steps does
USTR plan to take to effectively account for these threats?
Answer. Fostering innovation and creativity is essential to U.S.
economic growth, competitiveness, and the estimated 45 million American
jobs that directly or indirectly rely on intellectual property (IP)-
intensive industries. IP infringement undermines U.S. competitive
advantages in innovation and creativity, to the detriment of American
businesses and workers. We will take appropriate actions necessary to
combat unfair trade practices and to ensure that trading partners
follow through with their international commitments
Question. The UK and the EU continue to impose a damaging 25-
percent tariff on American whiskey. This tariff was imposed in June
2018 in response to U.S. tariffs on steel and aluminum, and will double
to 50 percent on June 1st. In March, the administration reached
agreements with the EU and UK to suspend tariffs for four months in
connection to the WTO large civil aircraft dispute, including tariffs
on U.S. rum, brandy, vodka and certain UK and EU spirits and wines.
Absent urgent action to fully suspend these tariffs, American whiskey
will remain at a serious competitive disadvantage in our two most
important export markets.
Will you commit to ensuring these damaging tariffs are eliminated,
and what is the administration's plan to secure the immediate
suspension of UK and EU tariffs on American whiskey and agreements that
result in the permanent removal of all tariffs on U.S., EU, and UK
distilled spirits and wine?
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, the
administration is also consulting closely with domestic stakeholders
and partners around the world that share similar national security
interests. We seek to address market distorting measures that pose a
serious threat to the 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, and we will be engaging
intensively with the EU in the coming weeks. The EU announced its
intention to temporarily suspend the planned increase in retaliatory
duties, including duties on American whiskey. We believe the EU's
duties are inconsistent with WTO rules and we are challenging them
before the WTO. 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.
For additional questions on the state of section 232 tariffs on
steel and aluminum, I would refer you to the Department of Commerce,
which has the statutory lead on section 232.
Question. Korea is an important U.S. ally in the Indo-Pacific, and
the upcoming summit between President Biden and President Moon will be
an important opportunity to strengthen this critical bilateral
relationship and partnership, particularly in strategic industries. For
example, while American cloud service providers offer the most secure
and technologically advanced storage and computing solutions on the
market today, and are certified to the highest international security
and privacy standards, Korea has imposed a unilateral security
certification scheme that USTR recognized in the 2021 National Trade
Estimate as ``a key barrier for U.S. cloud service providers (CSPs) in
the Korean public sector market.'' These same barriers are spreading to
other sectors of Korea's economy, further blocking access to Korea's
cloud market for U.S. cloud providers and undermining our bilateral and
regional security goals.
Given the strategic nature of the cloud services industry to the
U.S. economy and our security interests in the Indo-Pacific, will you
commit to working with the Government of Korea to remove these
discriminatory requirements, adopt international security standards,
and allow American cloud providers to compete in the public sector
cloud market?
Answer. We are actively engaged in working with Korea, both
bilaterally and in relevant WTO committees, to further our bilateral
and regional security and economic goals.
Question. Some are concerned about actions by Mexico on data
localization issues under USMCA, such as the recent regulation that
requires financial technology companies to localize data, making it
more complex and expensive for them to operate in Mexico, and
disadvantaging U.S. companies in the process. Data localization is also
a worrisome trend emerging in Latin America, as Ecuador and Uruguay
also have data localization blockers that are impeding US services
exporters, such as cloud service providers.
Are you committed to addressing these data localization blockers in
Mexico and other countries, and do you have a plan for implementation
of USMCA's digital chapter commitments in particular?
Answer. USTR is committed to ensuring that Mexico fulfills its
commitments under the USMCA and that barriers to digital trade are
effectively addressed. We are in touch with Mexico regarding our
concerns relating to Mexico's recently finalized requirements on use of
cloud services by electronic payment fund institutions.
USTR will continue to engage with countries in Latin America and
other regions across the world that adopt or consider any such measures
that impede cross-border data flows or impose data localization
requirements.
Question. May is National Beef Month. For many Americans, we will
celebrate National Beef Month by enjoying ribeyes, filets, and
hamburgers with our families and friends. But we are not the only
consumers celebrating U.S. beef. In fact, there has been a tremendous
growth in demand for U.S. beef among many of our trade partners in
Asia, where cuts like short plate, tongue, short ribs, and offal are in
strong demand. Earlier this year, Korea surpassed Japan to become our
number one export market. While sales in Japan remain strong, we have
seen a 1,500-percent increase in U.S. beef sales in China. These
remarkable developments are a combination of strong consumer demand
coupled with strong trade policy that opened these markets for U.S.
beef. Our trade agreement with Korea removed a 40-percent tariff, our
agreement with Japan removed a 38.5-percent tariff, and the Phase One
agreement with China removed numerous non-tariff barriers that acted as
a ban on U.S. beef. Trade policy rooted in market-based, science-based,
and rules-based principles has opened doors for U.S. cattle producers.
What does USTR need from Congress to ensure we will successfully
implement this winning formula for U.S. cattle producers and our
growing international consumer base?
Answer. I appreciate your offer of support as we continue
advocating on behalf of U.S. beef producers by holding trading partners
accountable to their international commitments and bilateral
obligations under our trade agreements. There is a demand for high
quality and nutritious beef products from the United States, and USTR
will continue its work to ensure that U.S. beef exporters are able to
supply this growing demand by addressing unjustified non-tariff
barriers to trade and encouraging tariff liberalization wherever
possible.
Question. The United States has a strong history of defending and
advancing science-based trade. The U.S. cattle industry has some of the
most efficient and sustainable production practices in the world, with
some of the healthiest cattle and safest beef, because we incorporate
science at every level of production. We use well-established, FDA-
approved technologies like hormones and beta agonists to raise cattle
efficiently and use fewer resources to produce more beef. We use low-
stress animal handling techniques taught in our Beef Quality Assurance
Program. As a result of these efficient production practices, the
United States produces 18 percent of the world's beef with only 6
percent of the world's cattle. Unfortunately, the European Union and
others apply protectionist measures not rooted in science, with the
purpose of restricting U.S. beef exports and to discourage developing
countries from adopting our safe and sustainable production practices.
Over the next year, the United States will be involved in different
global forums to discuss economic recovery efforts, strengthening
global supply chains, and address food security.
If we want to feed a growing global population with safe,
nutritious food, we must embrace technology and science-based standards
in food production. Will USTR continue to expand access for U.S. cattle
producers by prioritizing and enforcing science-based standards in our
trade agreements?
Answer. As you noted, the United States has a long history of
defending and advancing science-based trade through our active
engagement in global forums. USTR will continue to advocate for access
to safe, innovative tools, including those used by U.S. cattle
producers, that are essential to improve efficiency and support
sustainable agricultural production to address the challenges facing
agriculture worldwide.
Question. Forced technology transfer and intellectual property
theft in China have long concerned U.S. trade and national security
officials and culminated in WTO disputes, punitive tariffs, and other
actions. When it comes to COVID vaccines developed using U.S. taxpayer
dollars, it is particularly concerning that the administration would
waive our previously agreed to commitments under the WTO Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Does not the support for the WTO waiver amount to a giveaway of
American intellectual property and a voluntary technology transfer of
America's mRNA technology to China and the rest of the world?
Answer. The administration believes strongly in intellectual
property (IP) protections and the importance of safeguarding American
innovation from illicit acquisition. The decision to support a waiver
of IP protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We are committed to working with the
World Trade Organization members and will be clear-eyed about potential
risks as we enter text-based negotiations. Support for a waiver of
intellectual property rules for the WTO waiver does not amount to a
giveaway of American intellectual property, nor does it represent
voluntary technology transfer.
Question. As you prepare to meet with your counterparts from China
for a review of the Phase One agreement and progress to date, there is
support to focus on the importance of the purchase commitments made.
Additionally, a close review of progress to date with an objective of
China fulfilling its commitments under Phase One as we are nearing the
half way point should be considered.
What are your perspectives on the current status of the agreement
and how to facilitate fulfillment of the terms?
Answer. China's purchases shortfall is certainly in our sights.
China's purchase 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, and we need to ensure that its
promises are worth the paper that they are written on. We will continue
to make use of and push the tools that we have for the benefit of U.S.
workers, farmers, ranchers, manufacturers, service suppliers, and small
businesses.
Question. One of the challenges continuing to face many of our
agricultural exporters and shippers is port congestion and shortage of
shipping containers available for agricultural products being shipped
from the U.S. to Asia and other destinations. These issues are causing
increased shipping costs, order delays and penalties that can reduce
the value/price paid to farmers, and potentially harm our
competitiveness in export markets. These shipping concerns need to be
addressed aggressively across the administration and constituents urge
you to coordinate with your colleagues at USDA, Federal Maritime
Commission, and other agencies to ensure all steps are being taken to
resolve these challenges.
What thoughts do you have on how the administration can work to
address these concerns and what is currently being done?
Answer. I understand that recent port congestion issues are one of
the consequences of the economic disruption created by the COVID-19
pandemic and have put even more pressure on global supply chains. I am
committed to working with other agencies as well as allies to address
supply chain challenges. As part of the supply chain initiative
established by President Biden in Executive Order 14017, ``America's
Supply Chains,'' an internal task force spanning more than a dozen
Federal Departments and Agencies is closely examining the supply chain
vulnerabilities to recommend actions that increase supply chain
resilience in critical industrial base sectors that underpin America's
economic and national security, including the transportation industrial
base and the role of transportation systems in supporting existing
supply chains.
Question. As you know, during your nomination process a number of
Senators, including me, raised their concerns about the negative impact
of the section 301 tariffs that the last administration re-imposed on
January 1, 2021. Many Senators urged you and the President to take
action on these tariffs in advance of completing the new
administration's critically important review of China policy.
It is now a few days short of 2 months since your confirmation, and
while the administration's review is underway, these companies and
their consumers have already paid billions in new tariffs in 2021 which
often are undercutting their ability to compete globally, and in some
cases even advantaging their Chinese competitors. Additionally, many of
these companies have invested significant time and funds to move their
manufacturing out of China, but have been stalled in those efforts by
the more than year-long international travel bans.
Can you share where the administration is today on a decision to
either open a new exclusion process or extend the exclusions for some
defined period of time, perhaps through the end of the year?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. You have stated that the Biden administration will ensure
that our trading partners fulfill their commitments under existing
agreements. Since entry into force of the USMCA, the government of
Mexico has announced and enacted policies that threaten our access to
the Mexican market. This is particularly true in energy where
government policy is discriminating against U.S. energy companies and
instead favoring state-owned enterprises. These discriminatory
provisions have been approved and signed into law in Mexico in recent
months.
Many in America's energy industry are wondering at what point the
United States will begin enforcing the agreement. Are you prepared to
present a case under the dispute settlement provisions of the USMCA?
Answer. Mexico's energy policies are undermining existing
investments and directly implicate several of Mexico's USMCA
obligations. I made these points clearly to the Mexican government
during the inaugural meeting of the USMCA Free Trade Commission on May
18th. USTR continues to analyze Mexico's energy measures, including
recently passed legislation. I will use all dispute settlement tools to
fully enforce the USMCA. I am also aware that U.S. companies are
considering potential remedies under the agreement.
Question. You have held up the USMCA as a model for future trade
agreements. For that reason, one of my overarching concerns is that a
lack of enforcement of the agreement could put the credibility of the
USMCA at risk.
Will you take actions in the short term if the Free Trade
Commission meeting this month does not result in concrete steps by
Mexico to address these apparent violations of the agreement?
Answer. Full implementation of the USMCA is a top priority for the
Biden-Harris administration. Last month, we initiated the first dispute
settlement panel under the USMCA to review dairy TRQ allocation
measures adopted by Canada. We also utilized the USMCA's rapid response
mechanism last month to request that Mexico review whether workers are
experiencing a denial of their rights to free association and
collective bargaining. We continue to analyze other issues we are
tracking with Mexico, and will to use all dispute settlement tools to
fully enforce the USMCA.
Question. The United States has long used efforts to negotiate--and
fully enforce--next-generation free trade agreements to strengthen our
economy and our workforce. America's free trade agreement partners buy
nearly half of all U.S.-
manufactured exports--highlighting the importance of pursuing,
utilizing, and enforcing a robust and revitalized rules-based
international trading system that enhances the role of free market
forces, promotes respect for the rule of law, and propels manufacturing
innovation in the United States and globally.
We've seen lots of discussion about enforcing these agreements and
look forward to work with you to ensure comprehensive enforcement of
key commitments related to critical areas like labor, environment,
market access and innovation. But we also must look at negotiating new
agreements: we cannot afford to fall behind other trading partners like
the EU and China that are continuing to lock in market access for our
competitors through agreements.
How will you approach new trade agreements to combat unfair
barriers and practices around the world?
Answer. The administration is in the process of reviewing the
objectives of the UK and Kenya trade agreement negotiations, which were
launched under the prior administration. In these reviews, and in
thinking about potential future engagements, the administration wants
to ensure that new trade agreements meet the objectives of the Biden-
Harris administration for a worker-centric trade policy.
Question. Recent tech regulations out of Europe speak to a broader
need for the U.S. to engage with like- minded democracies on a wide
range of tech issues. Legislation like the Digital Markets Act (DMA),
if implemented, would likely discriminatorily target U.S. companies,
while avoiding any regulation of European companies.
Such efforts relate to what certain European leaders refer to as
``digital sovereignty,'' which means building European champions to
replace U.S. companies. While competition is desired, it must be fair.
Using discriminatory regulations is clearly not.
Is resolving such discriminatory practices against U.S. companies a
priority to USTR and if so, how is USTR working with the EU to ensure
actions are nondiscriminatory?
Answer. I am aware of the concerns that U.S. companies have raised
about digital services taxes (DSTs), other European Commission
regulatory initiatives, such as the Digital Markets Act (DMA), and the
continued free flow of data. I will consider the full range of trade
tools available to me to address discrimination against U.S. workers
and U.S. companies.
Question. Numerous companies around the country are collectively
owed millions of dollars in refunds by U.S. Customs and Border
Protection (CBP), which have gone unpaid due to the way the previous
administration administered the section 301 China tariff exclusion
process. In short, when exclusions from China 301 tariffs were granted,
they were applied retroactively to when the China tariffs were
initially put in place, which should have resulted in a refund of China
tariffs already paid. However, because it took so long to approve many
of the 301 exclusions, many companies are unable to recoup money that
is otherwise owed to them.
If a company imported a product that qualified for an exclusion,
they should be able to take advantage of that exclusion, regardless of
when the exclusion was granted. As the current United States Trade
Representative, will you commit to working with CBP and this committee
to ensure these companies receive all of the money that is owed to
them?
Answer. USTR has worked closely with Customs and Border Protection
on all aspects of the implementation of the China 301 tariffs, and will
continue to do so.
Question. Two critical trade preference programs--the Generalized
System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB)--
lapsed at the end of 2020 imposing a tax increase on American workers,
American consumers, and American businesses at a time when they can
least afford it. Both the GSP and MTB programs have been supported for
decades by overwhelming bipartisan majorities. The COVID-19 pandemic
has caused great uncertainty for American companies and their U.S.
workers. This is not the time to impose new costs on U.S. supply
chains, particularly on American job creators who are still recovering
from the impacts of the COVID-19 pandemic.
Can you confirm the administration's support for retroactive
renewal of GSP and MTB in short order?
Answer. I look forward to working with you and other members of
this committee to ensure reauthorization of these programs is
consistent with the President's
worker-centered trade policy.
Question. Some are concerned about the wave of regulations in
Mexico targeting the packaged food and beverage industry. As you may be
familiar, the restrictions include sales bans (already in effect in two
Mexican states, with proposals in 23 others and at the Federal level),
as well as excessive packaging and marketing rules which infringe on IP
rights (trademarks and patents) and stifle innovation. These measures
lack scientific justification and provide incomplete and misleading
information to consumers.
What is USTR doing to ensure that Mexico lives up to its
international trade commitments, including USMCA?
Answer. On the subject of Mexico's prepackaged foods front-of-
package labeling, Mexico exempted food service products, raw materials,
and unfinished products from its labeling requirements, and in April
2021, Mexico notified an inter-institutional agreement allowing
continued use of stickers on imported products to comply with its
front-of-package labeling requirements indefinitely.
We continue to closely monitor and raise concerns with any State or
Federal level bans that would impact foods that are required to carry
front-of-package warning symbols.
Question. There has been a lot of focus on moving supply chains out
of China. The Generalized System of Preferences (GSP), which excludes
China but eliminates U.S. tariffs on developing countries that could be
viable sourcing alternatives, seems like a natural fit to encourage
such sourcing shifts. In fact, expanding GSP to cover travel goods in
2016/2017 has led to a rapid relocation of supply chains for backpacks,
luggage, and other travel goods from China to GSP countries in
Southeast Asia in recent years.
How can programs such as GSP fit into the administration's broader
China strategy?
Are there aspects of the current GSP program that you believe limit
its effectiveness for companies seeking sourcing alternatives to China?
As Congress considers GSP renewal legislation, what changes could
we make to increase its effectiveness in this regard?
Answer. As the 2021 President's Trade Agenda Report notes, one of
the Biden-Harris administration's core international and trade policy
goals is to strengthen relationships with America's allies and friends
to tackle pressing global challenges, including the China policy
challenges we face.
As conceived by Congress in 1974, GSP is a development program,
intended to improve the conditions of people in those beneficiary
countries. However, GSP can also be an important tool that helps build
relationships with many low- and middle-income countries, through
support for their development and economic diversification. Economic
diversification among beneficiaries can also promote economic
diversification away from countries such as China.
I look forward to working with you and other members of this
committee to ensure that GSP renewal is effective in tackling our China
policy challenges.
Question. What are your thoughts on incentives, through GSP or
otherwise, to move supply chains away from China and to the Western
Hemisphere, given the increased cooperation between the EU and China
for example?
Answer. President Biden's executive order on America's supply
chains sets out to establish resilient, diverse, and secure supply
chains to ensure our economic prosperity and national security. The
2021 President's Trade Agenda Report also notes one of the Biden-Harris
administration's core international and trade policy goals is to
strengthen relationships with America's allies and friends to tackle
pressing global challenges, including the China policy challenges we
face. I welcome the opportunity to work with Congress on how USTR can
achieve these two objectives.
Question. What are your thoughts on creating specific incentives,
in contrast to the current tariffs, for companies currently operating
in China but looking to diversify their supply chains away from the
country?
Answer. As set out in the President's executive order on America's
supply chain, USTR is actively participating in the administration's
supply chain review, including by considering reforms to international
trade rules and agreements in order to support supply chain resilience,
security, diversity, and strength. I welcome the opportunity to work
with Congress on these goals as well.
Question. June 5th will mark 2 years since India's eligibility
under the Generalized System of Preferences (GSP) program was
terminated. Since then, American companies have paid as much as $600
million in new tariffs, yet none of the issues raised when the review
was launched 3 years ago have been resolved. I view cooperation with
India not just from an economic benefit but as a geo-strategic way to
counter Chinese influence.
What are your plans to engage on a trade agreement of any type with
India which has never successfully negotiated?
Answer. India is an important, but challenging market for US
businesses. In my initial discussions with India's Minister of Commerce
and Industry Goyal, we have agreed to revitalize the U.S.-India Trade
Policy Forum to resolve outstanding trade concerns before exploring
additional prospects for expanding the bilateral trade relationship.
Question. It's good that we are using the tools of the USMCA. We
also put a lot of work into the state-to-state mechanism in Chapter 31.
It's important to show that mechanism works too. Mexico has proposed or
enacted many domestic trade-
affecting measures inconsistent with its USMCA obligations and failed
to carry out other obligations.
Which commercial USMCA implementation concerns are ripe for
consultations, the first step in the process?
Answer. We are tracking issues across several sectors with Mexico,
including in the agricultural and energy sectors. We continue to
analyze these issues, and will use all dispute settlement tools to
fully enforce the USMCA.
Question. U.S. companies are reporting a long and growing list of
USMCA implementation challenges in Mexico. Some have catalogued
concerns across 13 chapters and annexes, covering agriculture, national
treatment, government procurement, biopharmaceuticals, medical
equipment, financial services, telecommunications and broadcasting,
Customs, and more.
Can you discuss how enforcement of USMCA's commercial provisions is
critical to the President's worker-centric trade agenda and
strengthening our industrial and innovation base?
Answer. We are tracking issues across several sectors with Mexico,
and I have been in touch with several stakeholders directly about their
concerns. The President's worker-centric trade agenda is based on
ensuring that America's workers don't face unfair competition from
competitors beyond our shores--and especially from our closest trading
partners like Mexico. Ensuring that Mexico lives up to its obligations
in the USMCA is critical to avoiding a race to the bottom, and I will
use all dispute settlement tools to fully enforce the agreement.
Question. A new bill in the Mexican Senate would, if passed, force
a 10-percent local content quota for video streaming services. This
would violate USMCA commitments that prohibit performance requirements
and require Mexico to accord non-
discriminatory treatment. It would unfairly restrict U.S. services
exports that support tens of thousands of U.S. jobs.
How will USTR act to prevent this initiative from coming into force
and protect U.S. audiovisual exports to Mexico?
Answer. Since the first version of this bill appeared in March
2020, USTR has coordinated closely with the U.S. Embassy in Mexico City
and our counterparts in the Ministry of Economy to ensure that the
USMCA implications of this bill are widely understood. USTR will
continue with these efforts.
Question. A common stated goal in U.S. trade policy is the
promotion and expansion of U.S.-based manufacturing, employment, and
exports. However, apart from trade remedies, there are notable examples
of tariff policies in trade agreements and adopted by the United States
and other countries with whom the United States has negotiated a free-
trade agreement that undermine those broader trade-policy goals by
undercutting the cost competitiveness of U.S. based manufacturing in
our domestic and export markets.
Would the Office of the U.S. Trade Representative support and be
willing to request that the U.S. International Trade Commission (ITC)
conduct a study of this problem and develop recommendations to address
it, including how existing programs, especially the U.S. Foreign-Trade
Zones Program, that are designed to advance broader trade-policy goals,
could be used most effectively?
Specifically, would you be willing to consider reviewing the USMCA
restriction on goods produced in FTZs?
Answer. This issue was considered by Congress as part of the
implementation of USMCA. I would be happy to discuss your concerns
about this issue.
Question. The EU has made it clear that they seek ``tech
sovereignty'' and have set forth an ambitious agenda that proposes a
range of regulatory efforts that at times clearly targets American
firms.
Are you closely watching these worrisome developments and how are
you engaging Europe to ensure American companies are treated fairly in
its market?
Answer. I am aware of the concerns that U.S. companies have raised
about digital services taxes (DSTs), other European Commission
regulatory initiatives, such as the Digital Markets Act (DMA), and the
continued free flow of data. I will consider the full range of trade
tools available to me to address discrimination against U.S. workers
and U.S. companies.
______
Questions Submitted by Hon. Richard Burr
Question. The partnerships formed to develop and manufacture the
COVID-19 vaccines have been one of the biggest scientific success
stories in generations. As part of the global response to COVID-19,
over 275 partnerships have been created to further the collaborative
efforts to scale up vaccine manufacturing for global health security. I
am gravely concerned by the Biden administration's decision to support
waiving intellectual property protections for COVID-19 vaccines under
the WTO framework. Intellectual property rights are not a credible
barrier to increasing vaccine supply to countries in need. This
counterproductive approach will jeopardize ongoing efforts to ramp up
vaccine production and undermine our ability to respond to this and the
next pandemic.
On April 23rd, international vaccine innovators and manufacturers
raised concerns regarding existing supply challenges impacting COVID-19
vaccine production.
As part of the deliberation regarding this decision to undercut
innovators, what steps has the administration taken to address the
identified supply challenges to help increase vaccine production and
distribution immediately, such as working to help address export
controls?
Answer. Starting in mid-April, USTR began consultations with
interested parties: labor organizations, civil society, public health
advocates, public health experts both inside and outside of the
government, and also vaccine manufacturers. USTR, along with the rest
of the administration, will continue to ramp up efforts to work with
the private sector and other partners to expand vaccine manufacturing
and distribution around the world.
Question. We are not going to get this pandemic under control if we
do not work together to address the global vaccine needs. According to
the WHO, there have been more than 2.3 million new cases of COVID-19
reported in India within the last 7 days.
What specific actions has the administration taken to help get
COVID-19 vaccines to other countries in need, such as India?
Answer. The top priority of the United States is saving lives and
ending the pandemic in the United States and around the world. This
includes investing in the COVAX Facility, sharing our surplus vaccine
doses, and working with our international partners, such as the Quad
Vaccine Partnership, to surge production and delivery, including
through efforts to achieve greater regional and local manufacturing
capacity, in recognition of the importance of widespread vaccination
against COVID-19 to combat the pandemic and hasten economic recovery.
In particular, the United States and India have closely worked together
to respond to the COVID-19 pandemic. U.S. COVID-19 assistance has
reached more than 9.7 million Indians across more than 20 States and
union territories, providing life-saving treatments, disseminating
public health messages to local communities, strengthening case-finding
and surveillance, and mobilizing innovative financing mechanisms to
bolster emergency preparedness.
Question. I have significant concerns with how Mexico has
implemented USMCA. I am tracking recent actions by Mexico that violate,
or threaten to violate, commitments in multiple chapters and annexes,
covering agriculture, national treatment, government procurement,
biopharmaceuticals, medical equipment, financial services,
telecommunications and broadcasting, customs and more. The first Free
Trade Commission meeting is next week.
What actions will the United States take to get Mexico to abide by
its commercial USMCA commitments?
Answer. We are tracking issues across several sectors with Mexico,
including in the agricultural and energy sectors. We continue to
analyze these issues, and will use all dispute settlement tools to
fully enforce the USMCA.
Question. The 2021 Trade Policy Agenda states that ``Opening
markets and reducing trade barriers are fundamental to any trade
agenda.'' In addition to being a strong ally, the United Kingdom is one
of the top export markets for U.S. goods and services, and U.S.
businesses and workers stand to benefit tremendously from an agreement
to further lower tariffs and streamline regulations. You previously
noted, in your response to my question for the record, that you would
review the status of these negotiations.
Can you speak about your review and provide an update on your
plans?
Answer. The President recently met Prime Minister Johnson and
committed to deepening and strengthening our vital economic and trading
partnership. As a first step, we agreed to move past the 16-year WTO
dispute regarding aircraft subsidies. We have agreed to suspend tariffs
related to the dispute for 5 years, while retaining flexibility for the
United States to reapply tariffs if we're no longer competing on a
level playing field. We and the UK have also adopted clear statements
on acceptable support for large civil aircraft producers and a
cooperative process to address support between the parties and overcome
longstanding differences. Second, the President and Prime Minister
agreed to work closely to identify and pursue opportunities to deepen
our already extensive trade relationship. As part of the Biden-
Harris administration's focus on the Build Back Better agenda and
supporting a worker-centric trade policy, I am continuing my review of
the objectives of the negotiations with the United Kingdom that were
begun under the prior administration.
Question. The U.S.-China Phase One agreement is important to U.S.
farmers and ranchers for the purchase goals and for the commitments on
standards.
Can you provide an update on their fulfillment of the agreement,
particularly with regards to agriculture purchases, and how is USTR
working to ensure China fulfills its obligations under the agreement?
How is USTR working to expand the opportunities in China for U.S.
farmers and ranchers for the next year and beyond?
Answer. I agree on the importance of holding China fully
accountable for the numerous agriculture commitments that it made in
the Phase One agreement, including the purchase commitments. To date,
while China has made progress in implementing many of the agriculture
commitments under the Agreement, more work needs to be done. Especially
with regard to China's commitments to purchase agricultural
commodities, China's efforts so far have fallen short. Through the
extensive consultation processes established by the Phase One
agreement, USTR regularly engages China on all of these commitments to
discuss China's implementation progress and our concerns as they arise.
Going forward, we will continue to make use of the Phase One agreement
and other tools at our disposal in order to expand opportunities in
China for U.S. farmers and ranchers.
______
Questions Submitted by Hon. Rob Portman
Question. At the hearing you indicated that there is need for new,
21st-century trade tools to respond to emerging non-market practices by
countries, such as China.
Do you agree that modifications to the anti-dumping and
countervailing duty laws should be included within the scope of
conversations about the development of new tools to respond to such
non-market practices?
Answer. As you underline, at the hearing I discussed the need for
trade tools that address the challenges to our values and interests
today and anticipate those of tomorrow. Statutes developed several
decades ago may not fully address the economic and anticompetitive
challenges that have arisen more recently. A prime example is China's
industrial policies and role in global excess capacity. In this spirit,
as discussed at the hearing, we now have an opportunity to think
through the tensions or gaps between the existing authorities and the
particular non-market, coercive, or other unfair practices we now face.
Last time, we discussed this dynamic in the context of section 232 of
the Trade Expansion Act of 1962.
Our antidumping and countervailing duty laws may also need to be
part of this conversation. To that end, I welcome ideas from you,
Senator, and other members of Congress, on how we can enhance our tools
to remedy unfair foreign dumping and subsidization, particularly when
non-market practices are at play.
Question. In November 2020, 15 countries, including China, signed
the Regional Comprehensive Economic Partnership. If the United States
does not open new markets--such as the United Kingdom--for made in
America products, China and other countries will vie for that market
access.
How many trade agreements and entered into force among our largest
trading partners over the past 15 years? Do you intend to launch
negotiations for any comprehensive agreements in 2021?
Answer. As noted in the President's trade agenda, opening markets
and reducing trade barriers, while ensuring that U.S. businesses and
workers as a whole benefit from these efforts, will be a priority for
the Biden administration. USTR is actively engaged in discussions with
our partners in on how we can best work toward these aims.
Question. Efforts to waive the TRIPS Agreement for intellectual
property related to the COVID-19 vaccines are concerning because those
efforts may not actually expand vaccine access.
Can you provide an example of a factory in the world which would be
able to start producing safe and effective COVID-19 vaccines if IP
rights were waived at this moment? Are you considering efforts to
increase the supply of raw materials needed for COVID-19 vaccines?
Answer. The administration's aim is to get as many safe and
effective vaccines to as many people as fast as possible. As our
vaccine supply for the American people is secured, the administration
will continue to ramp up its efforts--working with the private sector
and all possible partners--to expand vaccine manufacturing and
distribution. We will also work to increase the raw materials needed to
produce those vaccines. In supporting a waiver of intellectual property
protections for COVID-19 vaccines, the administration is committed to
starting a process at the World Trade Organization to find a solution
there that is effective and practical in saving lives.
Question. Last month, you testified that the United States and the
European Union need to find ways to come together and resolve
differences in order to meet emerging challenges. One outstanding
difference is the Boeing/Airbus dispute.
Do you need a path forward to resolving that dispute?
Answer. Our negotiations with the EU and the UK have resulted in
agreement to move past the 16-year WTO dispute regarding aircraft
subsidies. We have agreed to suspend tariffs related to the dispute for
5 years, while retaining flexibility for the United States to reapply
tariffs if we're no longer competing on a level playing field. We, the
EU, and the UK have also adopted clear statements on acceptable support
for large civil aircraft producers and a cooperative process to address
support between the parties and overcome longstanding differences.
With respect to China, we pledged to:
Meaningful cooperation on countering (1) investments in the
aircraft sector by non-market actors in our economies to acquire
technology and know-how; and (2) outward investments that involve
moving production into China pursuant to non-market forces.
Identifying where joint work is needed to take parallel action
against other non-market practices.
Sharing information regarding these and other areas in the
large civil aircraft sector.
Question. I understand that Customs and Border Protection (CBP) is
applying tariffs to used vehicles imported from Canada and Mexico.
Do you agree that the intent of the U.S.-Mexico-Canada Agreement
(USMCA) is for the agreement's rules of origin to apply only to newly
manufactured vehicles?
Answer. The USMCA rules of origin do not differentiate between any
new and used products. As a result, the rules of origin for autos are
the same for both new and used vehicles. No U.S. free trade agreement
has a separate rule of origin for used vehicles.
Question. As the Republican chair of the Friends of Switzerland
Caucus, I support closer ties between the United States and
Switzerland.
Do you believe that a trade agreement between the United States and
Switzerland should be a priority? Do you agree that it would open up
new agricultural markets for American farmers, ranchers, and growers?
Answer. The Biden administration highly values our relationship
with Switzerland. We regularly engage Switzerland bilaterally to
explore ways to expand and enhance our trade ties.
As the President has made clear, however, we will not be engaging
in new trade agreements before we make the necessary investments at
home.
______
Questions Submitted by Hon. Tim Scott
Question. As you know, South Carolina is home to some of the most
dynamic research institutions and biomedical manufacturers in the
country. Robust IP protections are critical to the work they do, which
is why I fought hard against the removal of IP protections for U.S.
biologics in USCMA. It has always been clear to me that removing--or
even threatening to remove--these protections doesn't just reduce
incentives to innovate, it will deprive innovative U.S. companies of
the fruits of their research and put them at a competitive
disadvantage. Researchers and innovators in the Palmetto State provide
us with a competitive edge in the global economy. It is alarming to
think that our own government would not have their back, especially
when their value has never been more clear.
Would you agree that this trend of increasingly reduced IP
protections for U.S. biologics threatens our economic and national
security?
How does this administration plan to reverse course and shore up
protections in the future so that we may avoid losing countless jobs
and our position as the world leader in biotech innovation?
Answer. The COVID-19 pandemic has highlighted the importance of
pharmaceutical, medical device, and other health-related innovation and
revealed the relatively concentrated distribution of resulting
products. USTR continues to seek adequate and effective protection for
pharmaceutical and other health-related intellectual property (IP)
around the world to ensure robust American innovation in these critical
industries to fight not only the current, but also future pandemics.
This is a global health crisis, and the extraordinary circumstances
of the COVID-19 pandemic call for extraordinary measures. The
administration believes strongly in IP protections, but in service of
ending this pandemic, supports the waiver of IP protections for COVID-
19 vaccines.
Question. As you may know, I joined 38 other members of Congress in
the submission of a bicameral letter to you earlier this month, asking
to coordinate with you to expeditiously develop a concrete action plan
to deliver effective and enforceable relief to help our seasonal fruit
and vegetable producers compete against unfair trade practices. As you
may recall from our previous discussions, this remains a critical issue
for the producers in my State who are continually forced to compete on
an uneven playing field.
Will you commit to working with me to develop and implement new,
effective ways to help deliver long-overdue relief to our country's
seasonal producers?
Will you commit to keeping me updated as to the status of these
efforts?
Answer. I commit to working closely with you and Congress on all
trade legislation and crafting trade policy consistent with the Build
Back Better agenda that prioritizes the interests of America's workers,
including producers of seasonal and perishable produce. I am also
committed to ensuring that U.S. producers are not unfairly
disadvantaged by our trading partners' policies. I welcome input and
ideas from you, Senator, and the other members of Congress as to how
USTR can further utilize the wide range of tools that are available to
address the challenges facing U.S. producers.
Question. As you know, the continued growth of the automotive
industry is critically important to my home State. In South Carolina,
the automotive industry is responsible for nearly 80,000 jobs and is
one of the top 10 fastest-growing labor forces in the Nation. Roughly
half a million vehicles were produced in South Carolina in 2019 alone,
providing billions of dollars in employee compensation, support for
U.S. suppliers, and State and Federal revenues. With the advent of the
inaugural meeting of the USMCA Free Trade Commission, I have the
following questions for you. Do you plan to make discussing the
automotive rule of origin a priority at the Free Trade Commission
meeting, and will you commit to working with your counterparts in
Canada and Mexico to ensure timely and efficient implementation?
Will you also agree to keep me updated on the progress of these
efforts?
Answer. During the first-ever USMCA Free Trade Commission meeting,
the committee on Rules of Origin and Origin Procedures provided an
update on its work related to the implementation of the automotive
rules of origin. I will maintain close communication with Mexico and
Canada on this issue. I will continue to keep you and other members
updated as we continue our engagement with both Mexico and Canada.
Question. As you know, two critical trade preference programs, the
Generalized System of Preferences (GSP) and the Miscellaneous Tariff
Bill (MTB), lapsed at the end of 2020. This has created a significant
burden on our workers, consumers, and businesses in the midst of an on-
going pandemic and ensuing recession.
Can you confirm the administration's support for the renewal of GSP
and MTB?
Can you share what steps the administration has taken, or plans to
take, to support congressional approval?
Answer. I look forward to working with you and other members of
this committee to ensure reauthorization of these programs is
consistent with the President's
worker-centered trade policy.
Question. As you may know, I have long been concerned about China's
unfair trade practices and continue to support efforts to challenge the
inequities in our relationship with China. At the same time, we must
also recognize the reality that certain inputs for domestic
manufacturers remain unavailable outside of China at this time. It is
critical, especially now, that we take the necessary steps to mitigate
undue harm to our small businesses, domestic manufacturers, and job
creators. For this reason, I was pleased to see a tariff exclusion
process that attempted to address these realities; unfortunately, that
process expired at the end of 2020.
In light of these realities, will you commit to launching a new
China section 301 product exclusion process and when can we expect that
to occur? Can you also expand upon the administration's perspective of
this form of relief as it currently stands, and, more specifically,
what actions we can expect to see in the short term?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
______
Questions Submitted by Hon. Bill Cassidy
Question. Stakeholders in the U.S. energy sector tell me President
Lopez Obrador has recently spearheaded major amendments to laws to
change market rules in favor of Petroleos Mexicanos (Pemex) and
Comision Federal de Electricidad (CFE) and against private companies.
This comes after having already directed energy regulatory agencies to
expressly favor Pemex and CFE over private investment in all energy
production and generation. The common denominator is to hinder new
private investment in the energy sector and minimize the value of
already operating private assets. I'm told this could be in violation
of Mexico's commitments under both NAFTA and USMCA. Issues such as non-
discriminatory treatment, minimum standard of treatment and unlawful
indirect expropriation each seem to be issues. These regulatory abuses
are an affront to the fair and equitable protections clauses under
USMCA. AMLO's repeated false claims that natural gas and oil are not
covered under USMCA, with encouragement from his legislature, are
highly concerning following the energy liberalization reforms that
opened up investment partnerships for U.S. and Western investors.
Can you state for the record whether natural gas and oil are
included under USCMA and detail for the committee the options USTR has
at its disposal to ensure interests are protected?
What options does USTR have available to counter any reprisals from
Mexico if they retaliate against companies who raise these concerns
with the Mexican government?
How will USTR address systemic regulatory abuses by Mexican
agencies toward U.S. and Western investors in Mexico that seem to only
serve to advantage Pemex and CFE?
Will you raise this matter during your upcoming Free Trade
Commission meeting with Mexican leaders?
Answer. There is no doubt that the USMCA applies to Mexico's energy
sector; this is very clear in the USMCA text. Mexico's energy policies
are undermining existing investments and directly implicate several of
Mexico's USMCA obligations. I made these points clearly to the Mexican
Government during the inaugural meeting of the USMCA Free Trade
Commission on May 18th. USTR continues to analyze Mexico's energy
measures, including recently passed legislation. I will use all dispute
settlement tools to fully enforce the USMCA. I am also aware that U.S.
companies are considering potential remedies under the agreement.
Question. As of this moment, the European Union, Canada, and the
Biden administration have all expressed support for carbon border
adjustment policies specific to their countries. A paper published this
month entitled ``Trade, Firm-Delocation, and Optimal Climate Policy''
suggests that border carbon adjustments created as a part of a ``carbon
club''--consisting of countries undertaking harmonized emissions
reductions--could reduce global CO2 emissions by 81 percent.
However, if these same countries unilaterally imposed domestic border
carbon adjustments, the global carbon reduction would only be 3 percent
of the reduction achieved under the carbon club proposal.
Do you worry that domestic border carbon adjustments may actually
create a system where carbon reduction does not occur and instead
serves solely as a tariff on imports?
In a scenario where individual countries each possess their own
domestic border adjustment, do you worry about the ability for U.S.
companies to export their goods abroad?
How can we take advantage of global interest in decreasing carbon
emissions to create a global system that helps U.S. companies export
their low-carbon goods?
Answer. I agree that the United States should seize the opportunity
to support global ambitions to lower carbon emissions, and leverage
this opportunity to support U.S. companies that export technologies,
goods, and services that are low-carbon and that will support a global
shift to low-carbon economic models. I share your concern that, if not
designed appropriately, a border adjustment could undermine global
ambition to achieve net zero emissions. USTR is engaged with the USG
interagency and with key trading partners on these issues, to ensure
that U.S. companies are not disadvantaged in the global marketplace and
measures are designed to help achieve our environmental goals with the
least disruption to efficient trade.
Question. In a speech last month, however, you stated that the
trade ``system itself'' creates an incentive to lower environmental
standards.
Can you elaborate with some examples?
Answer. The United States designs, develops, and implements
mutually supportive trade and environmental policies. This includes
ensuring that our trade agreements contain strong and enforceable
environment obligations. Without such an approach, there is an
incentive for companies, and governments, to seek to maximize profits
while lowering costs, including through lower environmental standards.
Over time, U.S. trade agreements have included environment provisions
that evolved from cooperative to fully enforceable and subject to the
same dispute settlement process as other provisions in those
agreements.
Question. On March 4th and 5th, the administration announced a
suspension of tariffs on the UK and the EU in connection with the
ongoing WTO Boeing/Airbus dispute for a period of 4 months (expires
July 4th and July 11th). As you know, this suspension now allows for
all EU and UK distilled spirits, including Scotch and Irish whiskey, to
enter the U.S. duty-free, while our American-made whiskeys remain
subject to a 25-percent tariff in the EU and in the UK, possibly a 50-
percent tariff in the EU by June 1st if nothing is done.
Can you help me better understand how we plan to avoid a 50-percent
tariff on our whiskey and what we're doing to secure a level playing
field for American-made whiskey to fairly compete in our largest export
markets?
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, the
administration is also consulting closely with domestic stakeholders
and partners around the world that share similar national security
interests. We seek to address market distorting measures that pose a
serious threat to the 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, and we will be engaging
intensively with the EU in the coming weeks. The EU announced its
intention to temporarily suspend the planned increase in retaliatory
duties, including duties on American whiskey. We believe the EU's
duties are inconsistent with WTO rules and we are challenging them
before the WTO. 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.
For additional questions on the state of section 232 tariffs on
steel and aluminum, I would refer you to the Department of Commerce,
which has the statutory lead on section 232.
Question. The section 301 product exclusion process expired at the
end of last year, except for a small number of exclusions that were
extended for products needed to respond to the COVID-19 pandemic. The
product exclusion process was deeply flawed--it lacked transparency and
consistency and placed significant burdens on those wishing to apply
for exclusions. Despite its flaws, the economic benefits were important
for those who were able to secure exclusions, and the relief from these
additional taxes became even more crucial during the economic
recession. Allowing the exclusions to expire and raising taxes on
American businesses of all sizes during this particularly difficult
economic time should not have happened.
You recently received two bipartisan letters that were signed by
over 100 House members and 40 Senators calling for a reinstatement of a
fair and transparent exclusion process. Understanding that time is of
the essence, can you provide us any further update on this front?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. I have been following your commentary about the future of
the WTO and the potential for the trade body to be workable with some
revisions. One major issue on the radar of the rice producers in my
State, and growers of other commodities around the country, are the
believed WTO violations by India.
Could you look at formally filing a request for consultations and
take a serious look at filing a WTO case?
Answer. India's agricultural trade policies are a serious concern
for U.S. agricultural producers. Resolving agricultural trade barriers
and unfair competition are a priority for USTR, and I am committed to
ensuring trade partners live up to their international obligations.
______
Questions Submitted by Hon. James Lankford
Question. Why did you not consult with Congress on your decision to
support a TRIPS waiver? Does the administration plan to submit the text
of any waiver to TRIPS that it negotiates at the WTO to Congress for
approval?
Answer. In supporting a waiver of intellectual property protections
for COVID-19 vaccines, the administration is committed to pursuing a
process at the World Trade Organization (WTO) to find a solution there
that is effective and practical in saving lives. I am committed to
keeping Congress fully informed of developments in the process in the
WTO.
Question. The decision to issue a TRIPS waiver blindsided many in
the United States as well as allies like the UK, Canada, and Germany
who do not want our intellectual property going to China and other bad
actors.
Have you considered how ceding our intellectual property to China
allows them to buy influence and boosts their predatory vaccine
diplomacy, thereby undermining U.S. leadership on vaccine distribution
throughout the developing world?
Answer. The administration believes strongly in intellectual
property (IP) protections and the importance of safeguarding American
innovation from illicit acquisition. The decision to support a waiver
of IP protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We are committed to working with the
World Trade Organization members and will be clear-eyed about potential
risks as we enter text-based negotiations.
Question. The decision to issue a TRIPS waiver raised concerns
that, in the future, the administration would pursue additional TRIPS
waivers for other vaccines or biotechnologies, such as treatments for
malaria, Alzheimer's, or Parkinson's that are currently in development.
Can you commit to the American people that the administration will
not pursue a TRIPS waiver for future vaccines and biotechnologies
without seeking the approval of Congress? Have you considered how this
decision will adversely affect the financing of future vaccines due to
the lack of confidence in this administration to defend American
intellectual property protections?
Answer. COVID-19 is a global health crisis, and the extraordinary
circumstances of the COVID-19 pandemic call for extraordinary measures.
The administration believes strongly in intellectual property (IP)
protections, but in service of ending this pandemic, supports a waiver
of those protections for COVID-19 vaccines. In supporting a waiver of
IP protections for COVID-19 vaccines, the administration is committed
to pursuing a process at the World Trade Organization (WTO) to find a
solution there that is effective and practical in saving lives. I am
committed to keeping Congress fully informed of developments in the
process in the WTO.
Question. The 2021 trade agenda does not indicate a desire for new
free trade agreements or to expand market access for Americans to new
places. Instead, the primary areas of focus appear to be climate
change, supporting American labor, and racial equity.
Do you believe that expanding trade opportunities benefits U.S.
businesses and their employees? If so, why is the administration
opposed to pursuing new FTAs or not making them a priority this year?
Why is the administration not working on TPP or alternative agreements
with our Indo-Pacific partners, even bilaterally?
Answer. As noted in the President's trade agenda, opening markets
and reducing trade barriers, while ensuring that U.S. businesses and
workers as a whole benefit from these efforts, will be a priority for
the Biden administration. USTR is actively engaged in discussions with
our partners in the Indo-Pacific region on how we can best work toward
these aims.
Question. In your confirmation hearing, you indicated the 301
exclusion process was ``very high on your radar.'' However, we have not
seen any action to resume the 301 exclusion process.
What have you done since your confirmation to get your arms around
the 301 exclusion process? How close are you to resuming that process
and reinstating expired exclusions? Will you commit to having a robust
and fair exclusion application process in place for American importers
for the duration that the 301 tariffs are in place?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. On February 24, 2021, President Biden issued an executive
order beginning a whole-of-government review of supply chain
vulnerabilities, including on critical minerals. I believe that in
order to reduce reliance on China, we must use our Indo-Pacific
partnerships to pursue a critical minerals agreement.
What have you recommended as part of that supply chain review on
critical minerals specifically? Have you been in touch with other
countries about working together to reduce reliance on China?
Specifically, have you pursued conversations with the Quad countries on
an agreement to jointly develop rare earth minerals? What is your plan
to leverage our alliances, and the Quad in particular, to counter
China's dominance in this area?
Answer. Executive Order 14017, the first report on supply chains,
``Building Resilient Supply Chains, Revitalizing American
Manufacturing, and Fostering Broad-Based Growth,'' was released on June
8th, and one of its overall recommendations to the President is that
the United States work with allies and partners to decrease
vulnerabilities in global supply chains. Specifically, the report
recommends expanding multilateral diplomatic engagement on supply chain
vulnerabilities, particularly through groupings of like-minded allies
such as the Quad and G7, to collectively assess vulnerabilities and
develop collective approaches to supply chain resilience.
Question. President Trump initiated FTA negotiations with the UK,
our closest ally and a top trading partner in Europe. The
administration held five rounds of talks in 2020 and made considerable
progress towards a comprehensive FTA. However, the trade agenda for
2021 does not outline any subsequent steps that the Biden
administration plans to take to complete the U.S.-UK FTA.
Why is the administration not prioritizing completing this FTA when
it is so close to completion? Can we expect progress in the area in the
coming months?
Answer. The President recently met Prime Minister Johnson and
committed to deepening and strengthening our vital economic and trading
partnership. As a first step, we agreed to move past the 16-year WTO
dispute regarding aircraft subsidies. We have agreed to suspend tariffs
related to the dispute for 5 years, while retaining flexibility for the
United States to reapply tariffs if we're no longer competing on a
level playing field. We and the UK have also adopted clear statements
on acceptable support for large civil aircraft producers and a
cooperative process to address support between the parties and overcome
longstanding differences. Second, the President and Prime Minister
agreed to work closely to identify and pursue opportunities to deepen
our already extensive trade relationship. As part of the Biden-
Harris administration's focus on the Build Back Better agenda and
supporting a worker-centric trade policy, I am continuing my review of
the objectives of the negotiations with the United Kingdom that were
begun under the prior administration.
Question. The price of lumber has drastically increased and is
affecting housing affordability across the United States.
Is your team working on a new softwood lumber agreement with
Canada? Have you discussed within the administration how to lower the 9
percent Canadian lumber tariff?
Answer. I am closely watching the historic movement in lumber
prices. 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. New Zealand has expressed a desire to improve trade ties
with the United States. Since our countries are close security and
intelligence partners, I support taking steps to bolster our economic
ties and work together in countering China.
Is the administration considering an FTA or smaller, sector-
specific agreements with New Zealand? Do you see improving trade ties
with New Zealand as a priority?
Answer. The Biden administration highly values our economic and
security relationship with New Zealand. We regularly engage New Zealand
bilaterally, including through our Trade and Investment Framework
Agreements (TIFA), to explore ways to expand and enhance our trade
ties.
As the President has made clear, however, we will not be engaging
in new trade agreements before we make the necessary investments at
home.
Question. Mexico continues to violate the USMCA with their state-
owned oil company, and recent laws favor Mexican state energy companies
at the expenses of private investment in the energy sector. It appears
that permits for private-sector energy projects have been blocked,
raising concerns about Mexico's commitment to the USMCA.
What is your plan to pursue correction action on these issues? How
will you stop the damage these measures are causing to U.S. energy
companies, and ensure that Mexico lives up to its commitments under the
USMCA?
Answer. Mexico's energy policies are undermining existing
investments and directly implicate several of Mexico's USMCA
obligations. I made these points clearly to the Mexican Government
during the inaugural meeting of the USMCA Free Trade Commission on May
18th. USTR continues to analyze Mexico's energy measures, including
recently passed legislation. I recommit to using all dispute settlement
tools to fully enforce the USMCA. I am also aware that U.S. companies
are considering potential remedies under the agreement.
______
Questions Submitted by Hon. Steve Daines
Question. What is the current status of Chinese implementation of
the Phase One agreement's IP provisions?
Answer. The intellectual property chapter of the Phase One
agreement addresses numerous long-standing concerns of a wide range of
U.S. stakeholders, including in the areas of trade secrets, patents,
pharmaceutical-related intellectual property, trademarks, copyrights,
and geographical indications. The United States has been closely
monitoring China's progress in implementing its commitments. In 2020,
China published a large number of draft intellectual property-related
legal and regulatory measures and finalized over a dozen measures.
Notably, China amended the patent law, the copyright law, and the
criminal law over the past year. However, additional legal changes are
needed and all steps toward reform will require effective
implementation at the local level. In addition, China's commitments
fall short of requiring the full range of fundamental changes needed to
improve the intellectual property landscape in China.
Question. What current actions is USTR taking to enforce the IP
provisions in the Phase One agreement?
Answer. The United States has been closely monitoring China's
progress in implementing its numerous commitments under the Phase One
agreement and has regularly engaged China using the extensive
consultation processes established by the agreement to discuss China's
implementation progress and concerns that we have as they arise.
Question. Is USTR currently tracking the number of instances of IP
theft or forced technology transfer since the Phase One agreement was
signed?
Answer. USTR is continuing to engage with both U.S. stakeholders
and other U.S. government agencies to track intellectual property theft
and forced technology transfer in China.
Question. Has the administration met with or received approval from
any of the U.S. companies that currently hold IP rights to the COVID-19
vaccines about the administrations WTO waiver proposal?
Answer. Starting in mid-April, USTR began consultations with
interested parties: labor organizations, civil society, public health
advocates, public health experts both inside and outside of the
government, and also vaccine manufacturers themselves. USTR will
continue to ramp up efforts to work with the private sector and other
partners to expand vaccine manufacturing and distribution around the
world.
Question. If the waiver is agreed to, what existing authorities
will the administration use to acquire and share COVID-19 vaccine IP?
Will the administration need to come to Congress for any additional
authorities in order to share vaccine IP?
Answer. In supporting a waiver of intellectual property protections
for COVID-19 vaccines, the administration is committed to pursuing a
process at the World Trade Organization (WTO) to find a solution there
that is effective and practical in saving lives. I am committed to
keeping Congress fully informed of developments in the process in the
WTO.
Question. Has the administration assessed whether increased U.S.
production and distribution to countries in need would provide more
shots in the near term than would that same country acquiring U.S. IP
and building out the necessary infrastructure to administer their own
shots?
Answer. The top priority of the United States is saving lives and
ending the pandemic in the United States and around the world. This
includes investing in the COVAX facility, sharing our surplus vaccine
doses, and working with our international partners, such as the Quad
Vaccine Partnership, to surge production and delivery, including
through efforts to achieve greater regional and local manufacturing
capacity, in recognition of the importance of widespread vaccination
against COVID-19 to combat the pandemic and hasten economic recovery.
In supporting a waiver of intellectual property protections for COVID-
19 vaccines, the administration is committed to pursuing a process at
the World Trade Organization to find a solution there that is effective
and practical in saving lives.
Question. As you know, the USTR's Chief Agricultural Negotiator is
an essential role and key to addressing market access challenges
Montana farmers and ranchers face in critical markets around the world.
A nominee for this important role has yet to be named though.
When can we expect a nominee for Chief Agricultural Negotiator to
be named?
Answer. The Chief Agriculture Negotiator is a priority position for
the Biden-
Harris administration. It is important that this position be filled by
someone who will put America's farmers and farming communities first,
and I look forward to working with Congress to confirming a nominee
soon.
Question. In your nomination hearing, you referenced that TPP was a
``sound formula'' but that it's a different world than 2015 or 2016.
What specific changes would you seek in TPP, whether provisions in
USMCA or other agreements, in order to seek to rejoin that agreement?
Answer. We are evaluating how best to ensure that provisions in our
future trade agreements be made consistent with the core principles of
the President's Trade Agenda and the administration's Build Back Better
agenda. This includes evaluating how best to craft rules of origin to
benefit parties to the agreement rather than third parties, advancing
labor and environmental priorities, safeguarding against the harmful
practices of non- market economies, and adopting other innovations
learned through our recent experiences with USMCA, other trade
negotiations, and the pandemic.
Question. Trade Promotion Authority is set to expire in just a few
months. I believe it is critical we reauthorize TPA in a prompt manner
and look forward to working with both my colleagues on this committee
and you to get it done.
Will you commit to supporting and prioritizing reauthorizing TPA
this year?
Answer. There are strong views on both sides of the Trade Promotion
Authority issue, and I look forward to working with this committee
should you decide to advance TPA legislation. Regardless, I commit to
consulting closely with members of this committee on trade policy as
long as I am USTR.
______
Questions Submitted by Hon. Todd Young
Question. American businesses have been working tirelessly to
address the domestic and global health challenges from the pandemic.
Innovators made careful and considerate decisions to ensure patient
safety first and foremost. Building more production capacity is the
logical next step, but your recent decision to pursue a waiver on
intellectual property protections for the COVID-19 vaccine undermines
the distribution pipeline and could allow access to replicates without
quality controls. We can protect patients and also support innovation--
it does not have to be one or the other. Even more alarming, right
after your statement on twitter, China's government controlled media
said, ``So--global pressure works. And I hope it does not take forever
for this to be a reality.'' A survey last month conducted by Teneo
Research further showed that 60 percent of all voters opposed sharing
sensitive biotech intellectual property with China.
After all we know of China's deliberate decisions to undermine the
strength of America's economy, should we be concerned of the
implications of the waiver, especially given China's public mockery of
the United States?
How is this waiver in the best interest of the United States?
How did the administration decide to pursue waiving these
intellectual property (IP) protections?
Was an analysis completed that identified key reasons why vaccines
were not produced at scale, and were IP protections identified as the
contributing factor to this issue?
Answer. The top priority of the United States is saving lives and
ending the pandemic in the United States and around the world. In
addition, the administration believes strongly in intellectual property
(IP) protections and the importance of safeguarding American innovation
from illicit acquisition. The decision to support a waiver of IP
protections for COVID-19 vaccines reflects the extraordinary
circumstances of this pandemic. We are committed to working with the
World Trade Organization members and will be clear-eyed about potential
risks as we enter text-based negotiations.
Question. Our economy is rapidly changing as new technologies
constantly emerge and businesses adapt to the changing landscape.
Countries, like China, that assert protectionist policies cause
barriers that hurt customers and leave American businesses at a severe
disadvantage. You affirmed this conclusion in the section 301 Special
Report that placed China on the Priority Watch List and identified key
areas of immediate concern.
The USMCA and the U.S.-Japan digital trade agreement contain
comprehensive and high standards indicative of the digital age we live
in. Enforcing cyber-theft penalties, prohibiting forced data transfer,
and removing localization requirements are some provisions that
increase integrity in digital trade.
How does the administration view the importance of strong digital
trade provisions, and how will you build on the strides made under the
USMCA and U.S.-Japan agreement?
What strategies will you employ to hold China accountable for
digital trade practices that specifically target and place barriers on
American businesses?
Answer. The administration recognizes the importance of the digital
economy to American jobs, prosperity and security, as well as U.S.
companies' unique competitive advantages in this area. For example,
every year in the last 15 years, the United States achieved a
substantial surplus for trade in ICT-enabled and potentially ICT-
enabled services, with that trade surplus exceeding $100 billion
annually in each of the last 6 years.
Trade rules must work to maintain and advance U.S. strengths in
digital trade. USTR will use a wide range of trade tools to address
discriminatory practices that hinder U.S. workers and firms, including
practices that discriminate against U.S. digital and technology
exports.
Question. President Biden and President Moon of Korea will meet
this week for a summit here in Washington. Korea is a linchpin of any
successful Indo-Pacific strategy, but we have also seen an explosion in
digital trade barriers coming out of Korea recently that have created
challenges in our bilateral trade relationship.
How are you and President Biden planning to work with your
counterparts in Seoul to rein in the protectionist measures recently
taken on data flows, cloud market access, competition, and other areas
so that we can build a stronger technological alliance going forward?
Answer. We are engaging with Korea in numerous fora, primarily
under KORUS committees, to address the challenges relating to digital
trade in the Korean market.
Question. Last week, I sent you and Secretary Raimondo a letter
with 17 bipartisan Senators expressing concern with the June 1st
scheduled increase of tariffs on distilled spirits and wine. I
understand that the European Union announced on May 17, 2021 that they
would not double the tariffs while discussions are ongoing to address
global capacity issues. As you know, adverse action on the distilled
spirits industry harms job creators and employees in Indiana and many
other States. Many of these jobs are located in rural communities in my
State, like Borden, Lawrenceburg, and New Albany. Further, boat
manufacturers employing over 14,000 Hoosiers are also subject to these
tariffs and would have been harmed by the subsequent increases. With
businesses attempting to recover from the pandemic, we should be
looking to strategies that minimize harm to industries while seeking to
hold countries accountable for adverse action that hurts American
manufacturers.
Did you receive this letter?
How will you provide certainty and relief to industries affected by
these tariffs?
Answer. I did receive your letter. 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, the
administration is also consulting closely with domestic stakeholders
and partners around the world that share similar national security
interests. We seek to address market distorting measures that pose a
serious threat to the 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 excesscapacity and the market distortions
that result from this excess capacity, and we will be engaging
intensively with the EU in the coming weeks. The EU announced its
intention to temporarily suspend the planned increase in retaliatory
duties, including duties on American whiskey. We believe the EU's
duties are inconsistent with WTO rules and we are challenging them
before the WTO. 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.
For additional questions on the state of section 232 tariffs on
steel and aluminum, I would refer you to the Department of Commerce,
which has the statutory lead on section 232.
Question. I have repeatedly heard from businesses requesting relief
and certainty in the section 301 tariff exclusion process. During this
hearing, you iterated that the administration is conducting a top-down
review of the current exclusions and subsequent process, and alluded
that American businesses and Congress could expect details before
December and likely in the summer. Can companies expect more details on
the administration's section 301 exclusion process in June, or July?
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 which provides us with important
opportunities to craft thoughtful and effective responses to China's
unfair trade practices.
Question. The United States exports over $6 billion in medical
devices to China. The Chinese volume-based procurement (VBP) tendering
system seriously threatens access to this important market and could
undermine the stability of U.S. exports and American jobs. The medical
device industry develops and produces these innovations on American
soil, and accessing the Chinese market is critical to support this
workforce.
Are you aware of the ongoing implementation of volume-based
procurement in China at both the national and provincial levels?
How will the administration plan to address this issue as part of
the broader trade agenda?
Do you believe there is an opportunity to work closely with other
medical tech-intensive countries on this critical market access issue?
Answer. USTR is closely tracking China's implementation of its
volume-based procurement approach to medical devices, both at the
national and provincial levels. As the 2021 President's Trade Agenda
Report notes, one of the Biden-Harris administration's core policy
goals is to strengthen relationships with America's allies and friends
to tackle pressing global challenges, including in the China trade
policy challenges we face. USTR remains committed to confronting
China's unfair trade practices and to promoting the success of the U.S.
medical devices sector.
______
Questions Submitted by Hon. John Barrasso
Question. The Phase One agreement negotiated by the Trump
administration was very important to American exporters. Wyoming's
farmers, ranchers, and energy producers applauded the deal. While
agriculture purchases have been positive for U.S. agriculture exports
to China, American energy exporters, services and manufacturing
industries are still waiting for China to fulfil their commitments.
What can we do today in Congress to ensure China meets its Phase
One purchase obligations with respect to energy, services, and
manufacturing? And should the U.S. proceed with a Phase Two agreement
prior to China meeting its commitments under the Phase One deal?
Answer. China's purchases shortfall is certainly in our sights. Not
only are these commitments important to the United States economically,
they are also important as commitments that China undertook of its own
free will to make, and therefore, we need to ensure that its promises
are worth the paper that they are written on. We will continue to make
use of and push the tools that we have for the benefit of U.S. workers,
farmers, ranchers, manufacturers, service suppliers, and small
businesses.
Currently, USTR is conducting a top-to-bottom review of the U.S.-
China trade relationship. The results of this review will inform our
thinking as to how we proceed with regard to the possible negotiation
of a further agreement with China.
Question. The WTO was formed to establish a trading system based on
``open, market-oriented policies'' per the 1994 Marrakesh Agreement
which established the organization. Despite modest improvements,
China's markets are not ``open.'' Their policies are not ``market-
oriented.'' China is no longer a ``developing nation'' despite its WTO
status. Market-distorting subsidies, intellectual property theft,
forced technology transfer, forced labor and industrial overcapacity in
China aren't anomalies. They are the cornerstones of China's economic
policy.
Is there any reason to believe the WTO has the necessary tools to
address the challenges the world is facing with respect to China? And
what WTO reforms are needed to make it a more effective ``cop on the
beat'' with respect to China?
Answer. 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. Our review is ongoing and we will share details of those findings
in the future.
Question. Chinese overcapacity of steel, aluminum, cement,
chemicals, and numerous other industrial inputs is part of a broader
strategy to drive down prices and put international competitors out of
business. China's rapid global expansion has been fueled by forced
technology transfers, intellectual property theft, human rights
violations and the use of forced labor. This is unacceptable and cannot
continue.
Can you elaborate on how we can work with our allies to achieve
lasting and meaningful change in how China conducts business in the
international markets? And could the EU-China investment agreement
impact our ability to work with our allies in Europe to counter China's
manipulative market practices and human rights abuses?
Answer. It is a priority of the Biden-Harris administration to work
with allies to take effective action to address the many challenges
posed by China, including its coercive and non-market practices and
human rights abuses.
For instance, we are working on strengthening our relationships
with the European Union and the United Kingdom, including through
engaging with them to resolve the ongoing Boeing/Airbus dispute, and we
are having constructive discussions with these trading partners to
address the problems of excess capacity in the steel and aluminum
sectors coming primarily from China. Further, as part of the
administration's effort to work with allies, we recently confirmed with
our partners in the G7 our shared commitment to address non-market
policies and practices and their harmful impact on our citizens and
businesses. As a result, all have agreed to cooperate to address non-
market policies and practices that create unfair competitive
conditions, hinder the development and use of innovative technologies
and undermine the proper functioning of international trade.
Question. American cattle producers raise some of the best beef in
the world. In the past, I have raised concerns with United States
Department of Agriculture (USDA) about fresh beef imports from Brazil,
which can carry foot and mouth disease.
Will you coordinate closely with USDA's Animal and Plant Health
Inspection Service and the USDA's Food Safety and Inspection Service
(FSIS) to ensure that the United States does not allow the import of
meat and meat products from countries that have livestock diseases that
could be transmitted to our domestic industry?
Answer. USTR will coordinate very closely with USDA on issues
related to the bilateral trade of fresh and frozen beef products
between the United States and Brazil, including to ensure that imports
of beef from Brazil comply with relevant U.S. sanitary and
phytosanitary measures.
Question. USTR is currently working through the notice and comment
process for section 301 tariffs in response to digital service taxes in
Austria, India, Italy, Spain, Turkey, and the UK. The Treasury
Department has indicated that this administration will pursue a global
minimum tax through the OECD even absent the repeal of these tax
regimes targeting American companies.
Given the fact the goal of these section 301 investigations is
apparently to protect U.S. interests, is the Treasury's global minimum
tax negotiating stance working in opposition to the USTR's goals?
Answer. The Biden administration is seeking to resolve the digital
taxation dispute in the context of the multilateral effort to address
base erosion and profit shifting through the OECD/G20 process.
Any multilateral agreement must include both a strong international
minimum tax and a path to resolution of the issues around Digital
Services Taxes (DSTs). A higher global corporate minimum tax is central
to reducing tax competition globally and removing incentives to move
profits to low tax jurisdictions. The OECD estimates that governments
lose $240 billion annually due to tax avoidance by multinational
companies.
The standstill and rollback of existing unilateral tax measures,
including discriminatory digital services taxes, is an essential part
of the OECD's proposed framework. A successful conclusion of these
negotiations is thus critical to the resolution of the issues raised in
the section 301 investigations.
Question. Canada and Mexico are our largest energy export partners,
and the United States-Mexico-Canada Agreement (USMCA) recognized that
fact and encouraged trade flows and investments in energy between the
three countries. Over the past year, the Mexican government has heavily
tilted market rules to favor state-run enterprises over private
companies. These actions against American companies run contrary to
several commitments Mexico made in signing the USMCA. What actions have
you taken, or do you plan on taking, to ensure that Mexico lives up to
its commitment under the USMCA?
Answer. Mexico's energy policies are undermining existing
investments and directly implicate several of Mexico's USMCA
obligations. I made these points clearly to the Mexican government
during the inaugural meeting of the USMCA Free Trade Commission on May
18th. USTR continues to analyze Mexico's energy measures, including
recently passed legislation. I will use all dispute settlement tools to
fully enforce the USMCA. I am also aware that U.S. companies are
considering potential remedies under the agreement.
Question. American cattle producers are responsible stewards of
pasture and rangelands, who sequester carbon while producing a premium
product on land that is not suitable for growing other food products.
As we enter fire season, it is important to emphasize that livestock
grazing can be used as a tool to lower wildfire risk by controlling the
amount, height, and distribution of grasses and forage that fuel
wildfires. Additionally, our natural landscape allows cattle producers
to graze livestock without deforesting, and EPA data shows that direct
greenhouse gas emissions from beef cattle only represent 2 percent of
greenhouse gas in the U.S.
As the United States engages in global forums, will USTR continue
to advocate for science-based trade and highlight the safe, efficient,
and sustainable production practices of U.S. cattle producers as part
of the solution to address climate concerns?
Answer. Through our active engagement in global forums, including
the World Trade Organization (WTO) Committee on Sanitary and
Phytosanitary Measures (SPS Committee), USTR will continue to support
and defend science-based trade while promoting our safe, efficient, and
sustainable production practices.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
This morning the Finance Committee welcomes U.S. Trade
Representative Tai for our annual hearing on the president's trade
agenda. In 2021, just about every major trade policy needs to be based
on a straightforward agenda: out-competing China for jobs and economic
growth. The reality is, too often, the Chinese Government has feasted
on weaknesses in the global trading system to the disadvantage of
American workers.
The Finance Committee examined many of the key issues in a hearing
last month. American factories and plants have shut down because of
unfair subsidies and overproduction in China. American websites and
digital service providers are blocked by the Great Firewall, and they
watch as homegrown Chinese firms rip off their ideas and grow into tech
giants intolerant of free speech. American workers cannot and must not
ever have to compete against forced labor, which is an atrocity on its
own regardless of what it means for international trade.
Bottom line, the U.S. has been playing catch-up ball in the
competition with China for too long. It's going to take higher
standards and stronger enforcement policies that move faster to protect
American jobs and businesses. The old, slower approach--one that
responds to China's rip-offs long after the damage is done--clearly
hasn't worked.
This committee is working on bipartisan legislation addressing
these challenges directly. There will be progress on that bill to
announce in the days ahead, and I'm looking forward to discussing these
issues with Ambassador Tai today.
Apropos of showing what tough, quick-moving trade enforcement looks
like in practice, there are two brand new examples making news this
week. The AFL-CIO announced Monday that it was bringing forward the
first major complaint dealing with labor rights under the new USMCA
rapid response mechanism. And as Ambassador Tai will tell us about
shortly, USTR announced just this morning that it has self-initiated
the first rapid response action to protect workers' rights to organize
and collectively bargain. Senator Brown and I proposed this new system
because the Trump administration's new NAFTA deal wasn't strong enough
on enforcement to protect American jobs.
The new petition and action announced this week are taking on
classic labor violations in Mexico, such as firing or harassing workers
who try to organize, and failing to ensure a legitimate vote on
bargaining agreements. That sort of abuse becomes a threat to workers
everywhere, including in Oregon and across the country, because it
perpetuates the race to the bottom on worker rights. This is a new
approach and a new day for labor rights enforcement. The committee will
have questions on this issue today, as well as other areas of USMCA
implementation.
USTR is also going to be leading negotiations dealing with
intellectual property and the COVID-19 vaccines. Entering negotiations
on an IP waiver was the right decision. The Biden administration is
working hard to get shots into arms across America, and COVID-19 cases
are dropping. However, new coronavirus variants will still pose a
danger to Americans as long as there are terrible outbreaks around the
world.
My view is, our system ought to include IP protections and
exceptions that promote the common good, and it's unquestionably in the
common good to squash this virus as quickly as possible all around the
world.
The waiver negotiations are one important step, but the waiver
alone will not unlock a vaccination miracle. There's a lot more to this
challenge. That includes manufacturing capacity. It includes building
out supply chains. It could also include helping make sure other
countries can afford the vaccine.
So there's a lot for the committee and Ambassador Tai to discuss
today on a wide range of topics. Again I'd like to welcome Ambassador
Tai to the committee. I look forward to hearing her testimony and Q&A.
______
Communications
----------
American Chemistry Council
700 Second St., NE
Washington, DC 20002
(202) 249.7000
https://www.americanchemistry.com/
The American Chemistry Council (ACC) appreciates the opportunity to
provide a statement for the record regarding the May 12-13 hearings on
the 2021 U.S. Trade Policy Agenda at the Senate Finance and House Ways
and Means Committees. These hearings were important opportunities for
ACC to hear Ambassador Tai further define the Biden Administration's
vision for U.S. trade policy and learn how the business of chemistry
can contribute to and benefit from that vision.They also shined a
spotlight on the impact of past U.S. trade policy on the U.S. economy,
U.S. manufacturing competitiveness, and the international trading
system.
In our view, a smarter U.S. trade policy tied to competitiveness can
better serve the U.S. economy, workers, businesses, families,
consumers, and communities achieve a healthier, safer, more secure, and
more just society. For our statement, ACC would like to provide our
2021 Trade Policy Priorities, which are outlined below. These
priorities contain five imperatives for immediate action:
1. Open new markets for U.S. exports of innovative chemicals and
plastics;
2. Deliver much-needed tariff relief to American businesses and
consumers;
3. Reduce and prevent non-tariff barriers to trade through greater
regulatory cooperation in key regions and markets;
4. Cultivate resilient and strategically integrated global supply
chains, particularly with key trading partners; and
5. Modernize the World Trade Organization (WTO) and the rules-
based international trading system.
Within imperative 2 on tariff relief, ACC urges the Congress to pass
the Miscellaneous Tariff Bill (MTB) as soon as possible with meaningful
retroactivity and renew the Generalized System of Preferences (GSP)
program. In that regard, we are encouraged by Senate Finance Chairman
Wyden's release of the ``Trade Preferences and American Manufacturing
Competitiveness Act'' on May 18th and will work closely with the
Congress to secure its passage and enactment.
We also urge the Congress to request that Ambassador Tai launch a new
product exclusion process for the Section 301 additional tariffs on
imports from China BEFORE the conclusion of the top-to-bottom review of
U.S. trade policy concerning China. U.S. chemical manufacturers would
appreciate the opportunity to seek exclusions from these tariffs. With
this tariff relief, they will be able to create high-paying and high-
skilled jobs, expand production, make supply chains more resilient, and
contribute to the broad and sustainable revival of the U.S. economy.
ACC TRADE POLICY PRIORITIES
2021
Smart Trade Policy to Enhance U.S. Chemical Industry Competitiveness,
and Achieve a Healthier, Safer, More Secure, and More Just Society.
Industry Profile
The business of chemistry is a $565 billion enterprise in the United
States, directly employing over a half a million workers and indirectly
supporting over 4 million jobs in other industries. Our industry plays
an important role in many elements of the Biden Administration agenda.
For example, we are:
Developing innovations and technologies critical to combating
climate change and making our world more sustainable;
Manufacturing goods and inputs necessary for combatting the
COVID-19 pandemic and a range of United Nations Sustainable Development
Goals (SDGs);
Increasing investments in manufacturing in the United States and
growing jobs;
Fostering inclusiveness and diversity in our industry, which
relies on a highly skilled, educated, and well-paid workforce; and
Scaling up advanced recycling technologies to convert hard-to-
recycle plastics into feedstocks for manufacturing, which increases
circularity by putting used plastics back to work and keeping them out
of the environment.
[GRAPHIC] [TIFF OMITTED] T1221.001
.epsACC Trade Policy Vision
U.S. chemical manufacturers share the U.S. Administration's vision for
a trade policy that benefits all Americans by:
Accelerating a wide-scale, equitable recovery from the
devastation of the COVID-19 pandemic, and supporting American workers
and businesses that may experience supply chain shocks caused by future
public health crises;
Fostering innovation in sustainable materials, products, and
technologies to reduce emissions and increase energy efficiency;
Mobilizing every segment of society to fight climate change; and
Achieving tangible progress in improving the social,
environmental, and economic health of underserved communities around
the globe.
Our industry's ability to contribute to this vision depends on a robust
partnership with the U.S. Administration on:
Incentivizing investment in U.S. chemicals production capacity
to enhance competitiveness and spur new jobs, economic growth, and
innovation;
Cultivating resilient and strategically integrated global supply
chains that help keep business costs low, workers' wages high, and
essential products readily available;
Facilitating imports of intermediate inputs that enhance U.S.
manufacturing processes and strengthen our industry's competitive
advantage; and
Boosting exports of innovative chemicals and plastics products
that are the foundation of sustainable materials, products, and
technologies.
5 Imperatives for Immediate Action
To maximize the U.S. chemical industry's ability to support the Biden
Trade Policy Agenda, ACC and our coalition partners throughout the
value chain are advocating for the U.S. Administration to:
1. Open new markets for U.S. exports of innovative chemicals and
plastics;
2. Deliver much-needed tariff relief to U.S. businesses and
consumers;
3. Reduce and prevent non-tariff barriers to trade through greater
regulatory cooperation in key regions and markets;
4. Cultivate resilient and strategically integrated global supply
chains, particularly with key trading partners; and
5. Modernize the World Trade Organization (WTO) and the rules-
based international trading system.
(1) Creating New Market Access
Identify and open new growth markets for exports of innovative U.S.
chemicals and plastics, and negotiate to reduce or eliminate tariffs.
Open new export destinations for U.S.-made chemicals and
plastics through bilateral, regional, plurilateral, and multilateral
agreements and negotiations, including by:
Continuing and concluding ongoing free trade
agreement negotiations;
Reaching a China Phase 2 trade deal that repeals
additional U.S. tariffs and China's retaliatory tariffs, and lowers
China's most-favored-nation (MFN) tariffs;
Entering into new free trade agreement
negotiations with key trading partners and emerging markets;
Exploring entry into existing regional agreements
such as the Comprehensive and Progressive Trans-Pacific Partnership;
Pursuing accessions to the World Trade
Organization (WTO) Chemical Tariff Harmonization Agreement (CTHA); and
Pursuing focused tariff elimination with key
trading partners and emerging markets wherever possible.
(2) Tariff Review, Reform, Relief, and Avoidance
Fully and transparently assess economic and social impact of U.S.
additional tariffs to facilitate their repeal; lift retaliatory
tariffs; and achieve a collective de-escalation of tariff wars.
Launch a U.S. International Trade Commission (USITC) or
Government Accountability Office (GAO) study on the impact of
additional tariffs--under Section 301, Section 232, and Section 201--on
the U.S. economy;
Pursue common-sense reform of Section 301 and Section 232 to
make their use more transparent, more strategic, and less burdensome on
critical industries that use imports to enhance their competitiveness;
Seek concessions from trading partners or alternative approaches
to addressing problems that would enable full repeal of Section 301 and
Section 232 tariffs;
Exclude products from the Section 301 tariffs if those products
also receive MFN duty suspensions or reductions under the Miscellaneous
Tariff Bill (MTB);
Suspend MFN and Section 301 tariffs on COVID-19 essential goods
and input as identified by the USITC;
Pursue full reauthorization of MTB with retroactivity as well as
renewal of the Generalized System of Preferences (GSP);
Eliminate tariffs on chemicals that support the manufacturing of
goods essential to combating climate change and addressing other
sustainable development goals (e.g., clean water, energy efficiency,
food safety, and food security); and
Avoid imposing further additional tariffs on imports of
chemicals, and avoid inviting retaliation by U.S. trading partners on
U.S. exports of chemicals.
(3) Addressing Non-Tariff Barriers
Resolve existing trade barriers, and prevent future ones, by
incorporating and enforcing regulatory cooperation provisions in both
current and future trade agreements.
Fully implement all provisions of the United-States-Mexico-
Canada Agreement (USMCA), paying particular attention to the provisions
on regulatory cooperation for chemical substances, technical barriers
to trade, good regulatory practices, the Rules of Origin (ROO) for
chemical substances, trade facilitation, digital trade, and marine
litter provisions;
Continuously identify improvements to USMCA in
advance of its six-year review in 2026;
Ensure trade negotiations achieve greater regulatory cooperation
between the United States and priority trading partners (e.g., United
Kingdom, European Union, Brazil, India, China, and Republic of Korea)
and emerging markets (e.g., Argentina, Colombia, Philippines, Thailand,
and Vietnam);
Ensure U.S. trading partners abide by their transparency
commitments in FTAs and at the WTO;
Reinforce Asia-Pacific Economic Cooperation (APEC) work on
regulatory cooperation and good regulatory practices (within the
Chemical Dialogue and across APEC fora); and
Support effective dispute settlement in trade agreements,
including through investor-state dispute settlement provisions.
(4) Building Resilient Supply Chains
Cultivate resilient and strategically integrated global supply chains
that help keep business costs low, workers' wages high, and essential
products readily available.
Refocus U.S. efforts toward making supply chains more resilient,
including through greater cooperation with allies;
Prioritize intermediate inputs neither made in the United States
nor made in sufficient quantity/quality, and with necessary access to
customer markets;
Collaboratively identify and assess exogenous shocks to supply
chains of concern to the chemical industry and potential impacts on
downstream industries;
Identify opportunities in key customer industries that support
increased market base for U.S. producers;
Identify and establish appropriate incentives for U.S. chemical
manufacturers to continue to invest in manufacturing in the United
States. Incentives could include:
Tax credits and abatements;
Expedited permitting for plant construction or
upgrading;
Timely review and approval of new chemistries
under the U.S. Toxic Substances Control Act (TSCA);
Programs to educate the workforce in response to
industry needs;
Facilitation of high skilled immigration;
Access to worker training/retraining programs;
Public-private partnerships for research and
development of new materials and technologies;
Potential cost-shared grants to support domestic
capital investments for key upstream materials, including chemical
inputs, as well as infrastructure;
Low-interest loans that support critical mineral
mine development;
Funding to support new downstream industry
development if new on-shore supply of critical minerals comes online;
and
Relief/insurance for domestic supply chain
disruptions, e.g., hurricanes, wildfires, and winter storms.
(5) WTO Modernization
Modernize the World Trade Organization and the rules-based
international trading system to protect, promote, and enforce free and
fair trade around the globe.
Facilitate update of WTO dispute settlement process by
identifying and promoting a package of reforms that can generate
consensus within WTO membership on restoring Appellate Body;
Advance negotiations on digital trade and investment
facilitation;
Enhance WTO operational/procedural transparency and stakeholder
engagement, with:
Full notification of proposed and final measures;
and
Greater opportunities for chemical industry
stakeholder input and participation in WTO meetings and events.
Explore how trade relates to climate change, circular economy,
plastic pollution, biodiversity, fossil fuel subsidies, decarbonizing
supply chains, and carbon border adjustment;
Ensure regulatory cooperation is an integral part of WTO
modernization;
Seek tariff elimination/reduction for chemicals via appropriate
mechanisms, such as:
Accessions to Chemical Tariff Harmonization
Agreement (e.g., Argentina, Brazil, Chile, Colombia, select ASEANs);
and
Plurilateral initiatives on sustainable materials
and environmental goods.
______
American Farm Bureau Federation
600 Maryland Avenue, SW, Suite 1000W
Washington, DC 20024
p. 202-406-3600
f. 202-406-3606
https://www.fb.org/
The American Farm Bureau Federation, the nation's largest general farm
organization, submits this statement for the Senate Committee hearing
on the President's 2021 trade policy agenda. Trade is critically
important to the current welfare and future prosperity of U.S. farmers
and ranchers. America's farmers and ranchers depend on growing and
stable export markets for the success of their businesses.
U.S.-China Phase 1 Agreement
The U.S.-China Phase 1 Agreement has and will continue to result in
real progress toward a mutually beneficial trade relationship. We are
already seeing positive results for agricultural trade and substantial
progress in the removal of barriers that impact the competitiveness of
U.S. products in this important market. In the Phase 1 Agreement, China
committed to increase purchases of U.S. agricultural products by $32
billion over two years. Working from the 2017 baseline of $24 billion,
China has agreed to purchase no less than an additional $12.5 billion
of U.S. farm and ranch goods in calendar year 2020 and no less than
$19.5 billion in calendar year 2021. Over the first two years of the
Agreement, China is expected to purchase a total of $80 billion of U.S.
agricultural products. For 2020, China purchased over $27 billion of
U.S. agricultural products.
Chinese purchases of soybeans, corn, wheat, sorghum, beef, pork and
other products are strongly improving, driving up demand--and prices--
for these goods.
China has also been meeting the commitments they made to improve and
reform many standards in the Agreement. Longstanding barriers to the
export of U.S. beef, pork, poultry and other products have been or are
being resolved, pursuant to the Agreement. An improved process for
biotechnology product approvals by China is also being addressed. As
these barriers go down, the opportunity for increased U.S. commodity
sales goes up.
Also helping our sales growth is China's granting, upon application by
importers, waivers of their retaliatory tariffs on U.S. agricultural
products, which were put in place in 2018 and 2019, with direct,
substantial impacts on agricultural sales.
The Biden Administration is conducting an overall review of relations
with China, U.S. agriculture's number one export destination. As such,
an ongoing trade relationship with China is critical for U.S. farmers
and ranchers.
U.S.-Mexico-Canada Agreement
The USMCA went into force on July 1, 2020. The implementation of
expanded access for U.S. dairy products by Canada through the new
tariff-rate quotas is of importance and concern to our dairy producers
and needs to be resolved. Concerns about agricultural trade with Mexico
include the approval process for biotech products, dairy product
labeling and the country's ban on glyphosate beginning in 2024.
U.S.-U.K. Negotiations
Five rounds of comprehensive negotiations have been completed. With the
negotiations on food safety focused on U.S. standards for chicken, beef
and pork, the U.K. needs to recognize the science-based approach of the
U.S. We support continuing the negotiations toward a trade agreement
with the United Kingdom.
U.S.-European Union
The U.S. has imposed $7.5 billion in WTO-authorized tariffs from the
Boeing-Airbus dispute on various EU products. The EU recently added $4
billion in authorized tariffs on U.S. imports, including agricultural
products such as cheeses, wine, tobacco, spirits, wheat and other
goods. We are encouraged by the four-month tariff suspension and
support a resolution of the underlying dispute and an end to the
retaliatory tariffs.
Retaliatory tariffs imposed on U.S. agricultural products by the EU due
to steel and aluminum tariffs are a continuing issue that needs to be
resolved.
U.S.-Japan Agreement
The U.S.-Japan Trade Agreement went into effect on January 1, 2020. The
tariffs applied to U.S. products are now the same as those applied to
the products of the other countries with a trade agreement with Japan.
Tariffs are being reduced or eliminated on a variety of U.S.
agricultural exports to Japan. The U.S. and Japan should continue talks
on the remaining issues, such as SPS rules, that would lead to a
comprehensive FTA between the U.S. and Japan. Also, rice and some dairy
products were not covered in the agreement.
U.S.-Kenya
The trade negotiations with the Republic of Kenya offer the opportunity
for a trade relationship with a nation that has growth potential for
U.S. agricultural exports. The ambitious effort also sets the precedent
for future discussions with other nations in the region. Eliminating
and lowering tariffs, improving science-based sanitary standards,
addressing the products of biotechnology and recognizing the common
names for food products, not restrictive EU-style geographic
indications, will allow for continued growth of agricultural trade in
Kenya. The U.S. exported $53 million in agricultural products to Kenya
in calendar year 2020.
Trade Promotion Authority
The current Bipartisan Congressional Trade Priorities and
Accountability Act of 2015 (Trade Promotion Authority) ends on July 1,
2021. Farm Bureau recognizes the crucial importance of Trade Promotion
Authority and supports its extension or reauthorization. The
negotiating objectives set by Congress, the consultation requirements
of the Administration with Congress and the voting procedures
established under TPA are important to the successful negotiation and
conclusion of trade discussions.
Seasonal Produce Investigations
On September 1, 2020, USTR, USDA and Commerce released a plan of future
actions that includes investigations and assistance for the seasonal
produce industry related to the impacts of increased seasonal imports.
The U.S. International Trade Commission (USITC) has begun a Section 332
investigation into imports of strawberries and bell peppers.
Investigations under this section are fact-finding only. Investigations
have also begun for squash and cucumber imports. A recently concluded
investigation into blueberry imports resulted in no action by the ITC.
Farm Bureau submitted comments to the USITC on the blueberry and
strawberry investigations and on the cucumber and squash investigation.
We encourage USTR to continue to engage on U.S. produce growers'
concerns about imports of seasonal produce.
World Trade Organization
The Biden Administration will need to deal with various WTO reform
issues such as the operation of the Appellate Body. The discussions on
agriculture before the next Ministerial meeting require the engagement
of USTR. We support working toward increased transparency through an
improved notifications process. We do not support discussion of subsidy
levels without a full discussion of market access initiatives.
As Congress considers future discussions with the nations that are our
most important export destinations, and those that have the potential
to grow in importance, we ask you to consider the opportunities to
expand agricultural exports to the benefit of U.S. farmers and
ranchers.
______
Americans for Free Trade
May 26, 2021
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
Washington, DC 20510 Washington, DC 20510
The Honorable Richard Neal The Honorable Kevin Brady
Chairman Ranking Member
House Ways and Means Committee House Ways and Means Committee
Washington, DC 20515 Washington, DC 20515
Dear Chairman Wyden, Ranking Member Crapo, Chairman Neal, and Ranking
Member Brady,
The Americans for Free Trade coalition, a broad alliance of American
businesses, trade organizations, and workers united against tariffs,
respectfully submits this written statement to include in the public
record of the Senate Finance Committee and House Ways and Means
Committee's 2021 Trade Policy Agenda hearings, which took place on May
12 and 13, respectfully. We appreciate the Committees holding hearings
on this important matter.
By way of background, Americans for Free Trade represents every part of
the U.S. economy including manufacturers, farmers and agribusinesses,
retailers, technology companies, service suppliers, natural gas and oil
companies, importers, exporters, and other supply chain stakeholders.
Collectively, we employ tens of millions of Americans through our vast
supply chains.
As the Administration and Congress continue focusing on the U.S.
economic recovery from the pandemic, a strategic trade agenda is a key
element in ensuring this recovery succeeds. A robust economic recovery
requires the U.S. to create and expand import and export opportunities
for American businesses to reach new markets, create jobs here at home,
and compete globally. It also requires the U.S. to craft a defined
China policy that addresses unfair trading practices but removes ill-
conceived tariffs that continue to harm all American businesses whether
they are importing inputs to manufacture products domestically or
finished goods. To date the U.S. has collected over $87 billion in
tariffs, which are taxes paid by U.S. importers. In other words, these
tariffs are paid by Americans, not China. They have caused significant
financial hardship for U.S. businesses, the millions of workers they
employ, and the millions of American consumers they serve. At the same
time, they have failed to effectively address China's unfair trading
practices.
We appreciate that several members of the Committees inquired about the
status of USTR's China review during the hearings. The China review is
of critical importance and must be a top priority for the
Administration. The tariffs continue to cause economic harm to
businesses both small and large across the country, as well as to
American consumers and workers who bear the downstream impacts of these
tariffs. In fact, Moody's Investor Services just released a new report
finding that the tariffs ``hit American businesses and consumers
hardest,'' with China absorbing only 7.6 percent of the tariffs ``while
the rest of the tab was picked up by Americans.'' Any delay in
reviewing the China trade policy means delaying relief to these
Americans--the same Americans whom Congress worked so hard to support
in multiple major pieces of pandemic legislation.
We also appreciate that the Administration plans to review the section
301 tariffs on products from China as part of its ``top-to-bottom''
review and applaud it for wanting to take a thoughtful and deliberate
approach. It is critical that this review begin immediately and
identify a clear timeline for the review's completion. This review must
also include a determination as to whether the tariffs are achieving
the stated objective of changing China's policies and behavior and
whether they provide any actual leverage in negotiations.
Unfortunately, the tariffs continue to cause economic harm to
businesses both small and large across the country, as well as to
American consumers and workers who bear the downstream impacts of these
tariffs. Any delay in reviewing the China trade policy means delaying
relief to these Americans--the same Americans whom Congress worked so
hard to support in multiple major pieces of pandemic legislation. Time
is of the essence.
This is why we support the Administration launching a new product
exclusion process sooner rather than later. We are therefore deeply
concerned that the Administration will not decide on whether to resume
the exclusions process until it completes its overall China review.
Reinstatement of a product exclusion process to provide targeted relief
to Americans can happen while this review is ongoing. We strongly
encourage the Committees to urge the Administration to immediately
reinstate a product exclusion process and to reinstate all product
exclusions that expired in 2020.
Furthermore, the previous section 301 product exclusion process had
significant flaws, and we agree it needs improvement. We also
appreciate that the Administration is interested in stakeholder
feedback to better understand the shortcomings of the previous process.
However, we are concerned that during the hearing, the Administration
offered no timeline regarding when this stakeholder engagement might
take place or when the broader review might be concluded.We support the
Administration reaching out to stakeholders to solicit feedback on the
exclusions process, and such stakeholder engagement should include
American companies impacted by the tariffs. However, ample feedback has
been provided to the Administration over the last several years
identifying transparency, consistency, and fairness issues with the
previous process, and we believe this outreach should not delay
instituting a targeted process for providing relief to American
businesses.
As the Administration and Congress continue to focus on the economic
recovery from the COVID-19 pandemic, lifting the section 301 tariffs on
products from China is a simple, straightforward way to provide an
economic boost to American families, American workers, and American
businesses and to help ensure a successful economic recovery. It is
also an important step to repairing relationships with U.S. trading
partners and allies and restoring our standing on the world stage.
We appreciate the Committees' continued engagement on these important
issues and urge it to continue weighing in with the Administration to
ensure that destructive tariffs are lifted, and that a new and more
effective approach to addressing China's unfair trading practices is
adopted. We thank the Committees for holding these hearings and look
forward to working with you on these important issues.
Sincerely,
Accessories Council California Retailers Association
ACT | The App Association Can Manufacturers Institute
Agriculture Transportation
Coalition (AgTC) Carolina Loggers Association
ALMA, International (Association of
Loudspeaker Manufacturing and
Acoustics) Chemical Industry Council of
Delaware (CICD)
American Apparel and Footwear
Association (AAFA) Coalition of New England Companies
for Trade (CONECT)
American Association of Exporters
and Importers (AAEI) Coalition of Services Industries
(CSI)
American Association of Port
Authorities Colorado Retail Council
American Bakers Association Columbia River Customs Brokers and
Forwarders Assn.
American Bridal and Prom Industry
Association (ABPIA) Computer and Communications
Industry Association (CCIA)
American Chemistry Council Computing Technology Industry
Association (CompTIA)
American Down and Feather Council Consumer Brands Association
American Fly Fishing Trade
Association Consumer Technology Association
American Home Furnishings Alliance Council of Fashion Designers of
America (CFDA)
American Lighting Association CropLife America
American Petroleum Institute Customs Brokers and Freight
Forwarders Assn. of Washington
State
American Pyrotechnics Association Customs Brokers and Freight
Forwarders of Northern California
American Rental Association Distilled Spirits Council of the
United States
American Specialty Toy Retailing
Association Electronic Transactions Association
American Wind Energy Association Experiential Designers and
Producers Association
Arizona Technology Council Fashion Accessories Shippers
Association (FASA)
Arkansas Grocers and Retail
Merchants Association Fashion Jewelry and Accessories
Trade Association
Association For Creative Industries Flexible Packaging Association
Association for PRINT Technologies Florida Ports Council
Association of American Publishers Florida Retail Federation
Association of Equipment
Manufacturers (AEM) Footwear Distributors and Retailers
of America (FDRA)
Association of Home Appliance
Manufacturers Fragrance Creators Association
Auto Care Association Game Manufacturers Association
Beer Institute Gemini Shippers Association
BSA | The Software Alliance Georgia Retailers
Global Business Alliance NAPIM (National Association of
Printing Ink Manufacturers)
Global Chamber National Association of Chain Drug
Stores (NACDS)
Global Cold Chain Alliance National Association of Chemical
Distributors (NACD)
Greeting Card Association National Association of Foreign-
Trade Zones (NAFTZ)
Halloween Industry Association National Association of Home
Builders
Home Fashion Products Association National Association of Music
Merchants
Home Furnishings Association National Association of Printing
Ink Manufacturers
Household and Commercial Products
Association National Association of Trailer
Manufacturers (NATM)
Idaho Retailers Association National Confectioners Association
Illinois Retail Merchants
Association National Council of Chain
Restaurants
Independent Office Products and
Furniture Dealers Association
(IOPFDA) National Customs Brokers and
Freight Forwarders Association of
America
Indiana Retail Council National Electrical Manufacturers
Association (NEMA)
Information Technology Industry
Council (ITI) National Fisheries Institute
International Association of
Amusement Parks and Attractions
(IAAPA) National Foreign Trade Council
National Grocers Association
International Bottled Water
Association (IBWA) National Lumber and Building
Material Dealers Association
International Foodservice
Distributors Association National Marine Manufacturers
Association
International Housewares
Association National Restaurant Association
International Warehouse and
Logistics Association National Retail Federation
International Wood Products
Association National Ski and Snowboard
Retailers Association
Internet Association National Sporting Goods Association
ISSA--The Worldwide Cleaning
Industry Association Natural Products Association
Jeweler's Vigilance Committee New Jersey Retail Merchants
Association
Juice Products Association (JPA) North American Association of
Uniform Manufacturers and
Distributors (NAUMD)
Juvenile Products Manufacturers
Association North Carolina Retail Merchants
Association
Leather and Hide Council of America Ohio Council of Retail Merchants
Licensing Industry Merchandisers'
Association Outdoor Industry Association
Los Angeles Customs Brokers and
Freight Forwarders Assn. Pacific Coast Council of Customs
Brokers and Freight Forwarders
Assns. Inc.
Louisiana Retailers Association Pennsylvania Retailers' Association
Maine Grocers and Food Producers
Association PeopleforBikes
Maine Lobster Dealers' Association Personal Care Products Council
Maritime Exchange for the Delaware
River and Bay Pet Industry Joint Advisory Council
Maryland Retailers Association Petroleum Equipment and Services
Association
Methanol Institute Plumbing Manufacturers
International
Michigan Chemistry Council Power Tool Institute (PTI)
Michigan Retailers Association Promotional Products Association
International
Minnesota Retailers Association Recreational Off-Highway Vehicle
Association
Missouri Retailers Association Retail Association of Maine
Motor and Equipment Manufacturers
Association Retail Council of New York State
Motorcycle Industry Council Retail Industry Leaders Association
RISE (Responsible Industry for a
Sound Environment) Retailers Association of
Massachusetts
San Diego Customs Brokers and
Forwarders Assn. Texas Water Infrastructure Network
SEMI The Airforwarders Association
Semiconductor Industry Association
(SIA) The Fertilizer Institute
Snowsports Industries America The Hardwood Federation
Society of Chemical Manufacturers
and Affiliates The Toy Association
Software and Information Industry
Association (SIIA) The Vinyl Institute
South Dakota Retailers Association Travel Goods Association
Specialty Equipment Market
Association Truck and Engine Manufacturers
Association (EMA)
Specialty Vehicle Institute of
America United States Council for
International Business
Sports and Fitness Industry
Association United States Fashion Industry
Association
TechNet U.S. Global Value Chain Coalition
Telecommunications Industry
Association (TIA) U.S.-China Business Council
Texas Retailers Association Washington Retail Association
Virginia Retail Merchants
Association Window and Door Manufacturers
Association
Virginia-DC District Export Council
(VA-DC DEC) World Pet Association, Inc. (WPA)
______
Association of Equipment Manufacturers
1300 I Street, NW, Suite 520 West
Washington, DC 20005-3314
T: 202-898-9064
https://www.aem.org/
Thank you, Chairman Wyden, Ranking Member Crapo, and members of the
Committee, for the opportunity to offer the views of the U.S. equipment
manufacturing industry on the important topics you are examining today.
The Association of Equipment Manufacturers represents more than 1,000-
member companies manufacturing equipment and providing services for the
agriculture, construction, utility, mining and forestry sectors
worldwide. Our industry supports 2.8 million jobs across all 50 states,
representing 12 percent of all manufacturing jobs in America, and
contributes $288 billion a year to the U.S. economy.
With nearly 30% of equipment manufactured in the United States destined
for export, our industry depends on policies that reduce global trade
and investment barriers and promote an open, transparent, and
nondiscriminatory rules-based trading system.
In today's global economy, U.S. equipment manufacturers rely on
international supply chains to source critical components not
manufactured in sufficient quantity or quality domestically. Starting
in 2018, many critical manufacturing inputs have been subject to
Section 232 steel and aluminum tariffs and Section 301 tariffs on goods
imported from China. These tariffs and the retaliatory countermeasures
by many of our trading partners have significantly driven up costs for
U.S. equipment manufacturers, particularly as it relates to the costs
of steel.
Domestic steel prices have risen more than 160% since August of last
year, while delivery times have increased to a point where
manufacturing operations are facing mounting delays. Throughout the
industry, manufacturers are halting production as they wait for
additional components and steel to arrive. Lead times have gone from 3
months to 8 months and surcharges ranging from 2%-5% for end-delivery
of equipment are now commonplace. These stoppages and surcharges hurt
U.S. employment as shifts and work hours are reduced, and U.S.
agricultural producers and end-users of construction equipment are now
forced to pay additional costs for domestically produced equipment.
Domestic steel mills are purposefully not increasing capacity to meet
customer demand to keep prices artificially high. This has resulted in
a huge price difference between U.S. steel and steel available on the
global market, undermining our national manufacturing base and
jeopardizing family-sustaining jobs in the steel industry.
The Biden-Harris administration must address this de facto competitive
advantage enjoyed by our foreign competitors by reducing or removing
the Section 232 tariffs on steel, particularly from our close trading
partners and allies. As long as these tariffs remain in place, they
will continue to undermine American workers and significantly undermine
U.S. equipment manufacturers' competitiveness in the global economy.
The Biden-Harris administration should instead bolster American
manufacturing strength, strengthen our nation's global competitiveness,
and increase exports of U.S. goods and services.
The Biden-Harris administration must request--and Congress must grant--
Trade Promotion Authority and should work closely with Congress on new
high-standard free-trade agreements that provide increased market
access for U.S. goods and services, confer originating status on
remanufactured products, ensure customs procedures are transparent,
predicable, and consistent, and guarantee intellectual property
protections.
As the U.S. economy begins to recover from the COVID-19 pandemic and
the economic crisis, the United States must rebuild our manufacturing
base. Opening up new markets for American made products must be a
priority. Failing to renew Trade Promotion Authority sends a clear
signal to our global competitors that America is not open for business,
and only incentivizes customers in other markets to buy their goods and
services from outside the U.S.
The Biden-Harris administration should move to rapidly complete ongoing
negotiations for high-standard free-trade agreements with Kenya and the
United Kingdom. In Kenya, consumers are demanding upgraded
infrastructure systems and producers want to invest in modern
agricultural production. American made equipment should help them
achieve these goals, and not our Chinese competitors. Concluding a
high-standard free-trade will not only boost exports of U.S. equipment
but will also incentivize additional foreign direct investment, helping
improve the Kenyan economy and lifting additional people out of
poverty.
A high-standard free-trade agreement with the United Kingdom will
strengthen transatlantic trade and investment with one of our nation's
largest trading partners, and will also create a regulatory regime
favorable to the adoption of U.S. technology and manufactured products.
Brexit has put the United Kingdom on a new economic path, and the
United States must seize this opportunity to formalize a high-
standard free-trade agreement that reflects the importance of the
``special relationship'' and the substantial commercial ties that
uphold it.
Thank you again for the opportunity to express the views of the U.S.
equipment manufacturing industry on the President's 2021 trade policy
agenda. We look forward to working with all members of the Committee as
well as the Biden-Harris administration to advance free and fair trade
policies and agreements that will strengthen American manufacturing and
secure our nation's long-term prosperity.
______
Center for Fiscal Equity
14448 Parkvale Road, Suite 6
Rockville, MD 20853
[email protected]
Statement of Michael G. Bindner
Chairman Wyden and the Ranking Member Crapo, thank you for the
opportunity to submit these comments for the record to the Committee on
Finance.
The last 4 years have shown us an extreme example of how not to use
tariffs. The prior administration used economic policy as gunboat
diplomacy, but without having a navy. We trust that from now on, trade
policy will be handled by professionals, leading to a return to
normalcy.
This is not to say that change is not needed. Donald Trump was
originally elected by voters who saw the impact that bipartisan trade
policy on their lives. Trump did not help, but for them, he at least
tried something. In the long run, employee ownership is the solution
for worker well-being on both sides of the border or ocean. Tax reform,
including a border adjustable credit invoice VAT, a subtraction VAT to
distribute benefits to workers and their families and an Asset VAT to
close the tax gap, channel more ownership shares to employees and a
negotiated rate to establish better international cooperation on
business taxation.The United States leaves millions of dollars on the
table because we do not have a value added tax that is zero rated at
the border, while applying to all goods and services imported. Please
see the attachment, distilled from prior year comments, which explains
how we propose to do this. Note that adding border-adjustable goods and
services taxes allows the removal of other trade barriers with no loss
of jobs.
We do not agree with the Administration's resolve to not raise taxes on
anyone making under $400,000 per year. This proposal led to constant
attempts to repeal the Affordable Care Act, not because of any flaw in
the Act, but because of how it was funded with surtaxes on unearned
income over $200,000. It is almost as if the Majority was setting a
future Republican Majority up (which happened rather quickly) to make
itself look bad by having these votes. The constant repeal votes,
however, provided no electoral advantage.
Still, we agree that initially, VAT should not make some people poorer.
When subtraction and a credit invoice VAT is first implemented, we
propose doubling the child tax credit again so that families with
children are not affected. A higher minimum wage ($10 now, $12 soon--or
$11 with a 32 work week--and eventually $15) will indemnify the rest.
During the transition, income tax withholding will be adjusted to
increase net income by 13%. The additional 6.5% invoice VAT rate comes
from eliminating employer payments for FICA (which has the effect of
eliminating the cap) and crediting each worker with the same amount.
All in all, our proposals are better for most of the working class than
the status quo, although not everyone. Some people deserve to pay more.
Please see our attachment on Tax Reform for more information.
We also propose a Carbon VAT, which is necessary for people to make
spending decisions on the health of the planet (which is why carbon
levies will be receipt visible rather than simply changing the price).
We propose an asset value tax with a compromise 26% rate (halfway
between the current 24% and the Biden 28%). The asset VAT would mark
option exercise and the first sale after inheritance, gift or donation,
with zero rating for sales to Employee Stock Ownership Plans.
The first attachment on trade policy and the VAT includes how expanding
employee ownership is the best trade policy for workers. Briefly,
employee owners in the United States have an incentive to give foreign
subsidiary and supply chain workers the same ownership rights and
standard of living they receive. In order to do this, however,
amendments to ERISA are necessary, as on paper owners will be paying
more for the same products than they are paying now.
Thank you for the opportunity to address the committee. We are, of
course, available for direct testimony or to answer questions by
members and staff.
Attachment--Trade Policy and Value-Added Taxes
Consumption taxes could have a big impact on workers, industry and
consumers. Enacting an I-VAT is far superior to a tariff. The more
government costs are loaded onto an I-VAT the better.
If the employer portion of Old-Age and Survivors Insurance, as well as
all of disability and hospital insurance are decoupled from income and
credited equally and personal retirement accounts are not used, there
is no reason not to load them onto an I-VAT. This tax is zero rated at
export and fully burdens imports.
Seen another way, to not put as much taxation into VAT as possible is
to enact an unconstitutional export tax. Adopting an I-VAT is superior
to it's weak sister, the Destination Based Cash Flow Tax that was
contemplated for inclusion in the TCJA. It would have run afoul of WTO
rules on taxing corporate income. I-VAT, which taxes both labor and
profit, does not.
The second tax applicable to trade is a Subtraction VAT or S-VAT. This
tax is designed to benefit the families of workers through direct
subsidies, such as an enlarged child tax credit, or indirect subsidies
used by employers to provide health insurance or tuition reimbursement,
even including direct medical care and elementary school tuition. As
such, S-VAT cannot be border adjustable. Doing so would take away
needed family benefits. As such, it is really part of compensation.
While we could run all compensation through the public sector.
The S-VAT could have a huge impact on long-term trade policy, probably
much more than trade treaties, if one of the deductions from the tax is
purchase of employer voting stock (in equal dollar amounts for each
worker). Over a fairly short period of time, much of American industry,
if not employee-owned outright (and there are other policies to
accelerate this, like ESOP conversion) will give workers enough of a
share to greatly impact wages, management hiring and compensation and
dealing with overseas subsidiaries and the supply chain--as well as
impacting certain legal provisions that limit the fiduciary impact of
management decision to improving short-term profitability (at least
that is the excuse managers give for not privileging job retention).
Employee owners will find it in their own interest to give their
overseas subsidiaries and their supply chain's employees the same deal
that they get as far as employee ownership plus an equivalent standard
of living. The same pay is not necessary, currency markets will adjust
once worker standards of living rise.
Over time, ownership will change the economies of the nations we trade
with, as working in employee-owned companies will become the market
preference and force other firms to adopt similar policies (in much the
same way that, even without a tax benefit for purchasing stock,
employee-owned companies that become more democratic or even more
socialistic, will force all other employers to adopt similar measures
to compete for the best workers and professionals).
In the long run, trade will no longer be an issue. Internal company
dynamics will replace the need for trade agreements as capitalists lose
the ability to pit the interest of one nation's workers against the
others. This approach is also the most effective way to deal with the
advance of robotics. If the workers own the robots, wages are swapped
for profits with the profits going where they will enhance consumption
without such devices as a guaranteed income.
Attachment--Tax Reform, Center for Fiscal Equity, May 10, 2021
Individual payroll taxes. These are optional taxes for Old-Age and
Survivors Insurance after age 60 for widows or 62 for retirees. We say
optional because the collection of these taxes occurs if an income
sensitive retirement income is deemed necessary for program acceptance.
Higher incomes for most seniors would result if an employer
contribution funded by the Subtraction VAT described below were
credited on an equal dollar basis to all workers. If employee taxes are
retained, the ceiling should be lowered to $85,000 to reduce benefits
paid to wealthier individuals and a $16,000 floor should be established
so that Earned Income Tax Credits are no longer needed. Subsidies for
single workers should be abandoned in favor of radically higher minimum
wages.
Wage Surtaxes. Individual income taxes on salaries, which exclude
business taxes, above an individual standard deduction of $85,000 per
year, will range from 6.5% to 26%. This tax will fund net interest on
the debt (which will no longer be rolled over into new borrowing),
redemption of the Social Security Trust Fund, strategic, sea and non-
continental U.S. military deployments, veterans' health benefits as the
result of battlefield injuries, including mental health and addiction
and eventual debt reduction. Transferring OASDI employer funding from
existing payroll taxes would increase the rate but would allow it to
decline over time. So would peace.
Asset Value-Added Tax (A-VAT). A replacement for capital gains taxes,
dividend taxes, and the estate tax. It will apply to asset sales,
dividend distributions, exercised options, rental income, inherited and
gifted assets and the profits from short sales. Tax payments for option
exercises and inherited assets will be reset, with prior tax payments
for that asset eliminated so that the seller gets no benefit from them.
In this perspective, it is the owner's increase in value that is taxed.
As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. These taxes will
fund the same spending items as income or S-VAT surtaxes. This tax will
end Tax Gap issues owed by high income individuals. A 26% rate is
between the GOP 24% rate (including ACA-SM and Pease surtaxes) and the
Democratic 28% rate. It's time to quit playing football with tax rates
to attract side bets.
Lower rates are not as regressive as they seem. Only the wealthy have
capital gains in any significant amount. The defacto rate for everyone
else is zero.
The mutual fund exemption will be repealed. It is the biggest tax
shelter is the use of money market funds to accumulate capital gains
and income without taxation. This practice must end if salary surtaxes
no longer include non-salaried income. 75% of such funds are held by
the top 10% of households as measured by the 2019 Survey of Consumer
Finance by the Federal Reserve. I suspect the other 20% are held by
high income retirees. The working class will not be harmed. Applying
the Pareto Rule to higher income households leaves the top 1450
households with 30% of wealth. The proof of the proposition is the
holders of Berkshire Hathaway.
Subtraction Value-Added Tax (S-VAT). These are employer paid Net
Business Receipts Taxes. S-VAT is a vehicle for tax benefits,
including:
Health insurance or direct care, including veterans' health care
for non-
battlefield injuries and long-term care.
Employer paid educational costs in lieu of taxes are provided as
either
employee-directed contributions to the public or private unionized
school of their choice or direct tuition payments for employee children
or for workers (including ESL and remedial skills). Wages will be paid
to students to meet opportunity costs.
Most importantly, a refundable child tax credit at median income
levels (with inflation adjustments) distributed with pay.
Subsistence-level benefits force the poor into servile labor. Wages and
benefits must be high enough to provide justice and human dignity. This
allows the ending of state administered subsidy programs and
discourages abortions, and as such enactment must be scored as a must
pass in voting rankings by pro-life organizations (and feminist
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border adjustable.
The S-VAT is also used for personal accounts in Social Security,
provided that these accounts are insured through an insurance fund for
all such accounts, that accounts go toward employee ownership rather
than for a subsidy for the investment industry. Both employers and
employees must consent to a shift to these accounts, which will occur
if corporate democracy in existing ESOPs is given a thorough test. So
far it has not. S-VAT funded retirement accounts will be equal-dollar
credited for every worker. They also have the advantage of drawing on
both payroll and profit, making it less regressive.
A multi-tier S-VAT could replace income surtaxes in the same range.
Some will use corporations to avoid these taxes, but that corporation
would then pay all invoice and subtraction VAT payments (which would
distribute tax benefits). Distributions from such corporations will be
considered salary, not dividends.
Invoice Value-Added Tax (I-VAT). Border adjustable taxes will appear on
purchase invoices. The rate varies according to what is being financed.
If Medicare for All does not contain offsets for employers who fund
their own medical personnel or for personal retirement accounts, both
of which would otherwise be funded by an S-VAT, then they would be
funded by the I-VAT to take advantage of border adjustability. I-VAT
also forces everyone, from the working poor to the beneficiaries of
inherited wealth, to pay taxes and share in the cost of government.
Enactment of both the A-VAT and I-VAT ends the need for capital gains
and inheritance taxes (apart from any initial payout). This tax would
take care of the low-income Tax Gap.
I-VAT will fund domestic discretionary spending, equal dollar employer
OASI contributions, and non-nuclear, non-deployed military spending,
possibly on a regional basis. Regional I-VAT would both require a
constitutional amendment to change the requirement that all excises be
national and to discourage unnecessary spending, especially when
allocated for electoral reasons rather than program needs. The latter
could also be funded by the asset VAT (decreasing the rate by from
19.5% to 13%).
As part of enactment, gross wages will be reduced to take into account
the shift to S-VAT and I-VAT, however net income will be increased by
the same percentage as the I-VAT. Adoption of S-VAT and I-VAT will
replace pass-through and proprietary business and corporate income
taxes.
Carbon Value-Added Tax (C-VAT). A Carbon tax with receipt visibility,
which allows comparison shopping based on carbon content, even if it
means a more expensive item with lower carbon is purchased. C-VAT would
also replace fuel taxes. It will fund transportation costs, including
mass transit, and research into alternative fuels (including fusion).
This tax would not be border adjustable.
Summary
This plan can be summarized as a list of specific actions:
1. Increase the standard deduction to workers making salaried income
of $425,001 and over, shifting business filing to a separate tax on
employers and eliminating all credits and deductions--starting at 6.5%,
going up to 26%, in $85,000 brackets.
2. Shift special rate taxes on capital income and gains from the
income tax to an asset VAT. Expand the exclusion for sales to an ESOP
to cooperatives and include sales of common and preferred stock. Mark
option exercise and the first sale after inheritance, gift or donation
to market.
3. End personal filing for incomes under $425,000.
4. Employers distribute the child tax credit with wages as an offset
to their quarterly tax filing (ending annual filings).
5. Employers collect and pay lower tier income taxes, starting at
$85,000 at 6.5%, with an increase to 13% for all salary payments over
$170,000 going up 6.5% for every $85,000--up to $340,000.
6. Shift payment of HI, DI, SM (ACA) payroll taxes employee taxes to
employers, remove caps on employer payroll taxes and credit them to
workers on an equal dollar basis.
7. Employer paid taxes could as easily be called a subtraction VAT,
abolishing corporate income taxes. These should not be zero rated at
the border.
8. Expand current state/federal intergovernmental subtraction VAT to a
full GST with limited exclusions (food would be taxed) and add a
federal portion, which would also be collected by the states. Make
these taxes zero rated at the border. Rate should be 19.5% and replace
employer OASI contributions. Credit workers on an equal dollar basis.
9. Change employee OASI of 6.5% from $18,000 to $85,000 income.
______
Engine Advocacy
700 Pennsylvania Avenue, SE
Washington, DC 20003
[email protected]
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
The Honorable Richard Neal The Honorable Kevin Brady
Chairman Ranking Member
U.S. House of Representatives U.S. House of Representatives
Committee on Ways and Means Committee on Ways and Means
1102 Longworth House Office
Building 1139 Longworth House Office
Building
Washington, DC 20515 Washington, DC 20515
Dear Chairman Wyden, Ranking Member Crapo, Chairman Neal, and Ranking
Member Brady:
Thank you for holding hearings on May 12th and 13th on the
President's 2021 Trade Policy Agenda. Engine is a non-profit technology
policy, research, and advocacy organization that works with government
and a community of thousands of high-technology, growth-oriented
startups across the nation to support the development of technology
entrepreneurship. Strong, forward thinking digital trade measures are
critical to reduce and eliminate non-tariff barriers and enable U.S.
startups to succeed and expand into new markets. To that end, we value
your commitment to working with the Administration to promote sound
trade policy and appreciate the opportunity to share trade-related
priorities for startups.
Non-tariff barriers to trade hamper digital trade generally and
uniquely hinder the ability of U.S. startups to compete abroad. U.S.
trade policy must seek to reduce and eliminate these barriers. In
future negotiations and updates to current trade agreements, strong
digital trade provisions should be included. Such provisions would
reject data localization requirements and ensure cross-border data
flows, include balanced intermediary liability frameworks similar to 47
U.S.C. Sec. 230, and implement certain, balanced, and consistent IP
frameworks globally.
Many startups are unable to surmount the compliance burden that
data localization measures impose, leaving them at a competitive
disadvantage to larger companies. Similarly, large companies can afford
the moderation tools and potential legal exposure occurring in a world
without balanced intermediary liability frameworks, but startups
cannot.\1\ And commonsense IP frameworks like 17 U.S.C. Sec. 512 and
U.S. Courts' use of actual harm and proportionate relief in patent
litigation are needed in agreements to ensure startups can expand
abroad.\2\
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\1\ Evan Engstrom, ``Primer: Value of Section 230,'' Engine, 31
Jan. 2019, https://www.engine.is/news/primer/section230costs.
\2\ The Engine Team, ``The Importance of DMCA for Startups,''
Engine, 4 June 2020, https://www.engine.is/news/the-importance-of-dmca-
for-startups.
Digital Services Taxes are discriminatory, and, while targeting
large, mostly American companies, they impact American startups through
increases in the cost of services like advertising and cloud computing
that startups rely on to launch and grow. In jurisdictions that have
implemented DSTs, large companies have increased costs, something that
is likely to continue as these onerous levies spread.\3\ As the
pandemic continues and countries search for additional revenue sources,
more countries are likely to adopt DSTs at lower and lower thresholds
for companies subject to the tax. For example, the Indian equalization
levy has a revenue threshold of roughly $265,000.\4\ And the patchwork
of varying taxes popping up stands to be impossible for startups to
navigate given the compliance costs and difficulty of determining if
they are subject to the tax jurisdiction-by-jurisdiction.
---------------------------------------------------------------------------
\3\ James Vincent, ``Apple, Google, and Amazon respond to European
tech taxes by passing on costs,'' The Verge, 2 Sept. 2020, https://
www.theverge.com/2020/9/2/21418114/european-uk-digital-tax-services-
apple-google-amazon-raise-prices.
\4\ Asim Choudhury and Aesa Dey, ``INSIGHT: Indian Equalization
Levy Under U.S. Scrutiny--What Comes Next?'', Bloomberg Tax, 2 July
2020, https://news.bloombergtax.com/daily-tax-report-international/
insight-indian-equalization-levy-under-u-s-scrutiny-what-comes-next.
These taxes contravene international taxation norms by
discriminating against U.S. companies, excluding domestic players, and
taxing revenue, rather than profit--especially damaging for startups
that might meet the threshold but not yet turn a profit. To combat
these issues, the framework for digital taxation should receive new
---------------------------------------------------------------------------
attention at the OECD.
Through the Digital Markets Act (DMA), Digital Services Act (DSA),
and Artificial Intelligence Act (AIA), the European Union is leveraging
the notion of digital sovereignty as they attempt to achieve a
technology market comparable to that of the United States. But the
imposition of these heavy-handed regulations is misguided, likely
counterproductive to their goals, and harmful to U.S. startups. As
Engine has long noted, enacting strict rules designed to regulate the
practices of large companies without considering the impacts on the
entire innovation ecosystem is likely to actually cement the standing
of those large companies, while burdening their smaller rivals with
elevated barriers to entry and proportionately higher compliance
costs.\5\
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\5\ Edward Graham, ``Competition Policy Needs Startup
Perspective,'' Engine, 10 Sept. 2019, https://www.engine.is/news/this-
week-in-startup-policy-9/10/19?rq=enacting%20strict%20rules.
The DMA's proposed rules on competition discourage growth by
creating thresholds that impose different rules for companies that
reach a certain size.\6\ Startups shouldn't be discouraged from
attracting users, expanding into new markets, or boosting revenue, as
these thresholds would. The rules would negatively impact mergers and
acquisitions, an integral element of the innovation ecosystem related
to investment in new startups.\7\ Startups rely on the so-called
``gatekeepers'' for low cost services--any regulation that
significantly increases costs for ``gatekeepers,'' could cause an
increase in price of these services and would restrict startup
formation, growth, and their ability to compete abroad. And these
potential consequences mean the U.S. should not import and impose
similar regulations domestically.
---------------------------------------------------------------------------
\6\ Jennifer Huddleston, ``The Digital Markets Act: A Primer,''
American Action Forum, 7 Apr. 2021, https://
www.americanactionforum.org/insight/the-digital-markets-act-a-primer/.
\7\ ``The State of the Startup Ecosystem,'' Engine, April 2021,
https://static1.squarespace.com/static/571681753c44d835a440c8b5/t/
60819983b7f8bela2a99972d/1619106194054/The+State+of
+the+Startup+Ecosystem.pdf.
The DSA fails to recognize the difficult and expensive nature of
content moderation for small platforms and startups. Even though
startups would likely be subject to the lowest threshold under the DSA,
these requirements, along with the potential for significant fines,
could disincentivize content moderation due to increased liability that
nascent platforms cannot afford to shoulder. Sound regulation should
instead balance user safety with preserving opportunities for user
---------------------------------------------------------------------------
expression in a way that will allow startups to grow and succeed.
The AIA amounts to another non-tariff barrier to trade. The
proposed law treats both the AI provider and the user as the creator of
the AI.\8\ It imposes burdens such that European SMEs that might
otherwise use American startups' AI-powered business solutions e.g.,
for hiring or customer service, will likely avoid such technology
solutions altogether. Larger businesses that can afford the compliance
burden might still use AI solutions, but AI startups are unlikely to
overcome the compliance costs and thus will not be able to compete.
This means the law will likely cement the standing of larger players,
while U.S. startups are likely to be shut out of European markets.
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\8\ Benjamin Mueller, ``The Artificial Intelligence Act: A Quick
Explainer,'' Center for Data Innovation, 4 May 2021, https://
datainnovation.org/2021/05/the-artificial-intelligence-act-a-quick-
explainer/.
Onerous regulations like these have a disproportionate impact on
nascent startups. Ultimately, small American startups may be
disincentivized from expanding into the EU given barriers from these
regulations' costs of compliance, potential for fines, and probable
need for legal representation in the EU. In specifically targeting U.S.
companies through digital protectionism, the EU risks hampering
transatlantic trade, limiting options for consumers, and limiting
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opportunity for American startups to enter new markets.
Engine appreciates the opportunity to share the startup perspective
on the importance of robust digital trade measures in a forward-
thinking trade policy, and we look forward to being a resource for your
committees on these issues. We look forward to further engaging with
you on issues affecting startups in the future.
Sincerely,
Engine Advocacy
______
U.S. Global Value Chain Coalition
740 6th Street, NW
Washington, DC 20001
https://usglobalvaluechain.com/
This statement is being filed on behalf of the U.S. Global Value Chain
Coalition--a coalition of U.S. companies and associations--that is on a
mission to educate policymakers and the public about the American jobs
and the domestic economic growth our companies generate through their
global value chains.
Global value chains include those jobs we traditionally associate with
the creation of a product--such as those in a factory or on a farm--as
well as those positions involved in the conceiving of and delivery of
those products--such as design, marketing, research and development,
logistics, compliance, and sales. Simply put, the global value chain
accounts for all jobs that add value from beginning to end to the good
or service sold in the global marketplace. These positions are
essential to the creation or sale of a good or service. Moreover, these
jobs are primarily here in the United States and are usually high-
paying, accounting for much of the value that is paid at the register.
China
Global value chains are dependent upon trade with China to create jobs
and economic opportunities across the United States. For instance,
American companies, and the American workers they employ, design and
market consumer products that are sold in China, in the United States,
and around the world. Although these everyday items--articles such as
U.S. branded clothes, shoes, and backpacks--might be physically
produced in China, they support millions of U.S. jobs in such
disciplines as design, quality control, marketing, and compliance.
Furthermore, chemicals imported from China make their way through a
network of U.S. distributors, employing tens of thousands of Americans
who reformulate, manufacture, market, and distribute into American
industries, including agriculture, automotive, pharmaceuticals,
textiles, plastics, paints and coatings, and more.
The punitive tariffs on U.S. imports from China have been very damaging
to these U.S. global value chains. These tariffs have led to
considerable costs and uncertainty for our members because tariffs are
no more than taxes that U.S. companies pay, which are then passed on to
U.S. consumers in the form of higher prices. In fact, a recent report
by Moody's Investors Services \1\ found ``that U.S. importers absorbed
more than 90% of additional costs'' resulting from the section 301
China tariffs. Even before the coronavirus pandemic, these tariffs have
required companies to make painful choices--usually at the expense of
American jobs--as they figure out ways to manage these new costs.
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\1\ https://www.cnbc.com/2021/05/18/us-companies-bearing-the-brunt-
of-trumps-china-tariffs-says-moodys.html.
We understand USTR is currently reviewing its China policy, but as we
work to reopen the U.S. economy and get Americans back to work, we
request Congress: (1) urge a retroactive extension for product
exclusions that expired in 2020; (2) demand the Administration
reinstate and improve the Section 301 product exclusion process without
further delay; and (3) demand the Administration lift all punitive
China tariffs.
Diversification
It is not easy for companies to shift their global value chains. While
many have worked to diversify their value chains from the start of the
trade war, there are others where it is just not feasible in a short
period of time--if at all. There are many challenges such as ensuring
new vendors can meet capacity, quality, product safety, sustainability,
and social responsibility requirements, the availability of a skilled
work force and needed infrastructure, and testing and auditing
capabilities--just to name a few. In some instances, a product may not
be available from any other source. Further, the coronavirus pandemic
has made shifting supply chains even more complicated with travel
essentially shut down due to global stay at home orders and limits on
corporate travel. This should certainly be factored in as the
Administration reviews current policies.
Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill
(MTB)
The Generalized System of Preferences (GSP) and the Miscellaneous
Tariff Bill (MTB) expired at the end of 2020. Both programs allow
American businesses to use duty-savings to compete internationally,
lower costs for American families, hire more American workers, and
invest in new products. GSP promotes economic and sustainable
development in developing countries by eliminating duties on thousands
of products imported from 119 designated beneficiary countries. The MTB
allows American companies the ability to eliminate or reduce duties on
nearly 2,500 inputs and finished goods not available or manufactured in
the United States. We request Congress renew these critical trade
preference programs quickly to provide certainty and predictability to
American businesses, many of whom are utilizing these programs to help
make and distribute urgently needed personal protective equipment in
response to the coronavirus outbreak.
Punitive Tariffs
Punitive tariffs, and the threat of them, have resulted in price
increases for American consumers, American job losses, and other
irreversible economic damage to the U.S. The retaliation on unrelated
industries by our trading partners due to the Section 232 tariffs on
steel and aluminum is a prime example of how tariffs do not change the
behavior of countries in international trade disputes. Further, the
threat of punitive tariffs from the Boeing-Airbus dispute and the
digital services tax (DST) issue will unnecessarily bring harm to
unrelated industries. Lastly, we do not believe punitive tariffs align
with the worker-centric trade policy agenda of the Biden
Administration.
Thank you for this opportunity to provide a statement.
[all]