[Senate Hearing 117-798]
[From the U.S. Government Publishing Office]
S. Hrg. 117-798
THE PROMISE AND CHALLENGE OF
STRATEGIC TRADE ENGAGEMENT
IN THE INDO-PACIFIC REGION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
MARCH 15, 2022
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
________
U.S. GOVERNMENT PUBLISHING OFFICE
54-364 PDF WASHINGTON : 2024
-----------------------------------------------------------------------------------
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
----------
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
WITNESSES
Lauritsen, Sharon Bomer, principal, AgTrade Strategies LLC,
Washington, DC................................................. 5
Llanso, Emma, director, Free Expression Project, Center for
Democracy and Technology, Washington, DC....................... 7
Shaw, Kelly Ann, former Deputy Assistant to the President for
International Economic Affairs (2018-2019); and partner, Hogan
Lovells, Washington, DC........................................ 9
Wessel, Michael, staff chair, Labor Advisory Committee for Trade
Negotiations and Trade Policy; and president, The Wessel Group
Inc., Washington, DC........................................... 11
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Crapo, Hon. Mike:
Opening statement............................................ 3
Prepared statement........................................... 47
Lauritsen, Sharon Bomer:
Testimony.................................................... 5
Prepared statement........................................... 48
Responses to questions from committee members................ 51
Llanso, Emma:
Testimony.................................................... 7
Prepared statement........................................... 52
Shaw, Kelly Ann:
Testimony.................................................... 9
Prepared statement........................................... 63
Responses to questions from committee members................ 65
Wessel, Michael:
Testimony.................................................... 11
Prepared statement........................................... 67
Responses to questions from committee members................ 74
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 76
Communications
Center for Fiscal Equity......................................... 79
E-Merchants Trade Council, Inc................................... 80
(III)
THE PROMISE AND CHALLENGE OF
STRATEGIC TRADE ENGAGEMENT
IN THE INDO-PACIFIC REGION
----------
TUESDAY, MARCH 15, 2022
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10 a.m.,
via Webex, in Room SD-215, Dirksen Senate Office Building, Hon.
Ron Wyden (chairman of the committee) presiding.
Present: Senators Cantwell, Menendez, Carper, Cardin,
Brown, Bennet, Warner, Hassan, Cortez Masto, Warren, Crapo,
Grassley, Cornyn, Thune, Portman, Cassidy, Lankford, Daines,
Young, and Barrasso.
Also present: Democratic staff: Sally Laing, Chief
International Trade Counsel; and Joshua Sheinkman, Staff
Director. Republican staff: James Guiliano, Policy Advisor;
John O'Hara, Trade Policy Director and Counsel; Mayur Patel,
Chief International Trade Counsel; and Gregg Richard, Staff
Director.
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. The
committee meets this morning to discuss the challenges and
opportunities in stepping up our economic ties with countries
in Asia and the Pacific.
The Indo-Pacific region accounts for half of the world's
population. It is full of like-minded democracies and growing
economies. As one of the gateways to the Pacific, Oregon has a
lot to gain from this opportunity. One in five jobs in Oregon
is trade-related, and those jobs often pay better than do non-
trade jobs.
When you look across the Pacific, there are big markets for
everything, from Oregon blueberries and alfalfa, to
manufactured goods, to services. Raising environmental
standards and ensuring robust labor rights in the region could
also give us the opportunity to level the playing field for
American workers.
Last fall the Biden administration kicked off an effort to
develop a wide-ranging economic framework with several
countries in the region. There is a long way to go before any
such framework comes together, so today's hearing gives the
committee an opportunity to discuss key issues and priorities
at the outset of the process.
First, the United States must fight, and fight hard, for a
free and open Internet. The U.S. sees the Internet as a venue
for free speech and commerce. Authoritarian governments like
China's do not. The competition between those two visions is a
fight we have to win. Otherwise, Americans get hit with a one-
two punch. First, authoritarian regimes block our exports, and
then they export their censorship laws to us.
The most significant example is the Chinese Government and
its Great Firewall. When the Internet began to take off decades
ago, Americans were the first out of the gate, launching
companies with big, innovative ideas. The Chinese Government
decided it could not compete on that level. Instead, it blocked
our firms, ripped off our ideas, and started clone companies
under tight censorship rules. As those Chinese tech firms have
grown, the reach of their censorship has grown also, with
repressive effects on the American people.
The Chinese Government is still not a part of the Indo-
Pacific discussions, nor should it be. Even still, winning the
fight for a free and open Internet requires the United States
to push for digital rules that lock in freedom and openness
with our allies at each opportunity. We know--and Senator Crapo
and I have talked about this--there is bipartisan interest in
fighting this censorship. So our committee is going to watchdog
this issue very, very closely in the days ahead.
Second, our country has to raise the bar on labor rights.
Democrats in Congress fought to make sure that the recent USMCA
would be the strongest agreement in history when it comes to
worker protections. We have to build on that progress, with
enforceable labor obligations that fit the region and the task.
That includes combating the scourge of forced labor, which has
been a priority for the committee. The truth is, forced labor
and economic oppression overall are part of the Chinese
economic model. It is not only morally repugnant, it is a
threat to American workers and jobs.
Senator Brown and I closed a major loophole in our forced
labor law in 2015. Now we have to make sure that the law is
fully enforced. While the United States continues to fight
against forced labor in China, it's also essential to prevent a
race to the bottom on labor rights in other countries also.
Labor rights and environmental protections often go hand in
hand. For example, there is a big need for strong new rules on
subsidized fisheries. In some parts of the world, highly
subsidized and poorly regulated fleets are abusing workers and
massively overfishing. It is not sustainable. Everybody loses,
including the abused workers and Oregon fishing families who
should never have to compete with forced labor.
Third, in all areas of trade policy, we believe here that
sunshine is the best disinfectant. In 2015, this committee
raised the bar for transparency in trade negotiations, because
the American people expect it. That means consultations with
Congress and access to the text of any agreement before it is
signed. Senator Crapo and I have talked about this. We are
Westerners, and for years we go home, we have town hall
meetings, and people would ask about trade agreements, and
nobody in the Congress knew what was in them. So we have to
make sure that the public has access to texts of agreements
before they are signed.
These new discussions in the Indo-Pacific region have to
meet that transparency standard.
Let me close on one final and very important point. While
the committee meets for this hearing, there is a horrible war
happening about 5,000 miles to the east. The events of the last
few weeks show the importance of our economic alliances, as
well as the power they generate for the United States and our
friends around the world.
In this unprovoked, unjustifiable war, Vladimir Putin has
killed thousands of Ukrainians, displaced millions, and
decimated cities. Our country has marshaled the collective
strength of our economic allies to hit Russia with the most
severe economic sanctions in history. Russia's economy is now
in free fall. The country is isolated. Vladimir Putin is the
head of a pariah state.
This is proof that strong economic alliances add up to a
whole lot more than ``soft'' power. The United States is
putting that power to work, punishing Russia's government and
helping in the fight for democracy. The more economic allies
America has, the better.
We thank our witnesses for joining the committee today.
There are lots of issues for us to discuss, major challenges
ahead, and let me recognize my 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.
First of all, I appreciate your holding this hearing today,
and we are in agreement on the importance of strengthening our
economic and trade ties, particularly in the Indo-Pacific area,
but also across the world. Vibrant economic and trade links are
an essential part of building confidence, trust, and
cooperation in different areas of the world and at different
levels of geo-political engagement.
Putin's invasion of Ukraine makes it abundantly clear that
the United States must increase its focus on strategic trade
engagement and, as part of that, reestablish its leadership on
trade relations in the Indo-Pacific region.
For the first time, in January of 2022, the United States
exported more liquefied natural gas, LNG, to Europe than Russia
did. Although there is much more we can do to expedite U.S.
energy exports, our increased trade strengthened our allies'
ability to withstand Russian aggression.
Critically, the Department of Energy must still sign off on
any LNG export to any country with which we lack a free trade
agreement, causing uncertainty for many of our partners. This
is just one example of why we need more trade agreements with
our partners--and the Indo-Pacific is one region, maybe ``the''
one region, where we need them ASAP.
The Indo-Pacific is a dynamic region, perhaps the key to
U.S. economic prosperity. Over two-thirds of all global
economic growth in the last 5 years took place in the Indo-
Pacific. The GDP of just the 11 countries in the Comprehensive
and Progressive Trans-
Pacific Partnership, or what we call the CPTPP, is over $10
trillion.
Regrettably, we are losing ground in the Indo-Pacific.
Behind me are two maps comparing whether China or the United
States is the more important trade partner for a particular
country. The 2002 map shows the United States as the more
significant trading partner for most Indo-Pacific countries.
The 2018 map shows the relationship turned upside down, in
China's favor.
Even more regrettably, the situation with China in the
Indo-
Pacific region is likely to become worse--if not entrenched--
unless we change course. The Biden administration failed to
initiate any new trade negotiations last year, but China helped
finalize the trade agreement that it backs. Known as the
Regional Comprehensive Economic Partnership, or RCEP, it lacks
any disciplines on state-owned enterprises, labor, or the
environment, and worse, it essentially endorses China's limited
intellectual property protections. With RCEP having only
entered into force this January, China is already better
positioned than the United States in most of our Asian
partners' markets.
On top of that, China is now pushing to join CPTPP, which
would leave the United States even further behind in the Indo-
Pacific region. To reestablish the U.S. economic momentum right
now, the Biden administration must reverse course and chart an
ambitious trade policy.
Although the administration announced that it seeks to
pursue an Indo-Pacific Economic Framework, or IPEF, it
unfortunately indicated that this framework will not include
any market access component. Certain aspects of what I am
hearing about IPEF are troubling--including the notion that it
could be used to advance the tax deal the administration
negotiated at the OECD that would make the U.S. less
competitive, even before Congress agrees to accept such an
outcome for the United States.
The administration's present position of leaving out a
market access outcome makes no sense. Economically, our
workers, businesses, and farmers will lose out on important
opportunities if we stay on the sidelines. America's leading
innovators will also be undermined if we do not lay down a
foundation for a strong intellectual property rights system. In
fact, one way to redress the economic impact of the
administration's current misguided inflationary policies is to
promote market access.
Export-oriented jobs typically pay 16 percent more on
average in the manufacturing industries and 15.5 percent on
average in the services industries. We must strategically
deepen our trade ties to ensure we and our allies have secure
access to energy, critical minerals, and sensitive
technologies. We must also develop rules for digital trade that
enshrine openness and freedom. If we do not write the rules,
China will.
Accordingly, this hearing is an excellent opportunity for
the Finance Committee to help chart the course that the United
States must take to have a strategic and sensible trade policy
in the Indo-Pacific.
Mr. Chairman, once again I thank you for organizing this
hearing, and I look forward to hearing the testimony from our
witnesses.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. Thank you, Senator Crapo. And I know this is
another area where we have an opportunity to bring this
committee together and proceed in a bipartisan way.
Ms. Sharon Bomer Lauritsen of Washington is the founder of
AgTrade Strategies LLC, a specialty consulting service on U.S.
agriculture trade policies, focusing on expanding exports of
American agricultural products, food, and beverages. And she
has extensive experience in government as well.
Ms. Emma Llanso from Washington is director of the Center
for Democracy and Technology's Free Expression Project, where
she has been doing good work to promote law and policy that
promotes Internet freedom.
Ms. Kelly Ann Shaw of Washington is a partner at Hogan
Lovells; a lecturer at Columbia Law School; and she has deep
knowledge of international trade, investment, economic law, and
policy drawn from her service at the White House, the Ways and
Means Committee, and the U.S. Trade Representative's office.
And Mike Wessel, who is well-known to this committee, is
president of the Wessel Group, a public affairs consulting
program, and advisor to the USTR and the Department of Labor.
He also serves as an original member of the U.S. China Economic
and Security Review Commission, and we have known each other
for many years, going back to his days on the staff of House
Democratic leader Richard Gephart.
So we have a terrific panel.
Let's start with you, Ms. Lauritsen.
STATEMENT OF SHARON BOMER LAURITSEN, PRINCIPAL, AGTRADE
STRATEGIES LLC, WASHINGTON, DC
Ms. Lauritsen. Chairman Wyden, Ranking Minority Member
Crapo, and distinguished members of the committee, thank you
for the opportunity to appear before you today to share my
thoughts on the challenges and opportunities for America's
farmers and ranchers in the Indo-Pacific region. I appreciate
you making my full written statement part of the record.
One key element to enhancing the sustainability of American
farms and ranches is investing time, energy, and ambition to
negotiate new trade agreements to increase our competitiveness
and open export markets. And there is no better place than to
focus on the Indo-Pacific region.
But the unfair barriers to U.S. agricultural exports in the
region are many--both regulatory and tariff. Even if non-tariff
barriers are resolved, U.S. agricultural exports, including to
countries such as China, Thailand, and Vietnam, are often at a
disadvantage when our products face higher tariffs in countries
that already have preferential tariff agreements with U.S.
competitors.
We know that preferential trade agreements benefit our
farmers and ranchers. One quick example: U.S. agricultural
exports to South Korea have increased 54 percent with
implementation of our FTA in 2012. We are celebrating its 10-
year anniversary this week.
The administration's recently announced Indo-Pacific
Economic Framework provides an opportunity to create a fair and
level playing field for our exports in the region. But to have
meaningful impact for fair and resilient trade for U.S. food
and agricultural products, I believe the following elements
need to be considered for what I call IPEF.
First, the administration has already identified science-
based agricultural regulation as one pillar of IPEF. We need
disciplines to ensure food, animal, and plant health and safety
measures, known as SPS, and those in the standards area like
labeling, known as TBT, are backed by science or international
standards and are not disguised protectionism. Consideration,
however, should be given to providing least-developed countries
assistance to meet SPS and TBT-plus rules. Another element of
this pillar would be to gain commitments from trading partners
to not create new unwarranted trade barriers in the future.
Second, establishing strong SPS, TBT, and other rules such
as import licensing, however, is not enough. Using IPEF to
actually resolve unwarranted, nontariff barriers is important
up front so that U.S. farmers and ranchers can actually realize
improved trading conditions in the near term.
Third, many of the Indo-Pacific countries have high most-
favored nation agricultural tariffs compared to the U.S.
average applied tariff of about 5 percent. I recognize the
legal limits that the administration may have in negotiating
U.S. tariffs without Trade Promotion Authority. But even if
Congress does not pass TPA in the near term, opportunities
exist to negotiate with our trading partners to lower MFN
tariffs, including to U.S. levels, to help level the playing
field.
Fourth, IPEF can define a common vision on agricultural
sustainability, sustainable food systems, and food security.
And to advance sustainability, supporting the use of new
agricultural technologies with appropriate regulatory systems
would be of benefit to farmers throughout the Indo-Pacific
region.
Fifth, international trade is obviously one element in
building stronger foreign relations in the Indo-Pacific region.
IPEF should bring as many countries together as possible, since
the more inclusive the IPEF is, the stronger our economic ties
and foreign policy objectives will be in the region.
And finally, sixth, our traditional congressionally
approved FTAs have dispute settlement mechanisms built into
them. To have any meaningful or real results, IPEF provisions
also need to be enforceable, and of course USTR will then need
to do the follow-on work to enforce them.
With more than 20 percent of agricultural production being
exported, our rural communities in all 50 States depend on
finding strong, stable, and predictable markets. The U.S. trade
agreements do just that, and I believe that with creative
thinking and ambition, the IPEF can also have economically
meaningful results for a sustainable future.
Thank you.
[The prepared statement of Ms. Lauritsen appears in the
appendix.]
The Chairman. Thank you very much.
Ms. Llanso?
STATEMENT OF EMMA LLANSO, DIRECTOR, FREE EXPRESSION PROJECT,
CENTER FOR DEMOCRACY AND TECHNOLOGY, WASHINGTON, DC
Ms. Llanso. Chairman Wyden, Ranking Member Crapo, and
members of the committee, thank you for the opportunity to
testify before you today. My name is Emma Llanso, and I am the
director of the Free Expression Project at the Center for
Democracy and Technology, a nonpartisan, nonprofit 501(c)(3)
charitable organization dedicated to advancing civil rights and
civil liberties in the digital world.
At CDT, I have worked for more than 12 years to promote law
and policy that support Internet users' rights to freedom of
expression, access to information, and privacy in the U.S.,
Europe, and around the world. So I am grateful for the
committee's focus on the promises and challenges in the digital
sphere that will arise as the United States pursues closer
trade relationships in the Indo-
Pacific.
Over half of the world's young population lives in the
Indo-Pacific region, and the region accounts for a little over
half of the world's Internet users. Internet use in the Indo-
Pacific region is expected to grow to up to 3.1 billion users
by 2023. As Chairman Wyden noted, there is an urgent need to
counter the authoritarian model of Internet regulation promoted
by the Chinese Government.
China's use of Internet shutdowns, its decades-long project
to build a Great Firewall that blocks outside information
sources, and its mass and discriminatory surveillance of its
population threaten human rights and impede the development of
an open digital economy. A lack of respect for human rights and
weak rule of law in China means that it is extremely difficult
for U.S. companies to operate responsibly in the country, which
has only further cemented the Chinese Government's grip on its
domestic communications network.
The past 3 weeks have also provided a stark example of the
threats to human rights from digital authoritarianism in the
context of the Russian Government's invasion of Ukraine. The
Russian Government has blocked access to social media services
that dare to attach fact checks to state propaganda, and has
passed a new ``fake news'' law that prohibits anyone from
knowingly disseminating false information about Russia's
military--which includes referring to its actions in Ukraine as
``an invasion.''
As a result, many media outlets have left the country, and
many online service providers have shuttered their services or
are blocking access by Russian users, leaving the Russian
people with few information alternatives to state propaganda
and strengthening the government's control.
Unfortunately, there are an alarming number of recent laws
and legislative proposals across the Indo-Pacific region that
also seek to control speech and access to information,
subjecting Internet users to surveillance, and giving state
authorities control over Internet infrastructure. The Indian
Government has imposed more Internet shutdowns than any country
in the world, with 109 shutdowns recorded in 2020 alone, often
in response to military crackdowns or protests. And the 2021
Information Technology Rules in India put employees at risk of
being jailed if companies do not respond promptly to take-down
orders.
The IT rules are likely to serve as a model for other
legislation in the region. Bangladesh, for example, has already
proposed similar guidelines, and Myanmar is currently
preventing the staff of telecom provider Telenor from leaving
the country while it considers the sale of the company.
The U.S. has the opportunity, including through the Indo-
Pacific Economic Framework discussions, to promote an
alternative model of Internet regulation and advancement of
rights respecting a multi-stakeholder approach to Internet
governance that ensures the participation of civil society and
technical experts in the development of technology policy, and
that prioritizes maintaining an open, interconnected Internet
in the region and worldwide.
It is vital that the U.S. promote the rule of law and seek
commitments to uphold international human rights, which are
essential at countering digital censorship and surveillance
practices, and which in turn benefit the economy. Online
service providers and other businesses need the legal certainty
that comes from the rule of law in order to operate globally.
And, when national regulations comply with international human
rights' obligations, they both protect people's rights and
bring economic benefits by more closely harmonizing regulations
across borders.
To be clear, this does not mean that the U.S. Government
should go easy on U.S. tech companies, or that they should
challenge every regulation passed by another country as a trade
barrier. In order to be a credible leader on Internet policy
issues worldwide, the U.S. must get its own house in order,
including by passing comprehensive Federal privacy legislation,
reforming its intelligence surveillance practices, and by
addressing competition and concentration within the tech
industry.
For the U.S. to successfully promote the free flow of data
and to reject overly restrictive national data protection or
intermediary liability laws that can serve as vehicles for
censorship and surveillance, the U.S. must model a rights-
respecting vision for the Internet. And other nations must be
able to have confidence that, for example, their citizens' data
will be protected from government and corporate abuses when
sent to the U.S.
Globally, the U.S. should seek to build on existing
commitments to digital rights, including through the Freedom
Online Coalition, which was launched 11 years ago and which the
U.S. was a founding member of. The U.S. should seek additional
commitments from governments in the region to refrain from
imposing Internet shutdowns or general monitoring obligations,
to reject extra-legal censorship, to limit the use of
surveillance technologies, and to ensure access to end-to-end
encrypted services.
The U.S. should also promote opportunities for shared
learning across governments and with the involvement of human
rights advocates, technical experts, and other civil society
representatives, especially around emerging issues such as
artificial intelligence. The IPEF process should coordinate
with a variety of such learning and information-sharing forums
that already exist across the U.S. Government, including the EU
Technology Trade Council, and the Freedom Online Coalition. And
the IPEF process could develop cooperation mechanisms on
specific topics between the U.S. and governments in the
region--for example, supporting increased information sharing
on ransomware and other emerging cyber-threats modeled after
the U.S.-EU joint initiative on ransomware.
In short, there are a great many opportunities to defend
human rights through engagement on digital trade issues, and a
powerful need for the United States to advance a vision for how
to do so.
Thank you for the opportunity to speak before you today,
and I look forward to your questions.
[The prepared statement of Ms. Llanso appears in the
appendix.]
The Chairman. Thank you very much.
Let's go on to Ms. Shaw.
STATEMENT OF KELLY ANN SHAW, FORMER DEPUTY ASSISTANT TO THE
PRESIDENT FOR INTERNATIONAL ECONOMIC AFFAIRS (2018-2019); AND
PARTNER, HOGAN LOVELLS, WASHINGTON, DC
Ms. Shaw. Mr. Chairman, Ranking Member Crapo, distinguished
members of the committee, thank you for the opportunity to
discuss U.S. trade and economic engagement in the Indo-Pacific,
which is the world's most dynamic region.
Prior to my current role in private practice, I was
privileged to spend a decade in government service, negotiating
with our trading partners in the Indo-Pacific. So, while I draw
upon these experiences, the testimony I provide this morning is
solely my own.
How we structure and nurture our economic relationships in
Asia today will go far in determining whether the United States
remains the world's leading economic power. But the stakes are
about more than just whether the United States will continue to
be number one. Democracy itself is under threat, not just in
Europe, but in Latin America, Africa, Asia, and the Pacific.
The rise of autocracy and state capitalism threatens our
economic values and freedoms every bit as much as the political
freedoms that undergird successful democracies.
Historically, trade has been one of our most important
tools for pushing back against authoritarianism. The United
States led in creating a postwar global trading system that,
for many years, helped drive U.S. jobs and growth and widen the
circle of freedom and prosperity.
Now, at a critical moment when democracy is under threat,
we have retreated from our leadership role and abandoned our
longstanding view that countries that trade together are less
likely to go to war against each other. Trade is a difficult
issue for democracy, but rather than take the lead in defining
a new approach for today's challenges--one that strengthens
U.S. manufacturing, unleashes innovation, protects our workers,
and advances our values abroad--the United States has given up
saying anything at all. We have become mired in our own
domestic politics.
As a result, today the United States has no meaningful
offensive trade strategy. In no place is this current lack of
strategy and leadership vacuum more dangerous to long-term U.S.
strategic, economic, and commercial interests than in the Indo-
Pacific.
The Indo-Pacific is our backyard, filled with military
allies and important trading partners. Two-way trade with the
region totals upward of $1.75 trillion. But when it comes to
our economic vision, the concept of a free and open Indo-
Pacific has turned into something we say, rather than something
we do.
This year, as the ranking member pointed out, the largest
trade agreement in history, RCEP, encompassing one-third of
global GDP, 15 Indo-Pacific countries, 53 percent of world
exports, and 2.3 billion people, entered into force with China,
and not the United States, at its helm. Moving forward, Beijing
and not Washington will have outsize influence in setting
future standards and regulations for Asia and the Pacific.
Lower tariffs, common rules of origin, and eased customs
procedures will help China lock in regional supply chains,
attract new foreign investment, and expand its Belt and Road
Initiative.
U.S. manufacturers, workers, and farmers all stand to lose
from the deal. And if China manages to accede to the other
major regional trading bloc, the CPTPP, the results for U.S.
economic interests will be catastrophic.
Multilateralism will not save us. The World Trade
Organization is on the brink of irrelevance, after 2 decades of
atrophy. Regionalism, and regional trade rules, are now king.
Even before RCEP, more than 50 percent of global trade occurred
outside the WTO system through more than 300 bilateral and
regional trade agreements. Seventy-five percent of the EU's
trade, for example, is governed under these preferential
agreements, which means the world is moving on without us.
The recently announced Indo-Pacific Economic Framework is a
modest step in the right direction but risks turning into
another failed exercise. Few details have been announced
regarding participating countries, the scope of modular
commitments, or how the project will be more robust than CPTPP
without any significant trade components.
It is difficult to imagine IPEF having a meaningful impact
on long-term U.S. economic interests without enforceable
commitments on market access, rules of origin, technical
barriers to trade, services, IP investment, or state-owned
enterprises, to name a few. A trade pillar focused exclusively
on digital trade, forced labor, or trade facilitation is not
enough to extract meaningful concessions from our trading
partners or shape the region moving forward.
Congress should push the administration to broaden its
ambition so that we are setting rules, not merely making
suggestions. Instead of starting from scratch, the United
States should also seriously consider rejoining the CPTPP, and
to do so quickly. Despite some of the deep fundamental flaws of
its predecessor, the TPP, many of the provisions in the
original deal were groundbreaking. It would be straightforward
enough for the United States to return to the negotiating table
to harvest the provisions that work, jettison those that do
not, and ultimately keep China out of the deal.
To conclude, we need a trade strategy for the Indo-Pacific
that works for Americans and works for democracy--one that
serves both our economic and commercial interests, as well as
our strategic ones. Above all, we need to be bold, and we need
to act quickly.
Thank you.
[The prepared statement of Ms. Shaw appears in the
appendix.]
The Chairman. Thank you very much.
Let's go to Mr. Wessel. He is out in cyberspace somewhere,
I believe.
STATEMENT OF MICHAEL WESSEL, STAFF CHAIR, LABOR ADVISORY
COMMITTEE FOR TRADE NEGOTIATIONS AND TRADE POLICY; AND
PRESIDENT, THE WESSEL GROUP INC., WASHINGTON, DC
Mr. Wessel. I am, and am now unmuted.
Mr. Chairman, Ranking Member Crapo, members of the
committee, it is an honor to be here. It is an honor to be here
before you today.
My name is Michael Wessel, and I am here on behalf of
organized labor, as the staff chair of the Labor Advisory
Committee for Trade Negotiations and Trade Policy. Labor
appreciates the seat you are providing at the committee's
table. A disclaimer, however: my comments are my own.
While some are posturing that we need to advance the IPEF
as a way of being engaged in the region, we already are
engaged. We have free trade agreements with three countries,
and a separate trade agreement with Japan.
We engage in hundreds of billions of dollars in trade with
the region. Last year, we had a trade deficit of $33 billion
with India, more than $60 billion with Japan, and $90 billion
with Vietnam. We have more than $1 trillion in foreign direct
investment in the Indo-Pacific. So, the real question is not
whether we should be engaged, but what the future architecture
of that economic engagement should be.
Others want to know what the impact of the IPEF will be on
them and their families. They want--they deserve--a better idea
of how the IPEF will advance rather than undermine their
economic interests.
Let me focus quickly on three issues: workers' rights and
corporate accountability, digital trade, and resilient supply
chains.
The number one concern for organized labor is how workers'
rights will be protected, enforced, and promoted in the region.
Workers' rights are key to ensuring that trade will promote
growth and opportunity for workers, rather than driving a race
to the bottom.
Administration officials have indicated that workers'
rights will be part of the IPEF, but how broad that coverage
is, what standards will be applied, and what enforcement
mechanisms will be included, is an open question. This, coupled
with enforceable corporate accountability measures, must cut
across all of the separate modules in the IPEF.
On digital trade, there are highly complex issues that will
require enormous study and evaluation. Rushing about new
digital trade measures could have serious adverse consequences
for U.S. economic and national security interests. Congress
must be broadly engaged, along with other stakeholders, in
assessing what the road ahead should look like. Digital trade
is a worker issue. More and more jobs are susceptible to
outsourcing over digital platforms. Digital platforms are being
used to surveil workers. They are vehicles for
misclassification, and they are jeopardizing their privacy and
security.
Creative artists see their very livelihood under attack,
and their livelihoods depend even more on strong safeguards.
One website in the Philippines advertised that it provides
health-care business services for savings of up to 75 percent
over what a U.S. employer would have to pay. Yes, that is
already happening. But a digital trade agreement can accelerate
that offshoring, or with proper enforceable workers' rights,
corporate accountability, and other measures, it can help
rebalance the playing field.
Digital trade cannot be the only component of the IPEF and
should not be part of an early harvest strategy. Digital trade
is a real focus of organized labor.
Supply chains are no longer just discussed in board rooms,
but at kitchen tables as well. Our citizens have had to
confront where to get COVID tests, PPE, toilet paper, and other
goods. Auto workers wonder where the semiconductors will come
from so that they can return to their jobs. Other assembly
lines have been slowed or idled by other supply chain
bottlenecks. What will a resilient supply chain module in the
IPEF mean for them?
For many workers, the best supply chain is one that is here
in America. We know that we live in a global marketplace where
we buy and sell products around the world--preferably, we would
sell more, a lot more. Resilient supply chains must be about
more than simply shifting supplies from China into other
countries in the Indo-Pacific. That will have only limited
benefits and will continue our reliance and dependence on
others for our products.
Any approach on supply chains must support the efforts of
this and the last President to address our critical needs.
Mr. Chairman, Ranking Member Crapo, organized labor
supports international engagement and strengthening our
relations around the globe. Engaging in the world is an
imperative. Foreign policy, however, has been more a driver of
trade agreements than the economic results they produce. The
public rejects that approach.
A properly designed IPEF, along with other provisions in
the broader Indo-Pacific strategy, can truly be a course for
progress. That must be our goal. We look forward to working
with the committee and the Congress in the coming days.
Thank you.
[The prepared statement of Mr. Wessel appears in the
appendix.]
The Chairman. Thank you, Mr. Wessel. We have appreciated
all your assistance.
Also, for people who are paying attention to this
discussion right now, they are being introduced to some new
acronyms, some new lingo in the foreign policy and trade area.
An Indo-Pacific Economic Framework is what we are talking about
when you hear Senators talking about IPEF.
Okay, let's go now to you, Ms. Llanso, because China keeps
building the Great Firewall higher and higher and higher each
year. And in doing so, they suppress political dissent, which
is really a human rights disaster, and it is no coincidence
that the same laws that crush free speech in China also prevent
American companies from competing fairly in the largest country
on earth. And I think what is ominous is this repressive model
is starting to spread like dominoes throughout the Indo-Pacific
region.
So we obviously want to push back against censorship in
China and elsewhere, and we also want to begin to flesh out the
trade rules of the road as relates to the digital sector. The
Internet is the shipping lane of the 21st century, as we have
come to define it here in this committee. So my first question
to you, Ms. Llanso, is, we want to get other countries,
particularly ones that might be interested in joining this
Indo-Pacific Economic Framework--perhaps India, Vietnam, and
others--to join with us. Because, if we have a bigger
coalition, we are stronger in pressing back against China's
censorship. How do we go about doing that?
Ms. Llanso. Thank you very much for the question, Senator
Wyden. I think it is going to involve a mix of various
strategies.
I think one of the most important things to do in the Indo-
Pacific region is to understand what are some of the
motivations behind some of the more concerning tactics that we
have seen, or concerning elements of the legal frameworks. For
example, in my testimony I talk a lot about this issue of
personnel localization, or local presence rules. These are
proliferating across the region for various reasons.
By requiring local presence in a country, it gives that
nation jurisdiction over a U.S. tech company. That can be
abused in certain ways. And we have certainly seen it be abused
in China, for example, to threaten to jail or fine employees
who are in country in order to make a company comply with
censorship demands or provide access to user data. But there
are also reasons, for example legitimate law enforcement needs
to access user data, or concerns about the security and privacy
of user data if U.S. tech companies are not confined by the
laws in a particular country.
So that is where I think the United States could really
kind of look at addressing those underlying impacts, including
through whatever updates are needed to the laws in the United
States, which I do hope include passing Federal privacy
legislation and updating the U.S. foreign surveillance laws.
Being able to kind of come to the table willing to talk
about addressing those core needs will also give room to the
U.S. to set some really clear bright lines around human rights
and the rule of law in the region, to reject issues like
Internet shutdowns or general monitoring and filtering
obligations in the country, and to push for limits to
surveillance laws.
The Chairman. I know we are going to call on you frequently
in this area, particularly because of your work focusing on the
intersection of human rights and technology that is especially
important right now. I recently got asked by the press what the
importance of encryption is because I kept talking about it in
the context of Ukraine and Russia, and I said, ``Let me be
really blunt about this. Encryption there is literally a matter
of life and death. It is just that simple. If you do not
protect people's data with strong encryption, you can have a
threat to their lives.'' So, thank you for your good work.
A question for you, Mr. Wessel, as I wrap up my first
round. What do you think the lessons are, Mr. Wessel, as it
relates to what we learned with the USMCA, the U.S.-Canada-
Mexico Agreement, as it related to protecting workers? And we
want to make sure that workers are protected on both sides of
the ocean. We want to make sure that we use the innovative
steps that we have recently put together with respect to worker
protection and see if there are some lessons learned for going
forward in the Indo-Pacific region.
You were instrumental in working with us on what came to be
known--and I am proud to be associated with Senator Brown on
this--as the Brown-Wyden rapid response mechanism to respond to
labor violations at the facility level in Mexico. What are the
lessons from USMCA that we can employ to protect workers, both
in the Indo-Pacific region and our workers who are counting on
those good-paying jobs?
Mr. Wessel. Thank you for the question, and thank you for
your leadership, along with Senator Brown and others, in
bringing us the rapid response mechanism. It was an innovative
and ground-breaking approach in terms of labor rights
enforcement, coupled with what the USMCA had as part of its
definition of what the rights should be to be enforced. It
ensured for the first time
facility-level enforcement mechanisms, replacing essentially
state-to-state, so that we knew that the bad actors would pay
the price for any abuses of labor rights.
There has been an evolution, as you know, of labor rights
over the last 40 years, from simple unilateral approaches to
enforce your own laws, to new standards. The USMCA was
groundbreaking in terms of its labor chapter. We need to
include a similar concept in any IPEF that defines the rights,
and couple it with an enforcement mechanism that is accessible,
timely, and as much as possible, facility-specific.
The Chairman. Thank you again for your innovative thinking
on this, and we will be working with you, I know.
Senator Crapo?
Senator Crapo. Thank you very much, Mr. Chairman.
Ms. Llanso, I am not going to ask you a question because
Senator Wyden really covered the issue. I just want to
highlight that the points you raise show how critical it is
that we deal with our digital policy globally in an effective
way. This is not just an issue of freedom and human rights, it
is an issue of economics and trade and, frankly, national
security. So I just want to highlight that I agree with your
testimony.
I want to go first to Ms. Lauritsen. You already answered
this question, but I want to ask it again and ask you to just
briefly restate your position here, because it is so important.
I am glad that the administration's proposed IPEF may
include what it describes as ``binding rules,'' particularly if
they extend to the digital trade and agriculture market access
and so forth. But to ensure that our free trade agreement rules
are binding, because we can enforce them through dispute
settlement provisions, is key, in my opinion.
Are binding rules possible in IPEF if it lacks a dispute
resolution mechanism?
Ms. Lauritsen. I guess what I would suggest in response,
Senator, is that there are different types of dispute
resolution mechanisms. Clearly, having something that is
binding, such as what Congress has already approved in USMCA,
is very helpful. But other mechanisms can also be through
mediation, or actually forcing your trade and your agriculture
officials to sit down and hash out how to fix particular
problems. But clearly, having a binding agreement is critical
in the end if all else fails.
Senator Crapo. I agree with you, because we can force them
to hash it out, which they do very well and very long, and they
never get to a resolution sometimes.
Ms. Shaw, could I ask you, quickly, to answer the same
question? Because I have another question for you.
Ms. Shaw. Sure. Absolutely. And thank you, Senator. You
need a stick. And there are a lot of different ways to organize
an enforceable mechanism. But at the end of the day, you need a
stick. And traditionally we have done that through the threat
of removing preferential market access, or through tariffs. It
is difficult to see, absent that, what could really enforce the
agreement, but it is important not only to ensure that other
countries abide by the rules that they negotiated but also to
incentivize investment by the private sector to make sure that
industry has sufficient certainty that those rules will remain
in place.
Senator Crapo. All right; thank you very much. And, Ms.
Shaw, your expertise is quite unique. You were a former
negotiator at the Trans-Pacific Partnership talks, also a key
Trump administration official with responsibility for managing
the U.S. economic relationship with China.
TPP is now claimed to be outdated with respect to China
because it was negotiated during the Obama administration--so
long ago.
Every witness, as I understood your testimony, agreed that
we have to get engaged. We have to get off the sidelines and
back in the game. But it is not clear that there is agreement
among the witnesses as to what that engagement should look
like.
We have the IPEF--and we have heard some discussion about
that--which appears to be the current approach that the
administration is pursuing. We have the TPP, or maybe now it is
the CPTPP. It is kind of unclear whether that is one or two
different things. But I was always discouraged that we stepped
off to the sidelines and did not get back to reengage.
So my question to you is, given that we need to be engaged
and get off the sidelines, what is the vehicle? What do we need
to do?
Ms. Shaw. Thank you for the question. If IPEF is a modest
step forward, joining CPTPP would be a giant leap. But that
still does not get us all the way. There is a lot of work to be
done.
First and foremost, we need strong enforceable commitments
on trade. We are losing with respect to market access in China,
the European Union, and other countries that are out there
negotiating the rules without us. CPTPP is a flawed agreement.
There is a reason why it did not have the votes in Congress.
There is a reason why both major presidential candidates came
out against it. But with that said, it is fixable.
As I noted in my opening remarks, there were a lot of
provisions that were groundbreaking, specifically for the
region--provisions on telecommunications, on services and, at
the time, provisions on labor and the environment as well. But
we can go further. And negotiating strong provisions on SOEs,
labor, environment, going further in agriculture and market
access, are things that we can do because our CPTPP partners
would be open to doing that. But I think we need to do so, and
we need to do so quickly before the opportunity closes.
Senator Crapo. Well, thank you. I appreciate it, and I
agree with your answer. As I noted in my introductory remarks,
China is seeking to join. They see it. Even though they just
got their broader agreement agreed to in January, they
understand where the game is and are getting engaged. I think
the United States needs to do the same.
The Chairman. Thank you, Senator Crapo, and I know we are
going to be working together on these issues.
Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman. I thank you and
I thank Senator Crapo, and if anything, I see a Northwest
delegation here who should know, and does know, how important
trade is. And I definitely think we think about it a little
differently maybe than some parts of the world. I get so
challenged sometimes talking about it. I just say, ``You need
to know that we were trading with China before Lewis and Clark
showed up.''
So that means we are going to want to continue to open
market access. And when you think about the Northwest economy,
whether it is apples or airplanes or software, more than 50
percent of each of those markets are, you know, international
trade--or I should say wheat is 90 percent.
Okay, so my question is--I agreed with a lot that you said,
Ms. Shaw, because dissecting trade as an avenue against
authoritarianism is something I care immensely about. It took a
20-year-old staffer on my team to just say ``trade changes
culture.'' Like, yes, of course, but I think people somehow
have forgotten that trade changes culture. And part of what we
are trying to do is open up and have more stable democracies
around the world. And that is why we engage in trade.
So I agree with you that we need to use our leadership. If
you are not there--I remember a trip to Egypt and the change
after the riots that took place, and we said to the embassy,
``Let's go talk about wheat,'' because this was all about the
price of bread. And they said, ``Oh, no, no, no, let's not.'' I
said, ``What do you mean?'' ``Oh well, we have already lost too
much market share to the Canadians. They do not want to hear
from us.''
So, losing market share is an irreplaceable problem, and if
you are not at the table, you are not in the current
negotiations. Losing market share is not just losing imports or
our exports, it is losing, ultimately, in the competitive game
So my one thing is that--you know, I know your past role in
the administration--I would characterize the Trump
administration's as a tariff-first approach, and I felt very
challenged by that, given the impacts that we saw. We had
apples face a 70-percent tariff. India used to be the second-
largest export market for Washington apples before the Trump
administration's trade war. And now there is a huge decrease
from last year.
What should the U.S. be doing to end retaliatory tariffs in
India and elsewhere in the Indo-Pacific?
Ms. Shaw. Well, thank you so much for the question,
Senator, and I should say I was born and raised in the great
State of Washington, so I think you will find my views on trade
are quite similar to yours, just given the importance of trade
that I saw growing up.
The first step is to be engaged. It is difficult to extract
meaningful concessions from our trading partners unless we are
at the table talking to them about these issues. And
unfortunately, there was retaliation imposed as a result of
some of the trade actions that we took.
But at this point in time, we need to talk about how we can
advance our mutual interests. So I would encourage the
administration to be as bold as possible, and Congress, in your
role, to continue instructing them in what we need to move
forward on these issues. But certainly, we have a number of
challenges related to India. It is the world's largest
democracy and a partner that we want to work with strategically
in the region. So we are just going to have to roll up our
sleeves and figure it out.
Senator Cantwell. Do you think we should get rid of these
retaliatory tariffs?
Ms. Shaw. In terms of India's tariffs on us, or----
Senator Cantwell. The fact that--yes--the fact that--
listen, I think what you have learned when you grow up in the
Northwest is that if you start this fight, it is going to have
consequences. And so, we are in disputes on the solar stuff,
and it is 10 years later--10 years later, and nothing has
happened. So, we basically slowed things down.
So I do agree with your viewpoint, which is, if you want to
define the debate, you have to be in the debate. And I
personally believe we should be defining this debate all over
the place. If you are in the debate, you can say, this is what
countries need to do on the digital side. This is what you need
to do if you want to adhere to democracy. This is what you want
to do if you want to adhere to improving and enforcing as we
did with Mexico, building capacity so you actually have
enforcement of the laws; not just agreements, but actual
enforcement. So I just think right now that we have to end
these retaliatory tariffs. The retaliatory tariff issue is
costing us, to say nothing of the supply chain problems that we
have.
So farmers are really taking it right squarely on the nose,
and we need to help.
Ms. Shaw. I certainly agree with that. Our struggles with
India are longstanding and deep. They have a lot of challenges
in terms of the broader landscape of trade issues. But we are
going to have to figure out a way to use the leverage we have
to get them to peel back some of the trade barriers they impose
against us.
But I agree with you. I think they are a strategic partner,
and I think we need to be at the table.
Senator Cantwell. Thank you, Mr. Chairman.
The Chairman. Well said, as always, Senator Cantwell.
The next three are Senator Grassley, Senator Menendez, and
Senator Cornyn.
Senator Grassley?
Senator Grassley. Thank you, Mr. Chairman, and thank you
for bringing some trade issues to this committee, because it is
not being discussed much in this town at all, and I am
disappointed in that.
So I am going to start with Ms. Lauritsen. The Indo-Pacific
strategy mentions several ways to improve trade in this region,
yet agriculture was not mentioned once. I have serious
concerns----
[Cell phone rings.]
Senator Grassley. I'd better put this on quiet.
I have serious concerns about U.S. agriculture producers
being left behind in this economic framework. We also see this
administration falling behind on confirming nominees to key
trading posts. USTR still does not have a Chief Agricultural
Negotiator, and USDA does not have an Under Secretary for Trade
and Foreign Affairs.
Considering your experience at both USDA and USTR, can you
tell me what the administration is losing by not having Senate-
confirmed leadership in these positions?
Ms. Lauritsen. Well, thank you, Senator, and I agree with
your sentiments. I was a civil servant heading up the
Agriculture Office at USTR, and I can assure you that having
your political and
Senate-confirmed bosses in place is important in order to have
agriculture be part of the discussion among the political and
the White House engagement.
So, I think it is extremely important. It is important also
to be able to engage with other countries, because many
agriculture issues are going to be political. So you need a
political person there to push, to drive, to lead, and to have
the vision to move forward. And this is one of those areas in
IPEF where making sure you have a strong agriculture voice at
the political level within the administration will be important
to make sure it gets included as a part of any negotiation.
Senator Grassley. Also for you: one of my top concerns is
seeing China take serious action to expand its foothold in the
Indo-Pacific region. You noted in your testimony that other
countries are not standing still, and the U.S. farmers are
losing market share.
Do you feel that the Indo-Pacific Economic Framework is the
best vehicle for increasing our engagement in the Indo-Pacific
region?
Ms. Lauritsen. Thank you, Senator. Well, in full
disclosure, I was one of the negotiators of the Trans-Pacific
Partnership. So I feel that that agreement and the CPTPP would
be particularly important and possibly easier to benefit
American farmers and ranchers.
I recognize there are a whole bunch of other issues that
make it difficult, but that might be an important vehicle that
might be able to be achieved more quickly if there was a
political will on the part of the United States. Absent that,
and absent any other bilateral trade agreement negotiations,
IPEF could be an important vehicle, provided it has the right
provisions, the right level of ambition to actually open up
export markets for American food and agricultural products.
Senator Grassley. And also for you: a few weeks ago,
Ambassador Tai made a comment about setting standards that
promote fair and open competition with respect to our ag
producers when developing the Indo-Pacific framework. I
appreciate those comments, but we need more concrete
clarification about how the administration is working to
involve the agricultural industry in the process.
So for you: what would your advice be to Ambassador Tai
regarding non-tariff trade barriers like burdensome regulatory
requirements and geographical indication barriers to the sale
of U.S. exports?
Ms. Lauritsen. So, I am a firm believer, Senator, in a two-
pronged approach. One is building the strong rules. USMCA has a
set of very strong rules when it comes to sanitary and
phytosanitary barriers. But the other is actually to get the
regulators and the trade negotiators at the table with the
political will to find the resolution and open up those
markets. They need to be handled in tandem to have real results
for our exporters.
Senator Grassley. My next question is the last one. The
government of India has a goal of 20-percent ethanol-blending
gasoline by 2025. E-20 is set to be rolled out starting April
20, 2023. This is an aggressive timeline for a country with
over a billion people.
As noted in your testimony, India currently restricts
ethanol imports. How can the United States best engage with
India so that they can meet their air quality and climate goals
through U.S.-
produced ethanol?
Ms. Lauritsen. Thank you, Senator. And that is actually an
issue that I worked on while I was at the U.S. Trade
Representative's office, and I engaged proactively with India.
And we were actually making progress. But then the pandemic
occurred and the change of administrations, so things slowed
down.
So I do think there is opportunity--again if you are at the
table and actively negotiating and engaging--to be able to open
up that India market, particularly for ethanol for fuel use.
The Chairman. Thank you, Senator Grassley.
Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman.
Even as the United States is currently focused on the
tragedy unfolding in Ukraine, it is clear that one of the most
pressing challenges facing the United States in the 21st
century remains what has rightly been termed strategic
competition with China. And while we still may have aspirations
for a more constructive future with China, I think we have to
be clear-eyed and focused as we contemplate the sort of
regional and global architecture inimical to our interests and
our values that Beijing is currently seeking to construct, and
the steps that we have to take to invest in our economy and to
safeguard our interests and the values of our allies and
partners.
And I think we also must be equally clear-eyed that much of
our strategic competition with China is not just in traditional
geopolitical or geostrategic spheres, but competition in
geoeconomic dimensions of national power shaped by new and
emerging technologies like artificial intelligence, quantum
computing, and geonomics, among others.
So, success in this new realm of competition will require
the United States to work with like-minded partners to assure
that the economic and commercial map of the Indo-Pacific is
connected, free, and open, and that the United States is
engaged.
So the administration's IPEF proposal to me represents a
good first step in that direction, but that's just it: I think
it is a first step. What should a robust and durable regional
economic architecture, one that is underpinned by high-quality,
high-standard agreements on labor, the environment,
intellectual property, and rule of law, look like?
I met with all of the ASEAN ambassadors last week, and they
all say, ``This is nice, but if you want to have a real
presence here, then we are looking for a more robust
aspirational effort.''
So, can you address that question? It is open to any of you
who wish to answer.
Mr. Wessel. Senator, I would be happy to take that
question, and I appreciate it, and appreciate all the work of
you and your staff on so many issues.
As I look at recent events in Ukraine, with China's actions
in Hong Kong, their course of tactics and threats to Taiwan as
well, I think we all can understand that many of the countries
in the Indo-Pacific are not embracing China's vision of what
their hegemonic control of the region should be.
That does not mean we should not be engaged. As I said
earlier, we are engaged. The question is, moving forward, what
are the standards? And how do we engage?
I think the USMCA showed that, with real discussions with
labor and other stakeholders across the board that go to the
fine details of any approach, we can work things out. It does
not mean it is going to be perfect, but we can reach a broad
consensus.
So I am optimistic. I do not believe that countries like
Vietnam, India, et cetera are looking to China as being the
leader. We are engaged. We must continue that engagement, and
we must stay deep in it.
Senator Menendez. Ms. Shaw, did I see you leaning in to
answer?
Ms. Shaw. Yes, I am happy to unless you have another
question. On this, I could not agree more with your point, sir.
The 10 ASEAN countries together comprise the fifth largest
economy in the world. And China is their number one trading
partner.
The RCEP agreement that we talked about earlier further
entrenches a China-ASEAN supply chain. And we do not seem to be
doing much about it. I agree with you that IPEF is a modest
first step, but the question is, what else are we going to do?
I would support the CPTPP as the obvious next step, but
that is not going to get us all the way. We need strong rules
that are comprehensive, that cover the waterfront of our trade
and economic relationships, and we need to offer an alternative
to China, not just in terms of markets but also with respect to
values. And having real rules where we have skin in the game is
what is really going to move the ball, and that is what is
really going to get countries interested in this IPEF exercise.
Senator Menendez. Yes, 600 million people, and the fifth
largest economy in the world. It seems to me we should do much
better.
But lastly, Taiwan is a key trading partner of the United
States, one with which we have a strategic relationship that is
intimately intertwined with our economic security, particularly
as it relates to trade in semiconductors.
Could you comment on the role Taiwan plays in regional
trade and economic relations? And would not excluding Taiwan
represent a missed opportunity, both for the vision we have for
Taiwan and also for the sort of regional trade and economic
architecture we are seeking to build?
[No response.]
Senator Menendez. I did not think my questions were that
difficult. Anybody want to answer that?
[No response.]
Senator Menendez. Shall I direct my question, then, so that
I can get an answer? Ms. Lauritsen, I see you are smiling, so I
am going to give you a shot.
Ms. Lauritsen. That is a huge foreign policy issue, so I
wanted to keep to my lane in food and agriculture. You know,
Taiwan is a very important export market for U.S. with
agricultural goods, but obviously there are huge foreign policy
issues that are, I will say, well above my pay grade--even when
I worked for the government--that need to be delicately
balanced.
Senator Menendez. But even if we set aside the foreign
policy elements, as a regional trading element, it is a
powerhouse in that regard, is it not, Ms. Shaw?
Ms. Shaw. We have managed to figure out a trading
relationship with Taiwan in the context of the World Trade
Organization. I think that there are ways to move forward that
do not necessarily beg the question of defining our
relationship with China. Taiwan is clearly a red line for
China, so I agree with my fellow witnesses at the witness table
that we need to take into consideration broader issues if we
are going to move forward in deepening relationships with
Taiwan.
But I agree. They are a strategically important partner
economically, and I think we can figure out a way forward in
the context of this broader IPEF action.
Senator Menendez. Thank you, Mr. Chairman.
The Chairman. I thank my colleague. It is good to have the
chairman of the Senate Foreign Relations Committee, who looks
at these issues. And I thought that last comment to Chairman
Menendez was very instructive. We have to find a way that works
in both countries, and I am one who is committed to doing that
and working with my friend to do it.
Okay. Let's see; our next Senator will be Senator Cornyn.
Senator Cornyn. Well, thank you, Mr. Chairman. This is a
very important topic, and I appreciate the witnesses joining us
today. I am glad to see the Biden administration taking some
first positive steps toward trade agreements in the Indo-
Pacific, but looking back on TPP, Senator Carper--who is the
chairman of the Trade Subcommittee--and I as the ranking
member, have written and spoken a number of times at a hearing
on the importance of reengaging in the region, and expressing
some regret that we did not take the issue more seriously when
TPP was on the table.
I think that was a missed opportunity for us, and here we
are today having Trade Promotion Authority expiring. It seems
to me that that would be a first logical step for Congress to
take, if we are actually serious about trade in the Indo-
Pacific.
One of the challenges with the economic framework that has
been announced by the administration is, of course, it depends
on who is President, and it will change perhaps with the
politics changing with each change of the executive. And so it
seems to me that trying to figure out how we can move toward a
more permanent, or a more stable, relationship by reengaging
with the prospect of a possible trade agreement, would be very,
very important.
And I appreciate the comments made by Senator Menendez. I
do not know how we can look at this issue through a soda straw
and just look at the economic aspects of it and not consider
the national security imperative that is involved.
China is at the top of everybody's list here in Washington,
DC, as it should be, and we are playing catch-up.
But, Ms. Shaw, would you just comment on the desirability
of us actually passing Trade Promotion Authority as a
prerequisite to reengaging with the possibility of another
trade agreement in the Indo-Pacific?
Ms. Shaw. Yes; thank you for the question. I mean, clearly,
to be effective in the region, we are going to need to
negotiate the types of commitments that require congressional
authority.
So for that reason alone, I think it is certainly a step in
the right direction, and it is a positive sign to our trading
partners that we are serious about this type of engagement. I
guess my question would be, if Congress were to give the
administration Trade Promotion Authority, is it something that,
at this point, the administration would be willing to use? I am
not sure the answer to that is ``yes.''
Senator Cornyn. Well, I know that one of the issues that
continues to come up, and the chairman raised it as well, is he
and Senator Brown championed some labor-related provisions in
the USMCA, and, Mr. Wessel, I might ask you as the Chair of the
Labor Advisory Committee to USTR----
Last year at a hearing on the USMCA, I asked a labor
representative what it would take for labor to get behind a
multilateral regional comprehensive trade agreement in the Asia
Pacific. And the response was, ``We are a long way from
there.''
Could you provide maybe some more detail for what it would
take to get labor on board?
Mr. Wessel. I would be happy to, and thank you for your
question. In my prepared testimony, I identify a number of
provisions in the TPP that labor thought were deficient, from a
rule of origin that would have allowed China, for example, to
provide two-thirds of the products in an auto assembled by
other countries in the TPP region, and have that considered for
preferential status, to the SOE provisions where labor and the
business community jointly in the ACTPN report indicated that
the provisions were deficient by grandfathering all subsidies
prior to entering into force, as well as having an injury test
that, in most situations, required injury to occur for a year
or more.
For many industries--agriculture, commodities, steel, et
cetera--contracts are often done on a spot basis, so the injury
is periodic and not continuous. And the result was, the ability
to fight SOEs under those provisions would have been very
limited.
In the labor area, not only were the rights deficient, but
the consistency plans were inadequate. In Vietnam it would have
allowed them to have a 5-cent-an-hour minimum wage, but qualify
as if they have a minimum wage. So, the substantive concerns
that labor had about the TPP were very deep. It was not a
question of whether we should be engaged or whether we should
have a trade agreement, but what its provisions were.
Senator Cornyn. Thank you. My time is up.
The Chairman. I thank my colleague.
Our next four will be Senator Carper, Senator Portman,
Senator Cardin, and Senator Cassidy. And I believe Senator
Carper is on the line?
Senator Carper. Yes, he is proudly on the line.
Mr. Chairman, you're a fellow who has played a lot of
basketball in his day, and the University of Delaware--actually
we have had some women's sports teams that became quite good
over the years, and we have had some great football teams and
basketball teams as well. But this is the first time in
Delaware history where both our men's and our women's
basketball teams made it to the NCAA tournament.
So we have a witness, and I think it is Ms. Llanso--Ms.
Llanso, are you a Fightin' Blue Hen?
Ms. Llanso. I am. Let's go, Blue Hens.
Senator Carper. Friday afternoon, the men's team goes to
Pittsburgh to play Villanova, and actually it will be a little
challenging. I think we are taking on Maryland at College Park
on Sunday afternoon as well. So we will see how it ends up. We
are just proud that they have made it this far.
I want to welcome our other witnesses, those who are Blue
Hens and those who aspire to be Fightin' Blue Hens. There are
three topics I would like to cover today. One is effective
tools for economic engagement with our allies. Two is with
digital trade in the Indo-Pacific. And third is achieving
environmental goals through trade.
We will start with effective tools for economic engagement
with our allies. And this would be, I think, for Ms. Shaw.
First, I am grateful for all of your presence with us today. I
have long advocated for multilateral economic cooperation,
especially in the Indo-Pacific region. I am proud that today's
hearing builds on the bipartisan work of Senator Cornyn and I--
he just spoke about it--as leaders of the Trade Subcommittee of
this committee, including holding a hearing last summer on
opportunities for engagement in the Indo-Pacific. This
framework also provides an opportunity to work cooperatively
with many of our like-minded allies in order to advance our
shared values and combat the rise of China. However, this
framework is not expected to include tariff reduction or
expanded market access, which typically serve as incentives for
greater cooperation during multilateral negotiations.
My question to you, Ms. Shaw, is this: absent increased
market access, what tools should U.S. policymakers consider to
incentivize our partners to join this effort and adopt robust
standards as part of the Indo-Pacific Economic Framework?
Ms. Shaw. Well, thank you so much for the question. I think
you will find that my answer is pretty straightforward. We need
market access to be on the table in order to incentivize our
trading partners to make substantive commitments in these
areas.
It is hard to imagine what incentives they would have
unless there is more skin in the game. So I think, as a first
step, Congress should really impress upon the administration to
expand their scope--and to the extent they are not considering
market access, to reevaluate that strategy.
Senator Carper. Well, that was pretty straightforward;
thank you.
My second question would go to Ms. Llanso and Mr. Wessel,
and it deals again with digital trade in the Indo-Pacific. The
Indo-
Pacific Economic Framework presents an important opportunity to
establish digital trade rules, to uplift workers, and to expand
economic opportunity for women, for people of color, and
individuals from lower-income backgrounds, as well as the rest
of us.
I am eager to work with the Biden administration and our
allies to advance policy that supports the free flow of data
that connects small businesses to global markets and ensures
that digital technologies abide by robust cybersecurity and
consumer protection standards.
The question, again for Ms. Llanso and Mr. Wessel: what
lesson can be taken from digital trade standards in existing
multilateral agreements such as the USMCA and U.S.-Japan
agreement, and what kind of digital rules would best support
U.S. workers and businesses?
Ms. Llanso, please?
Ms. Llanso. Yes. Thank you, Senator. We absolutely need to
be pursuing commitments from nations in the region to limit the
use of surveillance technologies, both through domestic
legislation protecting, for example, workers' rights, ensuring
that workers are not surveilled by bossware or other kinds of
monitoring technologies, but also to focus on the limit on
export controls and to ensure that spyware and other privacy-
invasive technologies are not able to be kind of exported and
shared around the world.
Senator Carper. Thank you.
Mr. Wessel, the same question.
Mr. Wessel. A very broad question, and clearly a digital
component of the IPEF can have benefits for workers, for
democracy, and many other interests. But it also can undermine
them.
When we look, for example, at section 512--you mentioned
previous trade agreements. As the Patent Office, I believe
said, the Copyright Office, it is unbalanced and is in need of
being updated. And the Senate Judiciary Committee is looking at
that.
When we look at the rights of creative artists, of which $2
billion of their income is at risk every year, we need to make
sure that we have the enforcement mechanisms that ensure that
there is not wage theft.
But there are many other provisions, and it was mentioned
by the chairman earlier about the Arab Spring and the power of
the Internet to help spread democracy. It can also be used for
ill purposes, as we have seen with surveillance, with the Great
Firewall, et cetera. So this is a deep issue that we look
forward to working with you and your colleagues on to find the
right balance to move forward.
Senator Carper. All right; thanks.
Mr. Chairman, my time has expired, but if you do not mind,
I would just like to take 15 seconds to just state my third
question for the record. What opportunities exist to promote
environmental conservation sustainability as we engage with our
allies in the Indo-Pacific region? And that would be a question
for the record.
Again, thank you all very much for joining us today. And I
will say, Ms. Llanso, in closing, Go Blue.
Thank you.
Mr. Wessel. Senator Carper, I should also point out that
two of my sons are Blue Hens, so it is in the family.
Senator Carper. Oh, that is great. They must have picked
the right father and mother.
The Chairman. Thank you, Senator Carper. As a general
proposition, anybody who gets me involved in a basketball
discussion is going to generate a lot of time, so we will have
to pass on that.
Senator Portman?
Senator Portman. Thank you, Mr. Chairman. First, I want to
thank you and Senator Crapo for holding this hearing. It is
really important. And I want to start with just three quick
thoughts about where we are in terms of Indo-Pacific trade.
One is, we have to recognize the importance of opening up
foreign markets. That is sort of an obvious advantage of trade.
Trade jobs pay about 16 percent more on average; 90 percent of
consumers live outside of the United States. We need to make
things in this country in order to take advantage of that, but
that should be the objective.
The second is, I find it surprising that after passing
USMCA with such an overwhelming bipartisan vote, the conclusion
of a lot of people is that we should stop expanding trade at
all. And if you look at the campaign that President Biden ran,
one thing he said was, let's stop FTAs. That has always been
very confusing to me. The Indo-Pacific Economic Framework, as
was said earlier, does not include any new market access for
U.S. exporters. I mean, I don't get that. Senator Carper just
talked about that. It disappoints me because, after decades and
decades of debate, we finally developed what I thought was a
pretty good paradigm and found consensus between industry and
labor, ag, and others, and it is a template that we should be
using to move forward and improve our competitiveness. Instead,
we are ceding market share to China. And Mr. Wessel
acknowledged this in his testimony. We need to be engaged in
the region, not just writing it off, and engaged in terms of
opening up new market access.
Third, when we talk about expanding trade, there is always
a tendency to default to TPP. So it is either you are for the
Trans-Pacific Partnership or nothing. And we have to remember
that that was not very popular on a bipartisan basis. It had
some flaws, including its impact on the manufacturing sector
here in this country. I think what we should be doing
immediately is getting Japan into the fold. Japan is by far the
largest economy in the TPP group that we do not already have a
trade agreement with. We have trade agreements with most of
them, but not Japan. So we ought to deepen the existing ties
with Japan and get a trade agreement done, which requires TPA,
which is another reason it is important that we sort of look
beyond this notion that somehow trade is not a good thing, but
rather that it is something that helps our American workers.
Lastly, we need to be blunt about the elephant in the room,
which is China. In 2002, America was the top trading partner of
these Indo-Pacific nations. We were number one. Today, it is
China, by far.
And, Ms. Shaw, I heard your comment on that, but they are
the most dominant trading partner, and that should be a wake-up
call to us to embrace a new path forward, one that allows us,
again, to have better market access for our products and, like
USMCA, has enforceable labor and environmental rules to guard
against offshoring.
There are a couple of things that some of us have proposed
that I want to ask you about quickly, that take us down that
track.
One is to do something with regard to the WTO. Right now,
too often agreements get stalled because one country or another
objects. Often it is China. And so it works by consensus, and
that means it does not work very well. Senator Cruz and I have
introduced legislation called The Trading System Preservation
Act, which gives authority to USTR to pursue sector-specific
trade agreements with allies which do not have an MFN or a
most-
favored nation requirement. In other words, we should find
like-minded countries that want to come up with an agreement
with us and move forward with those agreements. And we should
not, certainly, allow China to be able to free ride on the
global trading system, or be empowered to act as a spoiler to
prevent these agreements from going forward. The Government
Procurement Agreement with the WTO would be an example of that.
So, we will start with you, Ms. Shaw. Do you support
sector-
specific plurilateral agreements without MFN as an effective
way to open markets with allies, and to put pressure on China?
Ms. Shaw. Thank you for the question. I do, and thank you
for your leadership, along with Senator Cruz, on that piece of
legislation.
I think countries are going to continue to negotiate with
or without the WTO. So to make clear that the view from the
U.S. Congress is that we should be pursuing plurilateral
agreements is the right message to be sending to Geneva and our
trading partners around the world.
But what I would say about plurilateral and sector-specific
agreements is that we should not be limiting ourselves to a
single sector, or a single topic to discuss. We should be
negotiating across a broad range of plurilaterals so that we
have the opportunity to make important trades across difficult
issue areas. That is how we make progress. And I realize I am
talking to a former USTR about negotiations, and I definitely
defer to your experience, but I do not see how we can make
significant progress just taking one issue at a time. I think
we need a coalition of the willing to go deep on a certain set
of issues that really reflect the challenges we are facing
today.
Senator Portman. Yes, I think that is a good observation,
because there are tradeoffs between different sectors, and our
legislation would not be limited just to one specific sector,
but it would be this notion that we do not have to have
everybody on board, because that is what has blocked progress
of all kinds. I think of environmental goods. Why can't we come
up with an agreement on that? Because one, or in this case, two
countries object. Well, let's get the rest of us together and
maybe do some tradeoffs with some other areas and move forward
to expand opportunities for trade and market openings.
The other bill that we have been working on is called
Leveling the Playing Field 2.0. A number of the members of this
committee are cosponsors to that legislation. Senator Brown and
I are the original cosponsors. And basically what it says is,
the reality is that with Belt and Road in particular, and with
transshipments, that China continues to game the international
trading system, and we need to be responsive to that. That is
the real world.
So that legislation has new tools to combat some of these
trade abuses. We now have 172 business trade associations and
ag groups and unions that have endorsed the bill. It has a lot
of support here on both sides of the aisle, including with
Republicans, and it also passed the House as part of the
COMPETES Act.
Mr. Wessel, maybe you could comment on that legislation. Do
you agree that the Leveling the Playing Field Act 2.0 will help
combat China's unfair trade practices and improve our economic
situation in the Indo-Pacific area?
Mr. Wessel. I couldn't speak more highly of both the bill
that you and Senator Brown put together, and your work over
time--and the importance of Leveling the Playing Field 2.0 as a
component of whatever legislation comes out of the conference
on COMPETES and USICA. Giving workers the tools to defend their
rights when they are injured by unfair foreign trade is vital.
There are too many areas right now where they have no tools,
and they are victims. Your legislation will help put an end to
that.
Senator Portman. Great; thank you.
Mr. Chairman, I appreciate the time.
The Chairman. Very good.
We are next with Senator Cardin.
Senator Cardin. Well, thank you, Mr. Chairman. And we thank
all of our witnesses. It is very helpful to have a former USTR
on our committee, and I really do want to acknowledge that
Senator Portman has always reached out to try to find
bipartisan ways to advance all agendas, including in trade. So
we appreciate your willingness to try to find common areas so
we can advance trade in this country.
I want to start with an observation, and then ask Mr.
Wessel what we can expect in regard to this framework to
advance good governance.
In the last Trade Promotion Authority, we put as one of the
principal objectives good governance and anti-corruption, and
the USTR took that seriously. In the initial negotiations on
the TPP, because that was evolving, there was a strong chapter
on anti-
corruption and governance.
Now we are not a party to TPP, but some of the countries
that are are part of this framework discussion. So, Mr. Wessel,
I would like to get from you--recognizing this is the
framework, it is not really the market access--what can we
reasonably expect to be able to achieve to advance our good
governance, anti-corruption agenda that Congress has clearly
shown a direct interest in in any trade discussions? What can
we expect in this framework?
Mr. Wessel. Well, I am optimistic about what we can
achieve. If you look at some of the other components of the
overall Indo-
Pacific strategy--which include infrastructure,
decarbonization, and many other components--good governance,
anti-corruption is a real opportunity for making some advances.
We have all seen the China model as it relates to Belt and
Road debt traps and their approaches there, et cetera. The
public in many of these countries is desperate for anti-
corruption measures. And with many of the provisions--the
carrots that are in what President Biden is seeking to
achieve--anti-corruption provisions should be part of that.
Senator Cardin. So, without having a formal access
agreement, how do you enforce any of those understandings in
the framework? Could you just enlighten me how we could advance
these issues and have some degree of confidence that it is not
just language, and not just verbal commitments, but actually we
have made progress in being able to achieve these objectives?
Mr. Wessel. When one looks at what the administration is
talking about in terms of infrastructure, alternatives to the
AIIB, and other engagement in the region, I think there are
real incentives to have enforceable standards around good
governance and anti-corruption. There will be other provisions,
of course, where there are carrots, some sticks, maybe sharp
carrots as I like to say, and I think there are ways of
ensuring that there are enforcement measures because there will
be preferential approaches within the overall Indo-Pacific
strategy.
Senator Cardin. Thank you.
Ms. Shaw, I want to get to a separate subject. The USMCA
included a separate chapter on small business, which was very
much appreciated by the small business community. I chair the
Small Business Committee, and I have been pushing for similar
sensitivities as we go into all trade discussions.
So in regard to this framework, could you just give us a
strategy as to how we can be sensitive to the needs of smaller
companies?
Ms. Shaw. Yes; thank you so much. Small and medium-sized
enterprises face unique challenges, and it is important that we
take steps to increase their opportunities in the Indo-Pacific
region, as well as safeguard their interest in the project.
One way that we can address some of these issues is through
trade facilitation, easing some of the Customs burden, cutting
red tape, making it easier for our businesses that need
critical inputs to be able to get them and to be able to get
them quickly. But I think that just generally improving the
terms of trade, and again being as bold as possible about
expanding the type of economic opportunities in the Indo-
Pacific, is going to go a long way to unleashing growth and
opening up jobs and opportunities for some of our small and
medium-sized companies.
Senator Cardin. There is no question, innovation is so much
focused in smaller companies, and there can be intimidation
issues. So I think some of the areas that you are talking about
are very, very important.
We also saw that the size of transactions may also be a
factor. We can make special rules that will assist those
smaller and
middle-sized companies in not having to deal with some of the
challenges that are created under trade agreements.
So I thank you for that. I hope that you will all stay
engaged as this moves forward. It is an area that we are a
little bit confused about, because we do not know exactly what
rules are going to be applied in regard to congressional
engagement or private-sector engagement, but I think it is
important that we all stay involved, because we know that we
have to increase our presence in the Indo-Pacific area.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Cardin.
We are now at Senator Cassidy.
Senator Cassidy. Thank you.
I will address my first question to Ms. Shaw and Mr.
Wessel.
So we have put these negotiations in, in which we seek to
have a decarbonization of an economy, and we seek to have some
sort of labor standards so that our folks are not competing
against slave labor. That is good.
But the cost of compliance, or the cost of not using slave
labor, increases your costs relative to a product made in
China, for example. I spoke to one fellow. A company he was
formerly with made the decision to put their new manufacturing
plant in China because they did not enforce their
SOx and NOx scrubbers. The return on
investment would be 18 percent there, as opposed to 8 percent
elsewhere, where they would have to turn on SOx and
NOx scrubbers.
In a sense, these requirements incentivize the movement of
industry to China where they do not enforce these standards.
So my point is, how do we avoid a race to the bottom? Or
should there be some sort of offset, border offset, for using
slave labor, or for polluting the common areas of the ocean and
of the sky which elsewhere we are attempting to regulate down?
Put differently, if we negotiate a trade agreement which
China is not a part of, and in which the participants must have
the cost of compliance with labor and environmental
regulations, are we not just building in an advantage for
China?
Ms. Shaw, you first, please.
Ms. Shaw. Sure. Having diverse and resilient supply chains
is critical. Part of the challenge that you are talking about
is that, wherever it is cheaper to produce is where companies
will go. But that is not the most effective way to do business.
We have to incentivize companies to do business in a strong
and resilient Indo-Pacific region, but we do have high labor
standards. We do have high environmental----
Senator Cassidy. I was going to say, how do you incentivize
it when there is a higher cost of doing business where you have
those standards, and a lower cost where you do not?
Ms. Shaw. Market access. You give preferential trade
treatment, lower duties, if you meet certain standards and
comply with certain provisions of the trade.
Senator Cassidy. So, implicit in what you just said is that
there should be an elevated duty on those who do not meet some
standard when it comes to the environment, labor, or perhaps
other factors.
Ms. Shaw. Or a lower duty for those who do.
Senator Cassidy. Okay.
And, Mr. Wessel?
Mr. Wessel. I think there are--first of all, thank you for
the question. I think in terms of carbon intensity, there is a
path forward. The U.S. and the EU, as part of their 232
arrangement, included a provision on a global arrangement to
deal with carbon intensity as one component. And I think one of
the things that is on the table there is a border adjustment
measure that would address the lax environmental enforcement by
China and other countries in terms of what they are exporting.
For each ton of steel, as I understand it, China has three
times more carbon intensity per ton than the U.S. We cannot
allow that to be a competitive advantage, and we need to deal
with that with border measures. I expect, as part of IPEF and
the Indo-Pacific strategy, that carbon intensity can be dealt
with in a similar way.
For the question of forced labor, similarly we can have
border measures. We do have some with the Uyghur Forced Labor
Prevention Act, which is now going through the regulatory
scrub. We have seen countries across the globe condemn China's
actions in Xinjiang, calling them genocide, and we need to find
a way to make sure that that is not a competitive advantage and
is dealt with effectively among allied nations.
Senator Cassidy. Would you suggest that if we were going to
have a trade agreement with other countries in which we expect
them to comply with standards such as this, that part of that
trade agreement would have to have a border adjustment of some
sort for these factors we are discussing, to avoid that
incentivization of companies to move to China?
Mr. Wessel. I think, in terms of carbon intensity, that is
going to be on the table. In terms of forced labor, I think we
need to trace supply chains to make sure that those products
either directly or--for example, polysilicon being utilized in
solar arrays, et cetera--that those products do not make their
way into the U.S. By doing that, we create the incentive for
the Indo-Pac countries and others to disengage from Chinese
supply chains that spoil the environment and abuse workers'
rights.
Senator Cassidy. I see. So wherever that supply chain
flowed through, if you just wanted to take it to a third
country, you would somehow defeat that initiative.
Let me take a little--Ms. Lauritsen, may I ask you a quick
question, please? I've got a lot of shrimpers, and they are
competing against what they allege is dumped shrimp coming from
India.
Now I think your testimony points out that India has really
high import tariffs, and yet we bless them with pretty low
import tariffs on our side--if you will, tilt the playing
field. How do I go back to my shrimpers and defend that?
Ms. Lauritsen. It is always a challenge, right? And India
is a particularly protectionist market when it comes to food,
seafood, and agricultural products. But this is where,
actually, negotiating on tariffs and market access to level the
playing field would be particularly important, either directly
and bilaterally with India, or through the IPEF. That is how
you deal with it.
Obviously, the U.S. already has countervailing duties and
antidumping laws which can help on the import side, but again I
would propose that having that balanced playing field in both
markets can be a benefit.
Senator Cassidy. I yield back.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Senator Hassan is next, and she has been very patient
indeed.
Senator Hassan. Well, thank you very much, Mr. Chair and
Ranking Member Crapo, for holding this hearing. Thank you to
all of the witnesses. We really appreciate your expertise and
your being here.
Mr. Wessel, I have a number of questions for you. So let me
start by asking you a question about supply chain resiliency.
As you know, the pandemic has laid bare vulnerabilities in our
supply chain and highlighted the importance of making
strategically critical goods here at home. And I have also
heard from Granite Staters, including Gray Chynoweth, who is
the CEO of a company called Minim. These Granite Staters have
been impacted by both new and longstanding supply chain issues.
That is why I am working on legislation to help us bring
American manufacturing back in critical sectors such as
semiconductors, biotechnology, and military technology. In
addition to these efforts, Mr. Wessel, how can the U.S. ensure
that the Indo-Pacific Economic Framework increases our supply
chain resiliency?
Mr. Wessel. As you just pointed out--and thank you for all
your work on this issue--in critical supply chain areas we must
ensure first that we can make those products here in the U.S.
where we can. Second, where we cannot, we must do so with
allied countries that share our views and refuse to weaponize
supply chains, as we have seen with China. I think that can be
a component of the IPEF agreement.
But investing in our own economy, making sure that we can
meet our critical needs, and working with our allies to make
sure that we share the burden of providing those products
globally to democratic nations, is key.
Senator Hassan. Thank you.
This is also a question to you, Mr. Wessel. I am working on
a bipartisan basis to promote research and development
investment in the United States, including through bipartisan
tax legislation with Senator Young.
According to a recent report by the U.S.-China Commission,
between the years--if I've got the years right--2001 and 2017,
U.S. companies increased their R&D investments in China at a
faster rate than their R&D investments in domestic operations
in the United States.
So how can the Indo-Pacific Economic Framework balance
promoting domestic R&D and strengthening ties with our allies
in the Indo-Pacific region?
Mr. Wessel. Well, thank you for the question. And again,
that goes back to your first point, which is, first we must
make sure that we have the environment here in the U.S. to
support R&D.
It is not only work like you are doing on the tax code, but
also the provisions that are in America COMPETES and USICA that
will ensure that we have the R&D base here that we need to make
sure that it is not under attack by countries like China that
engage in massive espionage.
There are also cooperative things we can do with our
partners in the Indo-Pacific. India, for example, is a major
producer of active pharmaceutical ingredients and utilizing
them in formularies, et cetera. We need to make sure that there
is a balanced R&D strategy but, first and foremost, do what we
can to have the core, the basic, and the forward-looking R&D
being done here.
Senator Hassan. Thank you. And I want to follow up on
something you just referenced, which is how we go about
protecting our intellectual property.
In addition to increasing R&D, protecting that intellectual
property produced by U.S. R&D is obviously vital for promoting
domestic innovation. That is why, as a part of any new
agreement, we have to address the vulnerability of U.S.
businesses to IP theft posed by policies like data localization
requirements that require U.S. companies to store data abroad.
What are the vulnerabilities to IP theft that U.S.
businesses face in the Indo-Pacific? And how could a new
economic framework address these vulnerabilities?
Mr. Wessel. Thank you. IP is the lifeblood for workers here
in the U.S. Labor led on the patent reform legislation a number
of years ago because, if U.S. producers of IP and innovation do
not have confidence in their ability to get the proper rate of
return, they are going to either do the R&D elsewhere, or they
are going to license it to countries like China that will then
undermine our long-term industrial base.
We need strong IP protections in any agreement. We need to
make sure that there are no coercive measures, performance
requirements, and other provisions that other nations in the
IPEF can use to force U.S. companies to share their IP
unwillingly.
Senator Hassan. Thank you very much.
And thank you, Mr. Chair. I yield back.
The Chairman. I thank my colleague.
Let's see. Next would be Senator Young.
Senator Young. Thank you, Mr. Chairman.
Ms. Shaw, thank you for sharing your important perspective
at this critical hearing today on trade in the Indo-Pacific
region.
I have been a constant advocate that the United States
should be proactive with pursuing meaningful trade negotiations
in the Indo-Pacific region, as it is an issue of national
security. In my view, trade and national security are
inextricably linked.
China's move to initiate their own trade agreement in the
region, followed by action in joining the CPTPP, should be an
important signal to Ambassador Tai that the U.S. cannot
continue passive engagement in the region.
Ms. Shaw, can you share with us some of the concerning
actions by China to increase its influence in the region, for
instance, how economic coercion or foreign direct investment
from China will further undermine our economy?
Ms. Shaw. Thank you so much for the question. I would need
more than the remaining 4 minutes to catalogue all of the ways
that China is continuing to advance its interests in the region
to the detriment of our producers, our farmers, and our
workers. But I will say, you have highlighted one step, which
is the negotiation of Chinese trade agreements, including the
largest trade agreement in history, and its application to the
CPTPP. China is also currently negotiating a trade deal with
South Korea and Japan, two important export markets for the
United States, and two important national security and military
allies. So there is a lot of concerning activity on the trade
front.
In terms of foreign direct investment, China's foreign
direct investment in the region, to put it simply, displaces
ours. In terms of economic coercion, that is unfortunately a
tool that they have used and continue to use. They have in some
ways weaponized their economy to pursue political goals and to
exert pressure and pain on countries that simply do not agree
with them. Australia and Lithuania are two recent examples.
So this is very concerning. And it is very much the reason
why the United States needs to lean in, needs to press in, and
frankly needs to give the region a real alternative.
Senator Young. Yes, I think that was a great summary in
about 90 seconds about why this is indeed a national security
issue.
Do you see, Ms. Shaw, the need for urgency by the United
States as it approaches trade policy with partners in the Indo-
Pacific region, particularly with ensuring that the Indo-
Pacific Economic Framework is an effective and useful tool to
bolster our relationships?
Ms. Shaw. Yes, absolutely. I mean, to be frank, we should
be negotiating right now. The economic framework has not yet
been launched, and it is not clear when that is going to
happen, although the administration has indicated by the spring
or summer.
Six months from now we will still have an opportunity to
engage. Three years from now, we will not. The time is now.
Senator Young. Well, I agree with you. I do not see the
same level of urgency, quite candidly, from the administration.
And I will do everything I can to support them should they lean
into this important national security issue.
Ms. Llanso, I am encouraged that the administration is
prioritizing digital trade by designating a module dedicated to
digital trade in the Indo-Pacific Economic Framework.
Discriminatory digital trade practices stunt our economic
growth and cause financial distress when countries,
specifically China, require forced transfer of intellectual
property in exchange for market access.
I am working on a digital trade resolution to complement
the administration's strong efforts to promote integrity in
digital trade. This will be a valuable tool in tandem with the
digital trade initiative present in the Indo-Pacific Economic
Framework.
Ms. Llanso, do you see value in congressional actions
supporting the administration's digital trade efforts? And more
broadly, how important is it for Congress and the executive to
be united when confronting the increasing challenge in
addressing digital trade barriers?
Ms. Llanso. Thank you, Senator. I think it is absolutely
important for Congress to be in coordination with the
administration, and for both sides to be operating in tandem in
the region.
The issues of security, both of intellectual property and
of individual users' data in the region, are very heightened.
And so, whatever can be done to ensure that not only are there
important principles being advanced through the IPEF, but also
to make sure that there are real guarantees for the safety and
security of data throughout the region, is critically
important.
Senator Young. Very good.
Lastly, I would like to turn to an important position which
the administration has not yet nominated someone to fill. It is
the Under Secretary of Agriculture for Trade in Foreign
Agricultural Affairs.
As our witnesses know, this post was previously held by Ted
McKinney, who made significant strides to increase market
access for American agriculture. Additionally, the Chief
Agricultural Trade Negotiator nominee has been named but not
considered by this committee.
With input prices skyrocketing due to inflation, it is
absolutely critical that Hoosier farmers have adequate demand
from our global trading partners and that we continue to
explore new market opportunities. So I would just like to, in
this public forum, emphasize the importance to me, to the
people of Indiana, and really to the country, to ensure that
someone is nominated to that Under Secretary post.
With that, I will yield back to the chair.
The Chairman. I thank our friend and look forward to
working with him.
Let's see. Senator Cortez Masto, I think, is next. I know
she has a busy morning.
Senator Cortez Masto. I am here. Thank you----
The Chairman. Oh, there she is. Senator Cortez Masto, the
time is yours.
Senator Cortez Masto. This has been an interesting
discussion today. I really appreciate you all being here.
Mr. Wessel, let me start with you, because you touched on
it very briefly, but I want you to expand a little bit more on
where we are in talking about digital trade. As you well know,
Nevada is the entertainment capital of the world. We have so
many creative artists there, and they are a major economic
driver. But my concern is, as we enter into these new
agreements and these trade agreements, what should we be doing
to really look out for the protection of creative artists? And
what are the complexities surrounding that as we look to
addressing digital trade in any framework as we move forward.
Can you touch on that a little bit more?
Mr. Wessel. I would be happy to. And thank you for your
question. My colleagues in the creative industries--there are
12 unions. As I understand it, there is more than $2 billion of
income each year, which they rely on via the Internet in terms
of residuals, other payments, et cetera. So this is critical.
And for many of the content workers, it is the difference
between food on the table or not.
I think we have to update the provisions and look at them
very carefully. I mentioned section 512 and section 230. As the
Patent and Trademark Office recently indicated, for section
512, it is unbalanced. The Senate Judiciary Committee is
looking at that. I think we need to take a step back before we
proceed in the digital area, have discussions among you and
your colleagues, as well as stakeholders and labor and
otherwise, to make sure that we have a balanced approach that
ensures there will not be wage and compensation theft, while
also promoting many of the other benefits of a digital economy.
Senator Cortez Masto. I agree, and thank you. I think it is
so important they are at the table. Their content is really
their livelihood, and they should be adequately compensated and
protected for that content. So thank you, because I do think it
is important that they are at the table as we are discussing
trade.
Let me jump to another area that is important for Nevada as
well, and that is really our agricultural industry that we have
in Nevada. And we so appreciate Senator Grassley's comments
earlier involving agriculture and making sure that it does not
get left behind in any framework.
Ms. Lauritsen, let me ask you this. Nevada's largest
agricultural industry here--we export our beef, dairy feed, and
livestock. South Korea and Japan both buy more of these from
Nevada ranchers than China does, which missed the purchase
commitment of $80 billion for the years 2020 and 2021. I know
you talked a little bit about some of the needed protections,
and you had a whole list of them.
Can I ask you, for purposes of protecting ag, including my
ranchers and dairy farmers, is there anything in that specific
list that we should prioritize over something else? Or can you
touch a little bit on, in general, which one is the most
important thing that we should be addressing in any future
framework to protect our agricultural industries across this
country?
Ms. Lauritsen [off microphone].
Senator Cortez Masto. Oh, there you go. If you could start
over, I could not hear the first part.
Ms. Lauritsen. I am sorry, Senator, I should know better,
having lived my life with microphones in negotiations. Thank
you for the question.
And in terms of, particularly the interests of your
exporters, looking at the sanitary and phytosanitary barriers
that we have in Asia--there are a number of phytosanitary
restrictions on wheat exports, for example. But in the case of
beef, you are also then looking at tariff differences, where
Australia has a better tariff going into Vietnam than the U.S.
So looking at those types of really concrete barriers to
our exports, and trying to get that level playing field, I
think is going to be critically important for your ranchers and
your farmers.
Senator Cortez Masto. Thank you. I appreciate that. Again,
thank you for this great conversation today.
Mr. Chairman, I yield back.
The Chairman. I thank my colleague from Nevada.
Next is Senator Barrasso.
Senator Barrasso. Thanks so much, Mr. Chairman, to you and
to Senator Crapo for holding this hearing. Thank you all for
being here today.
Ms. Shaw, as we take a look at this tragic, unprovoked war
in Ukraine that is continuing to shock the world, we are seeing
more nations realize really how energy security is tied to
national security. Russia has demonstrated its willingness to
use energy as a weapon. Countries around the globe are
scrambling to find new energy supplies to replace Russian oil
and coal and gas and nuclear fuel.
America can and should fill that void that Russia is now
creating. So, as I look at the priorities this administration
has laid out in the Indo-Pacific Economic Framework, I do not
see anything that resembles a strategy to help our allies in
the regions be more energy secure.
In Wyoming, we have an abundance of coal, oil, natural gas,
uranium, all of it. And I believe the U.S. can provide our
allies in the region reliable, affordable, and secure energy
resources.
So this framework fails to address market access in any
way, and focuses instead on climate change and decarbonization
of the energy sector. I believe it is a huge mistake.
So how can we counter China's influence in the region if we
do not aggressively export American energy to our allies?
Ms. Shaw. Thank you so much for the question. This may not
surprise you, but I completely agree with you. I think that the
framework, as it has been outlined and proposed, is a modest
step, but it is certainly not something that, in its current
form, is going to really move the dial.
I think we need to work closely with our allies where we
have a competitive advantage. We have a national security
interest, and I think energy is a prime sector where we should
be focusing our interests and our energies. But beyond that, we
need to take on market access.
We need to look at a broader scope of economic activity
between the United States and half the world's population. We
should not limit it to very specific and narrow issues.
Senator Barrasso. If I could go to the issue of trade--and
in the last question in responding to Senator Young, I think
you talked about trade, and you said, I think, the time is now,
Ms. Shaw. So the Indo-Pacific region is critically important
for American economic security and national security. So I
think, since backing out of the TPP, the U.S., in my view, has
been on the sidelines with respect to trade. China, on the
other hand, has been very aggressive in its efforts to expand
trade and their influence in the region.
So--and then I am going to turn to the other two witnesses
as well--given China's aggressive efforts in the Indo-Pacific
region, just how far behind have we fallen? And how quickly can
we move to counter China?
Ms. Shaw. When it comes to trade, we are woefully behind.
The trouble with TPP was that it was a flawed agreement. So,
while it was the right national security play, it was not the
right economic play. But the world has changed a lot since 2016
when we withdrew, and the national security arguments for
moving forward in a renegotiated CPTPP, or something like that,
are much stronger. And I think that there are incredibly strong
economic arguments for doing so as well. The further China goes
in terms of strengthening its own supply chains in the region,
the further behind we are.
So economically, we are starting from behind, and we really
desperately need to move ahead.
Senator Barrasso. Let me ask the other witnesses.
Ms. Llanso. Thank you. Yes, I think, unfortunately, we are
somewhat behind on advancing the open Internet and digital
freedom perspective that has been so beneficial to the United
States' economy and to so much of the world economy.
China has made significant inroads in advancing its
authoritarian model of Internet governance, and so I think the
United States really needs to show a vision for how an open
Internet really leads to more economic benefit and protection
of human rights as a counter to that.
Senator Barrasso. Thanks.
Ms. Lauritsen?
Ms. Lauritsen. Thank you for that. And already agricultural
exporters are falling behind in the Indo-Pacific region. For
example, in Vietnam for beef and pork, or in Japan also for
beef and pork issues--and wheat, and a whole bunch of other
agricultural products--we are at a tariff disadvantage. While
we have high-quality products, we also have inputs that are
costly. So we really need to be able to get to the table to
negotiate lower tariffs and compete.
Senator Barrasso. Well, following up on that, you know in
Wyoming we produce some of the highest quality beef in the
world. And the Indo-Pacific region is critical for our beef
export market, and opportunities in Japan, Taiwan, among
others, continue to be major growth markets for Wyoming beef.
In fact, Wyoming even opened our own international trade office
in Taipei a couple of years ago. So there continues to be great
opportunity for Wyoming beef around the world.
So how do we expand opportunities for Wyoming ranchers and
farmers in the region if we are not actively pursuing increased
market access?
Ms. Lauritsen. Well, I guess that is why I would answer
that by saying we need to be pursuing improved market access.
We also--I think a couple of Senators have talked about the
need for an Under Secretary of Trade at USDA to actually go
around the world and sell and promote the high-quality, cost-
effective U.S. products.
So, a lot more can be done in this area with boots on the
ground meeting, and talking, and negotiating with our trading
partners.
Senator Barrasso. Mr. Chairman, I see my time has expired.
The Chairman. Thank you, Senator Barrasso.
Senator Warren?
Mr. Wessel. Mr. Chairman, if I just might have the
opportunity to quickly respond to the Senator's question,
because I think America has stood up to China over the last
number of years, both through the Trump and now the Biden
administration, and President Biden's approach, which is to
invest in our economy, to strengthen America before we go back
into the trade field in a major way, I think is the right thing
to do, to both ensure that we go from a position of strength
but that we know Americans support, workers support our trade
policies.
So I do not think we are behind. I think we actually have
given an example to the world of China's predatory and
protectionist actions. They more and more agree with us. They
are cooperating. We need to strengthen our economy and then
move forward.
The Chairman. All right.
Senator Warren?
Senator Warren. Thank you, Mr. Chairman.
For too long, U.S. trade agreements have sold out American
workers for corporate profits, and in particular the Trans-
Pacific Partnership would have helped offshore American jobs to
countries that use child labor and deny workers the right to
organize.
So I am glad that the United States withdrew from TPP, and
I am glad that the current U.S. Trade Representative, Katherine
Tai, is committed to a worker-centric trade policy. But
corporate lobbyists would like nothing better than to turn back
the clock to the old failed trade policies.
The administration recently announced plans to negotiate a
new Indo-Pacific Economic Framework led by USTR and the
Commerce Department. Now corporations are heralding this as a
new trade deal that will be the second coming of TPP. And
comments from Commerce Secretary Gina Raimondo raised real
questions about whether she is putting workers first, or
instead trying to help out giant corporations.
Secretary Raimondo has bragged that this new agreement will
be, and I quote, ``even more robust than the traditional free
trade agreements.''
Mr. Wessel, you chair a committee that advises the U.S.
Government on labor issues in trade agreements. So I know you
agree that the goal of U.S. trade negotiators should be to
protect and create good American jobs.
Would modeling this new framework on old, failed trade
deals like TPP accomplish this goal?
Mr. Wessel. TPP was unacceptable and is not the model for
moving forward.
Senator Warren. Well, I agree with you on this.
Secretary Raimondo has also boasted that this new trade
deal will be, quote, ``flexible and inclusive, allowing
countries like Vietnam and Malaysia to sign up for some parts
of the agreement but not others.''
Now, Mr. Wessel, if this new trade deal is inclusive for
countries that mistreat their workers, and flexible by allowing
them to opt out of the requirements to improve their labor
standards, is that going to help American workers?
Mr. Wessel. It is only going to promote offshoring. And
what we have said is, there should be no cherry-picking labor
rights, and corporate accountability must apply to all modules.
Senator Warren. I agree with you, Mr. Wessel. And now the
Commerce Department has just put out a request for comments on
its plans to negotiate key parts of this deal, including
building on supply chain resiliency. But while Commerce lists
nine priority issue areas, there is zero--zero--mention of
workers' rights and worker protection.
This is puzzling. I am pretty sure that workers are at the
heart of our supply chain, making critical products from cans
to food. So, Mr. Wessel, the U.S. clearly needs to build more
resilient supply chains, but should we be locking ourselves
into overseas supply chains rooted in places that use forced
labor and suppress unions without any guard rails to raising
their labor standards?
Mr. Wessel. We need guard rails. We need to make sure that
our critical needs are met here first. Resiliency to support
our allies is fine, but again we need to make sure that our
needs here are supported. I believe President Biden is leading
in that direction.
Senator Warren. Thank you very much. I appreciate that.
You know, I have real concerns about this new Indo-Pacific
Economic Framework, and I am calling on the administration to
carefully consider its approach. It would be a huge mistake to
listen to corporate lobbyists and negotiate a new trade deal
that mimics TPP and that undercuts American workers. The Biden
administration has promised to put workers at the center of its
trade policy, and I want to hold them to that commitment.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warren.
Let's see. Senator Bennet, Senator Scott, and Senator Thune
is here.
Senator Thune?
Senator Thune. Thank you, Mr. Chairman. And thanks for
holding what I think is a very timely hearing. And before I ask
questions, I just want to underscore the vital importance of
having a Chief Ag Negotiator at USTR. Farmers, ranchers, and
producers in South Dakota and across the country deserve the
best representation possible on the global stage.
The Biden administration has had more than a year to
advance a Chief Ag Negotiator. If the administration is serious
about helping American agriculture and American workers, it
needs to stop dragging its feet and make filling this position
a top priority.
In year 2 of the Biden administration, the Indo-Pacific
trade strategy appears, unfortunately, hollow. Trade Promotion
Authority has lapsed. There have been non-meaningful market
access initiatives in the region, and America's exporters are
losing ground to competitors.
Meanwhile, China recently joined the Regional Comprehensive
Economic Partnership, the world's largest free-trade block, and
now aspires to join the trade deal that America helped craft,
but ultimately withdrew from, the TPP, or what is now known as
the CPTPP. Without coincidence, of course, China is also
becoming more aggressive militarily in the East and South China
Seas.
Ms. Shaw, if this lack of meaningful U.S. trade action
persists, what impact will it have on our Nation's strategic
and economic interests in the Indo-Pacific over the next 5 to
10 years?
Ms. Shaw. Thank you for the question. The results would be
catastrophic, particularly if China does join the other
regional trade agreement, the CPTPP. Part of the challenge that
we are facing is that, while on the one hand we are spending
trillions of dollars investing in the United States in some of
our most critical sectors, if we are not doing anything
offensively on the trade side, what we are doing here
domestically is going to be inherently less competitive in
third-country markets, and specifically the Indo-Pacific where
we have strong national security interests and strong economic
ones.
We are ignoring half of the equation. And I think it is
critical, both for our national security interests as well as
our economic ones, that we come up with a comprehensive and
offensive trade strategy. At the moment, we just do not seem to
have one.
Senator Thune. How would losing out on market access in the
region impact American jobs here at home?
Ms. Shaw. If American goods are less competitive, and 95
percent of the world's customers live outside our borders, at
some point we are not going to have anyone to sell our goods
to. And that is really the problem.
Senator Thune. So the Indo-Pacific Economic Framework is,
arguably perhaps, a step in the right direction, but the
proposal clearly does not seriously counter China or offer
durable advancement of U.S. economic interests.
In the IPEF, tangible benefits are off the table. Market
access and enforceable commitments are not prioritized. And the
process does not go to Congress for approval or review. A trade
pillar on digital trade, forced labor, and trade facilitation
is hardly a grand strategy.
So, Ms. Shaw, let me ask again--I know you have covered
some of this ground already--but how can the framework be most
improved? And let me ask a follow-up so you can just--are there
other trade initiatives in the region, such as CPTPP, that the
U.S. should pursue instead of, or in tandem with, this one?
Ms. Shaw. Thank you for the question. My strong view is
that we should be pursuing a renegotiated and completely
revamped CPTPP. Our CPTPP partners want us to be part of that
agreement, and at the moment we have leverage to make the
necessary changes that not only would advantage our national
security interests, but would also advantage our economic
interests. I think it is imperative that we put market access
on the table, that we are tackling services, intellectual
property, that we are moving forward in advancing the rules for
state-owned enterprises. This is about the future of U.S.
markets. And as I noted at the beginning of my comments, if all
we are doing is investing here at home and not opening up
export opportunities, we are missing the second half of that
puzzle, and we are just going to be shooting ourselves in the
foot long-term as we lose out on third-country market access
opportunities.
Senator Thune. Thank you.
So using the Indo-Pacific Economic Framework to resolve
nontariff barriers has the potential to help U.S. farmers and
ranchers, especially as it relates to export markets for foods
with common names such as parmesan and asiago. It can also help
blunt the EU from gaining protection for geographical
indications through trade negotiations.
Ms. Lauritsen, how could the administration best preserve
the rights of American food and beverage producers and reduce
foreign tariffs in the framework?
Ms. Lauritsen. Thank you, Senator. In my view, it is
critical that the IPEF include market access to create
incentives, to actually reach market-opening deals, and to
achieve the types of things that you have just mentioned,
commitments that protect the ability of us to sell cheeses with
common names or getting agricultural biotechnology regulations
that work for our corn and soybean exports.
You need real, tangible results. You need incentives, and
you need political will. And that really happens when there is
an economic incentive in a negotiation to try and reach those
deals.
Senator Thune. Mr. Chairman, my time has expired. Thank
you.
The Chairman. I thank my friend from South Dakota. These
are very important issues, and we look forward to working with
him as we have done so often in the past on trade issues.
I think Senator Daines is next.
Senator Daines. Mr. Chairman, thank you, and thanks to the
panelists today.
I think it has been said a couple of times, but it is worth
reemphasizing: 95 percent of the world's consumers live outside
of the United States. Because of that, trade is essential,
certainly for a State like Montana, as well as the entire
country. It is about jobs, economic growth, the future. It is
about kids and grandkids and access to these markets.
I think I am one of the few Senators who actually spent a
fair amount of time working on the ground in China, launching
American brands once upon a time, so I saw this up close and
personal.
It is also important that we work with our allies to reduce
unfair barriers to trade and ensure that our farmers and our
ranchers and small businesses are able to compete on a level
playing field at home and around the world, especially given
China's growing economic and geopolitical influence. It is
essential that we work with our allies and partners across the
Asia-Pacific region.
Last year, I traveled to India towards the end of the year
and met with Commerce Minister Goyal. We were advocating then
to reduce tariffs on Montana and U.S. ag, and we saw firsthand
some of their leading technology companies. It is clear that
India, I believe, is going to play an even larger role in the
region for years to come, and that the U.S. should work to
expand economic ties and consider formal negotiations with
India, which presents an enormous opportunity for growth. It is
the only other country that has a billion-plus in their
population.
As we think about our farmers long-term, especially
Montana's pulse crop farmers--Montana is the leading producer
of pulse crops in the United States, and India is the leading
consumer in the world. We can think about other businesses that
we can engage in with India, in addition to just the strategic
regional and geopolitical influence of India as a counterweight
to China's growing influence.
Ms. Lauritsen, in your testimony you highlight India's high
agricultural tariffs. How should the U.S. approach India and
its many challenging and longstanding market access issues,
whether it be on a bilateral or a multilateral basis?
Ms. Lauritsen. Thank you, Senator, for that question. And
in the last couple of years of my tenure at USTR, I actually
was negotiating with India to try and actually accomplish those
very things. They are tough negotiators. They protect their
farmers vigorously. But there are opportunities. First of all,
they have retaliatory tariffs still imposed on some of our food
and agricultural products as a result of the 232 steel and
aluminum restrictions. That hurts our exports, including on
pulses. But there are opportunities, I think, to engage with
them. It is likely kind of transactional, but you do not get
anywhere if you do not sit down at the table and actually work
through the issues to try and lower their tariffs--even to our
levels would be a huge benefit to our exporters.
We have a number of phytosanitary issues on wheat that
could be resolved, for example. Or agricultural biotechnology,
ethanol--there is a long list. But you have to be at the table,
and you have to have political will and economic incentives to
achieve it.
Senator Daines. Thank you.
I have been sitting here listening, and I know TPP has come
up a fair amount back and forth. During my time in the Senate,
I have been a supporter. In fact, I called on both President
Trump and President Biden to reengage with the Trans-Pacific
Partnership. In fact, if you remember, it was President Obama
who was an advocate of TPP, working more with Republican
Senators then. It was a unique kind of coalition to try to move
forward on TPP. I think it is important, both for economic
benefits as well as a more holistic strategy, to think about
countering China.
Ms. Lauritsen, how has withdrawing from TPP impacted U.S.
ag exports and access to markets in the region?
Ms. Lauritsen. So, because we are not a part of CPTPP, we
are at an economic disadvantage for many products. While we
have a partial agreement with Japan, we did not succeed in
negotiating elimination of all tariffs going into Japan. So
that needs to be done, and we are losing market share.
With Vietnam, we also are at a significant disadvantage;
for example, beef and pork in particular. So not being a
partner, we are at a tariff disadvantage. Foreign buyers are
going to buy based on price, and it is important that we have
lower tariffs so that we can compete against Europe, compete
against Australia and New Zealand and other countries.
Senator Daines. Thank you.
I have time for one more question. Ms. Llanso, you
highlight many concerns about increasing digital
authoritarianism around the world, particularly China and its
model of Internet regulation. China is in the process of
testing a digital yuan. While most countries that are looking
at digital currencies are concerned about privacy implications,
China's motivation stems in part from the desire to gain
insight into the financial lives of its citizens.
The question is, how could a push by the Chinese Government
to spread the digital yuan outside of its own borders threaten
human rights in neighboring countries around the world?
Ms. Llanso. Yes, that is an excellent question, Senator
Daines. I think the reach of China to be able to surveil the
financial transactions and interactions of people across the
region would only grow with the push to spread the digital yuan
beyond its borders. And it just highlights the issue of the
really important needs of security and privacy technologies for
all financial transactions that happen in the region, including
strong encryption and abilities to resist that kind of
surveillance and censorship.
Senator Daines. Thanks. My time is up.
Mr. Chairman, thank you.
The Chairman. Thank you. Before my colleague leaves, I want
to thank him for wrapping up his questions with that focus on
digital currency and encryption. I did that as well. And for
those who are not aware, Senator Daines and I have worked
together often on these issues, and I know we will be applying
some of what we have learned to the Indo-Pacific issue as well,
and I thank my colleague.
All right; Senator Brown?
Senator Brown. Thank you, Mr. Chairman. I am glad to see
labor here for the discussion. This is a different President
and a different chair of the committee, and I thank you for
putting labor at the center of all of this.
We want--and my question will be for Mr. Wessel--we want a
worker-centered trade approach that creates good jobs and
raises wages; that rebuilds our industrial base; that looks out
for workers' health and safety, and the safety and cleanliness
of our planet; and that improves labor rights worldwide,
something we have not seen in the past in this committee or in
an administration in my memory.
We unite in wanting--and I appreciate Ms. Llanso's comments
about that--we unite in wanting to counter China's labor and
human rights abuses, and its cheating in the global economy.
This committee, this administration, has put the world on
notice. No more Trans-Pacific Partnership that ignores labor
rights, as we saw in the last two administrations. Trade with
the United States may be possible and will be encouraged, but
under very different rules from the past. The rules in any
agreement matter. They matter for union steelworkers in eastern
Ohio, they matter for solar energy companies in northwest Ohio.
I have asked the administration--and this was a great
success, a bipartisan success, if you will--in the
infrastructure bill for an equally robust Made in America
economic framework. It includes infrastructure investments that
we are about to implement.
So my question, Mr. Wessel, is, speak to what you would
like to see the administration implement before, during, and
after any trade agreement that we pass.
Mr. Wessel. Thank you for your question, and thank you for
your leadership on these issues. First of all, going to your
point, this President has said that before he engages in new
trade negotiations, he is going to build back the U.S. economy.
And that is what he is trying to do. He did it with the
infrastructure plan that is now being rolled out. He has been
working with the Congress on the legislation that is now going
through both the House and the Senate and is ready for
conference. Hopefully, it includes the provision that you and
Senator Portman authored, Leveling the Playing Field 2.0. But
we first have to rebuild our economy to make sure that we are
approaching all of this from a position of strength.
Second, we need to have a better idea of what the
administration wants to achieve with IPEF. It is still ill-
defined, and Congress, along with other stakeholders, have to
be at the table, and they need to be real partners in all of
this.
And then, whatever provisions we are able to achieve--
hopefully with your help, Senator Wyden's, and the rest of the
committee--they have to be properly implemented, monitored, and
enforced. Too often we sign agreements and then move on to the
next one, without ensuring that we achieve the results that had
been expected.
Senator Brown. Thank you, Mr. Wessel.
Talk for a moment about labor enforcement. I thank Chair
Wyden for mentioning it earlier in his comments. I am thankful
to be associated with the chair on Brown-Wyden under the USMCA
and the difference--we took another corporate trade agreement
and dramatically changed the USMCA with Brown-Wyden and what
that will mean.
We have seen two elections in Mexico where workers voted
overwhelmingly for independent unions, not the company unions
in the past that we saw in Mexico and that we see around the
world. These two elections--the construct we built is going to
help workers on both sides of the border in the long run.
Our approach on trade policy in the Asia-Pacific region
requires that same buy-in from the people who make this country
work.
So, Mr. Wessel, what guidance would you recommend to ensure
that labor provisions included in the Indo-Pacific Economic
Framework are actually enforceable, as they have been in
Mexico?
Mr. Wessel. Again, thank you--not only thank you for your
question, but for the leadership that you and Chairman Wyden
had on putting together the rapid response mechanism that is
having a fundamental impact on labor rights in Mexico.
You mentioned the two cases. Subsequent to that, the
workers at the Mazda facility rejected a protection contract
that their protection union was trying to force on them. So it
is a model going forward.
But that model was also built on all the work that you and
so many others engaged in to make sure that the standards that
are being enforced are worthy of all of our efforts. And that
is a critical issue for the Indo-Pacific. We saw inadequate
labor consistency plans in the TPP. Vietnam was a perfect
example. So we must not only have the right standards, and we
must push forward, but we need efforts like yours and Senator
Wyden's to promote the right kind of enforcement mechanisms,
and engage in new implementation monitoring and enforcement
efforts that support workers around the globe.
Senator Brown. Thank you, Mr. Wessel. And thanks to the
whole panel.
Mr. Chairman, thank you.
The Chairman. I thank my colleague. And what is striking,
and it is so fitting that Senator Brown is--I am going to ask
you one more question, but Senator Brown is officially ending
the first round. We know that different parts of the country
for a lot of years had differences of opinion. In other words,
the Midwest looked at these issues differently than the Pacific
Northwest did. And what Senator Brown has been willing to do is
to make, in a very transparent way, specific ideas that could
bring the two regions together.
In my part of the world, where our backyard is practically
the Pacific region that we are talking about, people care
deeply about this issue, and they know that a lot of trade jobs
pay better. But as Senator Brown has said, it does not matter
unless you have strong trade enforcement.
So before you came, Senator Brown, Mike Wessel said we are
going to try to bring the same kind of approach to enforcement
to this new area. Now it is different. It is a different kind
of issue. Each one of these trade debates is different. But the
principle you brought to this committee, which is that trade
enforcement is important to workers in every nook and cranny of
this country, is one I do not think we are going to turn our
back on, and I thank you for it.
All right, let's wrap up with one question with respect to
climate, if I might. And I think I am going to ask you about
this, Ms. Lauritsen, because I know you have had an interest in
these issues. And it strikes me that the new approach we are
talking about with respect to the Indo-Pacific is one that
would give us a kind of less structured, perhaps more nimble
approach where we could really get at this climate issue that
is forgotten in too many instances.
I mean, climate and reducing carbon is front and center to
the quality of life and livability in our country and in the
Indo-Pacific region. And it seems to me the project is an
opportunity to pull solar panel production away from China's
Uyghur region and bring an innovative approach to climate.
So I think for my last question, tell me what you think of
that. Are there opportunities here to make real progress with
respect to tackling climate change that are born out of the
fact that you do not have quite so much of the bureaucratic
kind of set of requirements that almost tie our hands when what
we really need is fresh thinking? What do you think?
Ms. Lauritsen. Well, Senator, I actually agree with you. I
do think that this provides an opportunity, because the more
you get other countries on board with even general philosophies
but also bringing that concreteness to actual practices--you
know, in the area I know of farming, it is promoting resilient
agriculture, being able to promote technologies that can help
alleviate drought, whatever it might be, reducing the use of
greenhouse gas emissions on the farm.
This is an opportunity, but again, you have to be at the
table, and you have to have the incentives to bring these other
countries along. They may not be ready to sign on the dotted
line right away, but you bring them along. You work with them.
You help them. And that is an important way forward.
The Chairman. The three of you have been very valuable, and
we thank Mike Wessel, who is, I think, still listening online.
And I am just going to leave with one thought, and you all will
be liberated to get some lunch and go on about your business.
We have talked about big issues, hugely important issues
relating to freedom and censorship in digital trade. We
obviously keep coming back to more good-paying jobs in a
variety of sectors, and that involves a whole host of
questions, supply chain issues obviously being front and
center. And then we basically closed on the issue of climate,
and that perhaps the kind of structure for this upcoming Indo-
Pacific discussion may make it easier to tackle climate change.
And this committee is very proud of the fact that we basically
passed legislation to transform the Federal tax code. In this
committee, we took provisions on energy and threw them in the
garbage can and said, for the future, we are going to tie
reducing carbon emissions to tax savings.
So we are capable of looking at these issues in a different
way, and you have given us a lot of good ideas. The key to
getting it done, though, in my view--and you three touched on
it with Mike Wessel as well--is having more open and
transparent discussions.
I do not know if you all followed it, but the China
legislation was really up against it for a number of days when
we were trying to find a path forward on a bipartisan bill. The
Majority Leader, Senator Young, Senator Crapo, and I spent a
lot of time talking with both sides of our dais with respect to
the trade provisions. And when we got down to trying to advance
the legislation, we offered a bipartisan amendment that had an
enormous amount of debate among the members of this committee,
and it won 91 to 4. And then the legislation was on its way,
and we are getting ready to work with the House, and I think it
is going to be a bipartisan bill in the end.
And it really stems from the fact that we had the chance in
this committee to talk about various ways to craft legislation
in the hugely important area of trade that you are talking
about today. And thank you for giving us a lot of good ideas
for going forward. I think everybody understands trade debates
are not for the faint-hearted. People have really strong views,
and they often come in with a great interest in keeping their
view and defeating the other person's view.
Senator Brown just talked about how we broke new ground in
terms of labor enforcement. We can break new ground on climate.
You three and Mike Wessel have given us a lot of good ways to
proceed. We thank you.
And with that, the Finance Committee is adjourned.
[Whereupon, at 12:37 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
Thank you, Mr. Chairman. First of all, thank you for holding this
hearing today. We are in agreement on the importance of strengthening
our economic and trade ties, particularly in the Indo-Pacific area, but
also across the globe.
Vibrant economic and trade links are an essential part of building
confidence, trust, and cooperation in different areas of the world and
at different levels of geo-political engagement. Putin's invasion of
Ukraine makes it abundantly clear that the United States must increase
its focus on strategic trade engagement and, as part of that,
reestablish its leadership on trade relations in the Indo-Pacific
region.
For the first time, in January of 2022, the United States exported
more liquefied natural gas (LNG) to Europe than Russia. Although there
is much more we can do to expedite U.S. energy exports, our increased
trade strengthened our allies' ability to withstand Russian aggression.
Critically, the Department of Energy must still sign off on any LNG
export to any country with which we lack a free trade agreement,
causing uncertainty for many of our partners. This is just one example
of why we need more trade agreements with our partners--and the Indo-
Pacific is the one region where we need them ASAP.
The Indo-Pacific is a dynamic region, perhaps the key to U.S.
economic prosperity. Over two-thirds of all global economic growth in
the last 5 years took place in the Indo-Pacific. The GDP of just the 11
countries in the Comprehensive and Progressive Trans-Pacific
Partnership (CPTPP) is over $10 trillion.
Regrettably, we are losing ground in the Indo-Pacific. Behind me
are two maps comparing whether China or the United States is the more
important trade partner for a particular country. The 2002 map shows
the United States as the more significant trading partner for most
Indo-Pacific countries. The 2018 map shows the relationship turned
upside down, in China's favor.
Even more regrettably, the situation with China in the Indo-Pacific
region is likely to become worse--if not entrenched--unless we change
course. The Biden administration failed to initiate any new trade
negotiations last year, but China helped finalize the trade agreement
it backs. Known as the Regional Comprehensive Economic Partnership,
RCEP, it lacks any disciplines on state-owned enterprises, labor, or
the environment, and worse, it essentially endorses China's limited
intellectual property protections. With RCEP having only entered into
force this January, China is already better positioned than the United
States in most of our Asian partners' markets.
On top of that, China is now pushing to join CPTPP, which would
leave the United States even further behind in the Indo-Pacific region.
To reestablish U.S. economic momentum right now, the Biden
administration must reverse course and chart an ambitious trade policy.
Although the administration announced that it seeks to pursue an
Indo-Pacific Economic Framework, or IPEF, it unfortunately indicated
that this framework will not include any market access component.
Certain aspects of what I am hearing about IPEF are troubling--
including the notion that it could be used to advance the tax deal the
administration negotiated at the OECD that would make the U.S. less
competitive, even before Congress agrees to accept such an outcome for
the United States.
The administration's present position of leaving out a market
access outcome makes no sense. Economically, our workers, businesses,
and farmers will lose out on important opportunities if we stay on the
sidelines. America's leading innovators will also be undermined if we
do not lay down a foundation for strong intellectual property rights.
In fact, one way to redress the economic impact of the administration's
current misguided inflationary policies is to promote market access.
Export-oriented jobs typically pay 16 percent more on average in
the manufacturing industries and 15.5 percent on average in the
services industries. We must strategically deepen our trade ties to
ensure we and our allies have secure access to energy, critical
minerals, and sensitive technologies. We must also develop rules for
digital trade that enshrine openness and freedom. If we do not write
the rules, China will.
Accordingly, this hearing is an excellent opportunity for the
Finance Committee to help chart the course the United States must take
to have a strategic and sensible trade policy in the Indo-Pacific.
Mr. Chairman, thank you for organizing this hearing. I look forward
to the testimony from our witnesses.
______
Prepared Statement of Sharon Bomer Lauritsen, Principal,
AgTrade Strategies LLC
Chairman Wyden, Ranking Member Crapo, and distinguished members of
the committee, thank you for the opportunity to appear before you today
to share my thoughts on the challenges and opportunities for America's
farmers and ranchers in the Indo-Pacific region. Key to enhancing the
sustainability of American farms and ranches is investing time, energy
and ambition to negotiate new trade agreements to increase our
competitiveness and open export markets in the Indo-Pacific, and
particularly Asia.
As we witnessed in 2018 when U.S. agricultural exports to a major
market were severely disrupted, not only farmers, ranchers, businesses,
and their workers were hurt, but taxpayers as well when the government
provided support for those businesses to stay afloat. In 2017 before
the trade war, nearly 14 percent of U.S. agricultural exports were
concentrated in China. Despite calls at that time to diversity U.S.
export markets, last year in 2021, we were up to nearly 19 percent or
$33 billion of U.S. agricultural exports concentrated in China.
Clearly, China is and will remain a critically important export market
for U.S. food and agriculture. But, to enhance market stability and
resiliency in our food systems, we need to diversify our agricultural
export markets. And there is no better place than to focus on the Indo-
Pacific region.
With growing populations and fast-growing economies, Indo-Pacific
economies are attractive markets for the types of food and agricultural
products that the United States produces--whether it be apples, corn,
soy, ethanol, cotton, rice, potatoes, wheat, beef, pork, poultry,
dairy, or the thousands of other products grown on America's farms and
ranches and produced in our food manufacturing facilities. But the
unfair barriers to U.S. agricultural exports in the region are many.
Just a few examples are:
Indonesia's import restrictions on feed corn and apples;
Thailand's ban on imports of U.S. fresh and frozen pork;
India's restrictions on ethanol and products derived from
agricultural biotechnology;
Vietnam's animal feed certification requirements and its
longstanding ban on certain offal; and
The Philippines restrictive sanitary and phytosanitary
measures for a range of products.
The barriers, however, are also tariff-related. For example,
Thailand's average bound agricultural tariff is 39.1 percent
and its applied tariff in 2021 was 29.3 percent;
Vietnam's average bound agricultural tariff is 18.8 percent
and its applied tariff is 16.5 percent; and
India has one of, if not the highest average bound
agricultural tariffs in the world at 113 percent and its applied tariff
is 34 percent.
Even if non-tariff barriers are resolved, U.S. agricultural exports
are also often challenged with being competitive in certain markets,
because our products face higher tariffs in countries that already have
preferential tariff agreements with U.S. competitors, such as
Australia, New Zealand, or the European Union.
We know that preferential trade agreements benefit our farmers and
ranchers. Thanks to our free trade agreements, Canada and Mexico have
long been two of our three largest export markets. U.S. food and
agricultural exports to Australia increased 156 percent since
implementation of our FTA in 2005. U.S. agricultural exports to
Singapore increased nearly 400 percent since implementation of that FTA
in 2004. More recently, U.S. agricultural exports to South Korea have
increased 54 percent since 2012, and that FTA is still in the process
of phasing out tariffs.
Let's compare those growth numbers to overall U.S. agricultural
export growth over the past 10 years of 24 percent--both to the world
as well as to 15 non-FTA countries in the Indo-Pacific region,\1\ and
that is with a banner export year in 2021. The difference in U.S.
agricultural export growth rates between countries with U.S. FTAs and
those without is unmistakable.
---------------------------------------------------------------------------
\1\ Brunei, Burma, Cambodia, India, Indonesia, Japan, Laos,
Malaysia, Mongolia, New Zealand, Philippines, Singapore, Taiwan,
Thailand, and Vietnam. Source: USDA/GATS.
Other countries are not standing still. Countries with which U.S.
farmers and ranchers compete have proactive policies to negotiate free
trade agreements. The European Union is negotiating with the
Philippines, Indonesia, and Australia. Australia already has agreements
with ASEAN countries and is trying to negotiate with India.
Importantly, the Regional Comprehensive Economic Partnership is being
implemented by 10 countries in the region, although it may not be as
comprehensive as some of the United States' trade agreements. On top of
that, the Comprehensive and Progressive Trans-Pacific Partnership
(CPTPP), to which the United States is not a party currently, is
lowering tariffs among eight countries. These preferential tariff
agreements put America's farmers, ranchers, agribusinesses, and their
---------------------------------------------------------------------------
workers at a competitive disadvantage in these growing markets.
The administration's recently announced Indo-Pacific Economic
Framework (IPEF) provides an opportunity to create a fair and level
playing field for our exports in the region. At this time, however,
little public information is available as to what is really envisioned
by the administration. USTR's recent Federal Register notice identifies
agriculture as part of the IPEF, but unfortunately emphasizes that it
is not seeking to address tariff barriers at this time. In USTR's 2022
Trade Policy Agenda issued earlier this month, the administration
provides very general concepts for IPEF, for example: (1) sustainable
food systems and science-based agricultural regulation; (2)
transparency and good regulatory practices; and (3) trade facilitation.
Science-based agricultural regulation, transparency, good regulatory
practices, and trade facilitation are standard approaches in U.S. trade
negotiations, but will they really open new markets for America's
farmers and ranchers?
To have a meaningful impact for fair and resilient trade for U.S.
food and agricultural products, the following elements should be
considered for IPEF:
(1) Enhanced Sanitary and Phytosanitary (SPS) and Technical
Barriers to Trade (TBT) Rules: Several of the Indo-Pacific countries
have already signed onto the SPS- and TBT-plus rules of the CPTPP,
which are similar to the SPS and TBT provisions of the U.S.-Mexico-
Canada Agreement. Since the administration has already identified
science-based agricultural regulation as one pillar of IPEF, basing
IPEF commitments on CPTPP or USMCA is logical. Some least developed
countries may need additional assistance to build their SPS and TBT
regulatory infrastructure, but having a harmonized approach for strong,
science-based and transparent food safety, plant health and animal
health rules can greatly facilitate trade.
Another element of this pillar could be to gain commitments from
trading partners to not create new unwarranted trade barriers in the
future. U.S. negotiators have been successful in getting countries to
agree to recognize the U.S. food safety system, for example, and to
accept U.S. Department of Agriculture export certificates. These types
of specific commitments help to provide a predictable business
environment and facilitate trade into the future.
(2) Resolving Actual Non-Tariff Barriers: Establishing strong SPS,
TBT and other rules, such as transparent and functioning import
licensing practices, however, is not enough. Using IPEF to actually
resolve unwarranted non-tariff barriers is important up front so that
U.S. farmers and ranchers can actually realize improved trading
conditions in the near term. U.S. negotiators have been successful
using trade agreement negotiations to resolve long standing barriers.
For example, the United States negotiated with Australia to open its
market to U.S. cooked and processed pork in 2005, now about a $200
million market. Mexico eliminated all of its BSE-related barriers to
U.S. beef in 2012, when it wanted to join the Trans-
Pacific Partnership.
A couple of examples of the types of barriers that need focused
negotiations are non-functioning dairy facility registration systems in
Indonesia, and burdensome and restrictive import licensing regimes in
several southeast Asian countries. In addition, negotiating permanent
access in our export markets for U.S. foods with common names (e.g.,
asiago, parmesan) would help blunt the EU gaining protection for a
large number of geographical indications through its trade
negotiations. While the U.S. Department of Agriculture, the Office of
the U.S. Trade Representative, and U.S. regulatory agencies work every
day to resolve barriers, prioritizing this work during a trade
agreement negotiation, where incentives and leverage may exist, can
reap real results.
(3) Reduce Agricultural Tariffs: As noted above, many of the Indo-
Pacific countries have high most-favored nation (MFN) agricultural
tariffs, compared to the U.S. average agricultural applied tariff of
about 5 percent. As U.S. competitors gain preferential tariff access in
export markets, U.S. exporters lose out. For example, Vietnam has a 10-
percent tariff on U.S. apples, but a zero tariff on New Zealand apples
since 2019. U.S. apple exports have dropped 40 percent to Vietnam,
while New Zealand apple exports to Vietnam have increased 76 percent.
U.S. french fries face a tariff of 12 percent into Vietnam, and yet EU
fries will face no tariffs by 2025. I recognize the legal limits that
the administration may have in negotiating U.S. tariffs without Trade
Promotion Authority (TPA), but even if Congress does not pass TPA in
the near term, opportunities exist to negotiate for our trading
partners to lower MFN tariffs or to lower tariffs to U.S. levels.
Vietnam, for example, recently temporarily lowered its MFN applied
tariffs for pork, corn, and wheat to align the tariffs affecting U.S.
products with those provided preferentially to other countries. In
2020, with that temporary tariff reduction, U.S. pork exports increased
191 percent over 2019. When the tariff reduction lapsed, U.S. pork
exports decreased 74 percent in 2021, losing sales to the European
Union and Russia, which have FTAs with Vietnam.
In addition to MFN and applied tariff barriers, U.S. exports of
almonds, walnuts, apples, chickpeas, and lentils still face retaliatory
tariffs imposed by India in 2019 due to U.S. section 232 tariffs.
Exempting agricultural products from a dispute unrelated to agriculture
would provide welcomed relief to U.S. agricultural exporters.
(4) Common vision on agricultural sustainability, sustainable food
systems, and food security. International trade is integral to
supporting agricultural sustainability, sustainable food systems, and
food security. Secretary of Agriculture Tom Vilsack is taking important
steps in framing these issues and building coalitions internationally
for a common approach. IPEF can be an important forum to build on this
work and support food and agricultural trade among countries. Aligning
like-minded countries in these areas can also support science-based
decision making in the Codex Alimentarius Commission, World
Organization for Animal Health, and the International Plant Protection
Convention. To advance sustainability, supporting the use of new
agricultural technologies with appropriate regulatory systems would be
of benefit to farmers throughout the Indo-Pacific region. For example,
several countries in the Indo-Pacific region have either no functioning
regulatory approval system for products derived from agricultural
biotechnology or have cumbersome and slow systems. With the advent of
gene editing in the past several years, ensuring that countries allow
the import of these new crops becomes increasingly critical for a
sustainable and resilient trading system.
(5) Inclusion of as many countries as possible: International trade
is one element in building stronger foreign relations in the Indo-
Pacific region. If countries want to be a part of the broader Indo-
Pacific strategy, they then should also be a part of the IPEF. If a
country is concerned about meeting the obligations of SPS-plus rules,
for example, negotiators can be creative to find ways to bring them
along. IPEF should bring as many countries together as possible, since
the more inclusive the IPEF is, the stronger our economic ties and
foreign policy objectives will be in the region.
(6) Enforcement: An agreement is only as good as it is implemented
and enforced. For IPEF to have any meaning or real results, provisions
need to be enforceable. Enforcement should emphasize bilateral dialogue
to resolve disagreements, but timely and straight forward dispute
settlement mechanisms, including mediation, should be a part of any
agreement. Of course, USTR will then need to do the follow-on work to
actually enforce the agreement.
I have traveled to nearly every U.S. State and am always awed by
the breadth and scope of American agriculture. With more than 20
percent of American production being exported, our rural communities in
all 50 States depend on finding strong, stable, and predictable
markets. U.S. trade agreements do just that, and I believe that with
creative thinking and ambition the Indo-Pacific Economic Framework can
also have economically meaningful results for a sustainable future.
Thank you.
______
Questions Submitted for the Record to Sharon Bomer Lauritsen
Questions Submitted by Hon. Mike Crapo
Question. Asia is a key export destination of the success of
Idaho's farmers, particularly our dairy, wheat and potato farmers.
Oddly, U.S. French fries face a tariff of 12 percent into Vietnam, and
yet EU-produced fries will face no tariffs by 2025. In short, producers
in Idaho are losing ground because the U.S. is simply not negotiating
trade agreements, and I imagine the rest of the country is losing as
well.
Can we achieve successful agricultural market access in the Indo-
Pacific region without addressing foreign tariffs?
Idaho's farmers are also well aware that protectionist measures
disguised as food safety measures are a major impediment to
agricultural trade.
Do you think it makes sense to impose WTO obligations that ensure
such measures are based on science, in regional trade agreements, to a
framework like the IPEF?
Answer. To achieve meaningful market access, U.S. agricultural
exports need to be competitive in export markets, importantly in terms
of price. Key to competing on price is the cost of tariffs. While a
market may be opened with the elimination of a non-tariff barrier, if a
U.S. exporter is at a price disadvantage because of unequal tariffs
with his or her competitors, the U.S. exporter will not achieve
successful market access. With Indo-Pacific countries increasingly
entering into preferential tariff agreements with U.S. competitors, to
compete in the Indo-Pacific region and achieve successful market
access, the United States therefore would need to address high foreign
tariffs facing U.S. food and agricultural exporters.
While countries likely to be involved in the Indo-Pacific Economic
Framework are all members of the World Trade Organization and already
obligated to abide by its agreements, particularly the WTO SPS
Agreement and TBT Agreement, it does make sense to include such
obligations as well as enhancements and elaboration of those WTO
obligations in regional trade agreements. The WTO SPS and TBT
Agreements were written and agreed to nearly 30 years ago, and
governments and the private sector have learned how those agreements
have worked, and where they could be improved. Regional trade
agreements provide that opportunity to make such improvements as the
United States achieved in the United States-Mexico-
Canada Agreement. In fact, several countries in the Indo-Pacific region
have already agreed to SPS and TBT ``plus'' commitments in the
Comprehensive and Progressive Trans-Pacific Partnership.
Question. Inasmuch as the administration's proposed IPEF may
include what it describes as ``binding rules'' is positive,
particularly if those rules extend to digital trade and agricultural
market access. The U.S. ensures that its free trade agreement rules are
binding because it enforces the rules through dispute settlement
provisions and application of tariff suspension benefits.
Are ``binding'' rules possible in an IPEF, if it lacks a dispute
settlement mechanism?
Answer. Without the ability to resolve disputes and enforce a trade
agreement, ``binding'' rules would not then seem to be actually
binding. Dispute resolution or dispute settlement can certainly take
different forms, but if rules are to be binding some sort of dispute
settlement mechanism is needed. It also requires governments to
actually use the mechanism to resolve the disputes.
______
Question Submitted by Hon. Thomas R. Carper
Question. As the chairman of the Committee on Environment and
Public Works, I have a keen interest in the link between trade policy
and the environment. Building a strong economy can--and should--include
protecting our environment and addressing climate change. That is why I
believe it is crucial for us to include robust environmental standards
in our trade agreements.
What opportunities exist to promote environmental conservation and
sustainability as we engage with our allies in the Indo-Pacific region?
Answer. From an agricultural perspective, international trade is a
one key element to enhancing sustainability. For example, crops should
be grown where they are least resource intensive and then be able to be
imported and exported without unnecessary trade barriers. I believe
that environmental conservation and sustainability specifically can be
promoted with allies in the Indo-Pacific region. First, depending on
the partner country, this could come in the form of research
cooperation; technical assistance to promote production best practices;
sharing of tools to implement improvements for water and energy usage,
food security, or reduced greenhouse gas emissions; and supporting
profitability in farm income. Second, trade agreements, whether
bilateral or multilateral, should allow for a farmer's voluntary use of
conservation programs and prohibit discrimination based on how
sustainability and conservation objectives are achieved. Third, the
United States could also look to build support in the Indo-Pacific
region for conservation and sustainability objectives that are then
carried into plurilateral and multilateral discussions, supporting
widely accepted principles that measures affecting trade should be
based on scientific evidence, linked to legitimate objectives, and be
no more trade restrictive than necessary. A fourth element in
agricultural production would be acceptance of new technologies that
improve conservation and sustainability and ensuring Indo-Pacific
countries have science-based, transparent and functioning regulatory
systems to allow technology adoption.
______
Question Submitted by Hon. Bill Cassidy
Question. You mentioned in your testimony that India has amongst
the highest bound tariffs of any country in the world. I agree that
there is a huge need for new market access into these countries and
it's difficult for the U.S. to offer much in the way of tariff relief
for imported products without TPA. So looking at what agricultural
products Louisianans would like to ship more of to the Indo-Pacific
region, rice and seafood come to mind. Unfortunately, both of those
sectors are also historically and culturally sensitive within the Indo-
Pacific markets. If the administration chooses to pursue market access
as part of the Indo-Pacific talks, do you think there's likely to be
positive outcomes for those Louisiana commodities?
Answer. Negotiations to open export markets for import sensitive
agricultural products are never easy; but with an assertive trade
policy that achieves improved market access through elimination or
reduced tariffs for all products--both import and export--positive
outcomes can be achieved, including for products such as rice and
seafood. Getting such improved access, however, is likely to only be
achieved in a comprehensive trade agreement, if the other country gets
important benefits in return, such as improved tariff market access
into the United States, which would require Trade Promotion Authority
being approved by Congress.
______
Prepared Statement of Emma Llanso, Director,
Free Expression Project, Center for Democracy and Technology
Chairman Wyden, Ranking Member Crapo, and members of the committee,
thank you for the opportunity to testify before you today about the
opportunities for advancing digital rights and fostering robust digital
economies through strategic trade engagements in the Indo-Pacific
region. My name is Emma Llanso, and I am the director of the Free
Expression Project at the Center for Democracy and Technology (CDT),
where I have worked for more than 12 years to promote law and policy
that support Internet users' rights to freedom of expression, access to
information, and privacy in the U.S., Europe, and around the world.
CDT is a nonpartisan nonprofit 501(c)(3) charitable organization
dedicated to advancing civil rights and civil liberties in the digital
world. Headquartered since 1994 in Washington, DC, and with a growing
office in Brussels, Belgium, CDT works to ensure that human rights and
civil liberties are at the forefront of policy debates around the
Internet and emerging technologies, and to advance policy solutions
that sustain an open, interconnected Internet that supports people's
enjoyment of their human rights.
So I am grateful for the committee's focus on the promises and
challenges in the digital sphere that will arise as the United States
pursues closer trade relations in the Indo-Pacific. Over half of the
world's young population lives in the Indo-Pacific region, which makes
up 60 percent of the global GDP and nearly two-thirds of global
economic growth.\1\ It accounts for a little over half of the world's
Internet users,\2\ and Internet use in the Indo-Pacific Region is
expected to grow to up to 3.1 billion users by 2023.\3\
---------------------------------------------------------------------------
\1\ White House, Indo-Pacific Strategy of the United States 4-5
(February 2022), https://perma.cc/7PSM-QDY2.
\2\ Trisha Ray et al., The Digital Indo-Pacific: Regional
Connectivity and Resilience, QuadTech Network at 1 (February 2021),
https://perma.cc/BPL6-9WW6.
\3\ Cisco, Annual Internet Report 3 (2020), https://perma.cc/9TJA-
MJ6Z.
There is an urgent need to counter the authoritarian model of
Internet regulation promoted by the Chinese Government, which threatens
human rights and impedes the development of an open digital economy.
Indeed, there are an alarming number of recent laws and legislative
proposals across the Indo-Pacific region that seek to control speech
and access to information, subject Internet users to surveillance, and
---------------------------------------------------------------------------
give state authorities control over Internet infrastructure.
The U.S. has the opportunity, including through the Indo-Pacific
Economic Framework (IPEF) discussions, to promote a rights-respecting,
multistakeholder approach to Internet governance that ensures the
participation of civil society and technical experts in the development
of technology policy and prioritizes maintaining an open,
interconnected Internet in the region and worldwide. It should promote
the rule of law and seek commitments to uphold international human
rights, which are vital to countering digital censorship and
surveillance practices, and which in turn benefits the economy. Online
service providers and other businesses need the legal certainty that
comes from the rule of law in order to operate globally. When national
regulations comply with international human rights obligations, they
both protect people's rights and bring economic benefits by more
closely harmonizing regulations across borders. The U.S. should build
on existing commitments to digital rights, including through the
Freedom Online Coalition,\4\ and secure additional commitments to
refrain from imposing Internet shutdowns, reject extralegal censorship,
limit the use of surveillance technologies, and ensure access to end-
to-end encrypted services.
---------------------------------------------------------------------------
\4\ See Freedom Online Coalition (last visited March 12, 2022),
https://perma.cc/27Z8-PLXK.
The U.S. should also promote opportunities for shared learning
across governments, and with the involvement of human rights advocates,
technical experts, and other civil society representatives, especially
around emerging issues, including artificial intelligence. The IPEF
process should coordinate with the variety of such learning and
information-sharing forums that already exist across the U.S.
Government, including the EU Technology Trade Council and the Freedom
---------------------------------------------------------------------------
Online Coalition.
Finally, the U.S. should recognize that nations sometimes have
legitimate concerns that may impel them to adopt laws that threaten
human rights, such as data and personnel localization mandates and
requirements to undermine encryption. For the U.S. to successfully
promote the free flow of data, and reject overly restrictive national
data protection laws that can serve as vehicles for censorship and
surveillance, other nations must be able to have confidence that, for
example, their citizens' data will be protected from corporate and
government abuses when sent to the U.S.
countering digital authoritarianism
This committee is already familiar with the threat of digital
authoritarianism presented by China's model of Internet regulation.
China's Government uses a variety of technical and legal practices to
exert control over the Internet and the Chinese populace.\5\ China
engages in direct digital censorship, including through Internet
shutdowns and through its decades-long project to build a ``Great
Firewall'' that blocks outside information sources and enables the
Chinese Government to impose strict domestic censorship policies. China
also censors information through indirect means, including obligations
for technology companies to store data within the country, to enable
government access to user data.\6\ Such requirements discourage foreign
service providers from making information available in the country, and
the threat of surveillance can exert a chilling effect on users. The
Chinese Government is notorious for its mass and discriminatory
surveillance of the population, particularly of the Uyghur community in
Xinjiang province.\7\ A lack of respect for human rights and weak rule
of law in China mean that it is extremely difficult for U.S. companies
to operate responsibly in the country,\8\ which has only further
cemented the Chinese Government's grip on its domestic communications
network.
---------------------------------------------------------------------------
\5\ See United States International Trade Commission, Foreign
Censorship, Part 1: Policies and Practices Affecting U.S. Businesses
(February 2022), hereinafter ``U.S. ITC report,'' https://perma.cc/
W7KK-XGBK.
\6\ Id. at 51.
\7\ Human Rights Watch, China's Algorithms of Repression: Reverse
Engineering a Xinjiang Police Mass Surveillance App (May 1, 2019),
https://perma.cc/MG86-67B3.
\8\ Global Network Initiative, The Operation of the GNI Principles
when Local Law Conflicts with Internationally Recognized Human Rights
(last visited March 13, 2022), https://perma.cc/5JJA-NZ6C.
Unfortunately, the past 3 weeks have provided a stark example of
the threats to human rights from digital authoritarianism, in the
context of the Russian Government's invasion of Ukraine. Bolstered by
laws that give the government broad censorship and surveillance powers
and that require foreign tech firms to locate personnel and data within
the country, the Russian Government has sought total control of the
Russian people's access to information about the war the government is
conducting.\9\ The Russian Government has throttled and ultimately
blocked access to social media services that dared to attach fact-
checks to state propaganda,\10\ and has passed a new ``fake news'' law
that prohibits anyone from ``knowingly disseminating false
information'' about Russia's military, which is understood to include
referring to its actions in Ukraine as an ``invasion.''\11\ As a
result, many media outlets have left the country, for fear of the
safety of their personnel on the ground, and many online service
providers have shuttered their services or are blocking access by
Russian users, leaving the Russian people with few information
alternatives to state propaganda and strengthening the government's
control.\12\
---------------------------------------------------------------------------
\9\ Human Rights Watch, Russia: Growing Internet Isolation,
Control, Censorship Authorities Regulate Infrastructure, Block Content
(June 18, 2020), https://perma.cc/P7E7-SZAR.
\10\ Dan Milmo, Russia blocks access to Facebook and Twitter, The
Guardian (March 4, 2022).
\11\ Ann M. Simmons and Alexandra Bruell, Russia Targets Media
Outlets With ``Fake News'' Law, Blocks Facebook, Wall Street Journal
(March 5, 2022), https://perma.cc/Z9B3-9ENL.
\12\ Guy Faulconbridge, Russia fights back in information war with
jail warning, Reuters (March 4, 2022); Rebecca MacKinnon, The Invasion
of Ukraine Is Horrific. Cutting the Russian People off From the
Internet Could Make It Worse, Tech Policy Press (March 10, 2022),
https://perma.cc/D2MV-H6PZ.
Troublingly, these authoritarian tactics are already finding
purchase in other nations, including in the Indo-Pacific region. The
recent U.S. International Trade Commission report, ``Foreign Censorship
Policies and Practices that Affect U.S. Businesses'' describes some of
the growing digital censorship practices in India, Vietnam and
Indonesia, among other countries.\13\ It is vital that the U.S. work
with these nations and other leaders in the region to advance an
affirmative vision for Internet governance grounded in an open,
interoperable Internet free from digital censorship.
---------------------------------------------------------------------------
\13\ U.S. ITC report, supra n. 5.
---------------------------------------------------------------------------
digital censorship takes many forms
``Digital censorship'' is direct or indirect state action that
seeks to prevent or suppress online communication, or to punish online
speakers, through laws, policies, or practices that are inconsistent
with states' international human rights obligations. Digital censorship
impedes both individuals' freedom of expression and their ability to
receive information. Some forms are direct and overt, such as Internet
shutdowns or laws prohibiting certain content. Other forms of
government suppression of expression and information online are
indirect, such as government pressure on content moderation processes
through methods contrary to the rule of law and mandates to locate
personnel in-country to increase the government's leverage over private
companies. In this section, I discuss several forms of digital
censorship and their economic consequences, including examples from the
region (with country names in bold), as well as alternative, rights-
respecting approaches that the U.S. Government could promote.
Internet Shutdowns
A free, open, interconnected, and interoperable Internet
contributes to the enjoyment of human rights and freedoms by people
around the world, including the rights to opinion and expression,
assembly and association, public participation, privacy, and religious
freedom and belief. Internet access is an essential prerequisite to
full enjoyment of those rights in the digital age. However, as CDT and
other human rights groups have noted, there is a disturbing trend of
governments disrupting ICT services to calm unrest or thwart perceived
threats.\14\ State-sponsored network disruptions have grown from a few
dozen in the years between 2008 and 2014 to 155 in 2020 alone.\15\
According to UN Special Rapporteur Clement Voule, Internet shutdowns
are now `` `lasting longer' and `becoming harder to detect.' ''\16\
---------------------------------------------------------------------------
\14\ Michael Grimes and Emily Barabas, Network Shutdowns, Ctr. for
Democracy and Tech. (September 11, 2014), https://perma.cc/GT5Z-H5A7.
\15\ Id.; Access Now, #KeepItOn (last visited March 13, 2022),
https://perma.cc/5DGJ-7L3Y.
\16\ United Nations, Internet shutdowns now ``entrenched'' in
certain regions, rights council hears, UN News (July 1, 2021),
hereinafter ``UN News,'' https://perma.cc/PSN7-53MW.
In China, the government uses Internet shutdowns to stifle dissent
and control the flow of information to its people, often justified by
claims of national security concerns.\17\ In 2009, China shut down the
Internet in Xinjiang, which had a population of 22 million people, for
10 months in response to ethnic violence in the regional capital;\18\
shutdowns have subsequently continued sporadically in that region.\19\
More recently, China has also engaged in Internet shutdowns ``to limit
information related to the COVID-19 pandemic.''\20\
---------------------------------------------------------------------------
\17\ Freedom House, Freedom on the Net 2021--China (2021), https://
perma.cc/ZL3C-JAHG.
\18\ Id.
\19\ U.S. ITC report, supra n. 5, at 46.
\20\ U.S. ITC report, supra n. 5, at 47.
When governments act directly or coercively to interrupt wireless
service, they are enacting a ``prior restraint'' on speech which in
turn inevitably suppresses many innocent speakers' ability to
communicate; this has been especially effective in countries which have
few Internet providers, leaving them technically more vulnerable to
such shutdowns.\21\ Military conflicts and protests are often the
impetus behind Internet shutdowns, including within the Indo-Pacific
region. The Indian Government has imposed more Internet shutdowns than
any other country in the world, ``with 121 shutdowns in 2019 and 109
shutdowns recorded in 2020,'' often in response to protests or military
crackdowns, such as in the Jammu and Kashmir regions.\22\ In Myanmar,
intermittent shutdowns and disruptions began following a military
takeover in 2021, depriving residents of access to the outside world
and to information about rights abuses.\23\ The Indonesian Government
has also repeatedly shut down the Internet in regions of the country
because of protests.\24\ In Bangladesh, authorities imposed an
``Internet blackout'' on a refugee camp that lasted 355 days, in
response to a demonstration by the refugees.\25\
---------------------------------------------------------------------------
\21\ Emma Llanso, CDT to FCC: Wireless Shutdowns Are Never the
Right Choice, Ctr. for Democracy and Tech. (May 1, 2012), https://
perma.cc/V53Z-KAX6.
\22\ U.S. ITC report, supra n. 5, at 46; Adrian Shabaz and Allie
Funk, Information Isolation: Censoring the COVID-19 Outbreak, Freedom
House (2020), https://perma.cc/FFL9-S7KM; Software Freedom Law Center,
Internet Shutdowns (2022), https://perma.cc/ASS5-QSV3.
\23\ Access Now, Update: Internet access, censorship, and the
Myanmar coup (February 16, 2022), https://perma.cc/MSX3-YPCA.
\24\ Access Now, Court rules the Internet shutdowns in Papua and
West Papua were illegal (June 3, 2020), https://perma.cc/4RWK-AN92;
Natalia Krapiva et al., Indonesians seek justice after Internet
shutdown, Access Now (May 13, 2020), https://perma.cc/CM2H-QMN8.
\25\ UN News, supra n. 16.
Internet shutdowns demonstrate extreme vulnerability of mobile and
Internet access companies to governmental pressure. These shutdowns
harm human rights, and they are all the more concerning during the
COVID-19 pandemic, because they ``limit[] people's ability to obtain
timely information about the pandemic or use digital tools to access
health care, education, and other necessary services.''\26\
---------------------------------------------------------------------------
\26\ Shabaz and Funk, supra n. 22.
In addition, Internet shutdowns have lasting economic effects,
resulting from a myriad of impacts. Experts estimate that these costs
add up to billions of dollars each year. For example, a report by
Brookings conservatively estimated that the global economy lost $2.4
billion as a result of Internet shutdowns in 2015.\27\ According to
this analysis, India alone lost nearly $1 billion in 2015 because of
its repeated Internet shutdowns.\28\ More recently, a report based on
the NetBlocks Cost of Shutdown Tool--which estimates the economic
impact of an Internet disruption, mobile data outage or app restriction
using indicators from the World Bank, ITU, Eurostat and U.S. Census
\29\--estimated that Internet shutdowns cost the economy $5.45 billion
in 2021 and has already cost the economy $1.2 billion in 2022.\30\
---------------------------------------------------------------------------
\27\ Darrell M. West, Internet shutdowns cost countries $2.4
billion last year, Ctr. for Tech. Innovation at Brookings (October
2016), https://perma.cc/5N9L-GXLV.
\28\ Id.
\29\ NetBlocks, Cost of Shutdown Tool (2022), https://perma.cc/
JZN4-KN33.
\30\ Samuel Woodhams and Simon Migliano, Government Internet
Shutdowns Have Cost Over $18 Billion Since 2019, Top10VPN (March 9,
2022), https://perma.cc/R6KR-EPXA.
---------------------------------------------------------------------------
Requiring Online Service Providers to Determine the Legality of Speech
Intermediary liability laws, which establish whether and in what
circumstances online service providers (or ``intermediaries'') face
liability for hosting, transmitting, or otherwise enabling access to
illegal user-generated content, are another tool that governments can
use for direct or indirect digital censorship. Intermediary liability
frameworks may take the form of broad, unconditional shields from
liability \31\ or conditional notice-and-action regimes that specify
requirements intermediaries must meet upon being notified of illegal
content, in order to maintain their statutory safe harbor from
liability.\32\
---------------------------------------------------------------------------
\31\ See, e.g., 47 U.S.C. Sec. 230.
\32\ See, e.g., 17 U.S.C. Sec. 512; European Union, Directive on
Electronic Commerce, Directive 2000/31/EC.
There is currently considerable debate about the optimal contours
of intermediary liability frameworks in the U.S. and many other
countries around the world.\33\ However, intermediary liability
frameworks that require or incentivize intermediaries to censor online
content that is not illegal pose significant risk to freedom of
expression. Some intermediary liability laws require private companies,
rather than courts, to make determinations about whether specific user-
generated content is illegal. These laws may also allow non-judicial
authorities to declare content illegal, which circumvents the rule of
law and international human rights standards.\34\ One of the most
notorious examples of this is the Chinese model, in which
intermediaries are provided with extensive lists of prohibited content
and required to actively police their services for it.\35\
---------------------------------------------------------------------------
\33\ The European Union, for example, is revising its intermediary
liability laws in the forthcoming Digital Services Act, though the core
notice-and-action framework of the E-Commerce Directive will persist.
\34\ See David Kaye, Report of the Special Rapporteur on the
promotion and protection of the right to freedom of opinion and
expression, Human Rights Council of the United Nations 19 (August 17,
2018) (finding that governments should only restrict access to or
remove content pursuant to the order of an impartial judicial body in
order to remain consistent with international human rights principles),
https://perma.cc/N3LV-ZEBU.
\35\ Freedom House, Freedom on the Net 2020--China B2 (October
2020), https://perma.cc/29SK-7XWU.
Nevertheless, many governments around the world--including in the
Indo-Pacific region--have adopted or proposed regulations that would
require service providers to evaluate whether content is illegal after
receiving a notification from an average user, or require providers to
remove content pursuant to an order from a non-
judicial government agency--or risk facing liability for the content
themselves. Such laws will result in the erroneous removal of lawful
speech. Users and non-judicial government agencies may accidentally
misuse or purposely abuse notices by reporting content that is not
actually illegal, spurring intermediaries to remove content rather than
---------------------------------------------------------------------------
risk facing liability for it.
For example, in India, the 2021 Information Technology
(Intermediary Guidelines and Digital Media Ethics Code) Rules (the
Indian Intermediary Rules) require online services to remove illegal
content within 36 hours of receiving an order from a government
agency--not necessarily a judge.\36\ Online services must also remove
certain categories of content, including sexually explicit material,
within 24 hours of receiving a complaint from any user about the
material.\37\ The Indian Intermediary Rules are stringent and could
lead to jail time for employees of online services who fail to comply
with requests to take down illegal content.\38\ CDT has warned that the
rules ``open[] the door for . . . authorities to seek the removal of
speech for political or other inappropriate reasons--and the Indian
government already has demonstrated it will walk through that
door.''\39\ The Indian Intermediary Rules are likely to serve a model
for other legislation in the region; Bangladesh, for example, has
already proposed similar guidelines.\40\
---------------------------------------------------------------------------
\36\ Information Technology (Intermediary Guidelines and Digital
Media Ethics Code) Rules, 2021, Rule 3(1)(d), hereinafter ``2021 Indian
Intermediary Rules.''
\37\ Id., Rule 3(2)(b).
\38\ Namrata Maheshwari and Emma Llanso, Part 1: New Intermediary
Rules in India Imperil Free Expression, Privacy and Security, Ctr. for
Democracy and Tech. (May 25, 2021), https://perma.cc/WLZ4-D4DK; see
also Global Network Initiative, GNI Analysis: Information Technology
Rules Put Rights at Risk in India (March 30, 2021), https://perma.cc/
W2TG-B8M5 (explaining that failure to comply with the new intermediary
rules can lead to a loss of safe harbor protections under the IT Act
and ultimately result in prison terms of up to 7 years for employees
based in India).
\39\ Maheshwari and Llanso, supra n. 38.
\40\ Mitaksh, Bangladesh Releases Draft Rules to Regulate OTT
Platforms, Modeled [sic] on India's IT Rules, MediaNama (February 9,
2022), https://perma.cc/83WP-86YP.
Some countries have used concerns about online disinformation or
so-called ``fake news,'' coupled with intermediary liability regimes
that do not require a court order determining the illegality of speech,
to require intermediaries to remove user-
generated content. For example, in Singapore, the Protection from
Online Falsehoods and Manipulation Act (POFMA) ``permits a single
government minister to declare that information posted online is
`false,' and to order the content's `correction' or removal if deemed
to be in the public interest.''\41\ Companies that refuse to comply
face steep fines, and individuals who violate the law can be
jailed.\42\ According to Human Rights Watch, ``As of mid-2020, the
government had invoked POFMA more than 50 times, primarily against
people or publications that criticized the government or its
policies.''\43\ After one instance in which government officials
ordered Facebook to block access to a blog post critical of the
government's response to the COVID-19 pandemic, the company argued that
the order was ``disproportionate and contradict[s] the government's
claim that POFMA would not be used as a censorship tool.''\44\
---------------------------------------------------------------------------
\41\ Human Rights Watch, Singapore: ``Fake News'' Law Curtails
Speech (January 13, 2021), hereinafter ``HRW, Singapore,'' https://
perma.cc/9P6L-TZB6.
\42\ Ashley Westerman, ``Fake News'' Law Goes Into Effect in
Singapore, Worrying Free Speech Advocates, NPR (October 2, 2019),
https://perma.cc/2TJU-8HWM.
\43\ HRW, Singapore, supra n. 41.
\44\ Reuters Staff, Facebook says ``deeply concerned'' about
Singapore's order to block page, Reuters (February 18, 2020), https://
perma.cc/2VJX-RFCM.
---------------------------------------------------------------------------
Short Time Frames for Content Removal
Another concerning liability trend involves laws or regulations
that obligate providers to remove content on sharply abbreviated
timelines--often within hours. These laws discourage companies from
closely scrutinizing government or user demands to remove content and
push them to err on the side of quickly removing content. Laws with
short deadlines for content removals may also effectively require, or
at least strongly encourage, intermediaries to use automated
technologies to detect, filter, and remove content, with often
disastrous impacts for users' freedom of expression. Despite recent
advances in machine learning and artificial intelligence, automated
content analysis techniques have significant limitations that create
risks to human rights.\45\
---------------------------------------------------------------------------
\45\ See Carey Shenkman et al., Do You See What I See? Capabilities
and Limits of Automated Multimedia Content Analysis, Ctr. for Democracy
and Tech. 22-24 (2021), https://perma.cc/XM4B-RLAY.
Laws discouraging scrutiny of removal demands and encouraging the
use of automated content analysis tools through brief time frames for
content removals are unfortunately proliferating in the Indo-Pacific
region.\46\ For example, the 2021 Indian Intermediary Rules require
that intermediaries remove content within 36 hours after receiving a
government order and that they remove certain other categories of
content within 24 hours.\47\ Similarly, in Australia, the new Online
Safety Act requires providers to remove content sanctioned by the
eSafety Commissioner within 24 hours.\48\ And in Indonesia, electronic
system operators could be required to remove prohibited content within
just 4 hours after receiving notice from authorities, in urgent
situations.\49\ In Thailand, users can report banned content to
intermediaries, and intermediaries ``must remove flagged content within
7 days for alleged false or distorted information, within 3 days for
alleged pornographic content, and within 24 hours for an alleged
national security threat.''\50\
---------------------------------------------------------------------------
\46\ Such laws and policies are not unique to the region: the
European Union's Code of Conduct on Countering Illegal Hate Speech
Online calls for participating companies to review content takedown
requests from ``trusted flaggers'' within 24 hours. EU: European
Commission's Code of Conduct for Countering Illegal Hate Speech Online
and the Framework Decision, ARTICLE 19 (June 2016), https://perma.cc/
J8UV-TH8P. Germany's NetzDG imposes a 24-hour timeline on providers to
remove ``manifestly'' unlawful content, and illegal content that is not
manifestly unlawful must be removed within 7 days. NetzDG, Article
1Sec. 3(2)2-3.
\47\ 2021 Indian Intermediary Rules, supra n. 36, Rule 3(1)(d);
Id., Rule 3(2)(b).
\48\ Freedom House, Freedom on the Net 2021--Australia (2021),
https://perma.cc/T4LW-HYGA; eSafety Commissioner, Online Safety Act of
2021 Fact Sheet (January 2022).
\49\ Freedom House, Freedom on the Net 2021--Indonesia (2021),
https://perma.cc/7YFC-YD5L.
\50\ Freedom House, Freedom on the Net 2021--Thailand (2021),
https://perma.cc/26V3-686V.
Weak intermediary liability regimes that can be leveraged for
digital censorship not only impact users rights; they also impose
economic costs. Given the high volume of user-generated content online
and correspondingly high volume of content reported as illegal or
violating a company's Terms of Service, it can be extremely costly for
online intermediaries to actively monitor content, make decisions about
the legality or illegality of content, and evaluate content under
strict time frames to determine whether or not it should be
removed.\51\ Laws that require intermediaries to undertake these
efforts--or face litigation costs or steep fines--serve as a barrier to
entry to new intermediaries, stymying competition and growth. In
addition, intermediaries that are unable or unwilling to comply with
intermediary liability regimes that require them to invest huge amounts
of resources may cease operating in a country altogether, depriving
local users of online services that allow them to communicate with
investors or customers, buy and sell goods, and engage in other
economic activity.
---------------------------------------------------------------------------
\51\ Katie Schoolov, Why content moderation costs billions and is
so tricky for Facebook, Twitter, YouTube and others, CNBC (February 27,
2021), https://perma.cc/L3SF-Z2XJ.
---------------------------------------------------------------------------
Manipulation of Content Moderation Processes by State Actors
Governments around the world are increasingly relying on service
providers' own content policies to obtain removal of online content or
accounts. Rather than challenging content in court as a violation of
law, the government flags and reports it to the provider for removal on
the basis that the content violates the provider's Terms of Service. In
some countries, governments have formalized Terms of Service referrals
using Internet Referral Units, which are government entities formed to
flag user-generated content directly to the service provider that hosts
it, often using the provider's own content-flagging mechanisms, so the
provider will remove the content under its Terms of Service.\52\
---------------------------------------------------------------------------
\52\ Jason Pielemeier and Chris Sheehy, Understanding the Human
Rights Risks Associated with Internet Referral Units, VOX-Pol (March
26, 2020), https://perma.cc/CC5Q-PF4L.
Manipulation of private companies' content moderation processes are
contrary to rule of law principles and allow governments to leverage
providers' Terms of Service to censor online speech of which they
disapprove. Terms of Service may prohibit a variety of types of speech,
including far more speech than that which is prohibited by law. As a
result, governments can use providers' Terms of Service to obtain
removal of legal content, including content that cannot be made illegal
consistent with international human rights standards. Government actors
may also selectively target speech prohibited by providers' Terms of
Service to censor speech based on viewpoint or content. In addition,
government referrals can be coercive, exerting significant pressure on
a provider to remove content ``voluntarily'' under its own Terms of
Service. And, in some countries, providers face mandatory regulations
for refusing to comply with government removal requests \53\ or can be
stripped of liability protection for user-generated content based on a
government notification.\54\
---------------------------------------------------------------------------
\53\ Tomer Shadmy and Yuval Shany, Protection Gaps in Public Law
Governing Cyberspace: Israel's High Court's Decision on Government-
Initiated Takedown Requests, Lawfare (April 23, 2021), https://
perma.cc/F4HX-LPPE (stating that the Israeli Cyber Unit ``has the power
to subject the online platforms to mandatory regulations should they
systematically refuse to comply with its takedown requests'').
\54\ Jim Killock, Informal Internet Censorship: The Counter
Terrorism Internet Referral Unit (CTIRU), Open Rights Group (March 5,
2019), https://perma.cc/LWM2-VTUD (describing the impact of detailed
notification under the E-Commerce Directive on content hosts' ``actual
knowledge'' of criminal content and subsequent potential liability for
that content).
Governments have used these Terms of Service referrals to target
critics, rivals, or activists. For example, Amnesty International has
reported that the Vietnamese Government engages in ``mass reporting
campaigns'' in which it relies on social media sites community
reporting functions to have ``large numbers of users . . .
simultaneously `report' a particular account or specific content with
the aim of having it deleted or suspended by social media companies on
the basis of it violating community standards.''\55\ According to news
reports, the Vietnamese government has used the mass reporting
technique to target journalists and human rights activists on
Facebook.''\56\
---------------------------------------------------------------------------
\55\ ``Let Us Breathe!'': Censorship and Criminalization of Online
Expression in Viet Nam, Amnesty Int'l 53 (2020), https://perma.cc/D88L-
69CA.
\56\ Russel Brandom, Facebook's Report Abuse button has become a
tool of global oppression, The Verge (September 2, 2014).
---------------------------------------------------------------------------
Local-Presence Requirements or ``Personnel Localization''
Legal requirements that Internet companies locate personnel in
particular country--known as ``personnel localization'' but sometimes
referred to as ``hostage provisions''\57\--are another mechanism
through which states indirectly exert control over online speech.
Personnel localization requirements make it harder for intermediaries
to resist abusive government demands to shut down the Internet or to
remove particular websites or user-generated content, because of the
threat that failure to comply will result in punishment, including
imprisonment, of the local personnel.
---------------------------------------------------------------------------
\57\ GNI Submission to European Commission Consultation on the
Digital Services Act, Global Network Initiative (April 1, 2021),
https://perma.cc/2JRT-YECV.
Recent events in Myanmar demonstrate how countries can use the
presence of personnel in-country to exert control over communications
intermediaries. Following the 2021 coup d'etat, and demands by military
leaders to shut down the Internet, block certain websites, and activate
communications-intercept equipment,\58\ Telenor Group decided to sell
Telenor Myanmar.\59\ The sale has yet to be formally approved by
authorities in Myanmar, and as of February 2022, Myanmar had prohibited
some Telenor staff, including a Telenor executive who is a Norwegian
citizen, from leaving the country.\60\ According to Telenor's CEO,
``The authorities say that they want to have leading Telenor employees
on the ground as long as they have not clarified whether we will be
allowed to sell the business or not.''\61\
---------------------------------------------------------------------------
\58\ Telenor, Updates on Telenor in Myanmar (February 28, 2022),
https://perma.cc/2L7Z-STW5.
\59\ Id. This decision raised human rights concerns because of
links between the companies to which Telenor Myanmar is to be sold to
the ruling military junta. Access Now, As Myanmar junta extends control
over telcos, surveillance and privacy risks increase (January 24,
2022), https://perma.cc/VSU5-G6X7.
\60\ Gregers M Australia.
Korea.
Singapore.
We have reached section 232 arrangements with Japan, South
Korea, and Australia.
With Vietnam there was a more than $90-billion trade deficit
in 2021.
With Japan there is more than $200 billion in bilateral trade,
with a goods trade deficit of more than $60 billion in 2021, most of
that in autos. For the first 9 months of 2021, the U.S. imported
1,041,625 new passenger vehicles and light trucks from Japan, while the
U.S. exported just 12,536 new passenger vehicles and light trucks to
Japan over the same period.
The goods trade deficit with the major Pacific Rim Countries
in 2021 was $503 billion (this excludes a lot of data--for example, the
good deficit with Thailand was almost $35 billion). Excluding China,
the goods trade deficit with the Indo-Pac countries was well over $215
billion).
The goods trade deficit with India was $33 billion in 2021 (an
increase of more than 37 percent over 2020).
The U.S. has more than $1 trillion in foreign direct
investment in the Indo-Pacific.
The 7th Fleet regularly transits the South and East China
Seas. We have forces located across the region.
We have expanded defense cooperation with Japan, Australia,
and other regional allies including the recent U.S.-UK-Australia
trilateral security partnership.
The revitalized Quadrilateral Security Dialogue is an
effective forum for strategic cooperation and military preparedness,
and President Biden has shown its usefulness for cooperation on COVID
and reaching a common understanding on Ukraine.
In short, the question is what should be our future engagement in
the region and what are the opportunities and challenges posed by such
engagement. The diversity and breadth of the landscape of the Indo-
Pacific defies a one-size-fits-all analysis or approach. I will first
comment on past initiatives, then current approaches, and finally what
provisions must be included in any enhanced engagement to advance the
interests of working people.
Despite the length of my prepared testimony, it only touches upon
the important issues before this committee and the Congress, and I look
forward to working with you as the debate unfolds.
Today marks the 12th anniversary of the commencement of the first
round of negotiations on the TPP which were held in Melbourne,
Australia. As the members of this committee know, the TPP was an
integral part of the Obama administration's pivot to Asia. Organized
labor spent thousands of hours engaged on the TPP negotiations.
The U.S. was right to have refused to join that agreement. The TPP
was poorly designed, and many of its critical provisions were
inadequate. Organized labor strongly opposed the agreement.
Some said that TPP was about writing the rules so that China didn't
get to. In my view, China didn't need to write the rules, because in
many areas, we did it for them. The TPP was not the kind of high
ambition trade agreement that advanced the interests of working people
here at home, or in the signatory countries.
There were numerous important flaws in the TPP agreement:
It failed to include robust provisions on enforceable workers'
rights that would have adequately advanced the interests of workers and
ensured that their internationally recognized worker rights were an
integral part of economic liberalization in the region. For example,
while signatory countries would have to have a minimum wage, it could
be 5 cents an hour and fulfill the labor requirements of the agreement.
In addition, the enforcement mechanisms and standards were deficient.
It failed to adequately discipline state-owned enterprises,
allowing all previously granted subsidies and benefits to be
grandfathered and limiting action regarding the non-market impact of
SOE activities in many instances to situations where the injury
occurred for a year or more, tying the hands of producers and workers
who were serially injured by the SOE predatory practices.
It included a rule of origin in the auto area that, according
to its provisions and analysis by the House Ways and Means Committee
staff, would have allowed roughly two-thirds of an automobiles content,
for example, to originate from non-TPP countries but still be eligible
for TPP trade benefits.
It included unacceptable Investor State Dispute Settlement
(ISDS) provisions.
It failed to include disciplines on currency manipulation.
It failed to address growing overcapacity in key sectors.
Many are now advocating that the U.S. join the successor
Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP), but that would be unwise and unacceptable as it includes many
of the flaws in the TPP.
We have been asked whether we support the President's Indo-Pacific
Economic Framework (IPEF). That's impossible to answer as there is not
yet enough detail to know whether it is an agreement that advances the
interests of working people. It is still a framework being developed.
We have engaged and will continue to work with the administration on
what the architecture of the IPEF should be.
We support enhancing America's relations with allies and friends to
foster growth with opportunity, democratic values, human rights and
workers' rights. Economic reform in a Western sense and greater
freedom, as we have seen all too clearly with China, are not the
automatic result of expanded economic relations. Free trade is simply a
theoretical construct and workers know the reality is far different--
particularly in the Indo-Pacific. How we shape our economic engagement
is the critical issue.
There are a number of initial questions that must be answered,
which I outline below. There are also a number of consequential design
issues that must be addressed for any agreement to have the support of
organized labor. As the IPEF is still very much a work in progress, I
look forward to working with you, other members of Congress and the
administration in the coming days and know that my labor colleagues
stand ready as well.
Some key initial questions:
1. Which countries will be participants in the IPEF?
2. Will the framework include ``docking'' provisions allowing
others to sign on and what will be the requirements for participation?
3. Will market access commitments be included in the framework?
While initial answers are no, what are the long-term plans?
4. What will be the role for stakeholders and Congress?
5. Will enforceable workers' rights and corporate accountability
measures apply to all modules?
These are important questions, and I am sure I am missing some. In
addition to these threshold questions, there are key design questions
relating to the substance of the provisions. Below I identify several
important issues. In the coming days, as more information becomes
available, we will be able to provide further thoughts.
workers' rights and corporate accountability
The number one concern for organized labor is how workers' rights
will be protected, enforced, and promoted in the region. Workers'
rights are the key to ensuring that trade will promote growth and
opportunity for workers rather than driving a race to the bottom.
There is cause for some optimism about workers' rights in light of
the impact of the first two USMCA rapid response mechanism (RRM) cases
in Mexico. At the GM facility in Silao and the Tridonex facility in
Matamoros, entrenched protection unions were voted out and have been
replaced by independent unions. Following these votes, workers at the
Mazda facility in Salamanca rejected the contract negotiated by the
protection union at the facility. There is still a long way to go to
harvest these successes at these facilities and to expand these wins at
facilities across the country. But the early signs are positive.
The RRM created a facility specific enforcement mechanism that
allows specific products to be sanctioned and potentially denied entry,
the first time in any trade agreement. Coupled with the labor chapter's
requirement in the USMCA and the changes in Mexican law that were
required, the requirement that workers' rights be respected,
implemented, monitored and enforced has advanced. The agreement,
however, is only a floor and significant improvements are needed in
future trade agreements and trade initiatives.
There can be no question that workers' rights are a priority for
this administration. Its record has been noteworthy in terms of a real
commitment to ensuring that not only are workers' rights a priority,
but that the necessary resources, implementation, and enforcement
efforts back up their stated commitment. The recent signature into law
of the Uyghur Forced Labor Protection Act shows that words will be
backed up by real action.
Administration officials have indicated that workers' rights will
be part of the IPEF. But how broad that coverage is, what standards
will be applied, and what enforcement mechanisms will be included is
very much an open question.
Workers' rights commitments and enforcement provisions must cut
across all of the separate modules that may be part of the IPEF.
Participants in the IPEF should not be able to cherry-pick which
modules they want to participate in to avoid having to adhere to high
standards and advance the interests of working people. There have been
some indications that workers' rights may only be contained within the
module being negotiated by the USTR. This would be a blow to the
administration's overall advocacy for and commitment to a worker-
centered trade policy.
Access to enforcement efforts must be available to workers as it is
their interests that are most affected. There must be no requirement to
show that a violation is ``in a manner affecting trade'' or that there
be a ``sustained or recurring'' course of violations to merit an
enforcement effort.Those concepts and requirements are outdated, and a
worker centered trade policy must ensure that abuse of workers' rights
be actionable.
We are willing to assess different approaches to advancing workers'
rights to ensure that corporations cannot continue to engage in labor
and environmental arbitrage, scouring the globe for the cheapest and
most lax regimes in which to operate. The IPEF must create enforceable
tools to hold corporations accountable for labor rights across their
global supply chains to ensure that trade is based on fair competition,
not worker exploitation.
digital trade
Efforts to promote a digital trade agreement predate the
announcement by the administration for the IPEF. Digital trade remains
a key module and is presently being shepherded by the USTR. The issue
of digital trade has garnered considerable attention from organized
labor in recent years as utilization of ``gig'' worker platforms have
skyrocketed, the power of technology companies has exploded, and
digital outsourcing of jobs has accelerated.
The digital issues are highly complex and require enormous study
and evaluation. Rushing to adopt new digital trade measures could have
serious adverse consequences for U.S. economic and national security
interests. Congress must be broadly engaged, along with other
stakeholders, in assessing what the road ahead should look like.
Technology's role in everyday life is difficult to comprehend. As
some say, data is the new oil with the potential to fuel economic
engagement at every level. Certainly, technology has provided enormous
benefits from connecting the world, to promoting democratic advances,
to facilitating working-from-home during the pandemic, to countless
other applications.
But technology has also been used by governments as a tool to
surveil and suppress, as has been evident in China, Russia, and
elsewhere. While technology originally helped foster democracy
advocates in Hong Kong, it was later turned into a weapon against the
population.
Data and technology are not only open to abuse by governments, but
by the private sector as well. Unregulated digital platforms like
Google and Facebook, collect massive amounts of users' data that is
then mined, packaged, and sold to third parties. Meanwhile, employers
are increasingly using ``bossware'' programs to monitor employees'
remote work and collect other data often without their knowledge or
consent--sometimes even when they are off the job.
Wejo, a publicly traded company, collects vehicle data to be used
by government and business. Of course, mapping congestion, enhancing
traffic safety and other uses can be for the good, the data can also
potentially be used for adverse purposes and to monetize every action
an individual takes. Wejo's website indicates that it has curated more
than 489 billion miles and, as of the date that this testimony was
written, has 13.2 trillion data points.
Similar collection platforms are expanding around the globe, and we
need to understand how digital trade provisions advance individual
rights and interests, rather than undermine them, and how any framework
does not just pad the bottom line of corporations.
These questions, of course, also go to data localization, privacy,
online fraud, worker misclassification, and many others. Those are
issues that organized labor is wrestling with.
We also must examine how a digital trade agreement addresses the
use, and abuse, of algorithms which can have a discriminatory effect on
users and communities. Digital employment tools have been criticized
for the costs imposed on communities of color, for example, and an
agreement must help abate that practice.
The potential direct employment impacts of digital trade provisions
are significant. At the outset, let me make clear that many jobs are
already being outsourced through digital means and via digital
platforms. Agreements that are properly structured, implemented,
monitored and enforced could make a significant difference. Poorly
constructed, however, they could mean accelerated outsourcing of jobs.
We cannot afford another trading arrangement that will ship more jobs
overseas.
Let me provide two examples of why we are concerned about the
offshoring of jobs via digital platforms.
Call center jobs are increasingly being outsourced with India
and the Philippines being significant locations for lost jobs. These
are good family-
supporting jobs, a substantial number of them being union jobs. The
Wall Street Journal reported last year on a startup that had received
significant funding for software ``that modifies pronunciation to make
accented speech more like Standard American English.''\1\ Wealthy
corporations will do just about anything to lower costs by shipping
jobs overseas.
---------------------------------------------------------------------------
\1\ David Carnevali, The Wall Street Journal, Startup That Reduces
Accents in Real Time Draws Seed Capital: Sanas.ai raises $5.5 million
after developing software that modifies pronunciation to make accented
speech more like Standard American English, September 2, 2021, https://
on.wsj.com/3MEDmK0.
---------------------------------------------------------------------------
Health-care jobs are also increasingly at risk. The Department
of Labor estimated that there were 341,600 jobs for Medical Records and
Health Information Specialists in 2019 paying a median wage of $40,090
per year with much faster than average job growth estimated during the
2019-2029 period (8 percent).\2\ A web page ad for Healthcare
Outsourcing Services Philippines, promotes its services highlighting
that ``Hire Dedicated Offshore Healthcare Professionals and save up to
75 percent compared to hiring locally.'' The site stresses that ``The
Healthcare Business Process Outsourcing (BPO) Market is estimated to
grow at a CAGR of +10 percent from 2019 to 2025 to reach $312 billion
by 2025 from $191.68 billion in 2019.''\3\ Teleradiology is
increasingly being used to offshore high-skilled radiology jobs.
---------------------------------------------------------------------------
\2\ Bureau of Labor Statistics, U.S. Department of Labor,
Occupational Outlook Handbook, Medical Records and Health Information
Specialists, at https://www.bls.gov/ooh/healthcare/medical-records-and-
health-information-technicians.htm (visited June 28, 2021).
\3\ Outsourced, https://outsourced.ph/services/staffing-categories/
healthcare/ (visited July 27, 2021).
The potential impact of digital trade provisions on public sector
workers, and those who service the public sector may also be
significant. The Australia-Singapore Digital Economy Agreement, for
example, included provisions that would open up access to government
data allowing ``for the development of new and customized products and
services demanded by business, government and the community.''\4\ This
is a potential pathway towards privatization.
---------------------------------------------------------------------------
\4\ ``Australia-Singapore Digital Economy Agreement: Summary of key
outcomes,'' https://www.dfat.gov.au/trade/services-and-digital-trade/
australia-singapore-digital-economy-agreement-summary-key-outcomes.
Many content-creating workers--actors, musicians, writers, and the
people who work behind the scenes--earn a portion of their collectively
bargained pay and contributions to their health care and pension funds
from the sales and licensing of works on digital platforms. Because of
the economic threat from stolen and unlicensed content, these workers'
very livelihoods depend on strong copyright protections. Yet past U.S.
trade agreements have enshrined outdated, overbroad rules that allow
digital providers to avoid any liability when they profit off of stolen
content that appears on their platforms, and which robs workers of just
compensation and future work opportunities. At stake is more than $2
billion in annual, collective compensation for hundreds of thousands of
middle-class creative professionals.\5\ A digital trade agreement must
protect and promote copyright protections for creative professionals,
not facilitate additional wage theft.
---------------------------------------------------------------------------
\5\ Creative Professionals Depend on Strong Copyright Protections,
https://www.dpeaflcio.org/other-publications/creative-professionals-
depend-on-strong-copyright-protections.
Education unions have also participated in discussions about the
digital trade issues. As distance and remote learning spiked during the
pandemic, the risk to our domestic education workforce--teachers and
others spiked as well. We cannot allow the education of our children be
put at risk to offshoring along with the provision of services from so
---------------------------------------------------------------------------
many other professions.
Until there is a better understanding of the design and direction
of a digital trade agreement, it is impossible to know its impact but,
clearly, without proper provisions including strong workers' rights and
corporate accountability measures that are enforceable, the possibility
for significant job loss and downward pressure on wages and
compensation exists.
As with the TPP, advocates for a digital trade agreement are
arguing that we need to write the rules so that China doesn't get to.
Certainly, we cannot allow China's vision of the digital economy with
the Great Firewall, 50,000 or more Internet cops, and suppression of
rights and freedoms to win the day. But we also cannot allow today's
digital rules to guide the future with virtually unregulated corporate
control of workers' and citizens' data, harvesting of value, fostering
of hate-filled speech and other abuses to be the model.
A digital trade agreement, done right, could advance the interests
of workers. Again, as with other issues within the IPEF, much work
remains to be done.
resilient supply chains
One of the pillars of the proposed Indo-Pacific Economic Framework
is resilient supply chains. Until several years ago, the American
public rarely gave a thought to supply chains. Their attention to the
issue was often sparked by press accounts such as those highlighting
dog food tainted with melamine and kids toys with lead paint from
China. There were occasional concerns for the public, but rarely
consistent attention.
The pandemic changed all that. Overnight the public became aware of
just how painfully dependent we are on China for many of our critical
products--pharmaceutical ingredients, personal protective equipment
(PPE) and other products. Autoworkers found their factories idled by
limited supplies of semiconductors. The availability of other products,
from toilet paper to paper towels and other daily needs, suddenly
became a concern for our citizens.
The increasing dependence on other nations for many of our needs
has increased dramatically as globalization has accelerated. This
dependence has been used as a political tool, such as when China
weaponized supplies of rare earth minerals many years ago. During the
pandemic, China engaged in so-called mask and vaccine ``diplomacy'' to
curry favor and advance its interests.
Russia's attack on Ukraine has also informed the public of our
dependence on overseas supplies. Energy is top of mind. But supplies of
critical minerals and materials are also highlighted as being at risk.
Most Americans want supply chains to be strengthened here at home.
Certainly, they recognize that we live in a global world and enjoy--and
depend on--products sourced from around the globe.
Organized labor's approach to supply chains is easy to articulate:
We want the vast bulk of production to occur here in the U.S. with the
jobs held by union workers. Of course, we know that not all products
will be sourced here.
So when we hear that the IPEF will include a module to promote more
resilient supply chains, we look at the idea through the prism I just
offered. Indeed, with this administration's efforts to ensure domestic
capacity to meet critical needs--an approach started under the previous
administration--we wonder whether the IPEF's supply chain approach will
advance or undermines that goal. Are they consistent objectives?
In discussions with the administration to date, there simply has
not been enough information on what will be included in the supply
chain module. Shifting sourcing from China to other countries in the
Indo-Pacific may have some benefits in terms of reduced dependence for
supplies from China which, all too often, benefits from its non-market
and predatory trade practices, and by signaling that we know our
economic engagement helps support the power of the Chinese Communist
Party (CCP).
But simply shifting the supply base around will at best only have
marginal benefit, and we will still face potential shocks from
geopolitical and natural events. We may lose the capacity to build our
own industrial and technological capacity as research and development
(R&D) and production moves offshore. For example, according to a staff
study issued by the U.S.-China Economic and Security Review Commission
based on Commerce Department data, between 2001 and 2017, the rate of
increase on R&D spending by U.S. multinationals increased in China at
three times the rate of their R&D investments here in the U.S.\6\
---------------------------------------------------------------------------
\6\ Malden, Kaj, Trends in U.S. Multinational Enterprise Active in
China, 2000-2017, the U.S.-China Economic and Security Review
Commission, July 1, 2020, at page 12, https://www.uscc.gov/sites/
default/files/2020-06/
US_Multinational_Enterprise_Activity_in_China.pdf.
A resilient supply chain module should also include provisions
ensuring that new investments be subject to corporate accountability
measures that require recognition and enforcement of workers' rights
and advance shared goals such as decarbonization and environmental
sustainability. An IPEF must promote our standards and interests, not
undermine them.
conclusion
Mr. Chairman, Ranking Member Crapo, members of the committee, my
testimony today has only touched upon the issues that are involved in
the design and development of the Indo-Pacific Economic Framework.
Issues like overcapacity, currency manipulation and others deserve
attention. I fully recognize that this is not a market access agreement
and, therefore, there are limits to what it can achieve. However, we
are not interested in an agreement that advances the interests of
multinational companies without significantly advancing the interests
of workers.
There is no question that we should be engaged in the region--we
already are. The question is what the forward path is and what
opportunities, and challenges, exist for our workers . . . our
citizens.
In past years, trade and international economic initiatives have
largely been fueled by foreign policy concerns. In many respects, the
agreements have either failed to produce the promised benefits or,
worse, have dramatically undermined U.S. interests. The admission of
China to the World Trade Organization, facilitated by the grant of
Permanent Normal Trade Relations, is the prime example of that failure.
In seeking to expand America's role in the region and to strengthen
our economic and national security interests we must not rush forward
without paying proper attention to the needs and interests of our
workers, and workers in the Indo-Pac countries. Workers here in the
U.S. have increasingly used their voices to speak out on trade issues
and their impact has been significant in politics and on policy.
America's leadership would be significantly undermined if another bad
agreement is brought forward that cannot garner the support of our
people.
Organized labor is committed to working with you, your colleagues,
and the administration to try and develop the right path forward. We
are not against negotiations, but we will fight for the interests of
our members.
Thank you.
______
Questions Submitted for the Record to Michael Wessel
Questions Submitted by Hon. Mike Crapo
Question. Medical supply chains between the United States and Indo-
Pacific countries are deeply intertwined. U.S. innovation in the
biopharmaceutical sector provides an opportunity for leadership and
engagement with our allies in the region. Moreover, U.S. leadership in
this proves to be good for workers. In particular, the
biopharmaceutical industry annually relies on 22 million union labor
hours, generating $774 million in wages.
Accordingly, one would expect the administration's worker-centered
trade policy to support this innovative industry. Instead, the
administration appears to have tentatively agreed to an outcome where
the U.S. will waive its intellectual property rights under the WTO
TRIPS Agreement with respect to COVID vaccines, immediately. An even
broader waiver will follow in six months on other therapeutics and
diagnostics.
The administration is amenable to this waiver even though existing
producers believe they can produce 22 billion vaccine doses by June of
this year. Moreover, the Pharmaceutical Industry Labor Management
Association warned last May that ``[t]he WTO TRIPS waiver will
permanently ship . . . jobs overseas to countries that do not have the
quality that we enjoy in the U.S.''
Even before the waiver, your testimony to the House Energy and
Commerce Committee stated that China's support policies are ``driving
out . . . many U.S. lines of production.'' You moreover asserted in
other forums that China's regulatory system for drugs is opaque and
presents safety risks, and that Russia and China hack our companies to
obtain technological data for vaccines.
Given all of this, do you agree that the administration should not
agree to the proposed TRIPS waiver without first preparing and publicly
sharing an assessment on the waiver's impact on U.S. jobs and global
vaccine access?
Do you believe that the waiver should extend to countries that
systematically undermine U.S. intellectual property rights in the
pharmaceutical sector?
Do you believe that the waiver should extend to countries that are
proven unreliable suppliers to developing countries because their
products are not proven efficacious, fail safety standards, or fail to
meet contractual obligations?
It appears the waiver may extend 3 to 5 years. Do you agree that,
at this time, the U.S. does not need to seek a waiver of that length?
Answer. The COVID-19 pandemic and devastating blow to the health of
tens of millions of people across the globe requires emergency
responses. More than 2 years after the beginning of the pandemic, too
many people are still dying, being hospitalized, and suffering in
countless ways. The health consequences, on their own, are enough to
merit unique and untested responses. In addition, the pandemic has
upended supply chains and has altered working conditions across the
globe.
A limited waiver of intellectual property rights to address the
pandemic is in our Nation's and the world's interests. Intellectual
property is the lifeblood of innovation and is critical to supporting
American production and employment but where so many lives are at
stake, we must respond to those needs and do so quickly. Simply
producing more vaccines here in the U.S. has not yet been sufficient as
access to those vaccines is still limited in many parts of the world. A
detailed economic analysis cannot begin to measure the human
consequences of COVID-19.
Countries that have systematically infringed on our intellectual
property rights should be subject to stringent controls in terms of
access to the vaccine IP. Their serial violations of our rights should
be taken into account but measures should be available to limit the
impact and ability to harvest our technology for other gains. These
considerations should also apply to countries that have failed to have
the proper safety protocols and regulatory regimes in place to ensure
the efficacy of their medical products Protecting human life must be
the core consideration.
The constant waves of new variants of COVID-19 merits flexibility
in determining the length of any waivers. The CDC recently authorized a
second booster for the vaccines from two companies. We have no idea as
to the future course of this pandemic and should accept a waiver period
that will help ensure that we can quickly produce and deliver the
vaccines that are needed to protect people around the globe.
______
Question Submitted by Hon. Robert P. Casey, Jr.
Question. Thank you for coming today to testify on these important
issues. I want to commend the Biden-Harris administration for their
critical work on supply chain resiliency and security, as well as
prioritizing our domestic production and manufacturing capacities. As
you know, Senator Cornyn and I have been working to pass the
bipartisan, bicameral National Critical Capabilities Defense Act, which
sets up a committee to review offshoring of critical U.S. supply
chains. As the pandemic has demonstrated, we need enhanced visibility
on supply chain vulnerabilities. I hope that, as the administration
develops the Indo-Pacific Economic Framework, they take into account
the decades of offshoring and unfair practices by non-market economies
that have left U.S. workers and businesses at a competitive
disadvantage.
What tools and strategies do you see as critical to prevent further
offshoring that threaten domestic supply chains and U.S. workers,
leaving us dependent on foreign adversaries, like Russia and China for
critical goods?
Answer. Policymakers and the public have come to understand the
risks to America's economic, health, and national security emanating
from the excessive offshoring of supply chains over the last decades.
While the pandemic has brought this into sharp focus, the overreliance
on foreign sources of supply and services have grown for some time.
Significant portions of critical supply chains such as electronics,
pharmaceutical, rare earths and other key components and products have
been offshored and the reclamation of those sources of supply will take
time and considerable resources.
This reliance does not only create economic strains, it also
threatens critical capabilities. For example, rare earth minerals and
resulting products, have largely been offshored with China controlling
the vast majority of those products. China has shown its willingness to
``weaponize'' supplies of these products, as it did with Japan. China
engaged in mask and vaccine diplomacy as a way of advancing the goals
of the Chinese Communist Party. These actions make clear that we must
carefully assess risks to U.S. interests and quickly respond.
The Trump and Biden administrations both engaged in actions to
identify critical supply chain risks and identify actions that must be
taken to abate these risks. Those are important initiatives. But much
more must be done. An important action would be passing legislation
based on the proposal you and Senator Cornyn introduced to include an
outbound investment screening approach and which was included in the
House America COMPETES package. The U.S.-China Economic and Security
Review Commission in its 2021 Annual Report to Congress identified the
goals of your legislation among its top ten recommendations. Congress
should quickly act to adopt such an approach.
______
Questions Submitted by Hon. John Barrasso
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. Chinese state-owned enterprises and export subsidies hurt
American businesses and workers. In Wyoming, our soda ash producers and
steel pipe and tubing producers know firsthand how difficult it is to
compete with China in the marketplace.
Where should the U.S. focus our efforts in the Indo-Pacific to
counter China's export subsidies and overcapacity?
Answer. China has been seeking to export its overcapacity and
undermine
market-based producers around the globe and has been doing so through
direct and indirect assaults on our producers and workers in a variety
of sectors. In the Indo-Pacific, the most immediate threat from China's
actions comes from transshipment of its products through countries such
as Vietnam, South Korea, and others in an effort to circumvent and
evade existing relief measures under U.S. law against unfair trade.
China has also invested in many of these countries in an effort to
create production facilities that will utilize subsidized and dumped
input to gain market share and opportunities. If an Indo-Pacific
Economic Framework proceeds, it should include measures to engage
partners in the region to respond and contain Chinese practices.
Question. The Chinese Communist Party continues to commit terrible
human rights abuses. The Uyghurs, a religious and ethnic minority in
China, have experienced brutal repression at the hands of the Chinese
Government. They continue to be subjected to torture, imprisonment, and
forced labor. At least 1 million Uyghurs have been put in internment
camps by the Chinese Communist Party. Around 100,000 Uyghurs and ethnic
minority ex-detainees have reportedly been used as forced labor in
textile and other industries in China.
How effective have U.S. actions been at addressing the human rights
abuses and the use of forced labor?
How can this framework improve our efforts to crack down on China
and increase transparency and enforcement?
Answer. Efforts to address human rights abuses and the use of
forced labor fostered by the Chinese Communist Party have been limited
and inadequate. The result of limited commitment to enforcement and
promotion of human rights is evident not only in the treatment of the
Uyghurs and other ethnic minorities, but the attack on human rights in
Hong Kong and across the mainland. Congress's passage of the Uyghur
Forced Labor Protection Act was an important step forward but the
implementation of that Act and the adequacy of the regulations now
being drafted is still very much in question.
The actions of the last several years in this critical area, and in
broader terms relating to concerns about supply chains supporting our
Nation's needs have drawn needed scrutiny on China and other Nation's
economic relationships with the U.S. We must learn from these efforts
to identify risks in our supply chains ranging from critical products,
to those that support efforts to suppress human rights, democracy and
freedom and quickly respond.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
The Finance Committee meets this morning to discuss the challenges
and opportunities in stepping up our economic ties with countries in
Asia and the Pacific. The Indo-Pacific region accounts for half the
world's population. It's full of like-minded democracies and growing
economies. As one of the gateways to the Pacific, Oregon has a lot to
gain from this opportunity. One in five jobs in Oregon is trade-
related, and those jobs pay better on average than non-trade jobs.
When you look across the Pacific, there are big markets for
everything, from Oregon blueberries and alfalfa to manufactured goods
to services. Raising environmental standards and ensuring robust labor
rights in the region could also help level the playing field for
American workers.
Last fall the Biden administration kicked off an effort to develop
a wide-ranging economic framework with several countries in the region.
There's a long way to go before any such framework comes together, so
today's hearing gives this committee an opportunity to discuss key
issues and priorities at the outset of the process.
First, the United States must fight for a free and open Internet.
The U.S. sees the Internet as a venue for free speech and commerce.
Authoritarian governments like China's do not. The competition between
those two visions is a fight the U.S. must win. Otherwise, Americans
get hit with a one-two punch. First, authoritarian regimes block
American exports, and then they export their censorship laws to us.
The most significant example is the Chinese Government and its
Great Firewall. When the Internet began to take off a few decades ago,
Americans were the first ones out of the gate, launching companies with
big, innovative ideas. The Chinese Government decided it couldn't
compete on the level. Instead, it blocked the American firms, ripped
off their ideas, and started clone companies under tight censorship
rules. As those Chinese tech firms have grown, the reach of their
censorship has grown too, with repressive effects on the American
people.
The Chinese Government is not a part of these Indo-Pacific
discussions, nor should it be. Even still, winning the fight for a free
and open Internet requires the U.S. to push for digital rules that lock
in freedom and openness with our allies at every opportunity. There is
bipartisan interest in fighting this censorship, so the committee is
going to watchdog this issue in the months and years ahead.
Second, the U.S. must fight to raise the bar on labor rights.
Democrats in Congress fought to make sure that the recent USMCA would
be the strongest agreement in history when it comes to worker
protections. It's essential to continue to build on that progress with
enforceable labor obligations that fit the region and the task. This
includes combating the scourge of forced labor, which is a top priority
for this committee. The truth is, forced labor and economic oppression
overall are part of the Chinese Government's economic model. It's not
only morally repugnant, it's a major threat to American workers and
jobs.
Senator Brown and I closed a major loophole in our forced labor law
in 2015, and the challenge now is making sure that the law is fully
enforced. While the U.S. continues to fight against forced labor in
China, it's also essential to prevent a race to the bottom on labor
rights in other countries too.
Labor rights and environmental protections often go hand in hand.
For example, there's a big need for strong new rules on subsidized
fisheries. In some parts of the world, highly subsidized and poorly
regulated fleets are abusing workers and massively overfishing the
waters. It's not sustainable, and everybody loses in the end, including
the abused workers and Oregon fishermen who should never have to
compete with forced labor.
Third, in all areas of trade policy, this committee also believes
in the old adage ``sunlight is the best disinfectant.'' In 2015, the
Finance Committee raised the bar for transparency in trade
negotiations, because the American people expect it and so do we. That
means consultations with Congress and access to the text of any
agreement before it's signed. These new discussions in the Indo-Pacific
region will need to meet that transparency standard too.
I'll close on a broader issue. While the committee meets for this
hearing, there's a terrible war happening about 5,000 miles to the
east. The events of the last few weeks show the importance of our
economic alliances, as well as the power they generate for the United
States and our friends around the world.
In this unprovoked, unjustifiable war, Vladimir Putin has killed
thousands of Ukrainians, displaced millions, and decimated cities. The
U.S. has marshaled the collective strength of our economic allies to
hit Russia with the most severe economic sanctions in history. Russia's
economy is in freefall. The country is isolated. Putin is the head of a
pariah state.
This is proof that strong economic alliances add up to a whole lot
more than ``soft'' power. The U.S. is putting that power to work,
punishing Russia's government and helping in the fight for democracy.
The more economic allies America has, the better.
______
Communications
----------
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. We have attached
our comments to the Subcommittee on International Trade, Customs, and
Global Competitiveness from June of last year, as well as our
attachment on fighting forced labor.
Forced labor is also a concern outside of China. When poor people go to
work, especially children, they accept conditions that are simply
unacceptable in the developed world. International inspection, (which
includes the American workplace), would help this. International
employee-ownership, with transfer pricing based on a common market
basket of worker goods, is the ultimate solution.
Let me reiterate--we are not exemplars in the matter of forced labor.
It can be found on our soil. By the same token, we are not as
``developed'' as we think we are. American development is uneven. In
some parts of the country, poverty and poor labor conditions are as
common as any ``third world'' country. Meanwhile, some nations on the
pacific rim are as advanced as we are. Just as there is a global upper
class, there is a global middle class. We don't have a monopoly on
skyscrapers or fast food.
From the Indian subcontinent to southeast Asia and Indonesia, a key
concern is climate change. When I shared that I was doing comments for
this hearing with a friend in Jakarta, she responded with a map of
global sea level rise. I had already seen it.
Warming in the United States is merely inconvenient. In the Indo-
Pacific region, it will be deadly. Island nations and Bangladesh will
simply be eliminated. This constitutes a large share of the global
population. Java has 154 million people in the same space that the
United States has 53 million in the Boston-Washington urban cluster.
Visualize relocating them.
Sea level rise is more than the matter for academic debate (which is
largely settled--climate change is an imminent threat). It is time to
be serious people on this issue.
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.
Multilateral Approach to Trade Policy in the Asia-Pacific Region, June
22, 2021
The foundational question must be this. What strategy is the nation
pursuing?
Are we putting consumers ahead of the interest of workers, both here
and abroad?
Are we acting in the public interest or in the interest of commercial
concerns? How are we balancing these two concerns?
What is the impact of our relationships on the environment, not only on
warming but on the basic questions of pollution? Stopping the warming
of polluted air and water still leaves us with polluted air and water.
Most importantly, how are donors affecting how we approach these
questions? Who is donating to member political and to ``public
information'' campaigns?
The next issue is tax policy. The easiest form of multilateralism is to
comply with the rest of the world on taxing imported and exported
goods. This means enacting a border adjustable value added tax. Goods
that come in are taxed while goods that go out are not. The current
system puts consumers over workers, encourages the exploitation of
overseas workers and constitutes an unconstitutional export tax.
. . . The final question is to examine who really killed the TPP and
why. Was this a case of an inept presidential candidate running amok or
did he gain personally from raising the issue? Was it merely sparring
between the major campaigns that killed the agreement or were there
more organized interests behind the scuttling of the agreement?
This matter demands investigation. The intelligence community needs to
follow the money (assuming it has not done so already). The Public
Integrity Section of the FBI must take part. Even the Federal Election
Commission has a role in this. The death of the TPP and the rise of the
Belt Road are too much of a coincidence not to take a second look. Our
democracy needs this question answered, even though many are not asking
it. The Subcommittee must.
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 from Finance: Fighting Forced Labor, March 18, 2021
. . . The other issue with China, as well as south Asia and the global
south, is de facto slavery.
On the moral front, I am not sure we have room to talk. We hold
migrants in stark conditions prior to deportation. If you doubt it,
visit Lewisburg Federal Prison. Also stop in the Federal Prison
Industries factory while you are there. Visit any food processing plant
with large immigrant workforces and see how many workers were
trafficked and how local law enforcement reacts when they decide they
want to leave. Examine the plight of sex workers in the United States
and see how many of their pimps have arrangements with local police.
Our best weapon is our example. As long as slavery exists in the United
States, our moral voice is compromised. Again, I am not saying to
ignore this situation. I am saying to go ``all in'' to really fight
slavery. Also, call it slavery. On the same subject, examine the
Chinese treatment of peasant workers at their factories. There is a
two-level society, and American consumers benefit from this. Our
commitment to abolishing slavery cannot live only in the fringes.
This is not to say that loopholes cannot be closed, although we must
stop our own unfair trade practices as well. American food should not
show up in countries just before harvest when doing so depresses the
price of local agricultural products. Poverty begets slavery. Making
others poor is an invitation to exploitation.
Poor farmers can either be individual or tenant farmers who are
essentially peons. The drive for lower food prices for American
consumers comes at a human cost. This is especially true when only one
buyer dominates the market, as is sometimes the case for export to
America (if not often). Poor factory workers never have access to
collective bargaining. This factor also drives down wages in American
factories--often those with immigrant labor bearing the brunt of bad
working conditions, poor wages and lax enforcement. The major
difference is that being blacklisted in the United States for
attempting to organize is rarely deadly, as it can sometimes be
overseas.
Improved enforcement takes money and the willingness to accept higher
food prices. More inspectors with more authority are needed at home and
abroad. Government or third party inspection is vital to make sure work
is safe, fairly compensated and able to organize. We cannot expect
worker protection in China or Guatemala if we do not insist on it in
North Carolina and Alabama.
______
E-Merchants Trade Council, Inc.
1655 North Fort Myer Drive, Suite 700
Arlington, VA 22209
(703) 574-0000
www.emtc.org
The E-Merchants Trade Council, Inc. (EMTC) appreciates the opportunity
to submit comments on ``The Promise and Challenge of Strategic Trade
Engagement in the Indo-Pacific Region,'' which was the subject of a
hearing before the U.S. Senate Finance Committee on March 15, 2022.
EMTC was formed in July 2021 to represent the interests of the e-
commerce industry by creating a global community of micro, small and
medium size enterprise (MSMEs) e-sellers, marketplace platforms, and
service providers to resolve trade, tax and transportation challenges.
EMTC's advocacy mission is to support national and international
policies that simplify cross-border transactions of physical and
digital goods. EMTC facilitates dialogue among the E-Merchant worldwide
community and global regulators.
Since Chairman Wyden and Ranking Member Crapo emphasized digital trade,
we hope the Committee finds EMTC's comments particularly relevant.
1. Policy objectives: What is the goal of strategic trade with the
Indo-
Pacific Region?
We understand that the Senate Finance Committee is concerned about the
significant impact of China's engagement with the other countries in
the Indo-Pacific Region through the Regional Comprehensive Economic
Partnership (RCEP) which covers 15 countries.
As Kelly Ann Shaw noted in her testimony before the Committee:
[t]he Indo-Pacific is our backyard, filled with military allies
and important trading partners. Two-way trade with the region
totals upward of $1.75 trillion. But when it comes to our
economic vision, the concept of a free and open ``Indo-
Pacific'' has turned into something we say, rather than
something we do.
See, ``The Promise and Challenge of Strategic Trade Engagement in the
Indo-Pacific Region:'' Hearing before Senate Finance Committee,
Statement of Kelly Ann Shaw.
EMTC proposes that the Biden Administration and Congress consider that
an Indo-Pacific Economic Framework (IPEF) combine the best elements of
trade liberalization and national security. EMTC envisions an economic
and security agreement that prioritizes:
Market access for all industry sectors in all IPEF countries.
Full implementation of the WTO Trade Facilitation Agreement for
small-
medium enterprises.
Export control regime and security agreement.
Digital trade.
Supply chain resilience.
2. Market access for all industry sectors in all IPEF countries
EMTC strongly urges the Biden Administration to prioritize market
access for all industry sectors in IPEF. Past administrations made the
mistake of prioritizing certain industries over others (e.g.,
pharmaceuticals over tobacco), and this had consequences for the
failure to pass the Trans-Pacific Partnership (TPP). The Centers of
Excellence and Expertise and Small Business Administration should
create online access for SMEs to identify and interact digitally for
opportunities in the Indo-
Pacific region to reduce dependence on the current limited number of
lower cost sourcing countries. Market access requires the development
of trust through accountability in governance of the supply chain.
3. Full implementation of the WTO Trade Facilitation Agreement for
small-medium enterprises
EMTC notes that the WTO Trade Facilitation Agreement has been in force
for five (5) years. While several IPEF countries have already achieved
100% of implementation commitments (e.g., Australia, India, Japan),
other countries have not (e.g., Vietnam).\1\ IPEF may provide an
opportunity for capacity building as a catalyst for countries to
achieve 100% implementation. EMTC suggests that preferential financing
or other trade benefits be contingent upon specific implementation
goals.
---------------------------------------------------------------------------
\1\ See, WTO May--Progress on Implementation Commitments at https:/
/tfadatabase.org/implementation/progress/map.
---------------------------------------------------------------------------
4. Export control regime and security agreement
EMTC recognizes that Congress made significant progress in national
security legislation with passage of the John S. McCain National
Defense Authorization Act, Pub. L. 115-232 (August 13, 2018) by
enacting the Foreign Investment Risk Review Modernization Act of 2018
(132 Stat. 2173) and Export Control Reform (132 Stat. 2208) as part of
the same regime to work in concert with each other. EMTC believes that
more IPEF countries should be enticed to become military allies of the
United States with all the benefits that accrue for purposes of foreign
direct investment in the United States and export controls for
technology to IPEF members.
5. Digital trade
EMTC believes that IPEF should address both the cross-border shipment
of physical goods ordered online (e-commerce) and treatment of digital
goods (e.g., cross-border digital transmission, data collection, data
flows, data localization rules, etc.).
For e-commerce, EMTC strongly believes that prioritizing increasing the
de minimis threshold for low-value shipments will go a long way to
increase MSME participation in global trade, especially as e-seller
exporters. Most of the countries in the IPEF have a de minimis level
between $0 and $200 whereas the United States de minimis threshold is
$800. The United States was successful in getting Canada and Mexico to
increase their de minimis in the U.S.-Mexico-Canada Agreement (USMCA).
Title 19 U.S.C. Sec. 1321 on Administrative Exemptions has been part of
the customs statute since the Tariff Act of 1930. Specifically, the de
minimis threshold under 19 U.S.C. Sec. 1321(a)(2)(C) for articles free
of duty ``in any other case'' was initially set at $1 and periodically
raised by Congress--first, to $5 in 1978, and $200 in 1993 as part of
the Customs Modernization Act, Title IV of NAFTA.\2\ Congress increased
the de minimis to $800 recently in the Trade Facilitation and Trade
Enforcement Act of 2015, Pub. L. 114-125, 130 Stat. 223. As these
amendments demonstrate, Congress has raised the de minimis every few
decades taking into account the erosion of purchasing power as a result
of inflation. EMTC believes this level for de minimis is appropriate
given reports of inflation at over 6% for 2021 and in excess of 7.5%
year-to-date. Congress should commit support for the current U.S. de
minimis level and stress for near reciprocity in treatment of low value
shipments in the Indo-Pacific countries within a limited phased
implementation period.
---------------------------------------------------------------------------
\2\ See list of legislative amendments for 19 U.S.C. Sec. 1321 at
https://uscode.house.gov/view.
xhtml?path=/prelim@title19/chapter4&edition=prelim.
We recognize that Congress has plenary authority to set trade policy
---------------------------------------------------------------------------
and tax rates:
The Congress shall have Power To lay and collect Taxes, Duties,
Imposts and Excises, to pay the Debts and provide for the
common Defense and general Welfare of the United States; but
all Duties, Imposts and Excises shall be uniform throughout the
United States.
U.S. Const. art. I, Sec. 8, cl. 1. However, EMTC is alarmed by the
possibility of Congress revisiting de minimis and lowering the
threshold under 19 U.S.C. Sec. 1321(a)(2)(C) as such policy instability
makes it very difficult for companies to plan when they have organized
their business operations based on the $800 threshold level. It is
precisely because Congress has only increased the de minimis threshold
infrequently every few decades that makes the possibility of a change
after only five (5) years from passage of TFTEA in 2016 greatly
concerning to the trade community, particularly e-commerce marketplace
platforms, e-sellers and companies that provide trade and
transportation services to e-commerce companies.
Since the passage of TFTEA in 2016, the trade community faced the
prospect of lowering the de minimis threshold under 19 U.S.C.
Sec. 1321(a)(2)(C) twice. First, during the negotiation of the USMCA in
2019, the Administration negotiated to raise the de minimis threshold
for imports to Mexico (to $117) and Canada (to $150), but included a
footnote:
Notwithstanding the amounts set out under this subparagraph, a
Party may impose a reciprocal amount that is lower for
shipments from another Party if the amount provided for under
that other Party's law is lower than that of the Party.
USMCA Ch. 7 Customs Administration and Trade Facilitation, Article
7.8.1(f) Express Shipments, footnote 3 at 7-7.\3\ As a result of the
trade community's advocacy efforts, Congress wrote a letter to the U.S.
Trade Representative stating:
---------------------------------------------------------------------------
\3\ See https://ustr.gov/sites/default/files/files/agreements/FTA/
USMCA/Text/07_Customs_
Administration_and_Trade_Facilitation.pdf.
We strongly oppose any effort by the Executive Branch to lower
the current $800 de minimis threshold through USMCA
implementing bill, including any amendment to 19 U.S.C. 1321
that would grant the Executive Branch additional authority to
---------------------------------------------------------------------------
decrease or eliminate the threshold.
The U.S. de minimis threshold is a policy recently set by
Congress, which raised the threshold from $200 in 2016. The
current de minimis threshold still enjoys wide bipartisan
support in Congress and throughout the manufacturing, retail,
logistics, and e-commerce landscapes. In our view, it is
neither necessary, appropriate, nor desirable to change this
policy in U.S. law as part of the implementation of USMCA's
requirements. In fact, we consider that such an effort would
amount to an override of Congressional authority by the
Executive Branch, and thus would be entirely inappropriate.
Letter from the Congress of the United States to Ambassador Robert E.
Lighthizer, U.S. Trade Representative dated October 18, 2019.\4\
---------------------------------------------------------------------------
\4\ See letter at: https://schweikert.house.gov/sites/
schweikert.house.gov/files/2019-10-18%20de
%20minimis%20threshold%20letter.%20Schweikert.%20Kind.pdf.
---------------------------------------------------------------------------
6. Supply chain resilience
As Congress considers several pieces of legislation to build supply
chain resilience to counteract the reliance that the United States
found itself in the difficult position of relying on China for many
commodities (e.g., active pharmaceutical ingredients) and products
(e.g., personal protective equipment) during COVID-19, IPEF should
create incentives to manufacture critical products in countries that
are U.S. military allies if they cannot be produced in the United
States. One method of achieving resilience is to jointly map supply
chains among the partners in the Indo-Pacific region to identify
mutually beneficial chains to ensure consistent competitively priced
supplies among the partners through multi-lateral trade agreements and
de minimis programs.
Global trade volumes have increased and evolved since 1993, and the
Congress has enacted a series of laws after the attacks of September
11, 2001, designed to balance the needs of the U.S. Government to
collect data for supply chain security and the need to facilitate
legitimate trade. See, Trade Act of 2002, Pub. L. 107-210, 116 Stat.
933 (August 6, 2002); the Security and Accountability for Every (SAFE)
Port Act of 2006, Pub. L. 109-347, 120 Stat. 1884 (October 13, 2006);
Implementing Recommendations of the 9/11 Commission Act of 2007, Pub.
L. 110-53, 121 Stat. 266 (August 3, 2007); and the Trade Facilitation
and Trade Enforcement Act of 2015, Pub. L. 114-125, 130 Stat. 122
(February 24, 2016). However, none of these laws were a holistic
revision of the statutory framework that has been in place since the
Tariff Act of 1930.
We understand that a primary driver of IPEF is countering China's
unfair trade practices. To accomplish this, EMTC recommends focusing on
creating a risk management framework that:
Increases supply chain visibility and access through the use of
transparent digital markets;
Supports trade facilitation by simplifying cross-border
transactions and clarification of data elements (country of origin
calculations) given the competitive advantages this affords the U.S.;
Targets risk management techniques to be introduced through
entity-based risk management rather than an entry transaction-based
system; and
Advocates for the use of recognized governance standards and
controls (ISO, COSO) to drive accountability and interoperability in
ecommerce transactions that result in broad alignment on key common
issues with similar agreed upon outcomes This type of regime would
allow for a better assessment of the control environment which would be
more effective in verifying the integrity and resilience of the supply
chain.
EMTC's recommendation is based on our experience with previous laws
passed to increase visibility in the supply chain, such as the Lacy Act
Amendments passed as part of the Food, Conservation, and Energy Act of
2008, Pub. L. 110-246, 122 Stat. 2952 (June 18, 2008) and Conflict
Minerals included in the Dodd-Frank Wall Street Reform and Consumer
Protection Act, 111-203, 124 Stat. 2213 (July 21, 2010). Neither of
these laws achieved their policy objectives. In the case of the Lacey
Act Amendments, the most significant enforcement action was the
criminal enforcement agreement against Gibson Guitar Corp. with a
penalty of $300,000, $50,000 payment to the National Fish and Wildlife
Foundation, and civil forfeiture of $261,844 worth of Madagascar ebony.
In the case of the ban on importation of Conflict Minerals from
Democratic Republic of the Congo, several companies instead found that
their products contain North Korean gold. See, Dozens of Firms Report
N. Korea Gold in Supply Lines, Wall Street Journal (June 4, 2014);
Banned North Korean gold taints U.S. products reported in MarketWatch
(June 5, 2014). Any U.S. law designed to keep certain commodities out
of the U.S. ultimately fails because these are sourcing issues, rather
than supply chain issues.
7. Conclusion
EMTC appreciates the opportunity to comment on the Promise and
Challenge of Strategic Trade Engagement in the Indo-Pacific Region, and
we are happy to discuss the ideas expressed above in more detail. The
critical components to effective strategic engagement to drive regional
prosperity in the Indo-Pacific Region are local accountability,
regional interoperability and risk management based upon globally
accepted standards. The Strategy cannot create barriers to trade by
raising or creating various taxes, setting unachievable standards or
commitments and expects to participate in a market of 1.5 billion
people. Rather, setting achievable, transparent standards and working
towards alignment on key issues with agreed upon outcomes not
regulations will facilitate the growth of trust among partners and
therefore resiliency to threats, increased trade among the participants
and exclusion of less desirable partners (e.g., PRC).
[all]