[Senate Hearing 118-784]
[From the U.S. Government Publishing Office]
S. Hrg. 118-784
THE PRESIDENT'S 2024 TRADE POLICY AGENDA
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
APRIL 17, 2024
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
63-388--PDF WASHINGTON : 2026
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 TIM SCOTT, South Carolina
SHERROD BROWN, Ohio BILL CASSIDY, Louisiana
MICHAEL F. BENNET, Colorado JAMES LANKFORD, Oklahoma
ROBERT P. CASEY, Jr., Pennsylvania STEVE DAINES, Montana
MARK R. WARNER, Virginia TODD YOUNG, Indiana
SHELDON WHITEHOUSE, Rhode Island JOHN BARRASSO, Wyoming
MAGGIE HASSAN, New Hampshire RON JOHNSON, Wisconsin
CATHERINE CORTEZ MASTO, Nevada THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts MARSHA BLACKBURN, Tennessee
Joshua Sheinkman, Staff Director
Gregg Richard, Republican Staff Director
(II)
C O N T E N T S
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OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Crapo, Hon. Mike, a U.S. Senator from Idaho...................... 3
ADMINISTRATION WITNESS
Tai, Hon. Katherine C., United States Trade Representative,
Executive Office of the President, Washington, DC.............. 5
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Barrasso, Hon. John:
Letter to Ambassador Tai from Senator Barrasso et al., July
20, 2023................................................... 47
Crapo, Hon. Mike:
Opening statement............................................ 3
Prepared statement........................................... 48
Tai, Hon. Katherine C.:
Testimony.................................................... 5
Prepared statement........................................... 49
Responses to questions from committee members................ 55
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 93
Communications
American Association of Exporters and Importers.................. 95
American Farm Bureau Federation.................................. 96
Americans for Free Trade......................................... 98
Center for Fiscal Equity......................................... 103
Coalition for Economic Partnerships in the Americas.............. 107
Computer and Communications Industry Association................. 109
Consumer Technology Association.................................. 116
Distilled Spirits Council of the United States, Inc.............. 121
Engine Advocacy.................................................. 125
Public Citizen................................................... 128
Society of Chemical Manufacturers & Affiliates................... 131
(III)
THE PRESIDENT'S 2024 TRADE POLICY AGENDA
----------
WEDNESDAY, APRIL 17, 2024
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:03
a.m., in Room SD-215, Dirksen Senate Office Building, Hon. Ron
Wyden (chairman of the committee) presiding.
Present: Senators Stabenow, Menendez, Carper, Cardin,
Brown, Bennet, Casey, Whitehouse, Hassan, Cortez Masto, Warren,
Crapo, Grassley, Cornyn, Thune, Cassidy, Lankford, Daines,
Young, Barrasso, Tillis, and Blackburn.
Also present: Democratic staff: Sally Stewart Laing, Chief
International Trade Counsel; Joshua Sheinkman, Staff Director;
and Tiffany Smith, Deputy Staff Director and Chief Counsel.
Republican staff: Molly Newell, International Trade Counsel;
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.
Ambassador Tai, thank you very much for joining us this morning
to discuss the President's 2024 trade policy agenda.
I am going to start by touching on some of the ways in
which the Congress and the Biden administration can work
together to build a trade agenda that will supercharge
America's diverse economic base and create good-paying,
innovative jobs across Oregon and the Nation.
I will start with trade enforcement, because without trade
enforcement, our trade laws are not worth the paper that they
are written on. India's wheat subsidies, for example, distort
prices and make it harder for Oregon farmers to compete in the
Asian market. Mexico's illegal fishing practices are hurting
the environment, and its harmful energy regulations are
undermining our clean energy suppliers. China has a rap sheet
of unfair subsidies and practices so long that if I were to go
through it, we would be here until dinner time. So I am going
to spare everyone that filibuster.
Every single one of these unfair practices by foreign
countries is directly hurting workers and companies in America,
including in my home State. There is a lot more USTR can be
doing, in my view, with the tools it has, and we want to work
together to raise issues directly with trading partners,
starting dispute settlement, or opening 301 investigations into
unfair trade practices. In my view, that is the only way to
hold trade cheats accountable and level the playing field for
American workers and businesses.
The second issue: trade barriers. Our economy thrives when
our workers can make stuff in America and grow stuff in America
and add value to it in America, and then ship it all over the
world. But you just cannot do it with all these barriers.
In my home State, one out of four jobs relies on exports.
We have world-renowned exports, from wheat to potatoes to wine
to high-tech electronics, and everything in between. But the
success of Oregon's farmers and workers depends on the
administration's knocking down barriers to help them compete in
the global market and get their products on shelves.
That is why, in addition to enforcing the rules on the
books to hold trade cheats accountable, I want--working closely
with the administration and USTR--to play offense. It is not
enough to sell domestically; the United States has to expand
opportunities in the global market for American exporters
across all our industries.
The negotiations with Taiwan, Kenya, and Indo-Pacific
countries could net big wins for our exporters in agriculture
and manufacturing. But we are going to have to work with the
administration to push even harder to crack down on tactics
like unfair labeling, duplicative testing requirements, and ag
regulations that are not supported by science and are designed
to put American farmers, workers, and ranchers at a
disadvantage.
Before I wrap up, I also want to note, particularly in my
State, how important it is that we have a standard for high-
tech innovative industries. The United States needs to be a
leader in setting the rules of the road for digital trade so
our creators and innovators get a fair shake in foreign
markets. We are not going to take a back seat to anybody in the
process when it comes to privacy, security, and antitrust
enforcement. While lawmakers look to domestic tech regulation,
we must also push for digital trade rules that are going to
protect a free and open Internet, help small businesses, and
push back on the China model of digital surveillance and
censorship.
I am very pleased to see that the White House is taking
charge in this issue, working closely with all in the
administration and vowing to work with the Congress on this
issue. There are diverse stakeholders and agencies, so I think
the White House position of a whole-of-government approach is a
wise one. I look forward to working on a digital trade position
that reflects the needs of American workers, businesses, and
consumers.
The American people, finally, deserve to know what the
government's priorities are with regard to trade policy. I am
concerned--and I made this point to a number of people in the
administration. I think that the administration needs to do
more to work with the Congress and make sure the American
people are not kept in the dark.
To this end, I want to make sure that the USTR and other
parts of the Biden administration are clear and straightforward
with Congress and the public. When you take meetings with
foreign officials, it is not enough to say, well, there was a
range of bilateral concerns raised. That does not tell my
constituents a whole lot about trade. We need to be told what
trade barriers the USTR and other parts of the administration
are trying to break down, and how this is going to help
American workers and businesses.
If negotiators are meeting with the Japanese, tell us if
you are pushing to get Oregon potatoes on shelves in Japan.
When officials engage with Indonesia, tell us if you are
pushing against unfair licensing requirements that hurt Oregon
dairy farmers. If there are negotiations with Kenya, tell us
how you will push them to improve their environmental and labor
laws or bring down barriers to biotech products. Fishermen in
Newport and ranchers in Prineville, they are asking me to tell
them exactly how the administration and this trade office are
helping their businesses thrive in the global market.
So, we need more light shed on trade policy in America, and
we are going to pursue that diligently. Enforcing laws on the
books and making our government's trade policies clear is a
good place to start, finally, in leveling the playing field. I
look forward to today's discussion and working closely with the
administration and all our colleagues on both sides of the
aisle of this committee on trade matters.
Senator Crapo?
[The prepared statement of Chairman Wyden appears in the
appendix.]
OPENING STATEMENT OF HON. MIKE CRAPO,
A U.S. SENATOR FROM IDAHO
Senator Crapo. Thank you very much, Mr. Chairman, and
welcome, Ambassador Tai.
I, first of all, want to say I agree wholeheartedly with
the chairman's opening statement and his comments. As a matter
of fact, Senator Wyden's first two issues that he raised are
the first two issues in my first paragraph.
I read the President's trade agenda carefully. If we
measured wisdom by word count alone, President Biden's trade
policy agenda would be very wise. If we measured it in terms of
creating meaningful opportunity for Americans, it is profoundly
misguided, particularly in terms of enforcement approach and
negotiating ambitions.
This administration's enforcement record is the weakest of
any administration in 25 years. Although the administration
highlights regularly using the USMCA rapid response labor
mechanism to help Mexican workers, that mechanism cannot
supplant bringing cases to increase market openings for
American workers. Such cases are sorely lacking. The USTR has
yet to self-initiate a single enforcement action against China,
period, whether at the WTO or under section 301 or under the
Phase One deal. Nothing. Today's announcement accepting a
section 301 shipbuilding petition, which could take a full year
to complete, does not make up for over 3 years of inaction on
China.
When it comes to discriminatory treatment, our trading
partners now expect USTR to simply note that it is considering
all options--as it did with Canada's decision to move forward
with its discriminatory digital trade services taxes--and
further expect that USTR's consideration of all options is
likely to be indefinite. For example, USTR has not advanced our
case against Mexico's discriminatory energy policies for nearly
2 years now.
Administration plans for negotiations fare no better than
they do for enforcement. For the fourth year in a row, the
administration's trade agenda provides no plan for real
negotiations to improve market access. Instead, the
administration lauds the Inflation Reduction Act, asserting
that our workers need to be shielded, subsidized, and
micromanaged through industrial policy, even if it entails
massively expanding our national debt.
That is not only misguided, but as former Joint Chiefs of
Staff Michael Mullen noted, our debt is in fact one of the top
national security threats to the United States. What we need is
market access.
I recently traveled to Asia, the United Kingdom, and to
other partners. Our partners want to make real deals with high
standards. They want to trade with us rather than China, and
they want to do it now. We should want that too, because each
day we wait is another day that Americans fall further behind
our competitors, including China.
Make no mistake: tariffs matter, particularly for small
businesses like our farmers. Australia and New Zealand each
negotiated free trade agreements with Thailand, and since then,
demand for premium U.S. beef fell by 30 percent because our
cattlemen face a 50-percent tariff while those two partners
face none.
Whether it be Idaho potatoes and dairy, Iowa soybeans and
pork, South Dakota wheat, Texas cotton and beef, or Washington
State apples, our farmers are the best in the world. That is
precisely why a large number of farm groups wrote to you,
Ambassador Tai, on Monday, asking for a real trade agenda and
advancing dispute settlement reform so that we can open markets
for them.
United States manufacturing, innovation, creative, and tech
industries are second to none. If the administration will not
negotiate tariffs, it should at least help workers in these
industries by negotiating critical rules on technical barriers
to trade, intellectual property, and key digital provisions
such as nondiscrimination and free data flows.
Thus far, USTR has failed to do so in any of the so-called
framework negotiations, and the trade agenda indicates this
will continue. This benefits China, which is aggressively
participating in international standard-setting bodies, pushing
technology transfer, and supporting data localization by
countries, which could require our companies to store data on
servers that are produced by Chinese companies such as Huawei,
rather than on ones we host in the United States.
The proposals the Trump administration crafted in
coordination with this committee for USMCA, for technical
barriers to trade, for intellectual property, and for digital
trade, ensured that we could regulate and also rise to China's
challenge. Simply abandoning coordinated and reasoned proposals
without consulting Congress is a profound mistake. I urge my
colleagues to remember when this administration told us that
comprehensive congressionally approved trade agreements are a
20th-century tool. Its vision of the future is piecemeal,
through frameworks done as executive agreements devoid of any
real enforcement mechanisms.
Ambassador Tai, the members of this committee know that
attempts to bypass Congress are neither new nor groundbreaking.
And they also know that such efforts are not sufficient or
truly effective in creating the types of opportunities our
citizens deserve. It is well past time this administration
begins working with Congress to meaningfully expand market
access opportunities.
Thank you, Mr. Chairman.
[The prepared statement of Senator Crapo appears in the
appendix.]
The Chairman. I thank my colleague.
So, Ambassador, you can already tell 15 minutes into the
discussion today, that a Democratic chair and a Republican
ranking member are going to work in a bipartisan way on these
issues, and we are interested in doing it with the
administration. So please proceed, and we will make your
prepared remarks a part of the record in their entirety.
Welcome.
STATEMENT OF HON. KATHERINE C. TAI, UNITED STATES TRADE
REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON,
DC
Ambassador Tai. Chairman Wyden, Ranking Member Crapo, and
members of this fine committee, good morning. And I appreciate
the opportunity to discuss with you the President's trade
policy agenda.
The Biden-Harris administration believes strongly that our
economic policies should work to strengthen our middle class.
In order to give all Americans a fair shot, we need to ensure
broad-based access to economic opportunity, and our trade
policy should be a tool that works together with our other
economic policy tools to reach that goal.
This is important because trade policy has not always
worked that way. To respond to the many changes occurring in
the modern economy, the world economy, and the world in
general, we must bring a more open mind and be willing to
innovate in the way that we approach trade policy, by
questioning and testing old assumptions, revisiting norms, and
thinking both creatively and strategically.
In this new era, we increasingly measure success and
progress by the degree to which we are delivering real benefits
to more Americans across our society, no matter where you live
or whether you have a college degree. Our approach is one that
addresses and advances the interests of all parts of our
economy, and does not pit Americans against Americans.
So, let me give you some examples of what middle-out,
bottom-up trade policy looks like. First, we are using trade to
empower workers, because we know that they are the backbone of
our economy. Their success is quite literally our success. This
is about building our middle classes together with other
countries, and not pitting them against each other.
This is why we have prioritized strong labor commitments in
our ongoing trade initiatives, including in our negotiations
with Kenya and Taiwan. This is also why we have been so focused
on utilizing the USMCA's rapid response mechanism, a key
worker-focused feature of the modernized and the reformed North
American Free Trade Agreement that has garnered robust
bipartisan support.
Since 2021, we have used the RRM 22 times at facilities
that span various industries, from automotive and garments to
mining and services. These cases have directly benefited 30,000
workers through new independent unions, new collective
bargaining agreements, higher wages, back pay, and
reinstatement for wrongful termination.
Advancing worker rights abroad is what strengthens and
empowers workers here at home, because only then can our
workers compete fairly and thrive in this competitive global
economy. Our enforcement efforts are also motivated by the
principle of inclusivity; that is, ensuring that all Americans
enjoy the benefits of trade.
With respect to the producers and the workers in our steel
industry, last year we secured a victory at the WTO that
determined the illegality of the retaliatory tariffs that the
PRC and Turkey imposed in response to the U.S. section 232
national security actions on steel and aluminum.
Separately, through the USMCA, we are actively championing
the interests of our farmers and agricultural producers. We
have pursued two cases now against Canada's dairy tariff rate
quota allocation measures, and we are currently challenging
Mexico's restrictive measures on biotech corn before a panel.
We are also opening markets for hardworking American
families and communities, especially our rural communities.
Through negotiations, our administration has secured over $21
billion in new agricultural market access in the last 3 years.
For example, after the U.S. and India terminated seven WTO
disputes, India agreed to remove retaliatory tariffs on several
U.S. products.
This means improved access for chickpeas, lentils, almonds,
walnuts, and apples, benefiting farmers across our country,
including in Michigan, Oregon, California, and Washington. This
means more market access for turkey, duck, blueberries, and
cranberries, benefiting the farmers in North Carolina,
Pennsylvania, Virginia, Massachusetts, and Minnesota.
Trade should work for all Americans. Our goal is to stop
pitting Americans against each other in our trade policy. This
is why we are taking unprecedented steps to incorporate more
voices into trade policymaking. Just as you stay connected with
your constituents in your States, I have made a point of
traveling the United States to hear from workers, farmers,
small businesses, and Tribal leaders directly, to better
understand their hopes and aspirations, and learn how our trade
policy can address them.
I am also meeting with civil society and labor leaders, in
addition to the big corporations and trade associations that
have always had access to USTR. My job is to represent the
entirety of the United States, not just those who can afford
the Washington lobbyists.
Our vision for a fairer future also applies to the
international arena, because it turns out that we all want to
grow our economies from the middle out and the bottom up. This
is what drives our work at the WTO and in our ongoing
negotiations with Taiwan, Kenya, and the Indo-Pacific. We are
focused on economic engagement and collaboration efforts to
drive durable economic growth and build our middle classes
together, instead of always pitting them against each other.
Over the course of the last several years, it has become
clear that, domestically and internationally, we need an
economy that is more resilient. That means supply chains that
can adapt and rebound more quickly and easily from shocks and
crises. Developing the tools to reduce dependencies and
vulnerabilities, and to incentivize stronger supply chains, is
a major priority for USTR, especially this year.
We are gathering public input and will hold several public
hearings on this. This effort will allow us to draw upon a
comprehensive set of perspectives and experiences to help us
identify more trade policy solutions. Part of this exercise
includes developing more effective countermeasures to the PRC's
unfair practices and the negative effects of those practices on
our economy and workers.
I want to end on this note. For many years now, we have
seen how the PRC's nonmarket policies and practices left
unchecked have devastated many working communities and
industries across our country, including many in your States:
steel, aluminum, solar panels, batteries, electric vehicles,
and critical minerals, just to name a few sectors.
As the President said during his State of the Union
address, this administration will continue to stand up to the
PRC. And we are prepared to use our trade tools in this effort,
including through new section 301 actions and our 4-year review
of the China section 301 tariffs, which assesses ways to deploy
tariff measures to more effectively and more strategically
address the harms from China's forced technology transfer
policies, such as cyber theft and cyber hacking, and related
imbalances and inequities in the U.S.-China trade relationship.
This is also why, after close review of the section 301
petition I received from five national labor unions, I have now
initiated a full and thorough investigation of the PRC's
longstanding efforts to dominate the maritime logistics and
shipbuilding sectors. The unions' petition raises serious
concerns about harms to U.S. workers, the shipbuilding
industry, and U.S. resilience.
This administration is fighting every single day to put
working families first, to rebuild American manufacturing, and
to strengthen our supply chains. We are using trade to give
everyone a fair shot, while working with our allies and
partners.
I want to especially thank my USTR team serving in
Washington, DC and around the world for their unwavering
devotion and determination to serve all of America.
Thank you.
[The prepared statement of Ambassador Tai appears in the
appendix.]
The Chairman. Thank you very much.
I am going to pick up--lots to cover on this China issue
that you touched on at the end. Obviously, China has just
thrown money at everything, from solar panels to
semiconductors, doing everything they can to drive American
competitors out of business with a flood of cheap imports.
So my own view is, I think it was a good thing that you and
the President opened a 301 investigation into the unfair trade
practices in China's shipbuilding industry, with the formal
petition from the Steelworkers, AFL-CIO, and others, obviously
being very, very important in this issue.
My question on 301 is--Congress gave you all the power to
self-initiate 301 investigations into unfair trade practices.
And my question to you is, Ambassador, how can you all use 301
more proactively to investigate and take action against China's
unfair subsidies in some of these areas that I mentioned: the
semiconductors, EVs, batteries, and solar?
It is good what you and the President did here just
recently in opening the shipbuilding one, but I want to see
more proactive work from USTR, because Congress gave you all
the power to do that. What can be done there?
Ambassador Tai. Senator Wyden, as you know very well,
section 301 is perhaps the most important enforcement tool at
USTR. When we encounter challenges throughout the world,
whether we advance them through negotiations, through
enforcement actions under our FTAs, or separately outside of
our trade agreements through a section 301 action, this is one
of the most important tools that we have to bring to bear.
So I can assure you that we value this tool very much. We
also look to appropriate tools for resolving the problems that
face us. In this particular case, with respect to shipbuilding,
this has been a longstanding concern in the U.S. economy.
If you look at the petition, since 1975 U.S. shipbuilding
capabilities have eroded not just significantly, but entirely
eroded. We are eager to take up this investigation, to follow
the rules of section 301, and to work on determining, first,
whether or not there have been harms to the U.S. economy.
I can assure you that, with respect to China especially,
given the scope and scale of the challenge that we have with
respect to China's nonmarket policies and practices, that
section 301 remains very much at the forefront of our minds,
and in the development of our posture.
The Chairman. Let me see if I can get a couple more
questions in. We want to follow that up with you, because I
want this used in the maximum fashion possible, particularly
with you all initiating, because that is why we gave you the
power.
As you know, up here we are very proud of the Brown-Wyden
part of the USMCA. I understand that you all have initiated 22
cases using the rapid response mechanism to enforce the rights
of our small businesses and our workers. Yet at some point,
this expanding number reflects a systemic failure of Mexico to
enforce the labor laws, and USMCA.
Have you all considered moving beyond our rapid response
and looking for more compliance through a state-to-state USMCA
dispute on labor enforcement?
Ambassador Tai. Well, Senator Wyden, before we started
regularly calling this mechanism the rapid response mechanism,
as you have called it, our shorthand name for this was the
Brown-Wyden mechanism. So I am delighted that you are following
the developments in our implementation and in our active use of
this tool very closely, because you should absolutely see this
as very much your contribution to modern trade policy.
There are multiple tools in the USMCA. There is the rapid
response mechanism. As you also know, there is an independent
Mexican labor expert board that assesses the state of the
overall Mexican labor reform on a regular basis, providing
expert assessment. As you also well know, the Mexican labor
reform that came together with the USMCA coming into effect was
always an ambitious project. That was even before COVID became
part of our world.
We remain very, very plugged into the progress that Mexico
is making, but also the continued challenges and their
implementation. And so, yes, we have many tools under the
USMCA, including regular reports from USTR to Congress. So,
yes, all of the tools are available and are ones that we
consider using.
The Chairman. I am really out of my time, but I just want
to get one other matter in very quickly, because Democrats and
Republicans are very much united on this, and that is dealing
with Mexico's discriminatory licensing processes in the energy
field.
I mean, we really are getting ripped off by Mexico. You all
have started consultations with respect to these discriminatory
actions. But when do you anticipate taking the next step and
bringing a formal case over Mexico's protection through these
discriminatory licensing practices harming our workers, and
particularly the ability to make sure that we tap the full
potential of the Clean Energy for America effort, which was
written essentially in this room?
Ambassador Tai. Senator Wyden, we look at that actively
every single day. The focus is on how to be most effective in
resolving the challenges for our companies. We remain in close
conversation with our companies, and in terms of our decision-
making and our timing, let me assure you that it also reflects
the appetite of our companies in terms of when and how to move
forward.
The Chairman. Senator Crapo?
Senator Crapo. Thank you, Mr. Chairman. And by the way, I
also agree with your questions as well as your opening
statement.
I would like to talk about section 301, the 301
investigation, not the petition that you just accepted. This
investigation has now been going on for 2 years, and it is my
understanding that President Biden has recommended that there
be a tripling of our tariffs on steel and aluminum for China,
but that there may be some kind of an interagency disagreement
between the USTR and Treasury about tariffs.
And the question I have is, when are we going to get an
answer? When will this investigation end and a decision be
made?
Ambassador Tai. Senator Crapo, I appreciate this question
as well, because obviously, this is something we have been
working very hard on. Just a couple of corrections. I think
that what you are talking about is the review of the existing
tariffs that we kicked off in the fall of 2022. So we are
calling it, shorthand, the 4-year review. It is an unfortunate
shorthand, because it is a review that starts at Year 4, not a
review that lasts for 4 years, first of all.
Senator Crapo. Understood.
Ambassador Tai. To your point about 2 years, it has really
been about a year and a half. But given the President's calling
on USTR to consider specifically the tariff adjustments on
steel and aluminum trade with China, I think that you should
take that as an indication that we are in very, very advanced
stages of our interagency work, and that I expect that we will
come to a conclusion very soon.
Senator Crapo. All right; I appreciate that. I hope that
that means very soon.
Next, as you know, the National Potato Council expressed
disappointment with how Japan's ban on U.S. potatoes appeared
in the National Trade Estimate, because it did not capture the
full extent of the problem. A number of your stakeholders also
took issue with this year's NTE because of your decision to cut
out a number of trade partners barriers, by seeing if those
barriers were in their public interest.
Did you take the opportunity to discuss the ban of U.S.
potatoes in your recent conversations with Japan?
Ambassador Tai. Senator Crapo, now this is an area of
shared interest and dedication with respect to potatoes, and
Idaho in particular. So yes, absolutely. USTR has raised market
access for table-stock potatoes in all four meetings of the
U.S.-Japan partnership on trade, most recently in December
2023.
We will continue to press Japan to advance the request in a
timely and science-based manner. And I also want to let you
know that, in the person of our very dynamic Ambassador to
Japan, Ambassador Emanuel, USTR has the strongest and most
active of partners in advancing this particular issue.
Senator Crapo. All right; thank you. I am betting that
Oregon potato growers agree with that, and we will continue to
raise this issue. I want to move on to digital services taxes.
Recently, when you were asked about discrimination against
U.S. technology companies, you said, ``How many of these
American companies are actually really American companies,
because they are actually paying taxes there as opposed to
paying taxes here.'' Actually, those companies pay billions of
dollars of taxes here, but they are paying more overseas
because of discriminatory digital services taxes, or DSTs.
If you feel that it is problematic that U.S. companies are
paying more taxes overseas, will you then commit to this
committee that you will actually take action against DSTs,
rather than just consider it? And if countries continue to move
forward on implementation of their DSTs, will you take action?
Ambassador Tai. Senator Crapo, with respect to these tax
issues, this is one of those areas where I always have to
acknowledge the jurisdiction of the Treasury Department,
although Senate Finance gets jurisdiction over both tax and
trade.
I think one of the challenges, as I understand it, working
this issue, is reflected in that Pillar 1/Pillar 2 negotiation
that Secretary Yellen has led, to address that arbitrage over
international minimum taxes, to try to level the playing field.
So, I know that this is part of a larger conversation.
With respect to USTR, our role in the digital services
taxes partnership with Treasury is really triggered around the
architecture of a lot of these DSTs, where USTR has run section
301s, assessed discriminatory impacts of these DSTs, and moved
forward with respect to articulating possible sanctions.
Those sanctions remain suspended. They remain part of our
toolkit, and we remain in very close touch with our Treasury
Department colleagues, and in monitoring what is happening in
these jurisdictions. So, I will just assure you that we are
looking at this very carefully, and we value our tools with
respect to the leverage that they give us in leveling the
playing field.
Senator Crapo. Well, are you telling me that Secretary
Yellen is the one I should be asking this question to?
Ambassador Tai. What I am telling you is that, with respect
to DSTs, it is an issue where USTR and Treasury authorities are
both implicated.
Senator Crapo. I think I understood you to say you are
still looking at it?
Ambassador Tai. We are prepared to use the tools that we
have.
Senator Crapo. I hope you do.
The Chairman. Thank you.
Senator Stabenow will go next, and Senator Grassley will go
after Senator Stabenow.
Senator Stabenow. Yes; good morning. It is wonderful to see
you again and to have you with us, and to talk about such
important issues, both in terms of markets but also fairness
and what needs to happen for American workers, businesses,
farmers, and so on.
I appreciate your efforts and the President's leadership as
we work to support our trade laws, both trade enforcement and
leveling the playing field for our farmers.
We just heard about potato growers. We have other issues,
as you know, with our farmers that need to be addressed, as
well as our manufacturers. I just want to lend my voice to the
fact that the 4-year review of section 301 tariffs on Chinese
products needs to be concluded as quickly as possible in favor
of both either extending or increasing tariffs on Chinese
goods, while we at the same time focus on the interests of
American workers.
And I want to speak to something very specific and
important to us in the auto manufacturing sector right now,
because in Michigan we know just how critical it is to level
the playing field. Our State, as you know, put the world on
wheels. We are very proud of that.
We have the best auto workers in the world, and they are
ready to build--and are building--the vehicles of the future
right here in America. There is no doubt in my mind that we can
outcompete anybody in the world, as long as the rules are
enforced and there is a level playing field. But the Chinese
Government's unfair trade practices, including heavy, heavy
subsidies for Chinese automakers, pose a significant threat to
our American manufacturing capacity and to our consumers--and
to our national security interests, I would add.
Allowing artificially low-priced Chinese EVs to flood the
U.S. market would cost thousands of jobs and endanger our
shared goal of ensuring that the electric vehicle transition is
led by American workers. Importing Chinese EVs, many of which
are equipped with highly connected electronic components and
autonomous driving technologies, also creates an unacceptable
national security risk.
It is essential that we protect our consumers, American
businesses, our workers, and our critical infrastructure from
being exploited by Chinese state actors, as we know. And so,
how does that fit into the President's trade agenda?
Ambassador Tai. Senator Stabenow, it is wonderful to see
you. I think that your State is actually one of the best
examples of why we are advancing a different kind of trade
policy. Michigan is a great agriculture-producing State, and
also a great State with an industrial contribution to America
and the world.
The specific challenge of EVs is actually a part of a
larger pattern that we have seen over and over and over again.
First it was steel and aluminum, then it was solar panels.
Again, where? I think in both Michigan and Oregon and other
places in the U.S., we had a growing, innovative industry in
the early 2000s that got washed out by exactly these same
anticompetitive practices: enormous amounts of state support
fostering an overproduction and overcapacity that brought world
prices down so far that no one could compete or survive.
So we know that we are facing this again on autos and EVs.
We have to take action. Leaving these types of policies
unchecked--we already know what is going to happen. We are
going to lose the capacity to produce and compete, and as we
lose that capacity, it is so hard to rebuild that capability.
So we have to take early action, decisive action, and we
have to be really clear about why we are taking the action. We
are looking for a level playing field, because the current
playing field is not level. For all the talk about free trade
being the ideal, it is a beautiful concept. But it is also a
beautiful dream, because the world economy is not characterized
by free trade, in particular when you look at the practices
that are leading to the dynamics we are seeing on autos and
EVs.
So, Senator Stabenow, this is a significant animating
principle for us as we look at our tools at USTR, how we
support American manufacturing industries, American
manufacturing workers, how we can continue to innovate. But it
is also an animating principle on how we look at how we can
partner with other countries and economies who share our
structures, share our values, both politically and
economically.
Senator Stabenow. Let me just say, as I close, two things.
One, we are right now competing--and this is happening in other
areas--but with the Chinese Government. It is not Chinese
businesses. It is the Chinese Government against American
businesses and American workers. So it is absolutely critical--
and with my ag hat, I will not go into questions, but I know
there are a number of agriculture stakeholders that sent you a
letter earlier this week, urging you to commit to an aggressive
agriculture trade agenda.
It is so important that we have those markets. Secretary
Vilsack, at the request of Senator Boozman and I, has added
robust funding to marketing of our agricultural products, and
we need those markets, and we need the trade agreement. So I
appreciate your focus on that.
The Chairman. We are always glad to have our ag champion in
the house. And another Senator who cares deeply about
agriculture is Senator Grassley.
Senator Grassley. Welcome, Ambassador.
I would like to discuss a prime example of this
administration's abdication of leadership on trade. There has
been a bipartisan agreement on this committee on critical
issues such as free cross-border data flow, data localization,
open markets, and intellectual property protection. However,
this has been undermined by actions of this administration, so
other countries then end up setting the rules on digital trade.
These bipartisan principles are the foundation of the digital
economy, and U.S. companies enjoy a significant competitive
advantage relative to foreign competitors.
Our competitors repeatedly seek to discriminate against
U.S. companies and impede access to their markets. Yet the
Biden administration has pulled back from negotiations on
digital services trade and rejected the long-term, long-held,
bipartisan principles against discriminatory practices of our
partners.
USTR has abdicated its leadership role on this important
issue. So why is USTR allowing other countries to set the rules
that will put American companies at a disadvantage? This cannot
be consistent with USTR's mission.
Ambassador Tai. Senator Grassley, it is good to see you.
Thank you for the question, and thank you for the opportunity
to address this concern that you have. I have heard it quite a
bit, and I welcome every opportunity to explain USTR's
approach.
You are right with respect to ongoing negotiations around
data flows provisions, data localization provisions, and source
code provisions. We have pulled back these longstanding
proposals that we have made in those negotiations to make
adjustments, in large part because we are connecting the dots.
I would like to encourage all of us to connect the dots,
because in addition to being on the Senate Finance Committee,
you have also been a long-time leader on the Senate Judiciary
Committee. I know, for instance, that you are a cosponsor of
the American Innovation and Choice Online Act, AICOA, which the
administration has expressed support for.
I also know that you are a cosponsor, along with many of
your colleagues on both sides of the aisle here on Senate
Finance, of the Kids Online Safety Act, which addresses data
security for children's data in the digital economy and in the
digital sphere.
What I wanted to reflect to you is--when you look at those
long-time, long-term developed proposals in the digital trade
negotiations on data--that those provisions are still largely
based on an understanding that what we are dealing with is data
as a facilitator of traditional trade transactions, goods
transactions; data as a facilitator of e-commerce, data
traveling along with the information that has to be traded in
order for goods to move across borders.
And that was certainly the case 20 years ago. But today in
2024, what we have seen is that data has become the commodity
itself, that data has become the powerful thing that has value,
that enables more innovation, that enables--when you accumulate
enormous amounts of it--technological innovation like
generative AI.
The issue is, who can have access to that data, and also,
where does the data come from? It comes from ordinary
Americans. It comes from you, it comes from me, it comes from
your constituents, it comes from our kids. And so, with respect
to the security of that data, the attempts that we see up here
on the Hill to assert the rights of ordinary Americans with
respect to that data as a trade matter----
Senator Grassley. Can you fill in the blanks in writing,
because I have to ask one more question?
Ambassador Tai. All right. Can I just finish? I will just
finish my sentence. We feel very strongly that our provisions
and our trade negotiations should reflect the debates that are
happening here, and the legislative efforts that you all are
making.
Senator Grassley. The last time you appeared before this
committee, I urged you to negotiate lower tariffs on ethanol
with Brazil. While I understand that you are currently
negotiating this matter, the results have been lackluster.
Brazil increased its duty on ethanol this year from 16 to 18
percent and continues to enjoy importing its ethanol tariff-
free.
This ethanol competes with home-grown ethanol and
California's low-carbon fuel standard, but also in sustainable
aviation fuel. What is the administration doing to press Brazil
to lower its tariffs, and what concrete measures is the
administration considering in the negotiations?
Ambassador Tai. Senator Grassley, your position on ethanol
has been crystal clear from Day One. This is a high priority
for the administration as well.
I am currently also extremely concerned about Brazilian
market access restrictions. We are in coordination with USDA,
including at political levels, actively engaging with our
counterparts in Brazil on market access barriers to U.S.
ethanol, including those tariffs and regulatory barriers that
you are talking about. Our objective is to ensure that U.S.
ethanol can once again compete on a level playing field with
domestically produced ethanol in Brazil.
In my latest engagement with my Brazilian counterpart,
which happened about a month and a half ago, the Brazilians
indicated to us that they understood at all levels, including
from the White House, the prioritization of this issue with
them, how important it is to us and our economy, and their
desire to find a way to accommodate this priority.
So we are actively working on it, and the strength of your
voice on this matter is an asset to us.
The Chairman. The time of my colleague has expired. Senator
Cornyn is next.
Senator Cornyn?
Senator Cornyn. Ambassador Tai, I had to do a double-take
on the title of this hearing. The title says ``The President's
2024 Trade Policy Agenda.'' I really think it would be more
accurate to say, ``The President's 2024 Non-Trade Policy
Agenda.''
The reason I say that is because the administration is not
currently negotiating any free trade agreements, are you?
Ambassador Tai. Not in the traditional sense, Senator
Cornyn. We are negotiating new types of trade agreements.
Senator Cornyn. So, the way you are negotiating these so-
called frameworks lacks the tools for any market access that a
trade agreement would provide, along with enforcement actions
that could be taken to enforce that access; correct?
Ambassador Tai. Well, Senator Cornyn, this is an
opportunity for me to explain again----
Senator Cornyn. No, you do not need to explain again. You
need to answer my question.
Ambassador Tai. The traditional FTAs that we negotiate
continue to pit Americans against Americans and sectors against
sectors, in a way that is entirely unsustainable, as we have
seen in our recent experience. We know we cannot----
Senator Cornyn. But I know you filibustered Senator
Grassley, but you are not going to filibuster now. The point is
that, absent trade agreements, there is no enforcement
mechanism to make sure that American farmers, businesses, and
workers are not harmed by denial of market access to these
countries that are denying that access, that are imposing huge
subsidies to prefer their products as opposed to ours. There is
no mechanism for enforcement, is there?
Ambassador Tai. Well, Senator Cornyn, the point is, to
secure the market access--and we have done that--with
negotiations that are not FTAs, they have moved faster. With
India, for instance, we have opened up 12 different categories,
gotten lower tariffs.
New product from America is going to India: $21 billion in
new market access over the last 3 years. We have seen results,
including for farmers in Texas.
Senator Cornyn. Let's talk about China for a minute. Has
the administration taken any enforcement actions against China?
Ambassador Tai. The administration absolutely has moved
forward with an aggressive set of policies against China----
Senator Cornyn. Have you taken enforcement actions?
Ambassador Tai. I suppose it depends on what you mean by
enforcement actions, but certainly----
Senator Cornyn. I mean enforcement actions----
Ambassador Tai [continuing]. With respect to export
controls on semiconductors, you have seen that. There is
enforcement there.
Senator Cornyn. I am not just talking about talk; I am
talking about actual enforcement actions against China for----
Ambassador Tai. I mean, I think that those actions have
certainly moved markets----
Senator Cornyn. If you will wait for my question, they are
accessing the World Trade Organization, seeking to dispute
provisions of the Inflation Reduction Act. Meanwhile, China
continues to subsidize and prefer their products by spending a
lot of money, making it much harder for American businesses to
compete.
Has the administration taken any sort of enforcement
actions against China at the World Trade Organization or
anywhere else to go after them? They are taking advantage of
that access to the World Trade Organization against us, but are
we doing it against them?
Ambassador Tai. We have in the past taken lots of actions
against China.
Senator Cornyn. When was the last time you did it?
Ambassador Tai. Well, let me put it this way; let me answer
your question.
Senator Cornyn. No. When did you do it?
Ambassador Tai. Well, it has been ineffective, Senator
Cornyn, which is why we no longer do the things that are not
effective.
Senator Cornyn. Well, you talked them into it or what?
Ambassador Tai. We initiated an enforcement action today
under section 301 on Chinese nonmarket policies and practices
affecting the maritime industry and shipbuilding industries. So
yes, we have this morning.
Senator Cornyn. Let me ask you about--Texas is the largest
trade exporting State in the Nation. Yet in recent years, corn
exports, for example, were down $500 million to $12.8 billion.
Livestock, poultry, and dairy exports are forecast to decrease
by $1.3 billion. Pork exports are down $300 million. Soybean
exports are projected down $500 million, and wheat exports are
forecast down $800 million.
What explains this robust trade agenda that you say the
Biden administration has and the fact that market share for
American agriculture products is down across the board?
Ambassador Tai. Well, Senator Cornyn, I would have to look
at the sources of your statistics to understand better what
basis the forecasts are made on. But the last 3 years, we have
set records for American ag exports.
Senator Cornyn. You set records, but it is a record
decrease, not increase.
Ambassador Tai. No, no, no. Record, record, record, high
record exports for the last 3 years. I am happy to get those
numbers to you.
Senator Cornyn. I will be happy to share my records with
you.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Senator Cortez Masto is next.
Senator Cortez Masto. Thank you, Mr. Chair. Ambassador Tai,
it is great to see you. Thank you for visiting with me last
week.
One of the things we talked about were titanium sponge
tariffs. So let me ask you this. As you well know, the United
States currently imports 100 percent of its titanium sponge, a
critical material that is domestically manufactured into parts
for fighter jets, for military satellites, and other defense
technologies. Over 90 percent of these imports come from Japan,
our key ally and security partner. This trade supports American
jobs, workers, and national defense, yet the U.S. is applying a
15-percent tariff to all titanium sponge imports.
This is a tax that manufacturers in Russia and China do not
pay, and our American companies, such as TIMET in Henderson,
NV, are trying to compete with companies in these countries.
I am pleased that Senators Blackburn and Tillis on this
committee, as well as Senators Capito and Manchin, have joined
my effort to remove this tariff and support American security
and jobs. Ambassador, my question to you is, do you support the
removal of this counterproductive tariff, and what can you do?
Ambassador Tai. Senator Cortez Masto, I just want to
reinforce how strongly we as an administration, certainly at
USTR, feel about enabling American manufacturing and American
manufacturers. It can be a complex question, because we do live
in an interconnected world with respect to inputs and access to
inputs.
So, I think what I would say to you is that the issue that
you raise and have been so much of a champion for certainly
merits our looking at through a very strategic lens.
Senator Cortez Masto. Thank you. I hope you do, and I look
forward to that quick review.
We also talked a little bit about AGOA, the African Growth
and Opportunity Act. I have been hearing from many Nevada
businesses about the importance of AGOA, and it is set to
expire next year.
I support the need to reauthorize AGOA, but I also think
there is a chance to improve the program. As we look to reduce
reliance on China for critical minerals, I think AGOA is an
opportunity to create closer ties to Africa in this space. I
also think there is a need to create more economic opportunity
for women and girls, and we can leverage these trade tools for
this purpose as well.
So, Ambassador Tai, what are your views as we look toward
the need to reauthorize the program?
Ambassador Tai. Well, I think, Senator Cortez Masto, that
this upcoming opportunity to reauthorize is also a tremendous
opportunity to revisit and enhance. AGOA as a program, like so
many of our trade programs, has been around now for 2 decades,
more than 2 decades. By the time it expires, I think it will
have been a quarter of a century. A lot has changed. A lot has
changed here in the world and, most importantly, on the African
continent. So I think that we should be looking at how do we
improve utilization rates.
AGOA is our foundational program with Sub-Saharan Africa.
Utilization rates on average are low. How do we improve that?
Second, as some of the countries in Africa really do develop
and hit that middle-income level, they become ready to graduate
the program as it stands. How do we continue to build on the
program so that we have a forward vision for the next stage of
development, and how the United States can be there as a
partner with these countries in Africa?
Another change in the last few years is the coming into
being of the African Continental Free Trade Area, the AFCFTA,
which is the effort of the African countries themselves to
integrate as a continent. So another question that is presented
to us is an opportunity to examine how AGOA can enable U.S.
partnership with the countries in Africa in a way that can help
to reinforce that integrative effort.
I also have some thoughts, as we continue to go through
those eligibility reviews every year, about how we can sharpen
the tools in AGOA, how we can make them more flexible, how we
can, once a country falls out of AGOA, how we could develop
tools to acknowledge progress along the way to encourage that
constant incentivization to come back into the program, as
opposed to just leaving a country out in the cold.
So, I think that there is a lot of room for enhancement. I
know how much Senators and members of the House care about
this, and I think that now is the right time to be working on
it.
Senator Cortez Masto. I could not agree more. Thank you
very much.
The Chairman. I thank my colleague.
We have worked often with Senator Thune on trade issues
over the years. Senator Thune?
Senator Thune. Thank you, Mr. Chairman. Ambassador Tai,
welcome.
And I would echo what my colleague Senator Grassley said
about digital trade, and that is something I have worked with
the chairman on a lot. It seems like we have abdicated our role
as a leader when it comes to digital trade, very quickly
allowing China to step into the gap.
But I want to focus specifically on ag trade. That has been
referenced already this morning as well, and you indicated that
one of the reasons we have a trade deficit in agriculture is
because of the strong dollar. I do not deny that there are
macroeconomic effects that impact trade.
But USDA also acknowledged that one of the reasons we are
running trade deficits is because of market access. I cannot
honestly see anything the administration is doing on market
access. I have talked to agricultural organizations all the
time, and by the way, we are running the largest trade deficit
this year ever: $17 billion this year. They are saying it could
be $30 billion this coming year, and net farm income was down
$30 billion last year, will be down they say $39 billion this
year. So, thanks to inflation, input costs are going up,
commodity prices are going down.
One of the things that affects commodity prices is demand,
and the way you create demand is to open markets. I cannot tell
that the administration is doing anything on that. Now you say
we have a different approach to trade, and I understand that
approach is grounded in things other than market access.
But market access is what our farmers and ranchers are
looking for to open up the market, so they can sell their
products and get the trade deficit back to a trade surplus, and
get this net farm income back in the positive column. It defies
explanation, and you talk about working with our allies.
We have some low-hanging fruit: UK, EU. I want a bill that
would create a free trade agreement with the United Kingdom.
They are one of our longest and closest allies, and there is
not a single free trade agreement that this administration has
entered into.
So I want to know what specific actions the Biden
administration plans to take to increase U.S. agricultural
exports in 2024.
Ambassador Tai. Senator Thune, there is so much that we
have already done. As I noted earlier, $21 billion in market
access over the last 3 years. That is, for example, the
safeguard agreement that we renewed with Japan that has allowed
for high-quality U.S. beef from your State to increase access
to a growing Japanese market. That includes the 12 tariff
categories with India, a growing market, a growing opportunity
for U.S. exporters.
So, I think we have to acknowledge that market access can
come more quickly, more effectively, in more agile ways if we
are looking for those opportunities to score--what we like to
call singles and doubles, to rack up the score that way--as
opposed to tying up opportunities over the course of many, many
years in FTA negotiations that sometimes do not ever come into
being.
Senator Thune. How about the easy FTAs? How about the UK?
Ambassador Tai. I think there are no easy FTAs. I do not
know if you have followed, but the UK and Canada have been
negotiating an FTA that they stopped negotiating, because the
UK will not talk ag market access.
And in fact, in the last years of the Trump administration,
in those negotiations the UK had refused to put ag market
access on the table. Ag market access is also something that
has traditionally really frustrated our efforts at large FTA-
like exercises with the European Union.
So we are absolutely committed. And, Senator Thune, I want
to let you know, I think our farmers are the savviest business
people that I talk to and work with in trade. They know their
businesses, they know trade. With respect to the deficit, we
are concerned about the deficit, absolutely, and I think your
concern is well placed.
I just wish that our ag champions were as concerned about
the industrial trade deficit as they are with ag trade, because
it can absolutely indicate a need for concern. Secretary
Vilsack and I know, along with our farmers, that we need to be
able to diversify our export opportunities, because we are at a
lot of risk. We are working very, very hard to do that.
But in addition to a strong U.S. dollar, one of the other
challenges we have is a really, really strong economy, a strong
consumer economy here in the United States that is actually
fueling our economic recovery.
Take for example China, where they are in an economic
downturn. They do not have the domestic demand to be able to
help them recover, which is why they are relying on an export-
led recovery program that is going to cause serious, serious
problems for all the rest of us unless we do something.
So I want to start on first principles, reinforce how much
we care about our ag producers. We want to make sure that they
continue to win, and we are working hard every single day to
score wins for them.
Senator Thune. Well, my time has expired, Mr. Chairman. But
I would just say I think that ag always ends up being at the
end of the line. Honestly, I mean, convince me, so I can
convince some of the agricultural organizations. I just met
with all of them in my State last Friday. This is an issue. I
mean, they do not think the administration gets it, that we
have to be opening up more markets, that the issue is market
access, it is tariff and non-tariff barriers.
You focus on all these peripheral issues, none of which are
at the core of why we cannot get access to some of these
markets around the world, and those tariffs and non-tariff
barriers.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Senator Hassan is next.
Senator Hassan. Thank you, Mr. Chair and Ranking Member
Crapo, for this hearing, and thank you, Ambassador Tai, for
coming before the committee.
Dependable U.S. trade policies reinforce American global
leadership, reassure that our partners and allies are working
together, and help drive down costs for American businesses and
consumers.
So, let me start with a question about LOGINK, which I
understand you just made an announcement about. The Chinese
Government controls a global logistics management platform
called LOGINK. Chinese companies that use LOGINK interact with
ports around the world, including our allies' ports that are
important to our economic and national security.
Through these interactions, the Chinese Government can
predict trends or access early information on U.S. logistics
and manipulate information to harm our interests. In past
discussions with you, I have raised concerns that through this
platform, the Chinese Government could harvest sensitive
national security information or commercial data that it could
use to undermine competition from U.S. companies.
So I am really pleased that USTR is taking action. This is
an urgent threat that I have obviously been following, as you
know, for a long time. What are the immediate next steps that
USTR is taking to address the threat that LOGINK poses to our
national economic security, and what is the timeline for this
investigation?
Ambassador Tai. Thank you, Senator Hassan. The immediate
step that we are taking with respect to this investigation is,
first, a Federal Register notice goes out today to solicit
public comment.
Senator Hassan. Okay.
Ambassador Tai. The deadline closes for public comment on
May 22nd. On May 29th, we will hold a public hearing, and again
the intention is to gather as much and as high-quality
information as we can from all of the participants in our
economy.
In the meantime, I will be requesting consultations with
China as required under the statute. From there, we have up to
a year under the statute to run our investigation. But I agree
with you. I think that these challenges and allegations made in
the petition are highly concerning and that we would do best by
ourselves to accelerate our work.
Senator Hassan. Well, I appreciate that very much. And will
you commit to me to briefing me and my staff on this issue as
it develops so we can really work together to address this
economic and national security risk?
Ambassador Tai. Absolutely.
Senator Hassan. Thank you.
Second question: recently the U.S. and UK imposed new
sanctions on Russian nickel, copper, and aluminum as a result
of Putin's war of aggression against Ukraine. In addition to
imposing sanctions on Russia, we need to support Ukraine's war-
time economy.
Ukraine has abundant critical mineral reserves.
Facilitating trade of critical minerals with Ukraine would
support their fight against Putin, and it would increase our
access to materials needed for defense applications, renewable
energy, and electronics.
How is USTR working with Ukraine and our European partners
on establishing strong trade relationships to help Ukraine's
economy and to provide more alternatives to Russian critical
minerals?
Ambassador Tai. Thank you, Senator Hassan. The challenges
presented by Russia's invasion of Ukraine have activated an
all-of-administration effort. We are all bringing our tools to
bear. With respect to the sanctions, those are primarily in the
Treasury and Commerce Department bailiwicks. On those, we work
to support.
Your question is specifically on what USTR is doing to help
and to support Ukraine. Here, I wanted to let you know that we
are negotiating a set of protocols with Ukraine right now on
things like trade facilitation, basically, good practices in
trade so that we can prepare Ukraine for a robust recovery.
We are also talking critical minerals with Ukraine as well,
and all of it is to gauge the engagement that Ukraine can
provide now, with a view to a future where Ukraine can fully
take advantage of recovery opportunities.
Senator Hassan. Excellent.
I have other additional questions on some of the other
agreements on critical minerals that you guys are working on. I
will submit those for the record.
Thank you, Mr. Chair.
The Chairman. I thank my colleague for her courtesy. This
is going to be a hectic day.
Senator Bennet, you are next.
Senator Bennet. Mr. Chairman, I appreciate the opportunity
to ask some questions today. Ambassador Tai, thank you very
much for being here.
I guess I want to start and maybe spend most of my time on
the Americas Act, which Senator Cassidy and I have now
introduced as a recognition of the importance for us to work
with our hemisphere on a whole range of issues.
It is not just about trade; it is about migration, it is
about economic development. And I think Bill and I found a way,
in a divided Congress, to remind everybody that we do have a
set of values here that are pretty shared. I think in the
hemisphere, we have a set of values that are pretty shared. And
when I am at home in Colorado, people there are saying to me,
``How are we going to compete with China? You know, they have
1.3 billion people, and they get to do whatever Chairman Xi
wants them to do. We are a messy democracy, and we're 330
million people.'' And my answer to them is, well, we have
really good trading partners in Canada and in Mexico. We have
the benefit of what I think almost everybody on this panel
agrees is a 21st-century trade agreement in USMCA. Is there a
way to begin to sort of think about how to build that out in
the hemisphere?
And that is what has led Bill and me to introduce the bill
that we have. I wonder--I know you have noticed it because we
have talked about it, but could you talk a little bit about how
the administration is seeing the hemisphere?
I would be happy to hear anything you have to say about our
bill, but really what I want to do is understand what our
strategy is there.
Ambassador Tai. Thank you so much for your leadership on
this particular issue, Senator Bennet. I remember seeing you at
the Cities Summit of the Americas that was held in Denver last
year, and that was a very visible representation of the
connectivity of the Western Hemisphere economies, through the
lens of cities--and Colorado and Denver's place in that
connectivity especially.
Here, I will just start with saying that this particular
effort that is embodied in the Americas Act is very much
consistent with the values of the administration and the
efforts of the administration that are embodied in the Americas
Partnership for Economic Prosperity.
I think that through both efforts, we are looking at ways
to frankly become more regionally integrated, to have more of a
coherent regional economic identity. I think that the
opportunities here are in, for example, the Americas
Partnership. I think of the 12 countries--so that is 11, other
than us--we have FTA relationships with eight of them already.
Now, they might be bilateral, they might be in groups like
USMCA or the CAFTA. But there is already a strong architecture
with respect to the kinds of trade disciplines we have
established between ourselves.
I think the real opportunity there--and I think that this
is maybe an interpretation of your comment about USMCA--I think
the opportunity there is, one, the USMCA is right now our gold
standard. How can we upgrade a lot of the rules in these other
relationships and bring them up to today?
The second one goes to supply chains, and that is the
economic integration piece of it. I think that you know, again,
in terms of our new more strategic approach to trade, we will
want to look at this sectorally. This is part of the work that
we are doing at the Americas Partnership. But I think that this
is also consistent with the spirit of the Americas Act.
Senator Bennet. I was going to say--I mean, it is our job,
obviously, to convince Chairman Wyden and the ranking member,
Senator Crapo, that this is something that merits the attention
of this committee and the Congress. But I do think the benefit
of it is that then it will last from administration to
administration, which is the kind of predictability that our
partners need, and I think frankly Colorado's producers need
too.
So I am grateful for the work the administration is doing
on it. I am hopeful that we can get to a place where we
persuade our colleagues that figuring out how to
institutionalize it is important. I mean, if you think about
it, in the last 20 years or so, China trade in this region, in
Latin America, has gone from $12.5 billion to $480 billion.
That is a 4,000-percent increase in our region with our
neighbors.
That is to say nothing of the infrastructure that they are
building and the debt traps that they are creating. I just
think there is a huge opportunity for us.
I am out of time. I look forward to working with the
chairman and the ranking member on this--and Senator Cassidy
has been an amazing partner--and you to see if we can advance
the ball as far as we can between now and the election.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague, and we will follow up
with you and Senator Cassidy.
Let's see. Next is Senator Tillis.
Senator Tillis. Thank you, Mr. Chairman. Ambassador, thank
you for being here.
Have you--are you aware of a bill that we put together,
working with Senators Stabenow and Casey, on the Fighting Trade
Cheats Act--also Senator Brown?
Ambassador Tai. Yes, I am.
Senator Tillis. Have you all taken a position on this yet?
Ambassador Tai. As an administration, I do not believe we
have. I will check with my team, although I think we have not
yet. But I think we are always prepared to provide technical
assistance in the meantime.
Senator Tillis. Yes. The reason I think it will be helpful,
I mean, the whole concept behind it--I had a lot of Republicans
looking at me and saying, ``What are you doing creating a
private right of action?'' I said, ``Not all private rights of
action are bad.'' When you're able to leverage the corporate
attorneys who would go after trade cheats, mostly from China,
it becomes a force multiplier for an agency that just does not
have the capacity today.
So what we are really talking about is being able to bring
more cases forward that the department right now is not going
to be able to do on their own. So hopefully, I think that we
have crafted it properly. I think that it would be a great
tool, and it would be a complement to getting through a backlog
you are simply not going to be able to.
China does this remarkable job of laundering products and
getting to a point where it is virtually impossible to go after
all the examples of cheating. So it came out of a suggestion
that I had from a company in Charlotte called Charlotte Pipe,
where the theft--the intellectual property theft and use cases
for Charlotte Pipe are extraordinary.
There is a facility in China that looks like the old
Charlotte Pipe foundry in downtown Charlotte. I mean theft--and
they came up with a good idea. I know their industry supports
it.
I hope we can, and I believe that it could be used maybe as
a tool for the administration, for really going after these
trade cheats. So that is my shameless promotion for what I
think is very sound policy that has good, strong bipartisan
support. So we would like to get an official position if we
may, because I think it would be helpful in getting it passed.
I wanted to talk a little bit about trade in general, but
before I do, we have an issue--I have had this discussion with
Senator Coons--on the TRIPS waiver. I am assuming that you
all--and I have chaired and now I am ranking member on the
Intellectual Property Subcommittee with Senator Coons.
We both think TRIPS waivers are really bad. I think the
administration still thinks they are good. So, instead of
asking you whether you think in hindsight some of the TRIPS
waiver decisions that were made in the COVID era were a good
idea, tell me your case for why you thought it was a good or a
bad idea? I am assuming you still think it is a good idea. Tell
me why you think it is a good idea.
Ambassador Tai. Senator Tillis, on the TRIPS exercises at
the WTO, the reason why we think it is a good idea to continue
to have these conversations at the WTO is because the public's
access--the access of ordinary people, whether they are
Americans or they are people in other advanced economies or in
developing countries, to the miraculous lifesaving medicines
that are developed, many of them----
Senator Tillis. I agree. I agree----
Ambassador Tai [continuing]. Is a really important, a
really important topic.
Senator Tillis. I agree. And the only thing more important
than access is the actual creation of these very promising
vaccines and cures. And if you do not get it right--if you take
a look at what we did with Project Warp Speed, and how this
country in historic record time produced a vaccine--nobody
disputes that--it only happened because the whole of government
came together and produced this. But the biotech industry took
certain risks. They were not all winners. There were some
failed projects out there, and if you send the message that
next--and it will not probably be 100 years--the next time you
want to do a Project Warp Speed that, for all the work that you
could put into it, you could have your intellectual property
time horizon collapse and not be able to recover your
investment, I do not know that people will line up and
necessarily marshal the resources the way that we saw during
COVID.
Intellectual property protection--I get access to drugs,
but that does not necessarily mean publishing or providing,
sharing vital proprietary intellectual property. If we do not
get this right, it will have a chilling effect, not only in
terms of biotechnology, but I think across all sectors. It will
destroy, I think, our position right now as the world's
innovator.
Ambassador Tai. Senator Tillis, if I can just respond very,
very quickly.
Senator Tillis. Briefly.
Ambassador Tai. I am going to say I agree with you that the
question is about getting it right, but also innovating and
creating all of these incredible medicines and having them out
of reach for the patients who need them is also not the right
place to be----
Senator Tillis. I agree. But I think the----
Ambassador Tai. It is about where we need to be.
Senator Tillis. But you would be hard-pressed to find an
absence or no access--if I may, because she responded to a
point that I think is very important. There were no vaccine
deserts. The vaccines were out there. The TRIPS waivers were
not necessary to provide more COVID vaccine.
So that would not be a good example, in my opinion,
particularly against the risk of failing to innovate in this
country.
The Chairman. Senator Blackburn?
Senator Tillis. Thank you, Mr. Chair; sorry.
Senator Blackburn. Thank you, Mr. Chairman. Ambassador Tai,
welcome. We are glad that you are here.
I want to talk to you about enforcement actions against
China, because I hear a lot about this in Tennessee. Theft of
intellectual property; the genocide, the crimes against the
Uyghurs, what all is happening in Xinjiang; the military
aggression against Taiwan; and of course you have TikTok and
what we are seeing there.
So, I know you have just announced the 301 on shipbuilding.
What other enforcement actions have you taken against China?
Ambassador Tai. So, the action from this morning--and thank
you for keeping up with the breaking news. We wanted to make
sure that there was an opportunity to talk to Senate Finance
today.
Senator Blackburn. Are there any others that you have done,
anything to hold China to account?
Ambassador Tai. Every single day, what we do, whether it is
directly vis-a-vis China or it is work that we are doing with
other partners and allies----
Senator Blackburn. Okay, but no new cases against China at
the WTO on your watch?
Ambassador Tai. I mean, cases against China at the WTO have
not netted us structural change in China, so----
Senator Blackburn. Okay. So you are not going after them
and you failed to use the dispute settlement mechanisms under
the Phase One agreement; correct?
Ambassador Tai. The Phase One agreement enforcement, we
absolutely are advancing in terms of raising the issues with
China. We have done that. Right now, I think probably the most
important aspect of China enforcement--set aside 301 that we
just started today on shipbuilding--comes to the review of the
existing tariffs and how we can make them more effective and
strategic.
Senator Blackburn. Okay. Then let's talk about agriculture.
We hear so much from our Tennessee farmers on this, and we know
that China is not living up to their purchase commitments that
they made under the last administration and under President
Trump's Phase One deal. So what are you doing to hold China to
account for those purchase commitments?
Ambassador Tai. I think that we are staying very, very
strong on not giving them more space. Over the course of the
last 3 years, we have faced a lot of calls to release the
tariffs on China, and the point that we have made over and over
again is that we do not see action from China that would merit
us going easier on them.
Senator Blackburn. So what are you doing about that? See,
this is our point of frustration, that there are purchase
commitments that they made, but they are not keeping up with
those. So, we have cotton and soybean producers who are saying,
``Hey, wait a minute, who is going to stand up for us?'' And
unfortunately, when they look at USTR and this administration,
they do not see people who are going to bat for them, because
you have had no new actions. There are no new cases that you
have brought against China.
Ambassador Tai. I think that is a narrow way of looking at
it. We have also not brought more retaliation on our farmers,
because that is a really important part of our trade policy,
which is to continue to improve the export opportunities for
our farmers. One of the challenges we have with China is an
overreliance on China as a customer. They are not a monopoly
here, but----
Senator Blackburn. If we made a commitment----
Ambassador Tai [continuing]. They are a consumer that is
dominating our demand----
Senator Blackburn [continuing]. Countries would expect us
to keep our commitments if we had made them. China is not
keeping their commitment.
Before my time runs out, I do want to talk with you about
digital trade, and I thank you for the response to my letter on
the small business impact of the digital trade rules. I
disagree with you on that, because I think the change in
digital trade policy is not one that has been welcomed.
And the Biden administration might think the change is
going after big tech, but what you are doing is really hurting
countless small businesses. You made a comment in your opening
that you were slow-walking the changes. You brought up the work
we were doing on the Judiciary Committee on privacy, and you
brought up KOSA as a justification for not doing something on
digital trade provisions.
And I would remind you that international agreements on
digital trade do not preclude countries from passing privacy
laws. You can look at the EU, you can look at GDPR. You can
look at New Zealand, you can look at Canada, you can look at
Australia.
So that is an excuse and not an accuracy. I see my time is
up, so, Mr. Chairman, thank you.
The Chairman. I thank my colleague. Senator Cassidy is up.
I note that Senator Casey has been so patient as well. Everyone
is trying to help him, and we will stay within the rules.
Senator Cassidy, you are next.
Senator Cassidy. I will defer to next in line.
The Chairman. All right. That makes it, in order of
appearance, Senator Lankford.
Senator Lankford. Thank you, Mr. Chairman. Thank you,
Senator Cassidy. Thank you as well for coming in. Thanks for
the work and for the task that you are taking on in this.
Obviously, all of us have questions. We have continued to
be able to press on free trade agreements, and it has been the
frustration of this committee, and it has been the frustration
of many of our ag producers in my State that there are no
ongoing FTAs that seem to be moving at all on that. Has that
changed? Are there any free trade agreements that are currently
being negotiated?
Ambassador Tai. For your ag producers, I just want to make
the case that--and reassert--we are working for them every
single day. We are scoring wins for them without having to do
the long negotiations in a free trade agreement.
So the short answer, to be responsive to you, is ``no,'' we
are not doing the big comprehensive agreements that are really
great for ag and terrible for our industries. But we are
nevertheless securing wins, $21 billion for our producers----
Senator Lankford. Right. No, I get that.
Ambassador Tai [continuing]. Over the last 3 years.
Senator Lankford. The challenge of that is, when it is not
an FTA, there is no certainty on it, and that--executive
agreements come and go with administrations. An FTA has some
semblance of certainty on it. We will at least know what the
plan is and what the long-term relationships on that are.
I know Senator Blackburn had mentioned about China and the
WTO, that we have not initiated any new cases on that. I have
heard you saying, ``Hey, we are not going to win anything
anyway, and so we are just not going to do it, and not spend
time on that.''
There is a messaging portion to that that I think is
significant as well, to be able to go through the existing
tariffs review that has been ongoing for 2 years. I know you
mentioned to Senator Crapo it has only been a year and a half.
As I am counting time on that, I think it started on May the
22d.
And so it has been--that sounds like 2 years to me on that.
So, 2 years of that process on it. Do you know when that review
is going to conclude?
Ambassador Tai. So, Senator Lankford, just to be really
precise, the review started in September 2022. And so, I do not
want to argue with you over 6 months. But soon, very, very
soon--I have a high degree of confidence that we will conclude
it soon.
Senator Lankford. So, the reason I asked you that is
because I know President Biden has asked for consideration--it
has not started yet--for consideration on a 25-percent tariff
on China on steel, 10 percent on aluminum. The Wall Street
Journal reported--and we are still waiting on the details on
this--The Wall Street Journal reported and said it would be .6
percent of the steel coming in the United States under this
particular tariff--I do not know if that is an accurate number
or not. That was reported today.
So I would be interested to know if it ends up being .6
percent of the steel coming into the United States, or if that
is even close. My question to you though is, if we are at the
point where the 7.5-percent review from the previous
administration--we are a year and a half into it. The 25-
percent review, how long will that take until a decision is
made, since that consideration started today?
Ambassador Tai. I think that the language was, he called on
USTR to consider them. I would not consider that as a starting
point. I just want to give you the best information and the
most holistic response. It has been a comprehensive review of
the existing tariffs.
You are right. It has taken 19 months now, but I have a
high degree of confidence that we are coming to a conclusion,
and we will be able to finalize it soon.
Senator Lankford. Okay. So, for this next group, for the
25-
percent and 10-percent tariffs, steel and aluminum on that, how
long until a decision is made on that one?
Ambassador Tai. So, what I am trying to tell you is that
the review on the tariffs takes place in its entirety, so that
when we conclude the process, you should see an entire package.
Senator Lankford. So all of that would be included together
at some point? The Wall Street Journal reporting today that
that would affect about an additional .6 percent of the steel,
is that accurate, not accurate, or where do you think that
number came from? They quoted just an administration source on
that, but I do not know who that would be, obviously.
Ambassador Tai. I have not seen the article, Senator
Lankford, but I will take a look at it, and I would be happy to
respond to you after I have taken a look.
Senator Lankford. Okay. It would be helpful; thank you.
As far as new markets on the ag side of things, I know you
are working through some of that, trying to be able to help
existing agreements. Are there other new markets on the ag side
that are pending?
Ambassador Tai. Yes. So there is the work that we have done
with India across 12 tariff areas, where we have opened up
opportunities for tree nuts and cranberries. This is a little
bit of a test for me. I think it was blueberries, turkey, and
duck. We had also worked on pork earlier. With Japan, we have
opened up with the beef safeguard. We have ethanol, more
ethanol going to Japan now too. Jordan just dropped tariffs on
eggs. Colombia, they just changed course; they have reopened to
our poultry exports. Bangladesh dropped cotton fumigation
barriers, which will allow us to ship more cotton. Ghana has
opened up access to meat and poultry as well. This is just kind
of a top level in terms of our latest work----
Senator Lankford. Right, right. So there are a few things.
I have seen some of that on the tree-nut side.
The chairman and I have had this conversation before,
talking through different aspects of how do we actually help
individual companies make complaints, especially against China.
We have companies in my State that know that steel or other
products are being dumped into the market. For them to be able
to initiate the challenge on that has been burdensome. As you
know, they have to get with a foreign entity to get them to
show their paperwork as well. It is very difficult. It is an
area that we need to be able to work together on as a
committee. The chairman and I have talked about this, and we
need to be able to get some solutions for those companies.
The Chairman. The time of the gentleman has expired. There
has been an awful lot of collegiality here in the last few
minutes, and I want to see if it would be acceptable to Senator
Brown if we let Senator Casey go next. If we could among
colleagues, say Senator Casey, Senator Brown, then Senator
Cassidy. Is that acceptable? Great. I thank all my colleagues
on both sides for all their patience.
Senator Casey?
Senator Casey. Mr. Chairman, I want to thank you for that,
and my colleagues. I also want to add Senator Whitehouse to
that chorus of charity here.
The Chairman. Yes, yes. Thank you.
Senator Casey. But, Ambassador Tai, I will keep within my
time. I want to start out by thanking you for your public
service and your focus in leading the trade office on a worker-
centered approach to trade. I am grateful for that.
I just want to get one thing on the record before I get
into a broad question. I want to thank you for your continued
commitment to securing the full set of dairy export benefits
that we worked so hard to establish in USMCA. I encourage you
to continue to exhaust all avenues to get Canada to fix how
they are administering USMCA dairy tariff rate quotas, so-
called TRQs, in order to see the export gains the agreement was
clearly designed to deliver for our dairy industry. The status
quo of Canada on this front is simply unacceptable, and I stand
ready to support USTR's work in securing fairness for
Pennsylvania dairy farmers. So you and I have talked about
this. I just want to put that on the record.
But here is the broader question. It is about Nippon Steel
and the potential acquisition of U.S. Steel. My principal focus
there is the high likelihood of loss of union steelworker jobs
in the Mon Valley of southwestern Pennsylvania to nonunion
States. But I also have a major concern, of course, about
national security.
In Pennsylvania, workers and industry are all too familiar
with how foreign actors seem to game the system with regard to
national or industrial subsidies, state-owned enterprises, the
use of forced labor, and more to sell their products in the
U.S. market at unfairly low prices. Another way of saying all
that is ``China, China, China.'' Unfair trade practices like
dumping have put far too many Americans out of work. The
practice serves to diminish the capacity of our industrial
base,. And in the case of my home State of Pennsylvania and
Pennsylvania steel, that risks our ability to adequately supply
our infrastructure and defense needs.
Nippon's potential acquisition--the big concerns among many
are its ties to China. Senator Brown made reference to a recent
report that is entitled ``Forged Friendship: Nippon-China
Industrial Base Risk.'' I will not go into that, but Horizon
Advisory was the one that put out that report.
We have already seen early indications of how these
external influences of China can impact robust trade
enforcement here in the U.S. So, I would ask you about the
dangers of that, of letting a foreign entity, a foreign
country, in this case China, determine the outcome of trade
enforcement in the U.S.?
Ambassador Tai. Senator Casey, thank you for raising this
very, very important subject. Now, I know that there is a CFIUS
process that is ongoing, and you have not asked me specifically
about it.
Senator Casey. Right.
Ambassador Tai. But I do want to be careful how I talk
about this as well. Just to note that, I am not going to talk
about the CFIUS process, subject to the confidentiality rules.
Nevertheless, I did want to really reflect to you that I hear
what you are saying overall in terms of--again, we have been to
this rodeo before.
And you know, just maybe taking a couple of steps back and
looking at it more broadly--I was talking to our Chief
Agricultural Negotiator, Ambassador Doug McKalip, who is
sitting behind me, who grew up on a farm in western
Pennsylvania. And he was telling us about his uncles who were
factory workers in the same community, and how their factory
was bought by a foreign company--I did not even bother to ask
which country, but just a foreign company--and that what
happened to them is something that had happened to their
neighbors and their friends as well, which is that after the
acquisition, the company moved the factory somewhere else, and
that that factory shut down and fundamentally affected the
landscape of that community, but also bit by bit the strength
of our manufacturing capability.
So just keeping it at a higher level, I just want to
acknowledge that these types of transactions are actually
things that we have seen for a long time, and we continue to
live with the consequences. I think that that is something that
we at USTR are very thoughtful about.
Senator Casey. Ambassador, thanks very much.
Mr. Chairman, thank you.
The Chairman. I thank my colleague, and again I thank
everybody for the collegiality.
Senator Brown?
Senator Brown. Thank you, Mr. Chairman. Thank goodness, and
again, Ambassador, thanks for serving our country so well.
Communities like mine have many of the same issues that Senator
Casey does--especially sort of west-central Pennsylvania and
Ohio--of closed factories and jobs leaving town because of bad
trade agreements.
American workers want to compete, and I want to take off a
little on what Senator Casey said about Nippon and trade
enforcement. The ITC decision, more and more people are saying,
could have come out differently if U.S. Steel had been part of
a seamless, if you will, steel industry in our country. But
they were not, and that may have made that decision go the
wrong way. That is why I am particularly concerned about that
merger. I know Senator Casey has talked to the White House--so
have I--talked to the Economic Advisors, talked to you about
that, and we are counting on this administration. I know the
President is in Senator Casey's State today.
At the USW, we know how Nippon did not bring workers to the
table. Cleveland-Cliffs--I am not advertising for one company
to buy this plant. It is not my choice, not my decision, but I
am advertising that one company not buy this plant, this iconic
U.S. steel company. So thank you for that.
I want to talk about--if I could again thank Senator Casey.
I want to talk about what Mexico is doing with steel. In 2019,
Mexico signed a joint agreement with the United States,
promising to keep imports to historic levels. The United States
lifted the 232 tariffs. Mexico is not sticking to their side of
the agreement. Still, products like conduit are surging. I am
hearing from Ohio companies about the damage it is causing. I
am introducing a bill with Senator Cotton, the Stop Mexico's
Steel Surge Act, to reimpose 232 and allow the administration
to use quotas. Will you commit to holding Mexico accountable to
protect American steelworkers?
Ambassador Tai. Senator Brown, my team and I are absolutely
working on this, and this is something easy for me to commit to
every single day.
Senator Brown. Okay; thank you. Thank you.
One last question. Now is not the time to let up on
countries like Mexico and China. The administration must keep
the 301 tariffs in place, and increase them where necessary in
areas like solar panels and steel, to address China's unfair
trade practices and attempts to undermine our national
security.
I may be in the only State that has major steel production,
and we are for sure the State with the largest solar
manufacturer in the country in northwest Ohio, a different part
of the State. China has consistently demonstrated they will not
play by the global rules of trade. We are concerned about
dumping of electric vehicles. I know you are too. I know the
chairman is. We are concerned about steel. We are concerned
about their cheating and circumventing and manipulating to get
ahead, targeting our manufacturing base.
Just sort of an open-ended question. What do you plan to do
at USTR, Ambassador, to stand up to China and protect American
jobs, especially in industries like solar and steel?
Ambassador Tai. Senator Brown, thank you for your
leadership on these issues, and for being such a clear and
strong champion for our critical industries. They need to be
able to survive before they can thrive. At USTR, we have a lot
of tools, obviously section 301. We have a lot of tariffs
deployed.
We are in the final stages of a process for assessing how
those tariffs can be more effectively and strategically
deployed with the goal in mind of more effectively and
strategically creating countermeasures with respect to the
unfair practices that harm our industries and our workers.
On solar as well, we have authorities under section 201. We
have been looking at all of our authorities and looking at how
we can bring them to bear to address this challenge of
revitalizing an industry that we were on the path to having and
growing, that we lost because of the inability to compete with
unfair advantages from the Chinese marketplace.
And you know, coupled with our climate needs, how do we
reestablish American leadership in this field? So, we are
looking at all our tools. And, Senator Brown, I know that you
are one of the foremost leaders in developing new tools as
well.
I know that you have bills out there too. This is an area
where I commit as well to continuing to work with you, to
develop those tools that are fit for the challenges of today.
Most of our tools date back to the 1970s and the 1980s.
Senator Brown. Okay; thank you, Ambassador.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague. And earlier Ambassador
Tai said that they have used the Brown-Wyden concept 22 times,
and we talked about the ways in which they can apply it to
other areas as well. So, thank you for all your leadership. It
is wonderful to partner with you.
Senator Cassidy?
Senator Cassidy. Thank you. Ambassador Tai, I'd like to
continue the conversation we had regarding shrimp a couple of
days ago. Just for table-setting, a whistleblower has found
unsanitary conditions and rampant labor abuses in the India
shrimp industry.
The Department of Commerce has put on countervailing duties
with rates of 3.89 to 4.72 percent. Now, I understand the CBP
has a role in enforcing forced labor designations, and we
recognize that the USTR has put out the CVD.
My shrimpers are saying, ``My gosh, if I have to go to
court to make this happen, I am going to be out of business
before there is actually relief.'' So, if you were speaking
directly to my shrimpers, who are being put out of business by
labor abuses and subsidies, how do you reassure them, my gosh,
this is going to be taken care of and you do not have to spend
millions on lawsuits?
Ambassador Tai. Well, I would begin by pointing to you,
Senator Cassidy, and the fact that you and I have been talking
about this. This has been literally one of your highest
priorities since the day we have sat in this formation. So you
did share with me the report on the abuses in this particular
industry in India.
USTR is part of the Forced Labor Enforcement Task Force
that was created as part of the USMCA implementing bill, but it
goes more broadly. We sit on that alongside the Department of
Labor, as well as CBP. We can continue to prioritize the
addressing of this particular issue.
I think that with respect to our relationship with India as
well, that has been evolving in very important ways. I do raise
this issue with my Indian counterpart. It is not an easy
conversation.
We will continue to champion this particular issue, because
I take your point, and I think that, with respect to the logic
of the trade policy that we are advancing, it is to ensure that
we can champion the survivability and the opportunity to thrive
for all of our industries, and that no one is asked to
sacrifice themselves for someone else.
Senator Cassidy. So, if the person, the shrimper, watching
right now would say, okay, out of all that, is there something
in particular that we think will have an immediate effect, or
will it be more lawsuits and more kind of cajoling, but it is
hard to have something hard and fast?
Ambassador Tai. Senator Cassidy, it occurs to me that what
we could do, hopefully fairly quickly, certainly something we
can do at USTR, is to try to convene with our partners at CBP,
and also with yourself, and have a session where we can really
probe what our options are in the very near term.
Senator Cassidy. I would appreciate that. Because there is
also a concern that WTO will push the U.S. to have a so-called
pass-through consideration, that if the upstream is getting a
subsidy and selling to the downstream processor who has to
freeze it to ship it, that kind of subsidy that they are giving
gets buried within that transaction.
But it seems that, if we are decreasing the price for the
downstream guy to freeze and ship, it is still a subsidy
affecting our shrimpers, if you will.
Ambassador Tai. Let me take that one back with my team and
drill down on it a bit more. We are very, very vigilant when it
comes to the WTO negotiations. And I appreciate the flag from
you, and I promise you a follow-up.
Senator Cassidy. There is also concern from my rice
people--they said that if it were not for Indian subsidies of
rice, they would have like roughly $850 million more in
exports. So, if we can add that to the agenda, I would
appreciate that.
Ambassador Tai. One hundred percent. That issue I know very
well.
Senator Cassidy. Going back to steel and aluminum, we have
spoken about our proposal for a foreign pollution fee, which I
have introduced with Senator Lindsey Graham--and I know that
Senator Whitehouse has something similar on his side--in which
we would put a tariff relative to the avoided cost of
environmental compliance with international environmental
norms, which would principally apply to China, but also to
other countries.
Just your general thoughts about that, because it is a
little bit different than what you are negotiating with the
Europeans, but I think ours is more robust.
Ambassador Tai. I think the most important thing is, it is
consistent, and I think that the progress you are making will
help us with progress that we are trying to make. I hope that,
vice versa, it can help too, that this can be a virtuous cycle.
So we do know about your legislation. We are very encouraged by
it and want to continue this conversation with you.
Senator Cassidy. I appreciate it. I yield.
The Chairman. All right. Next in order of appearance would
be Senator Menendez.
Senator Menendez [off mic].
The Chairman. That would be wonderful. I mean, we've got
colleagues all coming in, and I think we had better stick to
the order of appearance, or we are just never going to get out
of here. Senator Menendez will be next, and we only have a few
other Senators, so I think we can get this done pretty quickly.
But Senator Whitehouse has been Mr. Collegiality.
So, Senator Menendez?
Senator Menendez. Okay.
Ambassador, I have continued to hear from many New Jersey
businesses about the importance of GSP, which Congress has
unfortunately failed to renew since it expired in 2020. That
has cost importers in New Jersey alone over $182 million. And
beyond the direct monetary effects, allowing GSP to lapse has
undermined other parts of our trade policy.
So, Ambassador, how does the lapse of GSP hamper our
efforts to combat China's maligned trade practices?
Ambassador Tai. Well, I suppose what I would say here is,
recalling that GSP is our foundational trade and development
program, GSP provides us with an ongoing program to support
development of our developing country partners. And those are
partners who--almost all of them--have very vibrant, strong,
and growing relationships in trade with China as well.
I would note that I spent some time with the Ways and Means
Committee yesterday, and there was a lot of focus on GSP,
because they are marking up a GSP bill today. The
administration's position is to support GSP reauthorization, of
course--with appropriate updates on anticorruption, human
rights, rule of law, labor, and environment--and also encourage
Congress and the two committees to look at other lapsed
programs that are relevant here too, like TAA.
Senator Menendez. Well, I appreciate that. I will look
forward to seeing them do that, and for us to have an
opportunity.
In New Jersey, 94 percent of GSP tariffs paid since
expiration were for products that faced section 301 tariffs
when imported from China. That means allowing the GSP to lapse
would weaken the effects of our section 301 program. It has
also cost us leverage, in my view, in negotiating with our
trade partners. So, I see it as a key component of our trade
policy, and I am glad to hear that the House is moving. I look
forward to being able to do that as well.
Earlier today we had a hearing in the Senate Foreign
Relations Committee about the Indo-Pacific, our challenges with
China. And I think that having heard a whole host of hearings
and experts in this regard, there is, I would say, a nearly
universal consensus that, as part of our meeting the China
challenge, we cannot do so unless we have robust trade
agreements in the Indo-Pacific, and trade agreements that
ultimately lead not just to uniformity of process and certain
standards, but that create market access.
If in fact that part of our China challenge--which this
Congress, in a bipartisan way, seems to be focused on trying to
meet--access to markets, is a key part of it, when will the
administration get to moving in that direction?
Ambassador Tai. So, Senator Menendez, I will begin with
what I wholeheartedly agree with, which is that we should have
vibrant trade negotiations and trade programs with our
partners, our strategic partners, and that those trade
agreements should reflect our values.
Now, with respect to the Indo-Pacific, I think that one of
the challenges, which is particularly pronounced because of
geography, is that so many of the existing supply chains have
links in and through China. And for us to bring an economic
engagement program to the region that adds value for us and
adds value for our partners, is really about supply chain
diversification as opposed to all of us, through these trade
agreements, further entangling ourselves into existing Chinese
supply chains. So I think that the key to how we do that is,
how do we develop programs within our trade agreements,
including on tariffs, that will help us to diversify and create
parallel supply chains that do not actually worsen the
challenge that we all have?
Senator Menendez. But we could do that through trade
agreements as well. We do not need to do it exclusive of trade
agreements.
All I am saying is that, without market access, we have
China an economic behemoth right next door, a neighbor to all
these countries, that will act in their self-interest. Their
self-interest is an economic one as well as a security one.
Right now, we only have one dimension that we seem to be
offering them, in part. So I commend that to your attention.
Finally, your 2024 trade policy agenda states that the
Chinese Communist Party's use of state-sponsored forced labor
is ``not just an extreme form of unfair competition, but a
moral stain.'' I certainly agree with your characterization.
But closer to home, I want to remind you and my colleagues
that the Cuban Government also uses forced labor to advance its
political and economic objectives. I raised the Cuban regime's
forced labor practices in the context of Article 23.3 of USMCA,
which requires parties to eliminate all forms of forced or
compulsory labor. It was reported last year that Mexican
President Lopez Obrador has been importing doctors from Cuba
and financing the regime.
These doctors are not going voluntarily. They are sent by
the regime, and our own State Department has listed it as
forced labor. Have you reviewed the applicability of USMCA's
forced labor standards on Mexico's decision to host Cuban
forced labor doctors?
The Chairman. Briefly, Ambassador.
Ambassador Tai. Yes, Senator Menendez. I think it is a
trafficking challenge, as opposed to that forced labor import
ban, which is about the products of forced labor. But this is
an important issue, and I am happy to follow up with you on
that.
The Chairman. Next in order of appearance will be Senator
Carper.
Senator Carper. I just sat down, and I am going to yield
maybe to whoever is next in line.
The Chairman. Next in order of appearance would be Senator
Daines. Senator Whitehouse has been wonderfully patient, but
Senator Daines would be next.
Senator Daines. All right. Mr. Chairman, thank you.
Ambassador Tai, good to have you here this morning.
I want to talk about agriculture for a moment. It is the
lifeblood of our economy in Montana, and 95 percent of the
world's consumers live outside of the United States. So our
farmers and ranchers know very well that access to trade is
absolutely essential to provide a future for Montana
agriculture.
The USTR is charged with opening markets and creating new
opportunities for American producers to compete on a level
playing field around the world. But frankly, as it relates to
agriculture, that is not happening. I am concerned by this
administration's unambitious trade agenda and the growing
decline in U.S. ag exports. I would urge you and your team to
prioritize action to reverse this very troubling trend.
Ambassador Tai, in fact, in the last fiscal year, ag
exports declined by more than $17 billion and are forecasted to
continue to drop to a record low in the coming year. That is
unacceptable.
I just met this morning with some of my ranchers from
Montana, and they are talking about the soaring prices, the
rise in input costs. At the same time, commodity prices remain
volatile. Montana farmers and ranchers need expanded access to
these critical foreign markets just to stay afloat.
The current trade deficit is unsustainable, and corrective
action is necessary. My question, Ambassador, is, what specific
actions does the administration plan to take to reverse this
widening ag trade deficit?
Ambassador Tai. So, Senator Daines, I actually wanted to
start by saying to you that we actually have something to
celebrate, which is--in my confirmation hearing, you impressed
upon me how important pulse crops and the pulse crop producers
are in your State. And just in the last year we have been able
to achieve improved market access for lentils and chickpeas to
the Indian market, a market that has been very, very
challenging for us.
So, I wanted to begin there with a positive, and to
acknowledge that every one of these conversations makes a
strong impression on me, that it is a strong and important part
of the work that we do at USTR.
Senator Daines. Yes, and thank you for that progress in
pulse crops. We are one of the leading--we have been the
leading pulse crop producer in the United States, and access to
India is very important for them. Thank you.
Ambassador Tai. Super. So, from there, I want to address
your points on the ag trade deficit. We have run deficits
before in the past, in the recent past. It happens from time to
time.
Part of the factor is the strong U.S. dollar, but also
really, really strong consumer demand here in the United
States. That said, you and I have absolutely a shared priority
in terms of the work that we want to do to continue to boost
U.S. ag exports. In fact, even with the downturn last year,
2021, 2022, and 2023 were record-
setting years for U.S. ag exports at $173 billion, $197
billion, and then $179 billion.
I think that the drop, even for 2023, reflects growth from
2021 numbers. Again, I know we have been through a pandemic, so
everything about the global economy is a bit more volatile than
we would like. That said, for your State as well, we have
opened up Japan for more beef, expanding that safeguard in
Japan.
We also have allowed for U.S. producers to capture up to
100 percent--that is, the entirety--of the Japanese ethanol
market. We have just gotten Jordan to drop tariffs on eggs,
Colombia for poultry, Bangladesh for cotton, across the board.
Our focus is to score the singles and doubles that we can
do with more agility, faster, with more effective results for
our farmers and producers. And again, I know that we are going
to have differences of opinion. But I just want to reinforce
how important our farmers are to us, from the large farmers all
the way down to the small family farmers.
Senator Daines. Thanks. Thanks for the answer.
I wanted to, before we wrap up my time here, talk about TPP
for a moment. I have called on our Presidents--both parties,
Republicans and Democrats--to reengage on the Trans-Pacific
Partnership, to boost the American economy through fair trade
with partners, I think a very strategic part of figuring out
what to do about China in the Indo-Pacific. This should be a
priority as China advances alternative agreements in the region
now without the United States.
Here is my question: does the administration have any plan
to prioritize market access agreements and enforce existing
agreements in the Indo-Pacific?
Ambassador Tai. Let me put it this way again. This builds
off my answer to Senator Menendez, but this is my answer to
you, which is, where we do agree, I do agree that it is
important for us to have a robust trade and economic
relationship with the countries in the Asian Indo-Pacific. The
focus--I think, whether it is market access or other rules
aspects of trade agreements--is how do we bring a program to
our partners that will help us diversify our supply chains and
make each other more resilient?
And I think that that is the key question for how we
develop a program that necessarily will look different from
TPP, especially around those tariffs, but how important it is
for us to do that.
Senator Daines. Thank you.
The Chairman. The time of the gentleman has expired.
Senator Carper is next.
Senator Carper. Thanks. Welcome. It is great to see you;
thank you. You have a hard job, and you knew that when you
signed up for it. But thank you for taking it on, and our
thanks to the folks sitting behind you who are part of your
team.
As you know, the pandemic highlighted the fragility of
global supply chains and the importance of medical innovation
for our national security. I applaud the President's recent
efforts to shore up supply chains across industries, and the
U.S. Trade Rep's request for public comments to inform new
actions on supply chain resiliency.
Strong and diverse supply chains with our allies are vital
to ensuring that medical supply chains are resilient in the
future, and ensuring that Americans have access to the products
that they need when they need them. I was pleased to see that
your office will explore tariff and nontariff negotiations with
the European Union and the United Kingdom as part of its work
plan in 2024. Europe has been a historically important partner,
as you know, for medical supply chains, and it is clear that
there is more work to be done to strengthen those relationships
with our allies.
My question: do you agree that initiatives focused on
eliminating tariff and nontariff barriers to goods like medical
products should be one tool in our toolbox to promote supply
chain resiliency with our allies around the world?
Ambassador Tai. Senator Carper, what was your question? I
am sorry, I missed it, the entirety. Do I agree that tariffs
can be an important tool in enhancing supply chain resilience
for medical products?
Senator Carper. Let me just repeat it verbatim, all right?
Ambassador Tai. Thank you.
Senator Carper. Do you agree that initiatives focused on
eliminating tariff and nontariff barriers to goods like medical
products should be one tool, one tool in our toolbox to promote
supply chain resiliency with our allies around the world?
Ambassador Tai. I think it could be, absolutely, and we are
looking forward to hearing from our stakeholders on that
specific question with respect to the Federal Register notice
exercise.
Senator Carper. Second question: in February of this year,
the American Civil Liberties Union, along with Freedom House
and a number of other advocacy groups, as well as academics,
sent a letter expressing concern with the United States'
decision to withdraw from the key digital commitments at the
World Trade Organization. But that letter outlines the impact
of digital trade across sectors and the importance of ensuring
that the United States has a seat at the table in order to help
write the rules of the road, both for creators and small and
medium-sized businesses that must adapt to the changing digital
landscape.
Here is my question. As you work with our friends in the
White House and other agencies to develop the United States'
position on digital trade, can you commit to us to working with
a broad group of stakeholders, as well as U.S. creators across
industries, to build out a United States posture on digital
trade commitments?
Ambassador Tai. Absolutely, Senator Carper, and it is
something that we are already doing. But yes, I know that
commitment is very consistent with our approach, which is to
ensure that what we are calling digital trade policies on
data--in particular data flows, localization, storage, source
code--reflect the perspectives and the equities of all of the
American economy so that clearly the biggest of the big, big,
big companies, but also smaller ones that might still be big
companies, smaller companies that are struggling with access to
data, computing power, are citizens whom many of you are
championing in terms of asserting and creating rights for them
on their data privacy, on securing where their data ends up,
what rights they have, their intellectual property rights as
well.
So I think this is an opportunity for me to assure you, I
also am looking for robust engagement with the technologists
out there, the people who are actually innovating and who are
actually making use of the data and understanding what is
happening, including with data brokers.
I know that the chairman has been lead sponsor on a data
broker bill that addresses people's and women's health data in
particular. Those are all aspects we want to make sure are
informing our approach to the development of trade proposals.
Senator Carper. Yes. Last thing, right? It is not a
question that I am going to ask you to answer here. But I am
going to ask you for the record to describe how the
administration is working to appropriately use trade tools and
work with our trading partners to address the climate crisis in
ways that foster job creation. I will ask that for the record.
Thank you, and thanks so much for your service. Thank you
for being here; thank you for your testimony. Thank you.
The Chairman. I thank my colleague. I just want to
recognize all the remaining members.
Just on this point with respect to digital, I feel strongly
that keeping these markets for digital free and open and
fighting these sleazy data brokers are not mutually exclusive.
We can do both.
Senator Young?
Senator Young. Thank you, Mr. Chairman. Ambassador Tai, it
is good to have you before the committee. I am going to
continue to pull on the thread that Senators Carper and Wyden
have, as they have emphasized the importance of digital trade
to our country, to our national security, to our people.
I think not everyone associates the State of Indiana and
the industrial Midwest with digital trade and the importance of
digital trade, but they should. This is a potential opportunity
for countless Hoosiers to lower costs especially, something
top-of-mind at a time of inflation concerns. This creates new
opportunities for consumers and workers alike. It is an
opportunity for us to advance our global competitiveness.
Increasingly, service industries and IT-related industries are
an important part of Indiana's economy--and much of the rest of
the country's economy.
So I happen to believe--and I think our committee has
demonstrated on a broadly bipartisan basis--that digital trade
is increasingly important to our country. At this moment in
history, however, our government has not acted as though it is
as important as this committee seems to believe.
So, under your leadership, USTR is diminishing our role in
defending open digital trade rules, to put it pointedly. Can
you elaborate, Ambassador, on whether there was consultation
with the International Trade Commission, the White House
Council on Economic Advisors, the National Economic Council, or
other national security agencies, before deciding to scale back
our advocacy for open digital trade rules?
Ambassador Tai. Senator Young, good to see you. I agree
with you that digital touches all of us and is critical to all
of our lives. That is why it is so important to connect the
conversation that we have been having in digital trade with
everything else.
Yes, there is a lot of consultation that happens in this
administration. We consult with each other all the time. And
with respect to these provisions on digital trade--which are of
such importance and focus of this committee--relating to data
flows, data localization, storage, and source code, yes, robust
interagency conversations began or really heightened in the
early parts of last year.
Senator Young. So what was the rationale provided by these
national security bodies, since they were consulted? Were they
supportive of this decision to scale back U.S. advocacy for
open digital trade rules?
Ambassador Tai. So, I am going to quibble with you on your
characterization of what we did----
Senator Young. Please, please.
Ambassador Tai [continuing]. Because I do not, I certainly
do not see it as scaling back. I see it as upgrading and
advancing our conversation about what digital trade means. When
we talk about digital trade, it is really an extension of
talking about e-commerce, which is how we thought about these
issues 20 years ago.
The world is vastly different now. The level of
sophistication in the world of technology--and frankly, in the
public policy debate--is completely different now. If you look
at the provisions that are in question relating to data flows
and data localization--let's just start right there--they are
really, really good signaling. They are good signaling language
around free flows of data and prohibitions on data
localization. The challenge is kind of defining where the
companies and the private sector can have free rein, and it
really cabins governmental action, regulatory action, into the
confines of some exceptions.
One of those serious concerns we have--and at USTR, it is
because we are trade negotiators, but we are also the trade
litigators. We bring cases we also have to defend, and those
exceptions make us extremely nervous, given the kinds of debate
up here which are asserting the interests of Americans into
this framework, which is not reflected in the proposals.
Senator Young. I gave you plenty of time to reframe this
conversation. You are a negotiator in part, so what success can
you point to that you have had in persuading your
counterparties to adopt rules and to accept those rules in
strengthening our digital trade ties and thus giving influence
to the United States of America in this digital economy of the
present, but especially of the future?
Ambassador Tai. Well, an important part of negotiations is
also talking and listening. And in our negotiations--with the
Europeans through the Trade and Technology Council, certainly
with the Japanese in the bilateral and other formations that we
have, including in the Indo-Pacific and those partners--what we
have seen is that all of our friends and allies are all in the
process of struggling with the same types of questions we are
having today around privacy, around where you set the limits
for who can do what with people's data.
And so, the progress that we are making is in advancing
toward more updated proposals. You are right. Our proposals
might not be the same as the Europeans, but we are all facing
the same challenges.
Senator Young. So, I think it is fair to say--I will close
here, knowing that my time is already expired--we do not have
any outcomes yet. I understand that can be the case. Talking
and listening has been the outcome.
I know that sometimes--I would regard that as part of the
process before you get an outcome. We are almost at the end of
the administration. You have been years in office, and I would
hope that we would have had an outcome. That is not always
realistic. I think that is a fair way to end it. I will look
forward to working with you.
The Chairman. The time of the gentleman has expired.
Senator Young. Yes; thanks.
The Chairman. Senator Whitehouse?
Senator Whitehouse. Thanks very much. Welcome, Ambassador
Tai.
I think we are in a happier situation with respect to the
CBAM than we have been in past conversations. So, I am very
pleased about that, and I would like to ask first of all if you
read John Podesta's remarks to Columbia University?
Ambassador Tai. I did have a chance to see those before he
delivered them.
Senator Whitehouse. Are you a part of that White House
Climate and Trade Task Force?
Ambassador Tai. I asked Mr. Podesta the same question, and
the answer is ``yes.''
Senator Whitehouse. Do you know who else is?
Ambassador Tai. I do not know that yet. I have not seen the
list.
Senator Whitehouse. Can you take a question for the record
to fill me in on the status of that task force, and who is on
it?
Ambassador Tai. I would be delighted to.
Senator Whitehouse. I appreciate that. Any idea when I
might get that answer?
Ambassador Tai. The membership lists, I think, are due
soon.
Senator Whitehouse. Very good. I am very interested in
finding out where we are and where it is going. I thought that
the speech that John gave was very positive, and I think it
reflects, first of all, the firm response of the EU joined by
the UK, that they are not going to accept weak alternatives
from the U.S., which is something that I think is terrific.
That helps improve our negotiations here in Congress.
And I want to thank particularly Senator Cassidy for his
very productive work with Senator Graham on a Republican
counterpart to my border tariff bill. They do not align yet,
but you start with your positions, and then you work together.
So, I am very appreciative of what they have done, and I am
very appreciative that the position of the White House seems to
have moved in this direction. So I will make that statement.
The other thing I wanted to talk with you about is the
loathsome ISDS process. We are not putting ISDS provisions into
any new treaties, but they exist as hangovers from past
treaties.
I am told that it is actually possible to remove ISDS from
existing free trade and bilateral investment agreements, and
that you are looking at the best way to go about doing that.
Can you give me a progress report on that? But let me just
elaborate for a moment that I really think that there is
something very evil about the entire ISDS mechanism.
It is perhaps best embodied by the attack, through the ISDS
mechanism, of the tobacco industry on the little country of
Togo. Togo had the nerve to try to control the packaging of
cigarettes with warnings about tobacco's known health effects,
and they were sued by the world tobacco industry, which has
enormous resources at its disposal.
Togo is a country of about 8 million people. It has less
than 5,000 miles of roads. Its annual budget is about $1.2
billion. It is in no position to take on an international
industry like that that can use it to, first of all bully Togo
into submission, and then take that and leverage it against
other countries.
In fact, the tobacco industry even ultimately went up
against Australia and got themselves tangled up in the
complexity of their effort. But that shows how evil this is. So
the quicker we can get rid of that as a vehicle for putting
private interests over public interests, and putting size and
weight over virtue, the better off we will be.
I would ask for your thoughts on how we can remove ISDS
from those existing agreements and treaties.
Ambassador Tai. Well, I think we have a number of tools
with respect to ISDS, whether they are in bilateral investment
treaties or they stand alone or they are incorporated into
FTAs. We are looking at this question actively right now with
respect to existing ISDS provisions and----
Senator Whitehouse. So you have no report on----
Ambassador Tai [continuing]. How they can be improved. But
again, this is one of those things where we are very, very
interested in the views of members of Congress, especially
those who sit on the Judiciary Committee and our in-house
lawyers, indeed.
Senator Whitehouse. Which I do. The U.S. was responsible
for pushing a lot of this ISDS nonsense into those treaties in
the first place; correct?
Ambassador Tai. I think that is absolutely correct.
Senator Whitehouse. Yes; okay. Well, Godspeed. Stay in
touch with us on the conclusions that you draw.
I would add to my existing QFR request for any further
information you have on this, so it will not belabor the time
of the committee, but might be useful to me and my team as we
look to try to rid our trade agreements of this really noxious
agreement.
Thank you very much, and thank you, Mr. Chairman.
Oh, and Senator Warren is arriving, who is the champion of
cleaning up the foul, toxic, noxious, and evil ISDS
arrangements. So----
The Chairman. All right. We are heading into the home
stretch here, with Senator Barrasso, Senator Cardin, and
Senator Warren.
Senator Barrasso. Thanks so much, Mr. Chairman. Great to
see you again. Thanks for being here today.
Last November, the U.S. Department of Agriculture finalized
a rule allowing fresh beef imports from Paraguay. There are
serious concerns that I have with this new rule, given that
Paraguay has a history of foot-and-mouth disease--the last
outbreak, 2012. Here in the U.S., we have not had foot-and-
mouth disease since 1929, 100 years. An outbreak would be
catastrophic to American cattle producers.
The Biden administration has stressed the importance of
Paraguay as an ally. I am just worried about placing one of our
largest agricultural industries at unnecessary risk. The number
one cash crop in Wyoming is beef. The U.S. Department of
Agriculture's approval process for Paraguayan beef was, I
believe, questionable. Specifically, the Department's Animal
and Plant Health Inspection Service relied on site visits from
2008 and 2014.
So, making a decision based on a site visit most recently
10 years ago, this means there are no recent in-country site
visits to confirm Paraguay's animal health claims. So, as U.S.
Trade Representative, how are you ensuring that the U.S.
promotes science-based trade with our allies and relies on the
latest, most accurate information prior to granting market
access?
Ambassador Tai. Senator Barrasso, thank you so much for
raising this particular issue. It is something that we are
tracking very closely and tuning in with respect to the latest
events here in the Senate, tracking what may happen in the
House and our own conversation with USDA.
To your question, I get a lot of flak for not negotiating
traditional big FTAs. Nevertheless, it is really important for
me to impress upon Senators like you from great agriculture-
producing States that we value our farmers, big and small, and
our ranchers across the board.
And what I want to highlight is, in every single one of our
active, ongoing negotiations--whether it is in the Indo-
Pacific, with Kenya, with Taiwan--we are actively negotiating
agriculture chapters that address this particular issue,
especially around science-based approaches to regulating food
trade and agricultural trade.
So that has been a very, very high priority for us. We are
making very, very good progress with all of these partners. And
even outside of those types of negotiations, the commitment to
science-based, transparent, risk-based regulation is something
we deeply believe in.
Senator Barrasso. Well, I appreciate the concern and the
value that you place on our farmers and ranchers. I mean, my
concern is science-based. As you talk about how critically
important it is, there has not been an onsite visit in 10
years. I would just hope that you would consider that as you
move forward with that area.
I want to move on to the next question, which is: in July
2023, I sent to you a bipartisan letter--bipartisan,
bicameral--regarding Mexico's discriminatory policies toward
American energy producers. We urged you to pursue full
enforcement action against Mexico.
Mexico's policies have violated the historic U.S.-Mexico-
Canada Agreement. Mexico continues to favor their state-owned
utility, oil, and gas companies. These actions threaten more
than $10 billion in U.S. energy investment.
Regarding this issue, the 2024 trade policy agenda report
says as of December 2023, the parties continue to consult on
this matter. You are well aware of that. So what concrete steps
have you taken to resolve issues with Mexico's energy policies
that would protect American producers?
Ambassador Tai. So, we went through a period of intensive
consultations and engagements with Mexico. I know the word
``consultation'' sounds polite. They can be pretty heavy-
hitting conversations that we have. I think maybe the most
important aspect of the work that we are doing on this right
now today is with respect to our own companies.
We want to make sure that steps that we take are well
supported by our companies, are coordinated with them. And I
think that, just for purposes of this conversation, I am happy
to follow up with you as well. I will just put the emphasis
there, that we remain very, very engaged with our companies
around our strategy here.
Senator Barrasso. I guess my final question is, Mr.
Chairman--I just know the timing--why has the U.S. not
requested a dispute settlement panel with relation to this?
Ambassador Tai. It is one of the options that we have, and
again, it is something that we are talking to our stakeholders
about.
Senator Barrasso. Thank you.
Thank you, Mr. Chairman.
The Chairman. I thank my colleague.
Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman. Ambassador Tai, it
is good to see you.
On March 26th, the third busiest port in the United States
was closed--a tragic event causing six people to lose their
lives, and the destruction of the Key Bridge.
The port of Baltimore was closed. It handles $80 billion of
foreign commerce every year, 1.2 million containers--number one
in roll-off/roll-on, whether it is auto or farm or construction
equipment, affecting supply chains in this Nation and globally.
President Biden committed the whole-of-government approach
to help Baltimore in getting the bridge replaced, getting the
harbor open, taking care of the challenges. So my question to
you is--I will be meeting with my port administrator tomorrow--
what can you do to help in regards to this tragedy, in regards
to supply chain, in regards to the return of the port of
Baltimore to full strength? Tell me how you can help us.
Ambassador Tai. Senator Cardin, I would like to begin first
and foremost with expressing condolences. Our thoughts are with
the families and the loved ones of the workers who lost their
lives, the first-order tragedy. Second, we are so incredibly,
incredibly grateful for the brave first responders who were on
the scene and rescuers who helped to contain the immediate
aftermath, and we stand with the people of Baltimore and all
those affected by this accident.
To your specific question about what USTR can do, let me
say a little bit about what USTR has been doing. Immediately--
and again, I want to acknowledge the contributions of my
fearless and vigilant Chief Agricultural Negotiator, Ambassador
Doug McKalip, who is sitting behind me. He leapt to action
immediately, especially with thoughts around how this tragedy
would be affecting trade--and agriculture trade specifically.
He has been a conduit for engaging with our stakeholders
and connecting them to the effort that is being driven by the
NEC. Second, USTR has been engaged throughout the interagency
process being convened by the NEC, and the process has been, I
am glad to say, holistic, communicative, and timely.
We remain in close contact on a daily basis with relevant
government authorities, to ensure there is as little disruption
to the supply chains as possible, and we will continue to stand
ready to use additional USTR tools when we are called upon to
do so.
Senator Cardin. And I want to just acknowledge, President
Biden has been incredible here, including helping us preserve
the contracts with the port of Baltimore. We recognize there
are going to be some diversions as a result of the port not
being open. We hope it will be opened to about 75 percent of
capacity by the end of the month, and 100 percent by the end of
May.
But there is a need to have the understanding of some of
our international players, and it seems to me that the USTR can
play a role in making that a reality, carrying out the
President's commitment to help the people of Baltimore. So we
may be calling on you to do a few more things.
The Chairman. Senator Cardin, all of us are prepared to
help you on the Baltimore issue and what you are dealing with,
and certainly the Finance Committee will be there.
Senator Cardin. I appreciate that, Mr. Chairman. It has
been incredibly difficult. And I agree that our prayers are
with the families of the victims, and the workers who have been
dislocated as a result of the closing of the port--20,000 jobs,
about $15 million a day, every day of delay in opening up the
port.
But I want to give a big shout-out to the Coast Guard, the
Army Corps of Engineers, and President Biden. The Unified
Command has really been a unified command. I have never seen
the cooperation that we have gotten there and the progress that
has been made.
It is a nightmare to try to clear out the port. The debris,
the steel and concrete, are mingled on the bottom of a 50-foot
channel, and the engineers are performing miraculous work. So I
thank you for that. We have had a tremendous outpouring, and we
will be calling upon all of you.
The Chairman. Count on it.
Senator Warren?
Senator Warren. Thank you, Mr. Chairman.
So, corporations have long used secretive trade
negotiations as a backdoor cheat to try to undermine
regulations, and to trigger a global race to the bottom. Now
big tech is running this play, and one of the demands is
blanket protections for the ``free flow of data,'' where they
want to guarantee big tech companies' right to sell Americans'
personal information anywhere in the world. In other words, big
tech wants to keep auctioning off your data to the highest
bidder, even when that means that your data makes it to the
Chinese or Russian Governments.
Now, Ambassador Tai, as U.S. Trade Representative, you have
stood up to big tech's trade agenda and to China's digital
authoritarianism. Tech lobbyists would have us believe that
their data flows language will persuade China to abandon its
surveillance state and to tear down the Great Firewall. Back
when China joined the World Trade Organization, supporters made
exactly the same claim, arguing that trade would transform
China into a liberal democracy.
Ambassador Tai, remind me. Did that happen? What has been
China's track record on meeting its WTO commitments that it
made at the time, and moving toward a liberal democracy?
Ambassador Tai. Senator Warren, this is one of the greatest
disappointments, I think, in trade policy over the course of
the last 25 years. I have had a lot of conversations with
members of Congress on both sides of the aisle around China's
accession to the WTO, and their description of how disappointed
they are, in terms of their expectations, is very deep.
Senator Warren. All right. So now, big tech is making the
same claim, that if we will just let big tech sell off our data
wherever they want, China will become a more open, democratic
country.
You know, President Biden has not been fooled by this. In
February, he issued an executive order to prevent big-tech
companies from transferring huge swaths of Americans'
financial, health, and other data to China and other countries
of concern.
Ambassador Tai, how would the President's data security
executive order square with big tech's demand for free data
flows in all situations? And let me just ask, is this why you
rejected big tech's demands, so that the U.S. Government can
take actions like the President's order, to protect Americans'
data from adversaries?
Ambassador Tai. Senator Warren, the short answer is
``yes,'' both with respect to the administration's executive
order safeguarding the security of Americans' bulk data from
flowing into China and never coming back out, but also with
respect to all of the activity that is happening up here in the
Congress.
We saw a data brokers' bill move through the House and pass
on a 414 to 0 basis. We see the data broker bill that has been
introduced by the chairman and Senator Hirono, as well as a lot
of the other legislative efforts up here, again, to define the
rights that Americans have with respect to their data, as well
as being concerned with the outward flow of that data to places
that make it unsafe for us.
Senator Warren. Yes, and I very much appreciate your making
sure that trade policy is not a way to block appropriate
regulations that Congress and the President are trying to put
in place.
I want to hit one more issue, and that is the USTR's annual
report listing foreign barriers to U.S. trade and investment.
Up until now, corporate interests have stacked this report with
kind of a laundry list of any other policy from any other
country that they think somehow nips into their own profits.
But not you. You have not fallen for this. This year, you
refused to label common-sense tech policies from the EU, from
Canada, and from other allies as ``trade barriers.'' And by the
way, those are policies that look a lot like the ones we are
actively working on here in the United States.
Now big tech is screaming that you are not protecting them
from these dangerous foreign adversaries like Canada.
Ambassador Tai, did you remove China's abusive data and
intellectual property policies from the trade barrier report?
Ambassador Tai. We did not.
Senator Warren. You did not. So, you are still taking on
China's abusive digital policies, but big tech is throwing a
tantrum, even though there is a clear difference between our
allies' good-faith efforts to regulate and China's digital
authoritarianism.
Look, big tech does not want to be regulated, period, and
hopes that it can use trade policy to help insulate them from
any regulation. I am glad to see that you and President Biden
are giving big tech's digital trade agenda the boot, and
instead fighting for the protection and security of Americans'
data. Thank you.
The Chairman. I thank my colleague.
Just to wrap up--and we will liberate you here momentarily,
Ambassador. Just on this question of technology policy, I
showed up in the U.S. Senate when only one Senator knew how to
use a computer. That was Pat Leahy.
I decided then it was one of the areas that I wanted to go
in on, and my horse was small business--small business. And I
put on this kind of prism to say the big guys are going to be
able to take care of themselves. My interest is small business.
So I am very glad that the White House is now working with
everybody on this, the whole-of-government approach. And just
so everybody knows, I am going to be pushing hard that these
policies like forced localization are just poison for small
businesses, because there is no way they can move ahead if they
are going to be paying for servers and all the rest.
So we can have this discussion another time. You have been
very patient. We have a lot to do. And you know, Ambassador--I
think we started close to 3 hours ago--obviously, we feel very
strongly about enforcement issues and trade barriers and the
like.
This is a challenge, obviously, to strike a balance on a
lot of these issues. We very much appreciate the shipbuilding
301 investigation. I get your point on how it all worked and
all the rest. Let's just play more offense. Let's just play
more offense; that is what you heard from the committee.
After TPP--and you and I have talked about this many
times--Senator Brown and I reached out to pretty much the
entire Senate and said, ``How can we do two things: how can we
be fair and protect our workers and our businesses, and how can
we open markets?'' That is why you heard all of us talking up
here. So let's find some ways to advance this kind of agenda.
For Senators, questions for the record are due April 24th.
Senator Crapo, do you have anything you want to add?
Senator Crapo. I am good.
The Chairman. With that, we are adjourned.
[Whereupon, at 12:38 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Submitted by Hon. John Barrasso,
a U.S. Senator From Wyoming
July 20, 2023
The Honorable Katherine Tai
U.S. Trade Representative
Office of the U.S. Trade Representative
600 17th St., NW
Washington DC 20006
Dear Ambassador Tai:
We write in regard to the Government of Mexico's pursuit of
discriminatory policies that favor state-run energy companies and
directly undermine United States-
Mexico-Canada Agreement (USMCA) commitments. We strongly support your
July 20, 2022 request for consultations--an important initial step to
enforce USMCA for U.S. energy workers and families. However,
consultations under USMCA are designed to last only 75 days before a
party may request a dispute settlement panel to review the matter. The
Biden administration has afforded Mexico nearly a year--and yet there
remains a lack of any meaningful progress. Consequently, we urge you to
pursue full enforcement action against the Government of Mexico to
address its energy policies that hinder U.S. investment in Mexico's
energy sector.
These discriminatory policies exist throughout Mexico's energy sector,
including natural gas and oil exploration and production, electricity
generation including solar and wind power, and retail sales. Mexico's
unfair actions threaten over $10 billion in U.S. investment that have
already been made and clearly run afoul of Mexico's USMCA obligations.
Ensuring there is a reliable market for U.S. energy production and
infrastructure will help strengthen energy supply chains in North
America and lower energy costs for consumers as Americans continue to
feel the impacts of volatile energy markets.
Extending the period of consultations has not yielded results. Robust
enforcement action is necessary--not just in the renewable energy
sector, but across the entire energy sector. Establishing a dispute
settlement panel for these troubling energy issues will demonstrate
that the United States is serious about enforcing USMCA to provide
Americans the benefits that the we bargained so hard to achieve in
USMCA negotiations.
We therefore respectfully urge the U.S. Trade Representative to request
the swift establishment of a USMCA dispute settlement panel to address
Mexico's discriminatory policies across the energy sector.
Sincerely,
John Barrasso, M.D. Jodey C. Arrington
United States Senator United States Representative
John Cornyn Adrian Smith
United States Senator United States Representative
Tim Scott Beth Van Duyne
United States Senator United States Representative
James Lankford Carol Miller
United States Senator United States Representative
Bill Cassidy, M.D. Brad R. Wenstrup, D.P.M.
United States Senator United States Representative
Todd Young Mike Carey
United States Senator United States Representative
Ron Johnson Lloyd Smucker
United States Senator United States Representative
Henry Cuellar Vicente Gonzalez
United States Representative United States Representative
______
Prepared Statement of Hon. Mike Crapo,
a U.S. Senator From Idaho
Thank you, Mr. Chairman. Welcome, Ambassador Tai.
I read the President's trade agenda carefully. If we measured
wisdom by word count alone, President Biden's trade policy agenda would
be wise. If we measured it in terms of creating meaningful opportunity
for Americans, it is profoundly misguided--particularly in terms of its
enforcement approach and negotiating ambitions.
This administration's enforcement record is the weakest of any
administration in 25 years. Although the administration highlights
regularly using the USMCA rapid response labor mechanism to help
Mexican workers, that mechanism cannot supplant bringing cases to
increase market openings for American workers.
Such cases are sorely lacking. USTR has yet to take a single
enforcement action against China, period--whether at the WTO, or under
section 301, or under the Phase One deal. Nothing.
When it comes to discriminatory treatment, our trading partners now
expect USTR to simply ``note'' that it is ``considering all options,''
as it did with Canada's decision to move forward with discriminatory
digital services taxes, and further expect that USTR's ``consideration
of all options'' is likely to be indefinite. For example, USTR has not
advanced our case against Mexico's discriminatory energy policies for
nearly 2 years now.
Administration plans for negotiations fare no better than they do
for enforcement. For the fourth year in a row, the administration's
trade agenda provides no plan for real negotiations to improve market
access. Instead, the administration lauds the Inflation Reduction Act,
asserting that our workers need to be shielded, subsidized, and
micromanaged through industrial policy, even if it entails massively
expanding our national debt. That is not only misguided, but as former
Joint Chiefs of Staff Chairman Michael Mullen noted, our debt is, in
fact, one of the top national security threats to the United States.
What we need is market access. I recently traveled to Asia, the
United Kingdom, and to other partners. Our partners want to make real
deals with high standards. They want to trade with us rather than
China. And they want to do it now. We should want that too, because
each day we wait is another day that Americans fall back further behind
our competitors, including China.
Make no mistake, tariffs matter, particularly for small businesses
like our farmers. Australia and New Zealand each negotiated free trade
agreements with Thailand, and since then, demand for premium U.S. beef
fell by 30 percent because our cattlemen face a 50-percent tariff while
those two partners face none.
Whether it be Idaho potatoes and dairy, or Iowa soybeans and pork,
or South Dakota wheat, or Texas cotton and beef, or Washington State
apples--our farmers are the best in the world. This is precisely why a
large number of farm groups wrote to you, Ambassador Tai, on Monday
asking for a real trade agenda and advancing dispute settlement reform
so we can open markets for them.
United States manufacturing, innovation, creative, and tech
industries are second to none. If the administration will not negotiate
tariffs, it should at least help workers in these industries by
negotiating critical rules on technical barriers to trade, intellectual
property, and key digital trade provisions such as on nondiscrimination
and free data flows. Thus far, USTR has failed to do so in any of the
so-called framework negotiations--and the trade agenda indicates this
will continue.
This benefits China, which is aggressively participating in
international
standards-setting bodies, pushing technology transfer, and supporting
data localization by countries, which could require our companies to
store data on servers that are produced by Chinese companies such as
Huawei, rather than on ones we host in the United States.
The proposals the Trump administration crafted in coordination with
this committee for USMCA for technical barriers to trade, for
intellectual property, and for digital trade ensured we could regulate
and also rise to China's challenge. Simply abandoning coordinated and
reasoned proposals--without consulting Congress--is a profound mistake.
I urge my colleagues to remember when this administration told us
that comprehensive, congressionally approved trade agreements are a
20th-century tool. Its vision of the future though is piecemeal
frameworks done as executive agreements, devoid of any real enforcement
mechanisms.
Ambassador Tai, the members of this committee know that attempts to
bypass Congress are neither new nor groundbreaking. And they also know
that such efforts are not sufficient or truly effective in creating the
types of opportunities our citizens deserve. It is well past time this
administration begin working with Congress to meaningfully expand
market access opportunities.
______
Prepared Statement of Hon. Katherine C. Tai, United States Trade
Representative, Executive Office of the President
Chairman Wyden, Ranking Member Crapo, and members of the committee,
I appreciate the opportunity to discuss the President's trade policy
agenda. Congress is our constitutional partner on trade, and I am
delighted to be here to discuss our agenda and hear your views.
President Biden summed it up during his State of the Union address
last month: America is writing the greatest comeback story never told.
Our administration's economic plan is leading our country in the
strongest economic recovery amongst all developed nations. More
importantly, we are doing so in a way that democratizes economic
opportunity for more people.
We have shifted the conversation from focusing on the bigs to
including and championing the interests of the smalls and the mediums.
From trickle-down to
bottom-up. From people as consumers only, to people as workers also.
We are reorienting the economic system to strengthen the middle
class. The President's trade agenda is critical to this reorientation.
In the past, trade policy primarily focused on and benefitted the
largest stakeholders, but we are flipping that top-down approach on its
head.
Trade is a tool to give all Americans a fair shot and ensure that
our system is set up for inclusive and durable growth. Promoting
healthy competition is critical to achieving this goal. This is why I
am honored to serve as a member of the White House Competition Council,
to align our trade agenda with our domestic economic tools to advance
fair competition for more people.
It is also a critical tool for building robust supply chains that
lower costs for American families, a goal I work to advance as a member
of the President's Council on Supply Chain Resilience.
Asking old tools to solve new challenges--like economic insecurity,
fragile supply chains, and a worsening climate crisis--is destined to
fail. We must question assumptions, revisit norms, and think creatively
and strategically. In this new era, we increasingly measure success and
progress by the degree to which we are delivering real benefits to more
Americans across our society--no matter where you live or whether you
have a college degree.
Our approach is one that addresses and advances the interests of
all parts of our economy and does not pit Americans against Americans.
Let me give you some examples of what middle-out, bottom-up trade
policy looks like.
empowering workers through trade
First, we are using trade to empower workers, because they are the
backbone of our economy. Their success is our success. We are
incentivizing a race to the top so that we are not pitting our workers
against those in other countries and regions. Fellow trade ministers
tell me that they too want to build their economies from the middle
out, and enacting and maintaining high labor standards is key.
This is why the United States has prioritized strong labor
commitments in our ongoing trade initiatives, including in our
negotiations with Kenya and Taiwan. As part of this process, USTR has
consulted extensively with labor stakeholders, in addition to the
business community. We will continue to work with our trading partners
and with you to ensure that our trade agreements work for workers.
This is also why we are using innovative tools with our trading
partners to address harmful practices, such as forced labor. Our work
with Japan through the Task Force on the Promotion of Human Rights and
International Labor Standards in Supply Chains is one example.
This is a part of our administration's broader strategy to fight
for workers' rights around the world, including through the first-ever
presidential memorandum outlining our commitment to worker rights
globally, signed by President Biden last November.
Advancing workers' rights abroad also strengthens workers here at
home. This is possible when we are not pitting our working communities
against each other, but instead allowing them to compete fairly and
thrive in this global economy. This is what it looks like to align our
domestic and foreign economic priorities--a foreign policy for the
middle class.
At a press conference in San Francisco on the launch of the
memorandum, I had the privilege to meet Rudy Gonzalez, Secretary-
Treasurer of the San Francisco Building and Construction Trades
Council. He spoke with such passion and conviction on why our approach
is important to real, working people.
It is because of friends like Rudy and his colleagues that we are
also focused on enforcing the labor provisions in agreements we already
have. Trade agreements are not trophies to admire on shelves--they are
tools to get us results. The United States-Mexico-Canada Agreement is a
prime example.
When I worked for the Ways and Means Committee, I worked with many
of you to create the USMCA's rapid response labor mechanism, and I want
to share what it is doing for working people. Since 2021, the United
States has sought Mexico's review under the RRM 22 times at facilities
that span various industries, including automotive, garments, mining,
and services.
These cases have so far directly benefited 30,000 workers, provided
$5 million in back pay and benefits to workers, ensured wrongly
terminated workers were reinstated, and helped secure free and fair
elections in which workers selected independent unions to represent
them.
Last July, I participated in a labor stakeholder forum on the
margins of a USMCA FTC meeting in Mexico. There, I met Juan Gerardo
Castor Puentes, a special delegate for the Mexican Workers' League. It
is a union that represents garment workers at a factory near the
Coahuila-Texas border. He shared with me how important it was for
governments to work together to fight for workers and their interests--
how doing so is making a real positive impact on people's daily lives.
This not only affects workers in Mexico, it also empowers U.S. workers
by reducing the incentive to unfairly ship jobs overseas.
There are many success stories to choose from, but I want to
highlight the Teksid facility in Frontera, Mexico. In that case, the
United States requested Mexico's review of whether workers at the
facility were being threatened or coerced into choosing a particular
union, and whether workers were being subject to a state-level
collective bargaining agreement that was inferior to a federal-level
collective bargaining agreement. The company was also refusing to
recognize the independent union that held the right to represent
workers at the facility.
As a result of the RRM, 36 workers who had been wrongfully
terminated were reinstated and given back pack. The independent union
was given access to the facility and even paid dues that were
previously withheld from workers' pay. Shortly after the case was
closed, the independent union negotiated additional benefits for
workers, including a 9-percent wage increase and a 6.8-percent increase
in the overall value of nonwage benefits, as well as an increase in
vacation days, bonuses, compliance with required overtime pay, and
improvements to working conditions to address work-related injuries.
This is real positive change for these workers in Mexico, but also
helps ensure that the good-paying jobs our administration is creating
stays here, in our communities. This is how we are building up our
working communities and middle classes together, giving them a fair
shot to thrive in this global economy.
enforcing trade agreements for a level playing field
This is why enforcing the trade rules we have continues to be a
priority this year for the administration. We will continue to level
the playing field for American workers and businesses. We are
vigorously enforcing our trade agreements, defending American jobs, and
making sure more people enjoy the benefits of trade. For the USMCA,
this extends to the interests and rights of our farmers and
agricultural producers.
I know the agricultural biotechnology concerns with Mexico are
important to our farmers, especially our corn producers. Last August,
we established a dispute settlement panel under the USMCA. We are
working to resolve our concerns and help ensure that American farmers
can continue to access the Mexican market and use innovative tools to
respond to climate and food security challenges.
I also know that many of you are concerned that Mexico is
undermining American companies and U.S.-produced energy in favor of
Mexico's state-owned utility and oil and gas company. We launched
dispute settlement consultations under USMCA with Mexico to address
those concerns and continue engagement with our stakeholders on
developments.
On Canada dairy, the United States won a USMCA dispute on Canada's
tariff rate quota allocation measures. However, Canada's revised
policies did not fix the problem for U.S. dairy farmers, and we will
continue to work with Canada to resolve our dairy industry's concerns.
We have also activated the tools for environmental enforcement
under the USMCA by engaging in consultations with Mexico relating to
the protection of the critically endangered vaquita porpoise, the
prevention of illegal fishing, and trafficking of totoaba fish.
I also want to note that, last year, the United States prevailed at
the WTO in the cases against the retaliatory tariffs the People's
Republic of China (PRC) and Turkey illegally imposed in response to the
U.S. section 232 national security actions on steel and aluminum.
These matters are a priority for USTR this year, and enforcement is
one way we are fighting for American farmers, ranchers, producers,
workers, and businesses.
We are also working tirelessly with trading partners to open
markets for hardworking American families and communities--especially
our rural communities--to get more wins.
wins for u.s. agriculture and rural communities
We signed an agreement with the EU to modify tariff rate quota
(TRQ) allocations on several important U.S. products, including rice,
wheat, and corn.
We revised the beef safeguard mechanism under the U.S.-Japan Trade
agreement, to allow U.S. beef exporters to more reliably meet Japan's
growing demand for high-quality beef. In 2023, U.S. beef and beef
product exports to Japan were $1.8 billion, accounting for more than 46
percent of Japan's total beef and beef product market.
We are shipping more fresh potatoes to Mexico now, beyond the
previous limit of a 26-kilometer zone along the U.S.-Mexico border.
U.S. fresh potato exports to Mexico, our largest export market, grew
from $82.7 million in 2022 to $117.4 million in 2023. This benefits
U.S. potato growers from Idaho to Maine.
We also got major wins for our poultry producers: South Africa
lifted restrictions on U.S. poultry and poultry products, and we
reopened the Colombian market for U.S. poultry and egg products.
Specifically, let me highlight what we did to open the Indian
market for our exports. Last June, India and the United States
terminated six WTO disputes, and India agreed to remove retaliatory
tariffs on several U.S. products. This means improved access for
chickpeas, lentils, almonds, walnuts, and apples benefiting farmers
across the country, including in Michigan, Oregon, and Washington.
Additionally, in September, India and the United States resolved
our final outstanding WTO dispute, and India agreed to reduce tariffs
on several U.S. products. This means more market access for turkey,
duck, blueberries, and cranberries benefiting farmers in North
Carolina, Pennsylvania, Virginia, and Wisconsin.
We also worked with Japan to implement a new biofuels policy that
will allow the United States to capture up to 100 percent of Japan's
on-road ethanol market. I know this is important to many of you. Under
this policy, exports of U.S. ethanol could increase by over 80 million
gallons annually, representing an additional $150-$200 million in
exports each year. This is an important win for our producers in Iowa,
Missouri, and South Dakota.
U.S. agricultural exports totaled $174.9 billion in 2023, and our
administration has won over $21 billion worth of new agricultural
market access in the last 3 years. However, this is more than just
numbers. It is about people, their livelihoods, and their communities.
People like the first-generation farmer I met in Rowesville, SC. I met
him last December together with Congressman Clyburn at his farm where
he grows corn, soybeans, cotton, and small grains. Families growing
almonds, like one my Chief Agricultural Negotiator, Doug McKalip,
visited in the Central Valley of California last fall. This family was
impacted by India's retaliatory tariffs imposed in 2019, limiting their
access to a vital market for their operation. We removed those tariffs
and provided more economic certainty for this family and many others.
We are working hard in our efforts to not leave anyone behind. We
are making sure that Americans do not have to abandon their hometowns
to find opportunity.
making trade work for all americans
Trade should work for all Americans. This is why we are taking
unprecedented steps to incorporate more voices into trade policymaking.
Just as you stay connected with the constituents in your States, I
have traveled around the country to hear from workers, farmers, small
businesses, and Tribal leaders to learn how trade affects them. I have
also made it a priority to meet with a wide range of stakeholders to
ensure their views inform our work, including civil society and labor
leaders.
I know this approach may be surprising to some, but this should and
must be the norm moving forward--because my job is to represent the
entirety of the United States, not just those that can afford
Washington lobbyists.
We need to deliver more equitable, fairer outcomes for more
Americans. If we want different results, we need different inputs--from
more people across our society.
This consultation includes Congress and this committee. Like our
stakeholders, there is a wide range of views in Congress on trade. Over
the last few years, I have welcomed all of your views, and I truly
value the various perspectives I hear from Congress. Moving forward, I
will continue partnering with you as we carry out our agenda.
Pursuing the interests of all Americans is a clear mandate and
vision in the President's trade policy agenda, and we are placing
utmost importance on this work this year. We also know that we need
more and better data to informing our work. This is why USTR is
continuing to work with the U.S. International Trade Commission, and we
requested that the USITC repeat the distributional effects
investigation every 3 years for the next 15 years.
This is critical for policymakers, researchers, and the public to
monitor and ensure progress in assessing the distributional effects of
trade policy on U.S. workers. Better input, for better output.
We are also institutionalizing the principles of fairness and
equity in our negotiations and regional engagements. For the first
time, we have partnered on inclusivity chapters in our trade
negotiations, including those with Kenya. We are also meeting with a
broad base of stakeholders to gather input, such as the African
Diaspora, and women, youth, civil and rights organizations.
During our APEC host year, I was proud to host first-ever minister-
level dialogues with labor and Indigenous leaders. We also announced
during APEC that the United States is exploring observership in the
Indigenous Peoples Economic and Trade Cooperation Arrangement, or the
IPETCA. This is a direct result of our annual Tribal consultations and
engagements with Indigenous leaders and communities, and this will be a
cornerstone of our work going forward in APEC and in other fora.
This includes the World Trade Organization, where, during the
Thirteenth Ministerial Conference (MC13) in February, U.S. leadership
was reflected in the effort of ministers holding a first-ever
discussion specifically on how the WTO can help foster better outcomes
for more people.
transforming the wto
This is part of our overall effort to make the WTO more responsive
and effective. Our administration is working with other WTO members on
a reform agenda that reflects priorities of our worker-centered
approach--improving labor standards, protecting our planet, and
advancing shared prosperity.
MC13 was an important milestone to gauge our progress to date, and
we announced several important outcomes. We made more progress on
dispute settlement reform in the last year than we did in the last
several decades.
We extended the e-commerce moratorium, which was not a forgone
conclusion. We also announced significant development outcomes. We
ensured that members graduating from the least developed countries
(LDC) category can continue a smooth transition. We agreed to support
their capacity to effectively utilize the Agreements on Technical
Barriers to Trade and Sanitary and Phytosanitary Measures, and we
supported a work program for small and vulnerable economies. We also
agreed to hold dedicated sessions on issues important to land-locked
developing countries.
Our discussions in Abu Dhabi highlighted that developing economies,
both large and small, are having important debates over what rules and
policies best serve their interests. This includes issues such as
inclusivity, sustainable development, and the need for our trade
policies to be flexible to allow WTO members to manage current global
challenges. While MC13 is over, our work at the WTO continues, and our
administration remains committed to working with all WTO members to
develop a common agenda that allows all of us to have our priorities
reflected.
collaborating with trading partners
What we are trying to do in Geneva is reshaping the global trading
system for the better, for the future, for the people. And those are
the goals of our regional and bilateral trade initiatives as well.
We are making significant progress with Taiwan. Last June, the
American Institute in Taiwan (AIT) and the Taipei Economic and Cultural
Representative Office in the United States (TECRO) signed the first
agreement under the United States-Taiwan Initiative on 21st-Century
Trade. This was less than a year after we announced the negotiating
mandate in August 2022.
The first agreement focuses on economically meaningful areas to
build our middle classes together. For example, small business owners
tell me that tariffs are not the primary reason they cannot export more
of their products--in many cases, it is because of the red tape.
So, the first agreement with Taiwan includes commitments on
simplifying Customs procedures and making rulemaking processes more
transparent, among other issues. It also includes specific provisions
to help SMEs compete and thrive, including addressing corruption.
Furthering these negotiations with Taiwan is a high priority for USTR
this year.
We are making progress on the U.S.-Kenya Strategic Trade and
Investment Partnership (STIP) as well. Our teams recently wrapped up a
third negotiating round. The United States has tabled text on
agriculture, anticorruption, SMEs, and services domestic regulation.
Together, we are working closely to deliver real benefits to our people
and so that the STIP can serve as a model for engagement with other
willing countries on the African continent--all while respecting the
priority of integration among African countries themselves.
An important part of these negotiations is to make sure that any
trade deal incentivizes a race to the top, for our people and for our
planet. This is why we have tabled strong text on labor rights and the
environment in these discussions, and also in the Indo-Pacific Economic
Framework.
Trade deals take time, but our team made more progress in the last
year than what would typically take years to complete. I am incredibly
proud of my team for what we have accomplished. We are continuing
forward with a new and innovative approach to trade, designed to create
durable and sustainable economic growth.
This also applies to our work with AGOA partners and in our
planning for the next AGOA Forum later this year. I met incredible
workers, small business owners, and entrepreneurs when I was in
Johannesburg for the AGOA Forum last November. AGOA has helped Africa
grow its extraordinary economic potential over the last 2 decades.
Its renewal is important to continue to bring real change to people
across the continent, and our administration fully supports renewal
beyond 2025. However, we must also seize this opportunity to make AGOA
better, to improve utilization rates, and to explore other trade tools
to complement our AGOA relationship.
promoting supply chain resilience through trade
Increasingly, we are seeing that a sense of growing economic
insecurity is shared by different communities across continents, and
people everywhere felt this more acutely during the pandemic. Lives and
livelihoods, homes and communities were disrupted. This is why reducing
dependencies and vulnerabilities and strengthening supply chains is a
major priority for USTR this year, which informs our work as part of
the President's Council on Supply Chain Resilience.
Resilient supply chains also reduce opportunities for economic
coercion and enhance our economic security. They provide a range of
sourcing options; adapt, rebound, and recover with agility following
shocks; uphold labor rights and environmental protections; and
strengthen the U.S. manufacturing base and workforce.
We have been focused on this topic in various fora, including the
G7, G20, APEC, and OECD. This also includes our work through the trade
track under the Americas Partnership for Economic Prosperity, where a
lot of our efforts will focus on supply chain resilience.
But to continue our work to develop innovative trade tools and
strategies for connecting trade and other economic policy measures to
advance supply chain resilience, we published a Federal Register notice
last month. This will allow USTR to draw upon various perspectives and
experiences to get a more granular understanding of the challenges and
to identify potential policy solutions.
We are integrating trade tools with domestic economic measures to
position U.S. manufacturing and services for continued leadership and
competitiveness. We are also collaborating with trading partners and
allies to incentivize a race to the top through stronger coordination
and alignment on labor and environmental protections within trusted
networks.
I was in Burlington, NC a few weeks ago, and met with the owners
and workers of Glen Raven, a family-owned fabrics and textiles company.
I heard firsthand how important it is for us to pursue resilience over
efficiency, for our workers and businesses. I also visited the Marsh
Furniture Company, a family-owned cabinet manufacturer in High Point,
NC. We talked about the company's rich, 100-year history, and why it is
critical to address unfair practices by the PRC and other economies.
standing up to the prc's unfair economic practices
and fighting for fair competition
At its core, this is about giving everyone a fair shot. However,
that is not possible when countries like the PRC continue to use
nonmarket policies and practices to dominate industries. That dominance
is what enables the PRC to coerce other economies.
The PRC's unfair policies and practices have devastated many
working communities and industries across our country, including many
in your States: steel, aluminum, solar panels, batteries, electric
vehicles, and critical minerals--just to name a few.
The PRC also uses unfair policies and practices to concentrate
production of certain goods in the PRC, which undermines supply chain
resilience and harms consumers that, in the long run, are deprived of
the innovation and choice that fair competition would produce.
As the President said during his State of the Union address, this
administration will continue to stand up to China's unfair, non-market
policies and practices. And we are doing so with like-minded partners
and allies, as you saw in the joint declaration we issued last June
with Australia, Canada, Japan, New Zealand, and the United Kingdom.
We have seen the PRC create dependencies and vulnerabilities in
multiple sectors, harming American workers and businesses and creating
real risks for our supply chains. This is why we are taking a serious
look at how our existing tools are addressing this problem, including
through our 4-year review of the China section 301 tariffs. This is
also why I am closely reviewing the section 301 petition I received
from the five national labor unions regarding the PRC's acts, policies,
and practices in the critical maritime, logistics, and shipbuilding
sector.
Our economic relationship with the PRC is complex, and as the
President said, we want competition with China, not conflict. But the
competition must be fair, and USTR and the Biden-Harris administration
are fighting every day to put working families first, rebuild American
manufacturing, and strengthen our supply chains.
conclusion
We're using trade to give everyone a fair shot. That means creating
incentives that are more than lower costs; raising labor and
environmental standards; and pursuing resiliency.
USTR will remain focused this year on developing innovative trade
tools and strategies for connecting trade and other economic policy
measures to advance these goals. I want to thank my USTR team, serving
in Washington, DC, and around the world, for their unwavering devotion
and determination to serve all of America.
I think we all agree that our economic system, including trade,
should strengthen the middle class. I look forward to continuing our
partnership through regular briefings with you and your staff, as we
have done for the last 3 years.
Thank you.
______
Questions Submitted for the Record to Hon. Katherine C. Tai
Questions Submitted by Hon. Ron Wyden
Question. China uses large-scale industrial subsidies to support
production--and overproduction--of everything from solar panels to
semiconductors in an attempt to drive American competitors out of
business with a flood of cheap imports. China's massive subsidies,
along with its rampant technology theft and market restrictions, hurt
U.S. manufacturing and help Chinese industries corner the market on
critical inputs and products of the future. These practices also hurt
our allies, and a section 301 report would allow the United States to
build a definitive record of this behavior.
Will you use section 301 to proactively investigate, establish a
record, and take action against China's unfair subsidies in innovative,
high-tech industries like semiconductors, electric vehicles, batteries,
or solar?
Answer. Section 301 is one of the most important enforcement tools
that USTR brings to bear to address unfair trade practices. China
utilizes a wide range of unfair, nonmarket policies and practices to
undermine fair competition and dominate markets, both in China and
globally. Those anticompetitive policies and practices, which include
nonmarket excess capacity, pervasive subsidization, forced labor and
other labor violations, and many others, create strategic dependencies
and vulnerabilities, which undermine our supply chain resilience and
economic security. I agree with you that we must consider all available
tools and options to more effectively address this threat, including
use of section 301.
Question. Your written testimony stated that USTR opened India's
market for U.S. agriculture exports as part of an agreement to resolve
several outstanding World Trade Organization (WTO) disputes. This
includes disputes initiated and litigated under prior administrations,
such as India--Agricultural Products (DS430), in which the United
States successfully challenged India's restrictions on U.S.
agricultural exports. Notably, when the United States prevailed in that
particular dispute before a WTO panel and the Appellate Body, Secretary
of Agriculture Tom Vilsack hailed the result as ``a major win for U.S.
agriculture and, in particular, the U.S. poultry industry.''
However, under the Biden administration, USTR has not initiated any
new WTO disputes. During the hearing, you explained that USTR had not
sought to use this potential enforcement tool because WTO dispute
settlement had been ``ineffective.''
Please clarify why you consider WTO dispute settlement to be
ineffective, while also claiming market access ``wins'' for U.S.
farmers based on resolving WTO disputes. To the extent that your
statement was limited to WTO disputes involving China, please explain
why USTR has not initiated a single WTO dispute--or even requested
consultations--to address trade barriers with respect to any other WTO
Member.
Answer. The wins achieved for U.S. farmers through resolution of
our seven WTO disputes with India came after 2 years of intensified
bilateral engagement between the two countries to deepen our economic
and trade ties. The underlying WTO disputes, by contrast, had been
ongoing for years--some for more than a decade--and had remained
outstanding despite WTO reports. The specific language you quote is
from 2015,\1\ and we finally were able to resolve that India poultry
dispute, through intensive, cooperative efforts, only in 2024--more
than a decade after it was launched. This shows that the dispute
settlement process was ineffective in this particular case.
---------------------------------------------------------------------------
\1\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2015/june/wto-affirms-us-trade-enforcement-win.
As you well know, WTO rules and disputes provide no solutions for
the threats from China's nonmarket economy. In fact, China uses the WTO
to attack our ability to defend our workers and businesses from China's
nonmarket policies and practices. It also uses the WTO dispute
settlement system to attack U.S. actions to defend our national
security interests, such as our section 232 tariffs to preserve our
critical steel and aluminum industries, our Hong Kong national security
(ROO) actions in defense of democracy and human rights, and our
semiconductor export controls. And China has recently filed a dispute
attacking the Inflation Reduction Act, our groundbreaking tool for the
United States to seriously address the global climate crisis and invest
in U.S. economic competitiveness, even while the PRC continues to use
unfair, nonmarket policies and practices to undermine fair competition.
Given the numerous WTO disputes that have sided with China on critical
issues, it is clear that the WTO has been effective in advancing
---------------------------------------------------------------------------
China's interests and ineffective for core U.S. interests.
This is, in large part, why the Biden-Harris administration has
been clear that we must fundamentally reform the WTO dispute settlement
system. The United States initiated the interest-based reform
conversations in Geneva which were a collective and collaborative
exercise that resulted in draft text totaling 50 pages of potential
reforms that would advance shared interests. I am pleased that we have
made more progress in the interest-based reform conversations than was
made in nearly 20 years of the previous process.
Although difficult issues remain unresolved, such as correcting
critical erroneous Appellate Body interpretations--including several
criticized by members of Congress as diminishing U.S. rights to defend
our workers and businesses--the United States is continuing to engage
in an interest-based manner as we pursue a system that supports all WTO
members in the resolution of their disputes in an efficient and
transparent manner, and in doing so limits the needless complexity and
interpretive overreach that has characterized dispute settlement in
recent years.
We will utilize all our trade policy tools, including enforcement,
to defend American workers and businesses and promote our values and
interests. Enforcement includes all those actions to make sure that
workers, farmers, and businesses enjoy the full benefits of trade
agreements, not only at the WTO, but also under our USMCA and other
agreements. We have not hesitated to utilize all of those tools, from
bilateral dialogue, to engagement through trade agreements, to USMCA
rapid response mechanism actions, to dispute settlement, to section 301
investigations and actions to secure more fairness for our workers,
farmers, and businesses.
Question. Since 1998, the WTO e-commerce moratorium has ensured
that electronic transmissions--including things like music, movies,
software, and electronic communications--can be sent across borders
tariff-free. Attempts to introduce tariffs to electronic transmissions
would not only jeopardize the open internet but also put U.S.
exporters, innovators, creators, and workers across every industry at a
disadvantage. The United States has long supported the moratorium and
has pushed to make it permanent, with support from Congress.\2\ I
commend your work to secure an extension of the moratorium at the 13th
Ministerial Conference in March 2024;\3\ it is also critical that USTR
continue its work to keep the moratorium in effect.
---------------------------------------------------------------------------
\2\ See H. Con. Res. 190, Urging the United States to seek a global
consensus supporting a moratorium on tariffs and on special, multiple,
and discriminatory taxation of electronic commerce, https://
www.congress.gov/bill/106th-congress/house-concurrent-resolution/190/.
\3\ ICYMI: USTR Secures Extension on E-Commerce Moratorium at MC13,
https://ustr.gov/about-us/policy-offices/press-office/press-releases/
2024/march/icymi-ustr-secures-extension-e-commerce-moratorium-mc13.
Do you support making the e-commerce moratorium permanent on a WTO-
---------------------------------------------------------------------------
wide basis?
Will you advocate for a permanent extension of the e-commerce
moratorium on a WTO-wide basis in negotiations and discussions leading
up to and during the 14th Ministerial Conference?
Answer. I was pleased we were successful in our efforts to extend
the e-commerce moratorium and work program. While the moratorium and
work program enjoy broad support among WTO members, it is clear that
the WTO membership needs to have a more robust discussion about the
future of the moratorium and the impact of the digital economy on
developing members.
______
Questions Submitted by Hon. Mike Crapo
Question. The National Potato Council expressed disappointment with
how Japan's ban on U.S. potatoes appeared in the National Trade
Estimate, or NTE, because it didn't capture the full extent of the
problem. A number of stakeholders also took issue with this year's NTE
because of your decision to cut a number of trade barriers by seeing if
they were in our trading partners' purported public interest.
Did you take the opportunity of the April Japan state visit to
raise potatoes, and if not, will you commit to do so immediately?
Answer. I fully appreciate the importance of opening the Japanese
market to U.S. table-stock potato producers, which is why USTR has
engaged with Japan on this issue many times and has undertaken a number
of efforts to secure access for U.S. fresh table-stock potatoes to
Japan. Following Prime Minister Kishida's state visit in April 2024,
USTR raised this issue with senior officials from the Japanese Ministry
of Agriculture, Forestry, and Fisheries. Additionally, USTR has raised
this issue with Japan in all four meetings of the U.S.-Japan
Partnership on Trade, most recently in December 2023 and in a June 6,
2024 bilateral meeting with Japan's Minister of State Foreign Affairs.
Moving forward, USTR will continue to press the appropriate Japanese
ministries to advance this issue in a timely and science-based manner
in coordination with our colleagues at the U.S. Department of
Agriculture (USDA).
Question. Relatedly, why look at our trading partners'
justifications for their discrimination rather than the measure's
content and effects on American workers? As part of this explanation,
please explain if the statute for the NTE requires you to consider the
trading partner's justification or public interest in determining
whether a measure is a trade barrier, and if so, how?
Answer. The statute requires USTR to identify trade barriers in
order for USTR to then seek to remove those barriers. According to the
legislative history, Congress intended for USTR to ``consider
vigorously utilizing existing authorities'' to ``deal with the
identified barriers.'' Thus, the exercise is not simply listing
barriers, but listing barriers the United States then seeks to remove.
Prior NTEs have, for example, listed import licensing for narcotics as
a trade barrier. Consistent with the statute, and with our values as a
Nation, the United States does not to seek to ``deal with'' a measure
that, while it may impact trade, is for the purpose of protecting the
public.
Question. You speak of USTR's partnership with Congress. Both sides
of the aisle agree that consultation is poor. Briefings rarely share
any information, including USTR's position on an issue, until it is a
fait accompli. This must change.
Will you agree to follow, completely, the consultation provisions
in the United States-Taiwan Initiative on 21st-Century Trade First
Agreement Implementation Act (``U.S.-Taiwan Initiative on 21st-Century
Trade Implementation Act'') for that agreement?
Answer. Under my leadership, USTR has taken steps to enhance
consultation and transparency with Congress, stakeholders, and the
American public. In 2021, I released transparency principles that
established guidelines for our engagement with Congress, stakeholders,
and the public. These principles include: providing inclusive
opportunities for the public to participate in the development of trade
policy and trade initiatives; encouraging the participation of a broad
range of stakeholders; striving to ensure that the membership of
Federal advisory committees includes a wide variety of expert interests
and is reflective of the diverse set of stakeholder perspectives; and
adhering to the Guidelines for Consultation and Engagement that USTR
adopted in October 2015. We have also taken additional steps to keep
the public engaged in our negotiations, including holding public
listening sessions with stakeholder groups in advance of and during
negotiating rounds, publishing summaries of negotiating text, and
increasing congressional staff's access to our negotiating text.
USTR has consulted extensively with members of Congress, the Senate
Finance Committee, the House Ways and Means Committee, and staff for
various members on a bipartisan basis. These consultations have heavily
influenced our views and positions and USTR has made changes to
negotiating text in response to feedback from Democrats and
Republicans.
In the current negotiation regarding a further agreement with
Taiwan, USTR has acted consistently with the U.S.-Taiwan Initiative on
21st-Century Trade Implementation Act for its consultations with the
trade committees and intends to continue doing so.
That said, USTR is mindful of the President's signing statement for
the legislation, which said, in part, that ``[i]n cases where the
requirements of section 7 of the act would impermissibly infringe upon
my constitutional authority to negotiate with a foreign partner, my
administration will treat them as non-binding.''
Question. Please further explain USTR's position during a January
26, 2024 call with Senate Finance Committee staff that Taiwan's
comments and bracketed text on USTR's proposed labor chapter and non-
paper were not ``negotiating text'' as defined in the U.S.-Taiwan
Initiative on 21st-Century Trade Implementation Act, which resulted in
USTR providing updated labor negotiating text on January 16, 2024--well
beyond the statutorily required 3-day deadline for negotiating text
drafted by Taiwan.
Answer. USTR provided to Congress an updated consolidated labor
chapter negotiating text on January 16, 2024, which incorporated
attributions provided by Taiwan during a recent virtual meeting,
consistent with section 7(b)(3) of the legislation.
The informal ``non-paper,'' which you refer to from a staff
briefing, did not include negotiating text as defined in the
legislation. Rather, it was a conceptual paper designed to help USTR
understand Taiwan's views and develop negotiating text. As such, the
non-paper falls outside of the scope of section 7(b)(2)-(3) of the
legislation.
Where USTR has developed text that meets the definition of
``negotiating text'' in the legislation or is in possession of a
consolidated negotiating text, USTR has shared those texts with the
trade committees consistent with section 7(b)(2) or 7(b)(3).
Question. Will you apply the consultation procedures set forth in
the U.S.-Taiwan Initiative on 21st-Century Trade Implementation Act for
all other ongoing negotiations?
Answer. As discussed above, USTR has acted consistently with
section 7 of the legislation for the current negotiation of a further
agreement with Taiwan. In its other negotiations, USTR has acted
consistently with its longstanding transparency practices, including
consulting with the trade committees on the basis of proposed
negotiating text prior to USTR sharing that negotiating text with the
foreign trading partner, inviting committee staff to negotiating
rounds, and briefing them at those negotiating rounds. USTR has also
applied the additional transparency and consultation measures mentioned
in an earlier response to our negotiations with Taiwan and in other
ongoing negotiations.
Question. Recently, when asked about discrimination against U.S.
technology companies, you said ``how many of these American companies
are actually really American companies?'' because they are ``actually
paying taxes there as opposed to paying taxes here. . . .'' Actually,
these companies pay billions in taxes here, but they are paying more
overseas--because of discriminatory digital services taxes, or DSTs.
You said at the hearing that Treasury has a role as well in
addressing DSTs through its negotiations with individual countries. If
Treasury is unsuccessful in its role, and the decision is between trade
enforcement measures or not--will you move forward with enforcement
action rather than note that all options are under consideration?
Answer: USTR initiated section 301 investigations of the digital
services taxes of France, Austria, India, Italy, Spain, Turkey, and the
United Kingdom in 2019 and 2020. USTR and Treasury have worked closely
together in trying to address these DSTs, which burden technology
companies and challenge the existing international tax system.
An important purpose of the section 301 investigations is, and
always has been, to support Treasury's efforts to find a lasting
solution to the challenge of DSTs through the OECD/G20 Inclusive
Framework on Base Erosion and Profit Shifting negotiations and in any
other negotiations relating to DSTs.
In November of 2021, USTR terminated the trade actions in the
investigations on the grounds that action was no longer appropriate due
to political arrangements that Treasury had reached with the DST
countries. Since then, all seven investigations have been in a
monitoring phase under section 306(a) of the Trade Act. Specifically,
USTR is monitoring the implementation of the political agreement on an
OECD/G20 two-pillar solution as pertaining to DSTs, the commitments
under the joint statement between Treasury and the DST countries, and
associated measures.
On August 30, 2024, USTR requested consultations with Canada
concerning its DST under the USMCA dispute settlement chapter. Moving
forward, USTR will continue to consider using all available tools to
make progress towards addressing unilateral, discriminatory DSTs.
Question. Some of our trading partners have privately told us they
felt the United States was not helpful in securing the recent extension
of the e-commerce moratorium. They point to the uncertainty of the U.S.
position, such as when your deputy, Ambassador Pagan, said it supports
the moratorium ``for now.''
Can we set our partners straight right now by agreeing that the
United States supports a permanent moratorium, which is what Congress
approved in USMCA and 80 countries in the WTO e-commerce negotiations
support?
Answer. I was pleased we were successful in our efforts to extend
the e-commerce moratorium and work program. While the moratorium and
work program enjoy broad support among WTO members, it is clear that
the WTO membership needs to have a more robust discussion about the
future of the moratorium and the impact of the digital economy on
developing members.
Question. One of the main challenges to recommencing meaningful
agriculture talks at the WTO is India's demand to exempt its trade
distorting public stockholding programs. In some years, India's
stockpiles have become so large that it exported subsidized wheat at
discounted prices overseas, which hurt our farmers and those of our
allies in Canada and Japan.
Do you agree it is past time to challenge India's trade distorting
agricultural subsidy programs?
Answer. We understand that India's agricultural policies are
distorting and adversely affecting markets in India and globally.
The United States is actively coordinating with a growing number of
WTO members who are also deeply concerned about India's trade-
distorting agricultural subsidies, including those connected with
public stockholding programs.
We continue to take actions in WTO Committee on Agriculture
meetings, including by registering formal questions of India and
counter-notifying India's domestic support measures, laying a track-
record of our concerns and bringing greater scrutiny to India's
policies.
We will continue to closely monitor India's policies and actions
and continually assess our options for holding India accountable to its
WTO commitments.
Question. Many stakeholders feel that the framework agreements--
particularly farm groups--are not sufficiently ambitious. They are also
worried our partners will not adopt the commitments because we don't
have a plan for dispute settlement. Last year, you said you would not
insist our partners implement IPEF before declaring entry into force.
Will you revisit that decision and now agree that our partners need
to implement any obligations in a framework agreement before we
conclude any such agreement?
Answer. USTR's trade initiatives will provide substantive benefits
to a wide variety of U.S. producers, including agricultural producers.
For example, through the IPEF trade pillar, we are working to produce
mutually beneficial outcomes that advance workers' rights through
strong and enforceable labor standards; improve economic opportunities
for families, farmers and ranchers, and micro-, small-, and medium-
sized enterprises; and promote fair, open, and rules-based trade.
When it comes to farm groups, the trade pillar aims to tackle
persistent barriers for agricultural producers by seeking commitments
from trading partners to facilitate agricultural trade through science
and risk-based decision making and through the adoption of sound and
transparent regulatory practices. According to USDA data, the Biden-
Harris administration has facilitated roughly $21 billion in blocked
agricultural market access through the addressing of non-tariff
barriers like ones being tackled through the trade pillar.
We are committed to ensuring that trading partners implement their
international trade commitments, including those made in U.S. trade
agreements.
Question. The United States and Kenya agreed to discuss standards,
conformity assessment procedures, and technical regulations--commonly
known as TBT commitments--in the context of the STIP negotiations, but
USTR has yet to table any proposals in these areas.
Will USTR table TBT commitments in the STIP negotiations and when?
Answer. In response to concerns expressed by Congress over
problematic WTO decisions under the TBT agreement, as well as concerns
expressed by Congress about the nature of the participation of the
People's Republic of China in standards-setting bodies, USTR has sought
to ensure that any standards commitments address those concerns. USTR
continues to work with Kenya, including by facilitating meetings
between Kenya and U.S. standards-related bodies, to advance common
goals with respect to standards and compliance. We have also been
working with Kenya within the WTO Committee on Technical Barriers to
Trade on issues of common interest.
Question. If so, will USTR also commit to ensuring that any TBT
commitments proposed by the United States reflect the same level of
ambition as found in the TBT chapter of USMCA?
Answer. Please see above.
Question. Stakeholders assert that USTR's decision to support a
TRIPS waiver for COVID vaccines was not a unique instance of agreeing
to waive the interests of U.S. innovators but symptomatic of the
administration's failure to engage on intellectual property rights
generally. Among the issues that stakeholders have flagged where USTR
appears to be inactive are (1) South Africa's proposed copyright law,
(2) India's lack of trade secret protection and proposals to extend
statutory licensing to internet and digital broadcasters, and (3)
Peru's failure to implement all of the intellectual property
commitments in the United States-Peru Trade Promotion Agreement.
Please identify all significant enforcement or high-level
engagement actions taken by USTR during the Biden administration to
press intellectual property protections, including for the three issues
flagged above. (Please note that this question does not consider noting
an issue in a report to constitute significant enforcement or high-
level engagement.)
Answer. On South Africa, USTR has engaged heavily throughout South
Africa's copyright reform process, going back nearly a decade to the
initial stages of the recently passed legislation. Throughout the
process, we have engaged extensively with senior South African
Government representatives, members of Parliament, and other relevant
stakeholders.
Also, USTR has had extensive high-level engagement with India to
raise both the lack of trade secret protection and proposals to extend
statutory licensing to Internet and digital broadcasters, as well as
other high-priority intellectual property (IP) issues. These issues
were raised at the 2024 United States-India Trade Policy Forum led by
Ambassador Tai, and USTR continues to engage on these issues in all
levels of bilateral IP engagement.
In addition, USTR has regularly engaged with Peru on various IP
concerns, such as Peru's lack of preestablished damages for copyright
infringement and trademark counterfeiting and Internet service provider
liability regulations, including through the U.S.-Peru Free Trade
Commission under the United States-Peru Trade Promotion Agreement,
which most recently met in February 2024.
Further details regarding USTR's significant enforcement and high-
level engagement activity are in the 2024 Special 301 report.
Question. Why is USTR not including an intellectual property
chapter in any of the framework negotiations it is undertaking such as
the Indo-Pacific Economic Framework or U.S.-Taiwan Initiative on 21st-
Century Trade?
Answer. We recognize that intellectual property (IP)-dependent
industries can be drivers of employment and economic activity. We
worked with Indo-Pacific Economic Framework partners to develop the
scope for trade pillar negotiations and with Taiwan to develop the
scope for the U.S.-Taiwan Initiative on 21st-Century Trade, and focused
on topics that would enhance our resilient, sustainable, and inclusive
trade. We look forward to continuing discussions with you and your team
on other ways that we can advance IP protections, including through
bilateral engagement with trading partners.
Question. U.S. free trade agreements that contain commitments on
antitrust or competition normally include due process protections such
as right to counsel. These protections are a critical distinguishing
feature between legitimate competition regimes such as the United
States', and arbitrary regimes such as China's which uses it
antimonopoly law as a pretext to attack foreign companies. USTR has
indicated in briefings that including due process protections--many of
which are guaranteed by the constitution--may be inconsistent with
``Bidenomics.''
Does USTR agree that it is important that any negotiated
commitments concerning competition also include due process
protections? If not, please explain in detail USTR's position,
including if appropriate, why ``Bidenomics'' precludes USTR from
pressing constitutionally guaranteed rights in antitrust matters.
Answer. USTR has never indicated in a briefing that due process
protections may be inconsistent with the President's economic agenda.
USTR has, however, noted that the only instance in which concern has
been expressed about constitutional rights is in the competition
chapter. As USTR has explained repeatedly in briefings, the competition
chapter has historically been drafted to reflect the priorities of
large corporate interests, including those that benefit from weak
competition enforcement regimes.
I would note that the President's executive order on competition
states that those harmed by corporate consolidation include farmers,
who ``are squeezed between concentrated market power in the
agricultural input industries--seed, fertilizer, feed, and equipment
suppliers--and concentrated market power in the channels for selling
agricultural products. As a result, farmers' share of the value of
their agricultural products has decreased, and poultry farmers, hog
farmers, cattle ranchers, and other agricultural workers struggle to
retain autonomy and to make sustainable returns.'' Therefore, in this
regard, the President's agenda aligns with the interests of American
farmers, as well as small businesses, workers, and consumers.
As the United States and other governments promote fair
competition, including for the purpose of addressing monopolistic
behavior by nonmarket autocracies, it is important to ensure that our
trade agreements reflect that priority.
______
Questions Submitted by Hon. Maria Cantwell
Question. Japan is a huge market for frozen potatoes from the State
of Washington. Washington growers export approximately $220 million
worth of frozen, dehydrated, or chipped potatoes to Japan each year.
However, American growers continue to face significant obstacles in
gaining market access for fresh ``table-stock'' potatoes in Japan. I
raised this issue in a letter with nine of my colleagues to President
Biden last week during the Japanese Prime Minister's visit to
Washington, DC.
Japan's Ministry of Agriculture, Farming, and Fisheries continues
to delay substantive technical discussions on table stock access. They
have raised phytosanitary concerns, however, the U.S. has a strong
history of exporting fresh potatoes to Asia, including South Korea,
Taiwan, Hong Kong, Singapore, Indonesia, the Philippines, Malaysia, and
Thailand. If this market access for fresh potatoes is achieved, the
U.S. potato industry estimates it will result in an additional $150
million per year in exports.
I appreciate that you have repeatedly raised with the Japanese
Government the need to lower their trade barriers on fresh potatoes and
find a solution for U.S. potato producers. We need a concerted effort
between the USTR and the Department of Agriculture to make progress.
Can you describe the concrete steps you will take to lead Japan to
remove barriers to fresh U.S. potatoes?
Answer. I fully appreciate the importance of opening the Japanese
market to U.S. table-stock potato producers, which is why USTR has
engaged with Japan on this issue many times and has undertaken a number
of efforts to secure access for U.S. fresh table-stock potatoes to
Japan. Following Prime Minister Kishida's state visit in April 2024,
USTR raised this issue with senior officials from the Japanese Ministry
of Agriculture, Forestry, and Fisheries. Additionally, USTR has raised
this issue with Japan in all four meetings of the U.S.-Japan
Partnership on Trade, most recently in December 2023 and in a June 6,
2024, bilateral meeting with Japan's Minister of State Foreign Affairs.
Moving forward, USTR will continue to press the appropriate Japanese
ministries to advance this issue in a timely and science-based manner
in coordination with our colleagues at the U.S. Department of
Agriculture (USDA).
Question. In October, USTR withdrew its support at the WTO for
long-held positions that would have allowed the free flow of data,
protected forced transfer of American technology, and combat data
localization requirements. USTR also dropped reference to countless
digital trade barriers in the 2024 NTE Report (National Trade Estimate
Report on Foreign Trade Barriers) and stopped standing up against
digital protectionism abroad, just as U.S. services exporters are
facing a barrage of harmful barriers and a proliferation of
discriminatory regulatory thresholds around the world.
Business groups across every sector, along with key civil rights
and civil society organizations like the ACLU, have called for USTR to
continue its long tradition of enforcing digital trade rules and
standing up for an open internet. Similarly, you suggested that one
reason for backing out of digital trade negotiations and rescinding
support for strong digital trade commitments at the WTO and IPEF is a
lack of a domestic privacy law.
I wrote the American Privacy Rights Act, a privacy law draft with a
colleague Congresswoman McMorris Rodgers. In my view, this proposal is
fully consistent with existing digital trade rules, such as those in
USMCA, and would not interfere with your ability to replicate those
rules in other trade forums, including the WTO and IPEF.
Do you agree that current privacy proposals like mine, if enacted,
will help you in your negotiations in different trade forums?
Answer. Given the dynamic nature of the digital economy, USTR is
working diligently to ensure that any digital trade rules do not get
ahead of the legislative and regulatory considerations taking place
right now, including the important efforts that you are leading. As the
administration and Congress continue their work on issues critical to
the digital economy, such as privacy and personal data protection, USTR
will take all such actions, including the proposal of the American
Privacy Rights Act, into account in further evolving our trade policy.
In the Biden-Harris administration, USTR has been committed to
digital trade that is inclusive, that protects the privacy of consumers
and workers, that supports U.S. values like freedom of expression and
freedom from discrimination, and that supports environmental
sustainability goals.
Question. When it comes to a foreign country that targets and
blocks U.S. manufactured aircraft, automobiles, or machinery, or raises
barriers to U.S. agricultural products, you have been a strong advocate
for those industries--which in the State of Washington, we really
appreciate. But my State also has major U.S. services exporters. These
businesses and their workers rely on fair treatment by foreign
countries, yet USTR has stopped standing up against digital
protectionism abroad. Many of these other sectors, including aircraft
and automobiles, are highly regulated, yet you are able to work through
trade agreements and resolve disputes.
Given your approach to supporting other sectors and the clear
economic, security, and human rights justifications for upholding open
digital trade, why have you not used these same tools to support U.S.
services exporters and their workers?
How does digital differ from these other regulated sectors? Why is
it that you argue that unfolding regulations in digital are a barrier
to your ability to set appropriate standards in trade, when in these
other sectors, regulations are also always in flux?
Answer. USTR continues to support U.S. services exporters and their
workers through active engagement with trading partners to ensure fair
treatment for U.S. exporters. U.S. services exports in 2023 reached a
record of $999 billion, $71 billion more than in 2022 and $108 billion
more than in 2019. The U.S. trade surplus in services in 2023 was $280
billion, $48 billion more than in 2022.
The digital economy is a rapidly evolving aspect of the entire
economy that includes new and emerging technologies, such as AI, and an
increasing heavy reliance on the use of data, including personal data.
U.S. products and services in the digital economy are largely
unregulated compared to more mature and less dynamic areas of the
economy, and we need to give the administration and Congress their due
policy space in trade agreements to address issues important to the
American people.
Question. The EU's Digital Markets Act targets five U.S. companies
and no European companies, and it does not apply to massive Chinese
technology companies like Huawei, Tencent, Alibaba, or Baidu.
Will you commit to enforcing our trade rights in Europe with
respect to the EU digital regulatory agenda that targets U.S.
companies?
Answer. This administration is committed to ensuring that U.S.
companies are treated fairly by our trading partners and that our
trading partners honor their obligations to the United States. USTR and
interagency colleagues will collaborate to analyze and monitor EU
digital legislative and regulatory developments with that perspective
in mind.
Question. Can you explain why you haven't held to a position that
opposes foreign laws that target U.S. companies and in fact leave
Chinese competitors unregulated? If a reason is U.S. domestic policy
debates, can you be more specific about which U.S. domestic policy
conversation prevents USTR from opposing protectionist policies that
hurt U.S. interests and U.S.-led innovation while benefiting Chinese
companies?
Answer. Through the U.S.-EU Trade and Technology Council, the
administration is working with the EU to preserve U.S. and EU
technological leadership in a range of sectors. As part of this overall
effort USTR is working closely with our European Commission
counterparts to address Chinese nonmarket policies and practices that
unfairly undermine the ability of U.S. and EU workers and the companies
that employ them to compete fairly both at home and abroad.
Question. In 2018, USTR issued tariffs on selected U.S. imports
from China under section 301. In the process of setting the tariffs,
seafood products harvested by fishermen in my State, sent to China for
secondary processing, and then exported back to the United States for
consumption, were improperly included. USTR recognized this error and
permanently excluded some of these products, like salmon and cod, from
the tariffs. However, Bering Sea flatfish products were accidentally
left on the list even though they follow the very same market channel
as salmon and cod. Since that time the U.S. flatfish sector has
successfully applied for and received exclusions from the tariffs five
times.
The most recent exclusion expires on May 31, 2024. However, there
are often gaps in the exclusions which result in market disruptions and
the uncertainty of the process means U.S. fishermen are receiving lower
prices for their products.
Are there plans to revise the section 301 list and potentially
remove these products from that list? If not, would USTR consider
exclusions of a longer duration to remove some of the uncertainty of
this process?
Answer. In a Federal Register notice published at the end of May,
USTR further extended certain exclusions through May 31, 2025. The
extended exclusions include five exclusions for flat fish products. See
89 Fed. Reg. 46955. The exclusions cover all imports under the
following statistical reporting numbers: 0304.83.1015; 0304.83.1020;
0304.83.5015; 0304.83.5020; 0304.83.5090.
______
Questions Submitted by Hon. Robert Menendez
Question. As we discussed at the hearing, it has been reported that
Mexico helps finance the Cuban regime by participating in its medical
missions, which the State Department has identified as a form of forced
labor.
Has USTR reviewed the applicability of USMCA's forced labor
standards to Mexico's decision to host Cuban forced labor?
If USTR does not believe these standards are applicable, please
explain why.
If USTR has not reviewed the applicability of these standards, will
you commit to doing so?
Answer. We are aware of concerns related to Cuban medical
professionals working in Mexico and are tracking this issue closely. We
take all allegations of forced labor seriously and we are committed to
enforcing the relevant obligations under our trade agreements to ensure
that worker rights are upheld.
Question. Does USTR agree with the State Department's
characterization of Cuba's medical missions as forced labor?
If not, please explain.
Answer. In the 2023 Trafficking in Persons Report, the U.S.
Department of State found that ``Cuban nationals working in Mexico,
including medical professionals contracted by the Mexican government,
may have been forced to work by the Cuban Government.'' USTR continues
to work closely with the Department of State on labor issues in U.S.
trade partner countries, including issues related to allegations of
forced labor.
Question. If USMCA's forced labor standards are found to be
applicable to Mexico's use of Cuban forced labor, will USTR commit to
using USMCA's enforcement tools to combat this practice?
If not, please explain why.
Answer. The full implementation and enforcement of the USMCA is one
of my top priorities. We are committed to using the tools available
under the USMCA to ensure that Mexico and Canada provide all the
benefits negotiated for our workers, farmers, ranchers, service
providers, and producers under the agreement.
______
Questions Submitted by Hon. Thomas R. Carper
Question. As Chairman of the Environment and Public Works
Committee, I was encouraged to see your office focus on strengthening
environmental provisions in our trade agreements and putting the
climate crisis, which we have evidence to show is intensifying every
week, at the forefront of your work.
In light of the formation of the White House Climate and Trade Task
Force, how is the administration is working to appropriately use trade
tools and work with our trading partners to address the climate crisis
in ways that foster job creation?
Answer. The ongoing work of the White House Climate and Trade Task
Force was publicly announced by White House Senior Advisor and Climate
Envoy John Podesta in March. The Task Force work is divided into three
priority areas: methodologies and data, potential trade measures, and
other industrial competitiveness policies. This Task Force work
complements USTR's existing efforts to utilize trade tools to address
the climate crisis and support job creation. USTR continues to align
U.S. trade policies and relevant trading partner engagement with
domestic environment and climate efforts. In addition to ongoing
engagement in bilateral and multilateral fora, USTR submitted a recent
U.S. communication to WTO members to advance discussions on practical
ways that members' respective trade-related climate measures can
complement and support efforts to address climate change.
Question. In March 2024, the U.S. Trade Representative's office
released a request for comment on strategies to advance U.S. supply
chain resilience in trade negotiations and related initiatives.
Learnings from the COVID-19 pandemic have shown that trade and
regulatory barriers can adversely impact supply chains, and
specifically medical supply chain resiliency.
How is USTR evaluating the role of trusted trade partners in its
efforts to build supply chain resiliency?
How do you envision incorporating and enforcing such policies in
new forms of trade cooperation you are seeking?
Answer. In furtherance of supply chain resilience, USTR recognizes
the importance of building and strengthening trusted networks among
regional and like-minded trading partners and allies, where consistent
with and supportive of domestic economic policy priorities. When
weighing new strategies or forms of trade cooperation identified
through the public comment process, we will identify and collaborate
with trusted trading partners as appropriate. This collaboration would
include efforts to enhance coordination and alignment on labor and
environmental protections that are critical to supply chain
sustainability.
Question. Highly pathogenic avian influenza (HPAI) is a deadly
disease that has taken a toll on poultry farms on the Delmarva
Peninsula. After the detection of HPAI on a farm in the United States,
farms are subject to a quarantine period to limit the spread of the
disease, before they can return to regular operations and exports.
How are you working with China to relist States eligible for export
after they have cleared the U.S. Department of Agriculture--Animal and
Plant Health Inspection Service required protocols for cleaning and
disinfection after an HPAI detection?
Answer. We understand concerns regarding China's refusal to reopen
the market for products from States that are free of HPAI, consistent
with our bilateral HPAI regionalization protocol. In January 2024, the
Chief Agricultural Negotiator raised this issue in person with his
counterpart at China's Ministry of Agriculture and Rural Affairs. At
the staff level, we continue to press China on this issue at every
opportunity, including through regular consultations through the
consultative mechanism available under the Phase One agreement. At the
same time, we have been working closely with USDA experts to ensure our
efforts are coordinated as we press China at both the technical and
political level to adhere to science- and risk-based standards and
commitments related to trade in poultry products from regions impacted
by HPAI.
Question. Last year I submitted a question for the record asking if
it would be worthwhile to reevaluate the use of section 301 tariffs in
light of implementing some of the marquee pieces of legislation passed
in recent years, including the Bipartisan Infrastructure Law and the
Inflation Reduction Act.
In response you noted that as part of the 4-year review of the
section 301 tariffs, your office is reviewing the effectiveness of the
tariffs in achieving the objectives of the investigation, as well as
the effect of the tariffs on consumers, workers, and the U.S. economy
at large. And as part of this review, USTR is considering the existing
tariffs structure and how to make tariffs more strategic in light of
impacts on sectors of the U.S. economy as well as the goal of
increasing domestic manufacturing.
Can you provide an update on the status of the review? How are you
considering the needs of domestic manufacturers and others hard at work
building out our infrastructure and working to further the energy
transition?
Would you agree that a comprehensive robust and transparent
exclusion process that balances the administration's economic,
environmental, and social goals with countering China's unfair trade
practices would create an effective trade policy with greater public
support?
Answer. USTR has issued a comprehensive report on the statutory
review of the tariff actions in the section 301 investigation of
China's Acts, Policies, and Practices Related to Technology Transfer,
Intellectual Property, and Innovation.\4\ In the report, I recommended
a series of actions that the President could take to pursue the
objectives of the 301 investigation to obtain the elimination of
China's acts, policies, and practices, including modifications to
increase tariffs on specific products in strategic sectors. Many of the
sectors included are targeted by China for dominance or are sectors
where the U.S. has recently made significant investments through
initiatives such as the Inflation Reduction Act and the Bipartisan
Infrastructure Law. The sectors include: electric vehicles; lithium-ion
batteries; certain critical minerals; ship-to-shore cranes;
semiconductors; solar cells (whether or not assembled into modules);
and steel and aluminum products. The report also recommends the
establishment of an exclusion process targeting machinery used in
domestic manufacturing and recommends 19 exclusions for certain solar
manufacturing equipment, with the goal of supporting investment in U.S.
solar manufacturing.
---------------------------------------------------------------------------
\4\ https://ustr.gov/issue-areas/enforcement/section-301-
investigations/section-301-china-technology-transfer/china-section-301-
tariff-actions-and-exclusion-process/four-year-review.
Having considered my advice, President Biden directed me to take
action by proposing substantial tariff increases on targeted products
and establishing an exclusion process for machinery used in domestic
manufacturing. Consistent with the President's direction, in a Federal
Register notice published on May 28, 2024, I proposed certain
modifications to the tariff actions, including increasing section 301
tariffs on products in the above sectors.\5\ Additionally, the notice
establishes the framework for an exclusion process for machinery and
proposes temporary exclusion for certain solar manufacturing equipment.
---------------------------------------------------------------------------
\5\ https://ustr.gov/sites/default/files/
89%20FR%2046252%20(May%2028%202024).pdf.
On September 13th, my office announced the final modifications.\6\
The proposed modifications announced in May 2024 were largely adopted,
with several updates to strengthen the actions to protect American
businesses and workers from China's unfair trade practices following
the review of more than 1,100 comments from the public. The updates
included new timing and rates for tariffs on face masks, medical
gloves, needles, and syringes; an exclusion for enteral syringes; a
proposal regarding coverage of additional tungsten, wafers, and
polysilicon tariff lines; an exclusion for ship-to-shore cranes ordered
prior to May 14, 2024; an expansion of the scope of the machinery
exclusions process to include five additional tariff lines; and
modification of the coverage of proposed exclusions for solar
manufacturing equipment.
---------------------------------------------------------------------------
\6\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2024/september/ustr-finalizes-action-china-tariffs-following-
statutory-four-year-review.
These finalized tariff increases will target the harmful policies
and practices of the People's Republic of China that continue to impact
American workers and businesses. These actions underscore the Biden-
Harris administration's commitment to standing up for American workers
---------------------------------------------------------------------------
and businesses in the face of unfair trade practices.
Information on the revisions to modifications are detailed in
USTR's Federal Register notice.
Question. The Bipartisan Infrastructure Law includes important
provisions to ensure that American infrastructure is built by American
companies, workers, and that components that support infrastructure
products are made in America.
In 2022, Congress passed legislation to help build out our domestic
manufacturing base and to combat climate change, as we passed the CHIPS
and Science Act and the Inflation Reduction Act. I understand you have
been working with U.S. allies on trade measures to facilitate the
implementation of the Inflation Reduction Act.
How are you working with U.S. manufacturers, workers, and others to
ensure they have the resources needed to successfully and swiftly
implement the Bipartisan Infrastructure Law and its robust domestic
content provisions?
Answer. Strengthening our supply chains is a critical component of
the Biden-Harris administration's efforts to advance our worker-
centered trade policy, create sustainable economic growth, ensure that
our economy is more resilient in the face of supply shocks, and enhance
U.S. economic security. This is why the administration is undertaking a
whole-of-government effort to proactively strengthen domestic
manufacturing and to secure trusted supply chains through strategic
arrangements with trusted partners (friend-shoring) and with regional
partners (near-shoring). The President is using all the tools at his
disposal, including new authorities under the CHIPS and Science Act,
Inflation Reduction Act, and Bipartisan Infrastructure Law, to
incentivize the reshoring and domestic expansion of critical supply
chains. Enduring resilience will require new investments in
infrastructure, new incentives to increase the supply of key inputs,
and new forms of cooperation with allies and trading partners to
prevent and withstand supply chain disruptions and mitigate risks of
price spikes and volatility that could contribute to inflationary
dynamics. USTR endeavors to empower American workers and businesses,
large and small, that are recalibrating and rebuilding secure and
trusted supply chains for resilience, through a new approach to trade
and investment policy--one that is supported by innovative strategies,
tools, and mechanisms, and also integrated with domestic economic
policy to position U.S. manufacturing and services for continued
leadership and competitiveness.
______
Questions Submitted by Hon. Sherrod Brown
Question. As part of the renewal of USMCA, it will be critical to
revisit the automotive rules of origin to address growing concerns in
the automotive supply chain, particularly threats from countries
seeking to circumvent duties like China, that present challenges to the
United States auto industry and auto workers.
Does USTR intend to revisit the automotive rules of origin to
address the potential for countries outside of the agreement to exploit
the current rules? How does USTR intend to examine potential problems
such as Chinese EV companies setting up production facilities in
Mexico, or the need for a smelt and cast provision for aluminum
automotive parts to prevent Chinese and Russian aluminum from entering
the U.S. through Mexico?
Answer. As you know, one of the principal outcomes of the USMCA
negotiation was much stricter rules of origin for North American trade
in automobiles, to better ensure that preferential tariff treatment is
only accorded to automobiles substantially manufactured in the United
States and North America, and that the agreement's benefits accrue to
U.S. and North American workers. At the same time, we are clear-eyed
that China has developed and implemented a plan to target the EV sector
for dominance through a wide and evolving range of nonmarket-based
policies and practices applied across the entire EV supply chain, and
is looking to invest in EV production outside of China to circumvent
section 301 duties. We will continue to consider any necessary changes
to the USMCA rules to ensure the competitiveness of the North American
automotive and aluminum industries and that the USMCA's benefits
continue to accrue to U.S. and North American workers. In addition,
USTR is assessing other potential policy responses, given that the
USMCA duty preference is only one element of Chinese automakers'
calculus in shifting production abroad.
Section 301 tariffs on Chinese goods have promoted diversification
of supply chains away from China, thereby protecting U.S. firms from
forced technology transfer. Those tariffs have also encouraged Chinese
firms to set up operations abroad, whether in the United States or with
our trading partners. Rules of origin have left openings for those
Chinese firms to benefit from Most-Favored Nation (MFN) treatment
(avoiding section 301 tariffs) or preferential treatment under free
trade agreements (avoiding MFN tariffs). Given the openness of our
market to goods from key trading partners and to foreign investment, we
will need to work closely together with Congress on evaluating and
addressing these challenges.
Question. What are you doing to address Chinese and Russian-origin
aluminum entering the United States through Mexico? What steps are you
taking to work with Mexico to develop and implement an effective
aluminum monitoring system?
Answer. Maintaining a viable aluminum industry is essential to U.S.
national security. Aluminum helped fuel American industrialization and
build the American middle class.
On July 10, 2024, President Biden and President of Mexico Andres
Manuel Lopez Obrador announced actions to jointly prevent the evasion
of tariffs on aluminum and steel. Under this agreement, in order to
enter the United States free of section 232 tariffs, aluminum imports
from Mexico must not contain primary aluminum smelt or cast in Belarus,
China, Iran, or Russia.
My staff and I have repeatedly pressed Mexico to ensure greater
transparency with regards to its official trade statistics for aluminum
and steel, including through the publication of these data in Mexico's
Tariff Information System (SIAVI) and will continue to do so.
______
Questions Submitted by Hon. Michael F. Bennet
african growth and opportunity act
Question. As China increases its influence in sub-Saharan Africa,
the United States must renew the African Growth and Opportunity Act
(AGOA) to boost U.S. investment in the region and provide an
alternative to Beijing's initiatives and investments. I am glad to
cosponsor Senator Coons's bill to reauthorize AGOA, which expires in
September 2025. I am also glad President Biden has called on Congress
to reauthorize and ``modernize'' AGOA. But the longer we wait to
reauthorize AGOA, the less time we give U.S. firms to make decisions to
invest in sub-Saharan Africa. Waiting until the last minute will weaken
AGOA's effectiveness.
What specific improvements to AGOA would the administration like to
see? How would a failure to renew AGOA undermine the administration's
efforts to advance U.S. interests and influence in sub-Saharan Africa?
Answer. For the last 2 decades, AGOA has been a positive force to
grow Africa's extraordinary economic potential. It has made a
difference for millions of Africans by opening new doors for trade and
investment, creating hundreds of thousands of jobs, and promoting
regional integration. It has also incentivized many African Governments
to undertake key political and economic reforms.
The Biden-Harris administration strongly supports the timely
reauthorization and modernization of AGOA. Reauthorization requires an
act of Congress, and I am committed to working with Members of
Congress, African partners, and other key stakeholders to enhance AGOA
and make the program as impactful as possible.
As noted in the 2024 Biennial Report on Implementation of AGOA,
this includes supporting continental integration under the AfCFTA;
improving utilization rates; exploring ways to deepen economic
engagement post-graduation; and providing additional tools for
assessing and reinstating eligibility.
wto and china
Question. Last month, China requested World Trade Organization
(WTO) dispute consultations over the clean energy tax credits Congress
passed as part of the Inflation Reduction Act. China claims these
credits discriminate against Chinese goods and violate key
international trade rules. But over the past decade, China has made
concerted efforts to evade or undermine these rules, most recently when
it comes to electric vehicle dumping. You have noted that China
``continues to use unfair, nonmarket policies and practices to
undermine fair competition and pursue the dominance of [Chinese]
manufacturers both in [China] and in global markets.''
How can we use existing venues to build an evidentiary base
demonstrating China's consistent violation of international trade
rules? Are there legislative reforms that would support efforts to
counter China?
Answer. USTR has been working intensively with key trading partners
in a variety of venues to identify China's nonmarket policies and
practices, assess their impact, and design more effective responses,
including in the G7,\7\ the U.S.-EU Trade and Technology Council
(TTC),\8\ and with diverse like-minded partners.\9\ Regrettably, the
primary multilateral venue is the World Trade Organization (WTO), which
has undermined U.S. efforts to defend U.S. workers and businesses from
China's nonmarket policies and practices and is widely acknowledged to
have been ineffective in disciplining those policies and practices. As
we explained in the 2023 USTR Report to Congress on China's WTO
Compliance, WTO rules and the WTO's dispute settlement mechanism over
the years have not proven effective in addressing the serious issues
that arise from a WTO member's state-led, nonmarket approach to the
economy and trade that systematically disadvantages that member's
trading partners and broadly conflicts with the fundamental, market-
oriented underpinnings of the WTO system. Despite the extensive
enforcement efforts of the United States and other WTO members, China
has been able to continue to pursue its predatory nonmarket policies
and practices, which WTO rules and the dispute settlement mechanism
have proven unable to discipline effectively.
---------------------------------------------------------------------------
\7\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/20/g7-leaders-statement-on-economic-resilience-and-economic-
security/.
\8\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/31/u-s-eu-joint-statement-of-the-trade-and-technology-council-
2/.
\9\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2023/june/joint-declaration-against-trade-related-economic-
coercion-and-non-market-policies-and-practices.
Domestically, the Biden administration and USTR have been intensely
focused on using available trade tools to defend U.S. workers and
businesses from China's nonmarket policies and practices and to invest
in American workers and businesses to rebuild our manufacturing and
supply chain strength and resilience. I would welcome the chance to
work with you on ways to support our efforts to counter and more
effectively address the threat from China.
de minimis reform
Question. When Congress passed the de minimis law that allows for
tax and duty-free treatment for certain shipments valued under $800 per
person, per day, it was meant to cut red tape for small business and
reduce costs to the American consumer. As time has passed, the de
minimis law has been used as a loophole for bad actors to skirt laws on
forced labor and drug trafficking, among others.
What is your view on the existing de minimis law? Would you agree
that we must reform the law to better align with the United States'
values and standards on labor, environment, and national security?
Answer. Yes. USTR has serious concerns about the exploitation of
the de minimis exemption to circumvent laws and regulations governing
health and safety, labor rights, and environmental protections. USTR
also has concerns about the quality of the data that is being provided
to government officials seeking to enforce the law.
In addition, I would note that, on September 13, 2024, the
administration announced specific administrative actions to address de
minimis--including a notice of proposed rulemaking by CBP that would
exclude all shipments covered by section 301, section 201, or section
232 trade enforcement actions; a notice of proposed rulemaking by CBP
to require specific, additional data for de minimis shipments; and a
final rule from the Consumer Product Safety Commission requiring
importers of consumer products to file Certificates of Compliance
electronically with CBP and CPSC at the time of entry, including for de
minimis shipments--and urged Congress to pass legislation this year to
reform the de minimis exemption comprehensively to further protect
American consumers, workers, and businesses.
______
Questions Submitted by Hon. Mark R. Warner
Question. As you know, Virginia is a top poultry-producing State,
and the industry is critical to the Commonwealth's economy, employing
approximately 18,000 Virginians and providing a direct economic impact
of $5.8 billion to the State economy. Unfortunately, the poultry
industry has faced numerous challenges in recent years amidst one of
the worst outbreaks of highly pathogenic avian influenza (HPAI) to hit
the U.S. As this outbreak has persisted, it has had an uneven impact on
commercial flocks in various States. In Virginia, it has been over a
year since HPAI has been detected in a commercial flock.
However, despite the U.S. Department of Agriculture's (USDA)
rigorous monitoring regime confirming the safety of Virginia's
commercial poultry industry, China continues to restrict imports of
Virginia poultry products. This appears to be a case where China is
ignoring the science and defying their trade obligations under the 2020
Phase One trade agreement.
As of this writing, more than 30 States are banned from exporting
poultry products into China, including Virginia. This ban remains even
though Virginia's commercial poultry flocks have been free of HPAI for
over a year.
How has USTR been engaging with USDA and the Chinese Government on
HPAI restrictions and what progress has been made towards reopening the
Chinese market for American poultry producers, including those in
Virginia?
Answer. We understand concerns regarding China's refusal to reopen
the market for products from States that are free of HPAI, consistent
with our bilateral HPAI regionalization protocol. In January 2024, the
Chief Agricultural Negotiator raised this very issue in person with his
counterpart at China's Ministry of Agriculture and Rural Affairs. At
the staff level, we continue to press China on this issue at every
opportunity, including through regular consultations through the
consultative mechanism available under the Phase One agreement. At the
same time, we have been working closely with USDA experts to ensure our
efforts are coordinated as we press China at both the technical and
political level to adhere to science- and risk-based standards and
commitments related to trade in poultry products from regions impacted
by HPAI.
Question. What tools have you considered using if China continues
the seemingly willful violation of their obligations under the Phase
One agreement?
Answer. We continue to use the consultation mechanisms available
under the Phase One agreement to address these types of concerns
directly with China as they arise. In addition, our strategy has
expanded to include working with allies and partners on China-related
issues of common concern while also pursuing the vigorous defense of
our values and economic interests from the negative impacts of China's
unfair, nonmarket policies and practices.
Question. Can I get a commitment that you will work with me and
other members representing affected States to ensure China follows
through on their obligations?
Answer. I look forward to working with you and other members on
this.
Question. China has spent years tightening its grip on the world's
supply of key critical minerals and processing and refining
technologies. For dozens of critical minerals, China controls the
entire value chain from mining to refining and processing after years
of strategic investment in key industries.
Recent legislation including the Infrastructure Investment and Jobs
Act, CHIPS and Science Act, and Inflation Reduction Act is helping us
take a massive step forward in reshoring critical supply chains for
technologies like semiconductors, EV batteries, solar panels, etc.
However, the investments made by these bills--while transformational--
will not be enough to fully shake our dependence on China for the
critical materials and technologies we require for these products.
To address this issue, the U.S. needs a comprehensive strategy that
includes multilateral engagement with our allies to secure critical
mineral supply chains. One market that is ripe for additional U.S.
engagement is Africa. The continent is home to numerous untapped
reserves of critical minerals, including a significant quantity of the
world's manganese, platinum, chromium, cobalt, graphite, and copper
reserves.
Currently, our commercial relationship in sub-Saharan Africa is
dominated by the African Growth and Opportunity Act (AGOA), which is
set to expire in 2025. As Congress considers AGOA reauthorization, I'm
intrigued by the possibility of updating the agreement to help
encourage more trade between the U.S. and AGOA-
eligible nations in the critical minerals sector.
Such a provision could incentivize non-Chinese investments in both
mining and processing in eligible African countries, which could help
drive infrastructure investment, employment creation, and revenue
generation. Including a critical minerals-specific provision in AGOA
could have multiple benefits, including building resilience in the U.S.
critical mineral supply chain, deepening U.S. economic relationships on
the continent, and providing a significant alternative to China.
How is USTR engaging with African nations to facilitate trade
relating to critical minerals and combat Chinese influence on the
continent?
Do you believe AGOA reauthorization is an appropriate place to
address critical minerals trade between the U.S. and African nations?
Based on your conversations with our African trading partners do you
believe there would be significant interest in addressing critical
minerals trade in AGOA?
Do you believe a critical minerals agreement with AGOA
beneficiaries could incentivize nations to maintain eligibility for the
program and help reduce Chinese influence in the region?
Answer. Strengthening our supply chains is a critical component of
the Biden-Harris administration's efforts to advance our worker-
centered trade policy, create sustainable economic growth, and ensure
that the global trade and economic system is more resilient in the face
of supply shocks. We are undertaking a whole-of-
government effort to proactively strengthen supply chain resilience and
mitigate the impact of disruptions. This includes addressing supply
chain risks arising from unfair trade practices, creating opportunities
for businesses to increase sourcing options, including and especially
those located domestically, facilitating the movement of supply chains
to trusted partners through friend-shoring and near-shoring, and
strengthening labor standards and environmental protections governing
global supply chains. The administration remains committed to exploring
ways to work more closely with African partners on critical minerals
and supply chain resilience more broadly, in a way that advances U.S.
values, including labor rights and environmental protections.
Question. The United States and Australia have for decades enjoyed
a deep and long-standing trade and investment relationship, underpinned
by the U.S.-Australia Free Trade Agreement. Recently, Australia's
Ministry of Culture proposed mandatory screen content requirements on
American streaming services. The proposed requirements could place
significantly greater obligations on American streaming services and
curb foreign investment in Australia and consumer access to Australian
content.
Do you believe Australia's proposed mandatory screen content
requirements are permissible under the U.S.-Australia FTA?
Answer. We are closely tracking the Government of Australia's
consideration of domestic expenditure requirements for streaming
services. We have engaged the government on this issue, and have made
clear our expectation that any legislation in this space adhere to
rules set out in our FTA.
Question. How have you engaged with the Government of Australia on
this matter? Will you keep my office informed of progress on USTR's
engagements with Australia?
Answer. We have engaged the government on this issue, and have made
clear our expectation that any legislation in this space adhere to
rules set out in our FTA. My office will keep yours informed on these
engagements.
______
Questions Submitted by Hon. Sheldon Whitehouse
Question. On April 16, 2024, White House Senior Advisor John
Podesta announced the formation of the White House Climate and Trade
Task Force.
What is the status of this task force? Has it started on its three
workstreams? And who are the members of this task force?
Answer. The White House Climate and Trade Task Force was publicly
announced in March by White House Senior Advisor and Climate Envoy John
Podesta. In addition to USTR, it includes EOP components: NSC
(international economics and climate and trade staff), NEC, Climate
Policy Office, OSTP, OVP, CEQ, OMB, and CEA, as well as Treasury,
State, EPA, DOE, Commerce, DOD, GSA, DOT, EXIM, DFC, USTDA, USDA, and
NASA (satellite monitoring of emissions). It is currently active and
will operate through three priority areas: methodologies and data,
potential trade measures, and other industrial competitiveness
policies.
Question. The Biden administration has rightly opposed adding
investor-state dispute settlement (ISDS) provisions to new trade
agreements. But foreign corporations continue to exploit ISDS through
many existing agreements to the detriment of workers, consumers, and
small businesses.
Numerous countries have recently decided to exit ISDS-enforced
agreements. For example, the UK and European Union states are leaving
the Energy Charter Treaty, Honduras exited the World Bank's ISDS
arbitration forum, and Ecuador just voted in a referendum to affirm its
ISDS exit.
Experts have detailed viable strategies \10\ for the U.S. to
eliminate ISDS from existing investment and free trade agreements, and
I joined colleagues on May 2, 2023 \11\ and November 1, 2023 \12\ in
urging you to investigate and pursue all options at your disposal to
achieve this. I appreciate that you are actively looking into it.
---------------------------------------------------------------------------
\10\ Daniel Rangel, Lori Wallach, Ladan Mehranvar, Alvaro Santos,
and Mario Osorio, October 2023, ``Turning the Tide: How to Harness the
Americas Partnership for Economic Prosperity to Deliver an ISDS-Free
Americas,'' Center for the Advancement of the Rule of Law in the
Americas at Georgetown Law, Columbia Center on Sustainable Investment,
Rethink Trade, and American Economic Liberties Project, https://
rethinktrade.org/isds-freeamericas-papermain/.
\11\ Letter to Ambassador Tai and Secretary Blinken, May 2, 2023,
https://www.warren.
senate.gov/imo/media/doc/
2023.05.02%20Letter%20to%20Tai,%20Blinken%20re%20elimination
%20of%20ISDS.pdf.
\12\ Letter to Ambassador Tai and Secretary Blinken, November 1,
2023, https://www.warren.
senate.gov/imo/media/doc/
2023.11.01%20Letter%20from%20Warren,%20Whitehouse,%20Cohen
%20to%20USTR,%20State.pdf.
Can you provide an update on the status of your investigation into
how to effectively remove ISDS provisions from existing agreements?
---------------------------------------------------------------------------
Have you discussed ISDS removal with our trading partners?
Answer. The Biden-Harris administration does not believe
corporations should receive special tribunals in trade agreements that
are not available to other organizations, and the President opposes the
ability of private corporations to attack labor, health, and
environmental policies through ISDS. I share these views, and the
United States is not currently pursuing any trade or investment
agreements that would establish ISDS.
USTR has focused instead on working with our trading partners to
advance
worker-centered trade policies that deliver sustainable and inclusive
economic growth and benefit workers, consumers, and businesses of all
sizes.
Over the past several months, USTR has consulted with a range of
stakeholders on this issue, including representatives from labor
unions, environmental groups, and the business community. I also look
forward to working with you and other members of Congress, including
those on our committees of jurisdiction, to identify the best path
forward with respect to ISDS provisions in our existing agreements,
recognizing the role of Congress in such matters. To the extent that
our trading partners have engaged with us on our investment commitments
with them, such discussions generally relate to the standards of
investment protection in the context of ISDS.
______
Questions Submitted by Hon. Maggie Hassan
Question. Please provide information on the scope of USTR's
involvement in discussing LOGINK with other countries involved in the
IPEF negotiations, and details on the discussions. If any of that
information falls under the Federal classification system, please
provide such information to cleared members of my staff in a manner
consistent with the level of classification and all applicable laws and
regulations.
Answer. We are aware of concerns related to LOGINK. We would be
happy to provide further information to cleared staff regarding our
engagement on this matter
Question. USTR is negotiating critical minerals agreements with the
EU and the UK and has negotiated a critical minerals agreement with
Japan. Cooperation with our allies is important, as is ensuring that
American companies have access to critical minerals.
What lessons has USTR taken away from these negotiations that could
be used to inform future trade agreements, including potentially with
Ukraine?
Answer. The ongoing and concluded Critical Minerals Agreement
negotiations have demonstrated the importance of working with allies
and partners to support more resilient, diverse supplies in critical
sectors and promote high standards with respect to both labor and the
environment. We are working with Ukraine through our Trade and
Investment Council to lay the foundation for a sustainable economic
recovery and long-term reconstruction including business climate
reforms.
Question. How will agreements be implemented in a way that makes
them durable enough to provide confidence to U.S. companies and our
allies?
Answer. USTR remains committed to implementing agreements it
reaches, including the U.S.-Japan Critical Minerals Agreement, in a
manner that achieves our common goal of fostering secure, sustainable,
and equitable supply chains in critical minerals.
______
Question Submitted by Hon. Catherine Cortez Masto
Question. Titanium sponge is a critical material for U.S. national
security needs that is 100-percent imported. Nearly all imports come
from our key ally Japan, yet the U.S. applies a 15-percent tariff on
these imports, which harms downstream producers in the United States.
This counterproductive tariff threatens American jobs and national
security by driving up costs for American manufacturers who must
compete with those in China and Russia. I have introduced bipartisan
legislation called the Securing America's Titanium Manufacturing Act to
remove this tariff.
Does the administration support my legislation to remove this
tariff?
Answer. I understand your concerns regarding the lack of domestic
production of titanium sponge, the impact of the existing 15-percent
tariff rate on American manufacturers, and reliance on imports from our
key ally Japan and other countries. My team is carefully assessing this
issue and welcomes engagement with members of Congress and affected
stakeholders on the matter.
______
Questions Submitted by Hon. Elizabeth Warren
Question. You and President Biden have opposed the inclusion of
investor-state dispute settlement (ISDS) in future trade and investment
agreements, another sign that the Biden administration is reorienting
trade policy to work for consumers, workers, and small businesses and
not the largest corporations. Yet those corporate interests continue to
take advantage of ISDS provisions in existing trade and investment
agreements, sticking taxpayers with the bill and extorting U.S. trading
partners. Countries as diverse as Germany and Honduras are recognizing
the threat posed to necessary public policy by ISDS and have begun to
extricate themselves from ISDS liability.\13\ In fact, you reportedly
discussed ISDS with your Colombian counterpart in a March meeting.\14\
---------------------------------------------------------------------------
\13\ The Guardian, ``UK quits treaty that lets fossil fuel firms
sue governments over climate policies,'' Arthur Neslen, February 22,
2024, https://www.theguardian.com/environment/2024/feb/22/uk-quits-
treaty-that-lets-fossil-fuel-firms-sue-governments-over-climate-
policies?utm_term=
65d738703b7eedbf621e439f80513337; ICSID, ``Honduras Denounces the ICSID
Convention,'' press release, February 29, 2024, https://
icsid.worldbank.org/news-and-events/communiques/honduras-denounces-
icsid-convention.
\14\ Office of the U.S. Trade Representative, ``Joint Statement
from the United States and Colombia,'' press release, March 8, 2024,
https://ustr.gov/about-us/policy-offices/press-office/press-releases/
2024/march/joint-statement-united-states-and-colombia.
It is clear that the United States must also begin the process of
disentangling itself from ISDS liability, and experts have provided
detailed blueprints for how the United States could achieve this.\15\
Last year, I was joined by several colleagues in urging you to
investigate and pursue all options at your disposal to removing ISDS
from U.S. trade and investment agreements,\16\ and you shared at the
April 17th Finance Committee hearing that you are ``looking at this
question actively right now,''\17\ which I appreciate.
---------------------------------------------------------------------------
\15\ Rethink Trade, ``Turning the Tide: How to Harness the Americas
Partnership for Economic Prosperity to Deliver an ISDS-Free Americas,''
October 2023, https://rethinktrade.org/wp-content/uploads/2024/03/
ISDS_Report_Tides_03.12.2024.pdf.
\16\ Letter from Senator Warren and colleagues to Ambassador Tai
and Secretary Blinken, November 2, 2023, https://www.warren.senate.gov/
imo/media/doc/2023.11.01%20Letter%20from
%20Warren,%20Whitehouse,%20Cohen%20to%20USTR,%20State.pdf; letter from
Senator Warren and colleagues to Ambassador Tai and Secretary Blinken,
May 2, 2023, https://www.
warren.senate.gov/imo/media/doc/
2023.05.02%20Letter%20to%20Tai,%20Blinken%20re%20elim
ination%20of%20ISDS.pdf.
\17\ CQ, ``Senate Finance Committee Holds Hearing on U.S. Trade
Policy Agenda,'' April 17, 2024, https://plus.cq.com/doc/
congressionaltranscripts-7991639?5.
What is the status of your review of the process by which the
United States can withdraw itself from ISDS liability under existing
---------------------------------------------------------------------------
trade and investment agreement?
What has been the content and tone of your engagement with U.S.
trading partners--such as Colombia--regarding ISDS?
Would you consider forming a working group under the umbrella of
the Americas Partnership for Economic Prosperity (APEP) specifically
aimed at reviewing and assessing options for removing ISDS from
existing pacts among APEP members?
Answer. The Biden-Harris administration does not believe
corporations should receive special tribunals in trade agreements that
are not available to other organizations, and the President opposes the
ability of private corporations to attack labor, health, and
environmental policies through ISDS. I share these views, and the
United States is not currently pursuing any trade or investment
agreements that would establish ISDS.
USTR has focused instead on working with our trading partners to
advance worker-centered trade policies that deliver sustainable and
inclusive economic growth and benefit workers, consumers, and
businesses of all sizes. The Americas Partnership is a mechanism for
regional cooperation that will operate alongside our existing free
trade agreements in the hemisphere.
Over the past several months, USTR has consulted with a range of
stakeholders on this issue, including representatives from labor
unions, environmental groups, and the business community. I also look
forward to working with you and other members of Congress, including
those on our committees of jurisdiction, to identify the best path
forward with respect to ISDS provisions in our existing agreements,
recognizing the role of Congress in such matters. To the extent that
our trading partners have engaged with us on our investment commitments
with them, including Colombia, such discussions generally relate to the
standards of investment protection in the context of ISDS.
Question. The Biden administration has taken several steps to
address high prices and anticompetitive practices within the
pharmaceutical sector to check corporate abuses and lower health-care
costs. USTR has taken steps in alignment with these domestic policies,
including steps to ensure that corporate interests are not prioritized
over rational trade policy and international commitments.
Inequitable access to COVID-19 medicines needlessly prolonged the
pandemic, costing lives and exacerbating economic losses.\18\ The
United States supported the WTO's COVID-19 vaccine waiver,
acknowledging that pharmaceutical companies' patent protections should
not be a barrier to addressing urgent public health needs.\19\
---------------------------------------------------------------------------
\18\ See e.g., Health Place, ``Global inequities in access to
COVID-19 health products and technologies: A political economy
analysis,'' Deborah Gleeson et al., September 2023, https://
www.ncbi.nlm.nih.gov/pmc/articles/PMC10247888/.
\19\ Office of the U.S. Trade Representative, ``Statement from
Ambassador Katherine Tai on the COVID-19 Trips Waiver,'' press release,
May 5, 2021, https://ustr.gov/about-us/policy-offices/press-office/
press-releases/2021/may/statement-ambassador-katherine-tai-covid-19-
trips-waiver.
How are you approaching ensuring countries are able to utilize
compulsory licensing and other mechanisms to respond to health crises,
---------------------------------------------------------------------------
including during future pandemics?
Answer: Under the Biden-Harris administration, the United States
has made it clear that it respects its trading partners' rights to
grant compulsory licenses in a manner consistent with the provisions of
the World Trade Organization (WTO) Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS Agreement) and the Doha
Declaration. The United States also recognizes that the TRIPS Agreement
provides for additional flexibilities, including in public health
emergencies and other circumstances of extreme urgency within a
member's territory. Article 31 of the TRIPS Agreement establishes
requirements that must be met with respect to compulsory licenses.
Importantly, a member choosing to issue a compulsory license may waive
some of these requirements in certain circumstances. For example, in
cases of national emergency or extreme urgency or in cases of public
noncommercial use, members may waive the requirement to seek prior
authorization from the patent holder before issuing a compulsory
license. In addition, under Article 31bis, the requirement that
compulsory licenses must be authorized predominantly for the supply of
the member's domestic market may be waived in certain circumstances.
Recognizing that members with insufficient pharmaceutical manufacturing
capacities could face difficulties in making effective use of
compulsory licensing, Article 31bis and its related Annex set forth a
system whereby such members can import from another member
pharmaceutical products produced subject to a compulsory license.
It is also important to note that work on public health and
pandemic preparedness issues is continuing not just in the TRIPS
Council, but across the WTO, including under the June 2022 Ministerial
Declaration on the WTO Response to the COVID-19 Pandemic and
Preparedness for Future Pandemics. This declaration directs multiple
WTO bodies to analyze lessons that have been learned and challenges
experienced during the COVID-19 pandemic. The Abu Dhabi Ministerial
Declaration adopted at the Thirteenth Ministerial Conference (MC13) in
March 2024 recalled the June 2022 Ministerial Declaration on the WTO
Response to the COVID-19 Pandemic and Preparedness for Future Pandemics
and encouraged the relevant WTO bodies to continue their work, to which
the United States is contributing.
Finally, the Biden-Harris administration has continued its policy
of declining to call out countries for exercising TRIPS flexibilities,
including with respect to compulsory licenses, in a manner consistent
with TRIPS obligations.
______
Questions Submitted by Hon. John Cornyn
Question. China has been aggressively signing trade and economic
agreements across the Indo-Pacific, Latin America, and Africa,
including the Regional Comprehensive Economic Partnership (RCEP). China
also applied to join the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP). I am concerned about China's growing
influence in global trade.
Are you concerned that the U.S. is losing leverage to set trade
terms in the region because we are not negotiating free trade
agreements?
Do you agree that free trade agreements with countries in the Indo-
Pacific would help the U.S. counter China's influence?
Are your policies creating greater trade opportunities for China
that will disadvantage U.S. firms?
Answer. We are working with key trading partners, and also
regionally and multilaterally, to find solutions to the many serious
problems posed by China's state-led, nonmarket approach to the economy
and trade. USTR has been working intensively with key trading partners
in a variety of venues to identify China's nonmarket policies and
practices, assess their impact, and design more effective responses,
including in the G7,\20\ the U.S.-EU Trade and Technology Council
(TTC),\21\ and with diverse like-minded partners.\22\ The United States
is also holding discussions with many other like-minded trading
partners, including in the Indo-Pacific region, on how to strengthen
our existing trade relationships. In the current negotiation regarding
a further agreement under the U.S.-Taiwan Initiative on 21st-Century
Trade, the United States and Taiwan are seeking to adopt provisions to
collaborate on ways to address unfair, anticompetitive nonmarket
policies and practices. Given that China's approach to the economy and
trade poses so many serious risks and potential harms, it is in the
United States' interest to enhance our trade relationships with like-
minded economies.
---------------------------------------------------------------------------
\20\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/20/g7-leaders-statement-on-economic-resilience-and-economic-
security/.
\21\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/31/u-s-eu-joint-statement-of-the-trade-and-technology-council-
2/.
\22\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2023/june/joint-declaration-against-trade-related-economic-
coercion-and-non-market-policies-and-practices.
Question. Last year I submitted a question for the record asking
what it would take to restart and reform the section 301 exclusions
process. In your response you noted ``Within the 4-year review, USTR is
reviewing the overall structure of the tariffs, including which
products should be subject to additional duties . . . and that USTR
continues to consider whether additional exclusion processes may be
---------------------------------------------------------------------------
appropriate.''
What is the administration's position on restarting and reforming
the section 301 exclusions process?
Can you provide an update on the administration's timeline for
completing the review of the section 301 tariffs on products from
China, which has been ongoing for nearly 2 years? Will there be an
announcement this year?
Answer. USTR has issued a comprehensive report on the statutory
review of the tariff actions in the section 301 investigation of
China's Acts, Policies, and Practices Related to Technology Transfer,
Intellectual Property, and Innovation. In the report I recommended a
series of actions to the President, including modifications to increase
tariffs on specific products in strategic sectors. Many of the sectors
are targeted by China for dominance or are sectors where the U.S. has
recently made significant investments through such initiatives as the
IRA and Bipartisan Infrastructure Law. The report also recommends the
establishment of an exclusion process targeting machinery used in
domestic manufacturing and recommends 19 exclusions for certain solar
manufacturing equipment.
Having considered my advice, President Biden directed me to take
action. Consistent with the President's direction, in a Federal
Register notice published on May 28, 2024, I proposed certain
modifications to the tariff actions, including increasing section 301
tariffs on products in certain strategic sectors. Additionally, the
notice establishes the framework for an exclusion process for machinery
and proposes temporary exclusion for certain solar manufacturing
equipment.
On September 13th, my office announced the final modifications.\23\
The proposed modifications announced in May 2024 were largely adopted,
with several updates to strengthen the actions to protect American
businesses and workers from China's unfair trade practices following
the review of more than 1,100 comments from the public. The updates
included new timing and rates for tariffs on face masks, medical
gloves, needles, and syringes; an exclusion for enteral syringes; a
proposal regarding coverage of additional tungsten, wafers, and
polysilicon tariff lines; an exclusion for ship-to-shore cranes ordered
prior to May 14, 2024; an expansion of the scope of the machinery
exclusions process to include five additional tariff lines; and
modification of the coverage of proposed exclusions for solar
manufacturing equipment.
---------------------------------------------------------------------------
\23\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2024/september/ustr-finalizes-action-china-tariffs-following-
statutory-four-year-review.
These finalized tariff increases will target the harmful policies
and practices of the People's Republic of China that continue to impact
American workers and businesses. These actions underscore the Biden-
Harris administration's commitment to standing up for American workers
---------------------------------------------------------------------------
and businesses in the face of unfair trade practices.
Information on the revisions to modifications are detailed in
USTR's Federal Register notice.
Question. I appreciate that USTR has continued to provide
extensions for certain product exclusions under the section 301
tariffs. However, I am disappointed that USTR has continued to announce
its decisions regarding the extensions of the exclusions with little
time for importers or interagency partners to react. For example,
during the extension announced at the end of December 2023, USTR did
not provide U.S. Customs and Border Protection (CBP) enough time to
program its system (the Automated Commercial Environment or ACE) to
note that the exclusions had been extended. As a result, importers who
imported products eligible for the exclusions during the first few days
of January were required to pay duties to CBP and then subsequently
file for a duty refund--creating additional administrative burdens.
Will USTR commit to providing importers and its interagency
partners with more advanced notice about the status of the exclusions?
Answer. In a Federal Register notice published May 30, 2024, USTR
extended all exclusions through June 14, 2024, to provide a transition
period, and further extended certain exclusions through May 31, 2025.
This notice was submitted to the Office of the Federal Register and to
Customs and Border Protection (CBP). USTR's notice provided CBP with
sufficient time to program ACE prior to the exclusions expiring and
without interruption.
Question. The USTR budget indicates that the agency might be
preparing for a scale-down of its 301 exclusion operations. In the
President's budget, USTR references a consolidation of two staff
contracts ``. . . that USTR is using to operate the 301-tariff
exclusion process and support trade agreement enforcement; in FY 2024,
USTR anticipates consolidating the two staffing contracts into one and
adjusting the total staffing to the anticipated 301-tariff exclusion
process effort.''
What are the implications of this action?
Answer. Each year USTR must consider the level of contract staffing
needed for the section 301 exclusion process and other enforcement
activities. In FY 2024, with the statutory review and exclusion
extension docket, USTR maintained the previous year's staffing level.
However, with the recent announcement of a proposed exclusion process,
the level of contract staffing is likely to increase at the end of FY
2024 and in FY 2025. The consolidation of the two staffing contracts
helps streamline USTR's contractual services, but will not affect the
level of contract staffing maintained.
Question. The administration is expressing deepening concerns about
another round of PRC overcapacity, this time in advanced manufacturing
sectors beyond EVs.
What does the administration plan to do about that coming
overcapacity?
Answer. We continue to have significant concerns about PRC
industrial targeting policies across a range of sectors. These
nonmarket policies and practices are leading to market concentration
and excessive dependencies, distortionary effects, and harmful
nonmarket excess capacity in a range of sectors. These policies and
practices undercut our workers, industries, and the investments we are
making in our economic security and supply chain resilience.
The administration has urged Beijing to consider the broad
international spillovers of these distortions, and has taken measures
to foster more balanced growth, as we continue to maintain active
communication through both economic and commercial channels.
USTR has also developed and engaged in joint initiatives with
trading partners to share concerns about China's use of unfair
nonmarket policies and practices and to build a common understanding as
a basis for taking more effective action. USTR has been working
intensively with key trading partners in a variety of venues to
identify China's nonmarket policies and practices, assess their impact,
and design more effective responses, including in the G7,\24\ the U.S.-
EU Trade and Technology Council (TTC),\25\ and with diverse like-minded
partners.\26\
---------------------------------------------------------------------------
\24\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/20/g7-leaders-statement-on-economic-resilience-and-economic-
security/.
\25\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/31/u-s-eu-joint-statement-of-the-trade-and-technology-council-
2/.
\26\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2023/june/joint-declaration-against-trade-related-economic-
coercion-and-non-market-policies-and-practices.
In addition, USTR's recent Request for Comments on Promoting Supply
Chain Resilience has prompted stakeholder discussion of China's
nonmarket excess capacity in a range of sectors, and we expect to
---------------------------------------------------------------------------
consider the issue further as we weigh the comments received.
Question. How will it affect the outcome of the 4-year section 301
tariff review?
Answer. USTR completed a thorough statutory review of the tariff
actions imposed in the section 301 investigation into the PRC's acts,
policies and practices related to technology transfer, intellectual
property, and innovation. USTR found that the PRC's unfair, nonmarket
policies practices have persisted and, in some cases, become more
aggressive. Accordingly, and pursuant to direction from the President,
USTR proposed making modifications to the section 301 tariff actions to
increase tariff on strategic sectors, including imposing 100 percent
tariffs on EVs.\27\
---------------------------------------------------------------------------
\27\ https://ustr.gov/sites/default/files/
89%20FR%2046252%20(May%2028%202024).pdf.
On September 13th, my office announced the final modifications.\28\
The proposed modifications announced in May 2024 were largely adopted,
with several updates to strengthen the actions to protect American
businesses and workers from China's unfair trade practices following
the review of more than 1,100 comments from the public. The updates
included new timing and rates for tariffs on face masks, medical
gloves, needles, and syringes; an exclusion for enteral syringes; a
proposal regarding coverage of additional tungsten, wafers, and
polysilicon tariff lines; an exclusion for ship-to-shore cranes ordered
prior to May 14, 2024; an expansion of the scope of the machinery
exclusions process to include five additional tariff lines; and
modification of the coverage of proposed exclusions for solar
manufacturing equipment.
---------------------------------------------------------------------------
\28\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2024/september/ustr-finalizes-action-china-tariffs-following-
statutory-four-year-review.
These finalized tariff increases will target the harmful policies
and practices of the People's Republic of China that continue to impact
American workers and businesses. These actions underscore the Biden-
Harris administration's commitment to standing up for American workers
---------------------------------------------------------------------------
and businesses in the face of unfair trade practices.
Information on the revisions to modifications are detailed in
USTR's Federal Register notice.
Question. The supply chain for compound semiconductors used in the
critical telecommunications infrastructure sector, data centers, and
artificial intelligence is largely dominated by foreign adversary
production and includes investments from companies like Huawei and ZTE.
In fact, reports indicate that Huawei, from wafer production to
finished products such as optical transceivers, has made strategic
investments to dominate the U.S. and global supply chains in these
areas in order to ``leapfrog'' the United States and its companies. Not
only does this create U.S. supply chain dependency on foreign adversary
countries, but it creates the potential for cybersecurity risk in
critical infrastructure through hardware and software vulnerabilities.
In addition, these investments have resulted in the strategic
overcapacity of compound semiconductors, driving prices below market
value and harming U.S. compound semiconductor manufacturers and optical
transmission equipment manufacturers.
In its review of section 301 tariffs, its Request for Comments on
Promoting Supply Chain Resilience, and related supply chain
assessments, has USTR considered the impact of overcapacity in foreign
adversary compound semiconductor production, from wafer production to
finished products such as optical transceivers?
Answer. Yes. USTR has considered the impact of China's nonmarket
excess capacity in the semiconductors sector, and we continue to assess
the threats posed by China's unfair, anticompetitive nonmarket policies
and practices on an ongoing basis.
We continue to have significant concerns about PRC industrial
targeting policies across a range of sectors, including the
semiconductor industry. These nonmarket policies and practices are
leading to market concentration and excessive dependences,
distortionary effects, and harmful nonmarket excess capacity in a range
of sectors including semiconductors. These policies and practices
undercut our workers, industries, and the investments we are making in
our economic security and supply chain resilience.
The section 301 Investigation of China's Acts, Policies, and
Practices Related to Technology Transfer, Intellectual Property, and
Innovation and resulting tariff modifications are only part of the
solution to our broader concerns about China's nonmarket policies and
practices, including the threat posed by rapidly emerging nonmarket
excess capacity and market concentration in the semiconductors sector.
The administration has also urged Beijing to consider the broad
international spillovers of these distortions, and also to take
measures to support domestic demand and more balanced growth, as we
continue to maintain active communication through both economic and
commercial channels.
In addition, USTR's recent request for Comments on Promoting Supply
Chain Resilience has prompted stakeholder discussion of nonmarket
excess capacity in semiconductor production, and we expect to consider
the issue further as we weigh the comments received.
USTR has also developed and engaged in joint initiatives with
trading partners to share concerns about China's use of unfair
nonmarket policies and practices and to build a common understanding as
a basis for taking more effective action. USTR has been working
intensively with key trading partners in a variety of venues to
identify China's nonmarket policies and practices, assess their impact,
and design more effective responses, including in the G7,\29\ the U.S.-
EU Trade and Technology Council (TTC),\30\ and with diverse like-minded
partners.\31\
---------------------------------------------------------------------------
\29\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/20/g7-leaders-statement-on-economic-resilience-and-economic-
security/.
\30\ https://www.whitehouse.gov/briefing-room/statements-releases/
2023/05/31/u-s-eu-joint-statement-of-the-trade-and-technology-council-
2/.
\31\ https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2023/june/joint-declaration-against-trade-related-economic-
coercion-and-non-market-policies-and-practices.
Question. On March 7, 2024, USTR announced it is seeking comments
to ``inform the development of trade and investment policy initiatives
---------------------------------------------------------------------------
that promote supply chain resilience.''
Why is USTR launching this comment period and initiative just now
in Year 4 of the administration?
How will USTR communicate with stakeholders and Congress about
outcomes, strategies, and objectives developed from this public comment
period?
Answer. While USTR continues to pursue a range of efforts to
promote supply chain resilience, we seek through the public comment
period to solicit input from a wider group of stakeholders, which will
inform a more integrated, holistic understanding of supply chain
resilience. Additionally, having weathered the acute disruptions
wrought by the COVID-19 pandemic during earlier years in the
administration, many stakeholders now have new perspectives that can
help shape trade policy going forward. Accordingly, we aim to harness
these insights to both build on our past work and identify new tools
and approaches.
We are committed to communicating in due course with stakeholders
and Congress about relevant trade policy outcomes, strategies, and
objectives developed from the public comment period.
Question. I understand USTR conducted a review of China's
industrial subsidies and has a report on the topic that it never
issued.
Why has USTR not issued that report?
Does USTR plan to formally launch a section 301 review of China's
industrial subsidies?
Answer. China utilizes a wide range of unfair, nonmarket policies
and practices to undermine fair competition and dominate markets, both
in China and globally. Those anticompetitive policies and practices,
which include nonmarket excess capacity, pervasive subsidization,
forced labor and other labor violations, and many others, create
strategic dependencies and vulnerabilities, which undermine our supply
chain resilience and economic security. The United States must consider
all available tools and options to more effectively address this
threat, including use of section 301, strategic investments, and other
actions, in order to defend our workers and market-oriented businesses
and address China's nonmarket distortions.
USTR does not have a report on the topic that it has never issued.
Question. The administration has expressed an interest in engaging
with Congress on renewing the African Growth and Opportunity Act
(AGOA), which is currently set to expire on September 30, 2025. USTR
has also indicated it would like to explore how AGOA could be improved
to increase the utilization rates and ``ensure that the program's
benefits fully reach all segments of society.''
In your view, what changes to AGOA would help accomplish these
goals?
Answer. For the last 2 decades, AGOA has been a positive force to
grow Africa's extraordinary economic potential. It has made a
difference for millions of Africans by opening new doors for trade and
investment, creating hundreds of thousands of jobs, and promoting
regional integration. It has also incentivized many African governments
to undertake key political and economic reforms.
The Biden-Harris administration strongly supports the timely
reauthorization and modernization of AGOA. Reauthorization requires an
act of Congress, and I am committed to working with members of
Congress, African partners, and other key stakeholders to enhance AGOA
and make the program as impactful as possible. As noted in the 2024
Biennial Report on Implementation of AGOA, this includes improving
utilization rates, particularly for smaller and lesser developed
African economies; exploring additional trade tools to complement our
AGOA relationship, collaborating on the implementation of the AfCFTA,
and better using the multilateral trading system for the benefit of
underserved groups in each of our economies.
______
Questions Submitted by Hon. John Thune
Question. Recently, USTR published taking the dairy cases under
USMCA as an example of having advocated for agriculture, and then
answered questions related to next steps for Canada dairy with
brainstorming next steps. That response is similar to how this
administration answered the same question on next steps for Canada
dairy in December 2023.
What specifically is the administration working on and when do you
expect to be able to take action for U.S. dairy export trade barriers
in Canada?
Answer. The Biden-Harris administration is committed to ensuring
that American dairy farmers workers, processors, and exporters receive
the full benefit of the market access Canada agreed to provide under
the USMCA. While the United States won a previous USMCA dispute on
Canada's dairy TRQ allocation measures in 2021, USTR is disappointed
with the USMCA panel report released in November 2023. We continue to
work closely with U.S. industry to consider all options to ensure our
dairy sector receives the full benefit of market access under the USMCA
and will not hesitate to use all available tools to enforce our trade
agreements.
Question. The United States has a dairy trade deficit with the
European Union (EU) of more than $2 billion. More onerous EU tariffs
and nontariff barriers play a major role in driving this dynamic. As of
last month, the EU appears poised to increase that gap even more. In
March, the EU Health Ministry abruptly changed how it plans to enforce
a regulation related to the use of veterinary medicines and imported
animal products. It's bad enough that this statue dictates to U.S.
farmers which medicines they will be able to use on their farms moving
forward. Now, the EU appears to intend to enforce this regulation
retroactively, insisting that no animals supplying milk or meat bound
for the EU can have been treated with the newly restricted medicines in
their entire lifetime. Since dairy cows live for several years, this
new interpretation risks shutting down U.S. dairy exports to the EU.
How is the United States working to push back on European efforts
like these to dictate to our farmers how to farm?
What steps is the United States taking to ensure that this
veterinary medicines regulation is implemented on a forward-looking
basis, rather than on a retroactive one?
Answer. While the United States and European Union align on a
number of strategic issues, the U.S. is concerned with EU efforts that
treat American agriculture unfairly. The United States has raised
concerns both bilaterally and at the WTO SPS Committee regarding the
EU's proposed veterinary drug regulation, and the United States has
shared comments and concerns throughout the EU's process of fully
enacting their legislation. Like you, we are concerned with the EU's
proposed approach, in particular their recent clarification that new
restrictions on use of veterinary medical products will apply
retroactively to animals currently in production. Over the last 5
years, the United States has built a strong coalition of like-minded
countries that oppose the EU's proposed regulatory approach, and we
will continue to engage on multiple fronts as the EU works to finalize
implementation of the regulation.
Question. Indonesia is a valued partner and important destination
for many U.S. agricultural exports. For example, it is a top 10 market
for U.S. dairy exports. Yet, it also has the slowest, most onerous
process in the world for allowing new facilities to be authorized to
ship. Some facilities have been waiting over 4 years just to enter the
market--and still are not allowed to ship yet. In comparison, most
other countries manage to register new facilities anywhere from a few
days to a few months.
Where do efforts stand to secure more reasonable new entry terms
for our dairy exporters?
Answer. The United States continues to press Indonesia on its
onerous facility registration requirements not only for dairy, but meat
products as well. We have raised this issue on multiple occasions over
the past year with Indonesia, both bilaterally and in IPEF
negotiations, with the aim of having Indonesia commit to increased
transparency and a timely, science-based facility registration process
that would allow U.S. businesses to export their quality products. USTR
will continue to find opportunities to raise this issue and attempt to
improve the process in our future engagements.
Question. One of the nontariff barriers that the EU has
aggressively pursued domestically and exported to outside markets has
been the monopolization of common food and beverage names. The result
is that U.S. producers can suddenly no longer use certain terms, which
have long been generic--like ``parmesan,'' ``bologna,'' and
``chateau''--to market and sell their products abroad. The EU is
pressing this issue with real tenacity.
Can you provide an update on where USTR efforts stand regarding
protecting the rights of U.S. producers to use common names in markets
around the world?
Answer. The United States has seen how European Union (EU) trade
agreements with provisions that provide for automatic or virtually
automatic protection for a list of terms as geographical indications
(GIs) can undermine market access for U.S. products in third countries.
USTR is working intensively through bilateral and multilateral channels
to advance U.S. market access interests in foreign markets and to
ensure that GI-related trade initiatives of the EU, its member states,
like-
minded countries, and international organizations do not undermine such
market access, including through seeking provisions in trade agreements
and exchanges of letters. USTR is also continuing to press other
trading partners to ensure transparency and due process in the granting
of GI protection and to ensure that the grant of GI protection does not
deprive interested parties of the ability to use certain names.
Question. How are you working with trading partners to secure these
protections so that U.S. export markets aren't further undermined?
Answer. We are raising these concerns and engaging with trading
partners through every available avenue, including in trade agreement
negotiations, through exchanges of letters, and as part of bilateral
dialogues, such as our trade and investment framework (TIFA)
discussions. For example, on September 3rd, the National Congress of
Chile approved the agreement on Chile Market Access and Prior Users for
Cheese and Meats after a multiyear USTR-led effort to exchange letters
on this exact issue. The agreement ensures that U.S. producers have the
opportunity to grow their businesses and supply Chilean consumers with
specialty cheeses and meats.
______
Questions Submitted by Hon. Tim Scott
Question. As you know, our country is projected to have a $30.5
billion agricultural trade deficit this year. Surging imports of fruits
and vegetables from Mexico, which benefit from unfair labor and pricing
practices, are a large part of that trade deficit and continue to cause
widespread harm to growers in South Carolina and throughout the
southeast United States.
When will USTR officially launch its new Southeast Produce Advisory
Committee that was promised 18 months ago, and how quickly will the
administration take concrete trade measures in conjunction with that
advisory committee to restore fair competition for farmers in South
Carolina?
Answer. Since the beginning of the Biden-Harris administration,
USTR has been engaging with trading partners across the globe to
provide export opportunities for farmers and producers, including
through the reduction of both tariff and non-tariff barriers. According
to USDA calculations, these actions have supported roughly $21 billion
in U.S. agricultural exports over the course of the 3 highest years of
agricultural exports ever, breaking records in 2 of the past 3 years.
On May 30th, USTR and USDA announced appointments to the Seasonal
and Perishable Agricultural Products Advisory Committee. USTR and USDA
will work with the committee and members of Congress to develop
possible administrative actions and legislation that would provide real
benefits to producers of seasonal and perishable produce in the
southeastern United States.
Question. The United States' motion picture and television industry
generates billions of dollars annually for the American people, and in
South Carolina alone, the industry supports thousands of jobs,
contributing to millions of dollars in wages supported by the licensing
of content to over 140 countries.
This industry is one of the most highly competitive on the planet,
generating a positive balance of trade in nearly every country in which
the U.S. industry does business. However, U.S. leadership in this area
faces significant challenges due to ever-increasing market access
barriers--notably including the effort to impose legacy media
obligations on streaming services.
Given the importance of these industries to the U.S. economy and
American jobs, do you commit directing USTR's resources to push back on
such initiatives overseas?
Answer. We are closely tracking the imposition of domestic
expenditure requirements for streaming services. We are committed to
engaging governments on this issue, and have made clear our expectation
that any legislation in this space adhere to rules set out in our FTAs,
where applicable.
Question. While I appreciate your response to the bipartisan Senate
letter sent in March of this year regarding the European Union
Deforestation-free Regulation (EUDR), I would still like clarity as to
how USTR plans to engage with the European Union on this issue moving
forward. The EUDR as written will undoubtedly have a direct impact on
producers in South Carolina, and it is primarily the EUDR's vague
definition of ``forest degradation'' that gives me cause for concern.
What specifically is USTR doing to engage with the EU on this, and
what active steps will be taken to prevent the Commission from adopting
vague criteria that would put an undue burden on American producers?
Answer. The Biden-Harris administration remains strongly committed
to combating deforestation, but I share your concerns regarding how the
EU's Deforestation-free Supply Chain Regulation (EUDR) will be
implemented and the impact it may have on U.S. producers that engage in
sustainable production practices. USTR has directly engaged with the EU
at all levels regarding our implementation concerns and continues to
urge the EU to delay implementation and enforcement of penalties until
U.S. concerns have been addressed. This includes adjustments to the
risk benchmarking to take into account good forest management
practices, such as those in the United States. I have engaged directly
with Executive Vice President for the European Green Deal,
Interinstitutional Relations and Foresight Maros Sefcovic to request
that implementation and enforcement issues are addressed, including by
sending a letter with USDA Secretary Vilsack and Commerce Secretary
Raimondo detailing our shared concerns. Chief Agricultural Negotiator
Doug McKalip has also raised these issues directly to the European
Commission. Additionally, we have raised EUDR implementation concerns
at the WTO, including at the Committee on Technical Barriers to Trade,
the Committee on Market Access, and the Council for Trade in Goods.
USTR will continue to engage at all levels to press the EU to ensure
that this regulation does not lead to unnecessary barriers for U.S.
exports.
Question. You have stated for some time now that USTR's ongoing
review of the section 301 tariffs is finishing soon.
A number of manufacturers in South Carolina have requested tariff
exclusions related to machinery and key inputs that are critical to
their manufacturing processes, and they continue to wait for you to
complete the review.
Why has it taken so long for USTR to conduct its 4-year review of
the section 301 tariffs and can you assure me that your staff is moving
as quickly as possible to address the needs of manufacturers in South
Carolina?
Answer. USTR has issued a comprehensive report on the statutory
review of the tariff actions in the section 301 investigation of
China's Acts, Policies, and Practices Related to Technology Transfer,
Intellectual Property, and Innovation. In the report I recommended a
series of actions to the President, including the establishment of an
exclusion process targeting machinery used in domestic manufacturing.
The report also proposes 19 exclusions for certain solar manufacturing
equipment, with the goal of supporting investment in U.S. solar
manufacturing.
Having considered my advice, President Biden directed me to take
action and consistent with the President's direction, in a Federal
Register notice published on May 28, 2024, I proposed certain
modifications to the tariff actions and established the framework for
an exclusion process for machinery. On September 13th, my office
announced the final modifications. The proposed modifications announced
in May 2024 were largely adopted, with several updates to strengthen
the actions to protect American businesses and workers from China's
unfair trade practices following the review of more than 1,100 comments
from the public. The updates included new timing and rates for tariffs
on face masks, medical gloves, needles, and syringes; an exclusion for
enteral syringes; a proposal regarding coverage of additional tungsten,
wafers, and polysilicon tariff lines; an exclusion for ship-to-shore
cranes ordered prior to May 14, 2024; an expansion of the scope of the
machinery exclusions process to include five additional tariff lines;
and modification of the coverage of proposed exclusions for solar
manufacturing equipment.
These finalized tariff increases will target the harmful policies
and practices of the People's Republic of China that continue to impact
American workers and businesses. These actions underscore the Biden-
Harris administration's commitment to standing up for American workers
and businesses in the face of unfair trade practices.
Information on the revisions to modifications are detailed in
USTR's Federal Register notice.
Question. I share the concerns of a number of my colleagues on this
committee regarding USTR's stance on digital trade and cross-border
data restrictions. The United States has had longstanding negotiating
objectives when it comes to digital trade, and I believe USTR's recent
change of posture will ultimately harm American businesses and workers.
In particular, cross-border data restrictions can have the greatest
impact on the 61 million U.S. workers employed by U.S. small
businesses, which account for 95 percent of all U.S. exporting
enterprises.
What is USTR doing to protect U.S. small businesses from digital
trade barriers abroad?
Answer. The digital landscape is rapidly evolving and is not the
same as it was in 2020, particularly when it comes to the conduct of
nonmarket autocracies. Congress recently enacted legislation to
addresses the challenges associated with TikTok and also took action
with respect to data brokers. Earlier this year, President Biden signed
an executive order to address the harms associated with the transfer of
bulk data to countries of concern.
Given the dynamic nature of the digital economy and evolving public
policy considerations, USTR is very careful to ensure that any digital
trade rules do not get ahead of the legislative and regulatory
considerations taking place right now, and in particular the bipartisan
goal of addressing the risks associated with data flows to countries of
concern. As the administration and Congress continue their work on
issues important to the digital economy such as privacy and personal
data protection, USTR will take all such actions, including the
proposal of the American Privacy Rights Act, into account in further
evolving our trade policy.
USTR frequently meets with small business stakeholders to gather
information on their challenges in the international digital economy.
USTR works with interagency partners to address these concerns through
bilateral discussions, at the WTO, the G7, and other international
forums.
______
Questions Submitted by Hon. Steve Daines
Question. Australia is one of our longest trading partners and
closest allies in the Indo-Pacific. Unfortunately, Australia's Minister
of Culture is currently considering imposing screen content
requirements on streaming services, which is a violation of Australia's
Free Trade Agreement (FTA) commitments. This potential violation
coincides with an all-time high for U.S. investment in Australian
content services.
Do you agree that it is imperative that Australia complies with its
FTA obligations?
Answer. We are closely tracking the Government of Australia's
consideration of domestic expenditure requirements for streaming
services. We have engaged the government on this issue, and have made
clear our expectation that any legislation in this space adhere to
rules set out in our FTA.
Question. Chinese medical devices, particularly syringes and
needles, have flooded the U.S. market. This has pushed out American
manufacturers, impacted supply chains, and risks patient safety with
substandard products.
What steps will you take to help protect domestic manufacturing
from coordinated attempts to undercut by foreign entities?
Answer. Following the report in the statutory 4-year review of
actions taken in the section 301 Investigation of China's Acts,
Policies, and Practices Related to Technology Transfer, Intellectual
Property, and Innovation, on May 14, 2024, the President directed USTR
to increase tariffs on certain strategic sectors, including syringes
and needles.
Consistent with the President's direction, in a Federal Register
notice published on May 28, 2024, USTR proposed certain modifications
to the tariff actions, including increasing section 301 tariffs for
syringes and needles to 50 percent. In the same notice, USTR announced
the opening of a docket and requested public comments on the proposed
modifications. With respect to needles and syringes, USTR is soliciting
comments on whether the tariff rates should be higher than 50 percent.
On September 13th, my office announced the final modifications. The
proposed modifications announced in May 2024 were largely adopted, with
several updates to strengthen the actions to protect American
businesses and workers from China's unfair trade practices following
the review of more than 1,100 comments from the public. The updates
included new timing and rates for tariffs on face masks, medical
gloves, needles, and syringes; an exclusion for enteral syringes; a
proposal regarding coverage of additional tungsten, wafers, and
polysilicon tariff lines; an exclusion for ship-to-shore cranes ordered
prior to May 14, 2024; an expansion of the scope of the machinery
exclusions process to include five additional tariff lines; and
modification of the coverage of proposed exclusions for solar
manufacturing equipment. These finalized tariff increases will target
the harmful policies and practices of the People's Republic of China
that continue to impact American workers and businesses. These actions
underscore the Biden-Harris administration's commitment to standing up
for American workers and businesses in the face of unfair trade
practices.
Tariffs are only part of the solution to our broader concerns about
China's nonmarket policies and practices, including nonmarket excess
capacity. China utilizes a wide range of unfair, nonmarket policies and
practices to undermine fair competition and dominate markets, both in
China and globally. Those anticompetitive policies and practices, which
include nonmarket excess capacity, pervasive subsidization, forced
labor and other labor violations, and many others, create strategic
dependencies and vulnerabilities, which undermine our supply chain
resilience and economic security. The United States must consider all
available tools and options to more effectively address this threat,
including use of section 301 and strategic investments, in order to
defend our workers and market-oriented businesses and address China's
nonmarket distortions.
Under the U.S.-EU Trade Technology Council, we have engaged with
the EU with respect to China's nonmarket policies and practices in the
medical devices sector. The United States and the EU have engaged with
other countries who share our concerns the medical devices sector, and
conveyed these concerns directly to China.
Question. Protecting American intellectual property in our trade
initiatives should be one of the administration's highest priorities,
particularly in the Indo-Pacific Economic Framework for Prosperity
(IPEF). While you have expressed that addressing tariff barriers in
IPEF and other agreements, your position on protecting American IP is
not clear.
Do you agree that our trading partners need to do more to protect
American intellectual property, and can you explain why the
administration is not pursuing that objective in IPEF and other
agreements?
Answer. We recognize that intellectual property (IP)-dependent
industries can be drivers of employment and economic activity. We
worked with Indo-Pacific Economic Framework (IPEF) partners to develop
the scope for trade pillar negotiations, and focused on topics that
would enhance our resilient, sustainable, and inclusive trade. We look
forward to continuing discussions with you and your team on other ways
that we can advance intellectual property protections, including
through bilateral engagement with trading partners.
Question. Mexico has yet to fully implement commitments in the
United States-Mexico-Canada Agreement (USMCA) intellectual property
chapter and continues to delay regulatory approval for innovative
American medicines. These delays undermine American jobs and exports by
restricting market access and weaken medical supply chains in North
America.
Will you commit to use all tools at your disposal to ensure
Mexico's compliance with USMCA commitments?
Answer. The full implementation of the USMCA is one of my top
priorities, and I remain committed to ensuring that Mexico and Canada
provide all the benefits negotiated for our workers, farmers, ranchers,
service providers, and producers under the agreement.
The United States continues to urge Mexico to address longstanding
concerns related to intellectual property (IP), including with respect
to enforcement against counterfeiting and piracy, protection of
pharmaceutical-related IP, preestablished damages for copyright
infringement and trademark counterfeiting, and enforcement of IP rights
in the digital environment. The United States continues to monitor
Mexico's compliance with outstanding IP-related USMCA commitments,
including those with transition periods that end in 2024 and 2025.
In addition, I share your concerns about regulatory delays, which
remain a primary barrier to entering the Mexican market for
pharmaceuticals. The USMCA included novel commitments in the
pharmaceutical sector with the goal to better strengthen regulatory
cooperation in critical products and to enhance resiliency in North
American pharmaceutical supply chains. USTR will continue to raise
concerns about the regulatory delays and underscore the importance of
the full implementation of all pharmaceutical commitments under the
USMCA.
Question. Recently, members reached an agreement to extend the e-
commerce moratorium at the 13th World Trade Organization (WTO)
Ministerial Conference until 2026.
Do you support a permanent extension of the e-commerce moratorium
at the WTO?
Answer. I was pleased we were successful in our efforts to extend
the e-commerce moratorium and work program. While the moratorium and
work program enjoy broad support among WTO members, it is clear that
the WTO membership needs to have a more robust discussion about the
future of the moratorium and the impact of the digital economy on
developing members.
Question. Did you solicit feedback from or perform an economic
impact analysis for small and medium-sized businesses before the
decision to step away from previously held digital trade and e-commerce
commitments in October 2023?
Answer. Given the dynamic nature of the digital economy, USTR is
very careful to ensure that any digital trade rules do not get ahead of
the legislative and regulatory considerations taking place right now.
As the administration and Congress continue their work on issues
important to the digital economy such as privacy and personal data
protection, USTR will take all such actions, including the proposal of
the American Privacy Rights Act, into account in further evolving our
trade policy.
The President's competition agenda recognizes that corporate
consolidation is harmful to a wide range of Americans, including small
businesses. Digital provisions under discussion implicate the ability
of small businesses to compete with the largest actors. Therefore,
small businesses were an important factor in evaluating whether
traditional digital trade rules serve their interests.
USTR frequently meets with small business stakeholders to gather
information on their challenges in the international digital economy.
USTR works with interagency partners to address these concerns through
bilateral discussions, at the WTO, the G7, and other international
forums.
______
Questions Submitted by Hon. Todd Young
Question. As a member of the Committee on Foreign Investment in the
United States (CFIUS), you are at the forefront of scrutinizing foreign
investments into American industries. The proposed acquisition of U.S.
Steel by Nippon Steel not only has economic implications, but also
captures political attention, including pointed remarks from President
Biden.
Given President Biden's critical comments on the acquisition, how
do you--as a member--separate political perspectives from CFIUS's core
mission to evaluate national security implications? Additionally, can
you provide insights into how you will ensure CFIUS's decision-making
process remains impartial and focused on the statutory criteria despite
external political pressures in this particular case?
Answer. CFIUS is subject to strict statutory confidentiality and,
consistent with law and practice, I cannot comment on particular CFIUS
matters including whether a transaction is being reviewed. I would
refer you to the Department of the Treasury for any CFIUS-related
questions. As chair of CFIUS, Treasury is committed to keeping Congress
informed about its activities, consistent with its authorizing statute.
I take seriously USTR's role as a voting member of CFIUS and our
responsibility to maintain the United States' open investment policy
while taking appropriate action through CFIUS to protect our national
security. By law, CFIUS reviews are focused solely on national security
risks that arise as a result of a covered transaction. CFIUS's statute
lists illustrative factors to consider as appropriate in the context of
each transaction. Executive Order 14083, issued by President Biden in
September 2022, elaborates and expands on this statutory list of
factors to reflect the evolving national security threat landscape. The
executive order directs CFIUS to focus on protecting U.S. supply chain
resilience and security, technological leadership, and sensitive
personal data, and to examine transactions in the context of wider
industry and investment trends.
Question. The 2024 National Trade Estimate Report on Foreign Trade
Barriers (NTE Report) has scaled back its coverage of digital trade
barriers as compared to previous editions. This reduction has raised
concerns among various stakeholders about the United States' commitment
to defending its digital trade interests, particularly when faced with
escalating digital protectionism globally.
While I understand that not all digital trade barriers were
removed, can you clarify how this decision aligns with the mandate
under the Bipartisan Congressional Trade Priorities and Accountability
Act of 2015 to aggressively counteract measures that hinder U.S.
digital commerce?
Answer. The National Trade Estimate Report is governed by 19 U.S.C.
sec. 2241. Of note, the statute does not refer to digital trade. It
refers to ``electronic commerce.'' The statute cross references the
definition of electronic commerce under 47 U.S.C. sec. 151 note. That
definition provides that electronic commerce means ``any transaction
conducted over the Internet or through Internet access, comprising the
sale, lease, license, offer, or delivery of property, goods, services,
or information, whether or not for consideration, and includes the
provision of Internet access.'' The definition thus refers to
``information,'' and not to ``data.'' Nevertheless, USTR included
problematic data localization and other digital policies in its report.
With respect to Trade Promotion Authority, which Congress has not
renewed, it is worth noting that the digital landscape has changed
significantly since 2015. Congress has taken steps to address the
behaviors of countries of concern, including with respect to TikTok in
particular by passing the Protecting Americans from Foreign Adversary
Controlled Applications Act in April 2024. Congress has also taken
steps to address the behavior of data brokers, and the President
earlier signed an executive order on bulk transfers of data to
countries of concern. In this context, it is USTR's responsibility to
ensure that we advocate for U.S. digital commerce, but not in a manner
that puts the data of the American people at risk.
Question. Given USTR's rationale for scaling back various digital
trade barriers in the NTE Report--which argues that every government
``has the sovereign right to govern in the public interest and to
regulate for legitimate public policy reasons''--how will USTR ensure
this approach does not enable foreign governments to justify
discriminatory or unfair trade practices under the guise of
``legitimate'' public policy? For instance, if we examine some of the
barriers removed from the NTE Report, such as the EU's Digital Markets
Act, isn't there a risk that justifying these barriers as
``legitimate'' public policy could create a loophole for discriminatory
practices?
Answer. USTR indicated in 2021 that whether measures are
discriminatory or in furtherance of legitimate public policy objectives
is a factual question. The recognized tension between discriminatory
measures and measures in the public interest dates back to the GATT
1947.
Question. On page 32 of the NTE Report, it is noted that the
``United States continues to engage with Brazil to lower its ethanol
tariff to provide reciprocal treatment,'' highlighting the bilateral
trade disparities between the U.S. and Brazil.
What specific diplomatic efforts are currently being undertaken to
negotiate with Brazilian authorities for a resolution that benefits
both parties? Additionally, in light of the challenges faced by
American farmers and ethanol producers, such as market volatility and
regulatory uncertainties, what strategies does the administration have
in place to mitigate the negative impacts of these tariffs?
Answer. Market access for U.S. ethanol in the Brazilian market
continues to be a top priority in our overall trade relationship with
Brazil. USTR, led by Ambassador McKalip, is currently engaged with
Brazil on this issue with the aim of lowering Brazil's tariff and
ensuring fair treatment for U.S. ethanol in Brazil's market. We
continue to work toward the goal of arriving at a mutually agreeable
solution with Brazil soon where U.S. ethanol is once again treated
fairly in Brazil's market.
Question. Last May, as part of the U.S.-EU Trade and Technology
Council Joint Statement, the U.S. and EU committed to sharing
information on nonmarket policies and practices impacting digital trade
and their approaches to addressing risks from digital firms in
nonmarket economies.
What actions has USTR undertaken to assess how the EU's digital
regulatory framework, including the Digital Markets Act, affects the
competitiveness of U.S. firms relative to Chinese firms? How important
do you view this analysis for gauging our strategic stance in the
global digital economy?
Answer. This administration is committed to ensuring that U.S.
companies are treated fairly by our trading partners and that our
trading partners honor their obligations to the United States. USTR and
interagency colleagues will collaborate to analyze and monitor EU
digital legislative and regulatory developments with that perspective
in mind.
Through the U.S.-EU Trade and Technology Council, the
administration is working with the EU to preserve U.S. and EU
technological leadership in a range of sectors. As part of this overall
effort USTR is working closely with our European Commission
counterparts to address Chinese nonmarket policies and practices that
unfairly undermine the ability of U.S. and EU workers and the companies
that employ them to compete fairly both at home and abroad.
Question. Last year, the G7 Trade Ministers' Joint Statement
emphasized the significance of the Data Free Flow with Trust (DFFT)
initiative in advancing digital trade.
What are your views on the implementation and practicality of the
DFFT initiative, and how does USTR plan to collaborate with
international partners to find an agreed-upon definition of ``trust''
and its application in data regimes?
Answer. USTR remains engaged in ongoing discussions about the
appropriate role that trade rules play with respect to ``data free flow
with trust.'' Our objective is to secure space for legislators and
regulators to address critical issues related to data flows, such as
privacy, competition, and cybersecurity.
Question. What is USTR's plan for pursuing and concluding the Indo-
Pacific Economic Framework's trade pillar? What hurdles remain in
concluding these negotiations? How will USTR ensure that the trade
pillar delivers meaningful, high ambition commitments that help
American businesses and workers compete against China?
Answer. The Biden-Harris administration is committed to economic
engagement with partners in the Indo-Pacific region and to concluding
the IPEF trade pillar. Through trade pillar negotiations, the United
States seeks to strengthen our economic ties to the region, while
promoting inclusive growth for workers and businesses, advancing strong
labor standards, and tackling climate change. As part of this effort,
we are specifically focused on negotiating provisions that can help
American businesses and workers compete in the global economy and are
seeking to include commitments on labor, environmental sustainability,
the digital economy, agriculture, transparency and good regulatory
practices, competition policy, and trade facilitation. The
administration's focus is developing high-standard rules that can
increase competitiveness among parties to the agreement, which can
generate increased access to foreign markets for U.S. exporters.
At this time, we are not in a position to share a timeline for
concluding the agreement, but we are eager to make progress quickly and
deliver results for U.S. workers and businesses. We are committed to
continuing to keep Congress informed of progress on trade pillar
negotiations.
Question. The administration has expressed an interest in engaging
with Congress on renewing the African Growth and Opportunity Act
(AGOA), which is currently set to expire on September 30, 2025. Yet,
there are ongoing concerns regarding South Africa's increasingly close
relationships with adversarial nations such as China and Russia,
raising questions about its alignment with the trade values AGOA
supports.
Considering South Africa's deepening ties with America's strategic
competitors and persistent issues of public corruption, does USTR see
value in an out-of-cycle review to confirm South Africa's adherence to
the principles of AGOA and alignment with U.S. interests?
Answer. USTR announced the initiation of the annual AGOA
eligibility review on May 14, 2024. USTR, along with the AGOA
Implementation Subcommittee of the Trade Policy Staff Committee (AGOA
TPSC Subcommittee), will review written public comments and conduct a
virtual public hearing on this matter.
Question. As the coauthor of the Trading System Preservation (TSP)
Act alongside Senator Coons, our legislation directs USTR to negotiate
trade agreements with like-minded partners in key economic sectors.
This approach is designed to rejuvenate the World Trade Organization by
navigating around the stalemates caused by a few obstructive members,
enhancing our ability to secure sector-specific agreements vital for
our national interests.
In your view, could the TSP Act serve as a strategic tool for USTR
to forge targeted trade agreements in vital sectors such as critical
minerals? Additionally, if authorized to pursue sector-specific
agreements specifically for critical minerals, how would USTR work
closely with Congress to ensure that these negotiations are effectively
targeted and meet our strategic economic objectives?
Answer. We share your concerns regarding nonmarket policies and
practices that harm U.S. workers and businesses in key sectors. USTR
has been working with like-minded trading partners to formulate
appropriate responses. One area of particular focus is the critical
minerals sector. In March 2023, USTR, in consultation with Congress,
concluded a targeted agreement with Japan that facilitates
collaboration on strengthening critical minerals supply chains. A
strengthened, resilient supply chain will include enhanced domestic
production, as appropriate; more diversity of suppliers, through
shifting supply away from China and other sources of concern; and more
sustainability, through strengthened labor standards and environmental
protections, to ensure that trade reflects U.S. values. The U.S.-Japan
agreement provides for, among other things, collaboration with Japan on
``domestic measures to address nonmarket policies and practices of non-
parties affecting trade in critical minerals'' so that our trading
partners are contributing to solutions to our over-dependence on China
and other supply chain vulnerabilities. We are also pursuing critical
minerals agreements with the UK and EU, in close coordination with
Congress. In these critical minerals negotiations, as in any of our
trade engagements, USTR is committed to ensuring that our domestic
economic objectives drive and shape our trade policy, by consulting
with Congress and stakeholders and by developing tools and strategies
informed by a deep understanding of relevant supply chains. To that
end, we would welcome the opportunity to work further with Congress on
legislation relating to trade agreements focused on critical minerals
or other sectors.
Question. We have seen a significant increase in imports of certain
steel products from Mexico, particularly U.S. rebar imports, which have
significantly exceeded the historical average from 2015 to 2017. This
trend seems to challenge the 2019 U.S.-Mexico agreement that suspended
the application of section 232 tariffs under the condition that import
volumes remain within historical norms. While I appreciate USTR's
continued dialogue with Mexican authorities on this matter, I remain
concerned that Mexico does not seem willing or able to take the action
necessary to address U.S. concerns.
What additional measures is USTR considering to ensure Mexico
adheres to the terms of the 2019 agreement, and at what stage would it
be necessary to reconsider the implementation of section 232 measures
for these surging imports?
Answer. Maintaining viable steel and aluminum industries is
essential to U.S. national security. These industries fueled American
industrialization and built the American middle class.
On July 10, 2024, President Biden and President of Mexico Andres
Manuel Lopez Obrador announced actions to jointly prevent the evasion
of tariffs on steel and aluminum. Under this agreement, in order to
enter the United States free of section 232 tariffs, steel imports from
Mexico must be melted and poured in the United States, Mexico, or
Canada and aluminum imports from Mexico must not contain primary
aluminum smelt or cast in Belarus, China, Iran, or Russia.
The United States is committed to continued discussions with Mexico
on surges, including in products like rebar where we know our industry
remains deeply concerned.
Question. As you know, the Department of Commerce is currently
assessing Vietnam's classification as a nonmarket economy under U.S.
antidumping laws. This decision is critical, as numerous U.S.
manufacturing sectors rely on robust trade remedy enforcement to ensure
fair competition. The U.S. steel industry, in particular, has been
significantly impacted by surges in steel imports from Vietnam.
Could you elaborate on the administration's concerns, if any, about
potentially recognizing Vietnam as a market economy? Additionally, how
does Vietnam's status as a market economy play into its role in broader
trade discussions, such as those within the Indo-Pacific Economic
Framework?
Answer. We refer you to the U.S. Department of Commerce regarding
its review of the nonmarket economy status of Vietnam. The Department
of Commerce's determination that Vietnam is a nonmarket economy for
purposes of U.S. antidumping and countervailing duty laws does not
otherwise play a role in broader trade discussions with Vietnam.
______
Questions Submitted by Hon. Thom Tillis
Question. The United States' creative industries play a vital role
in growing the U.S. economy and creating good American jobs. In 2021,
these industries accounted for over 7 percent of the U.S. economy,
employed nearly 9.6 million workers and exceeded the U.S. average
annual wage by 51 percent. But U.S. leadership as the world's largest
content creator is under attack by pirates who seek to profit from U.S.
creativity and innovation. Unprecedented levels of digital piracy risk
eroding one of our Nation's greatest economic and cultural assets.
Moreover, digital piracy exposes consumers to innumerable harms
including identity theft, fraud, and malware.
Outside of Special 301, what is your agency doing to promote the
robust copyright protections and enforcement needed to combat this
threat?
Answer. USTR, in conjunction with our colleagues across
intellectual property (IP) agencies, monitors developments in our
trading partners' copyright legislation and engages with them on
improving their legislation to fully protect copyrighted content in the
digital space. For example, we promote accession to and the full
implementation of the World Intellectual Property Organization (WIPO)
Copyright Treaty and WIPO Performances and Phonogram Treaty
(collectively, WIPO Internet treaties) with all our trading partners,
as the rights and responsibilities laid out in these treaties are
critical to supporting the digital copyright ecosystem. We engaged with
the Dominican Republic's increased enforcement actions and interagency
cooperation on combating signal piracy and with Bulgaria on its new Act
Amending and Supplementing the Criminal Code, which provides for the
criminal prosecution of persons who create conditions for online
piracy. In addition, we have been engaging heavily with South Africa's
government on recently-passed legislation that would implement
protection for copy control technological protection measures and
introduce a right of making available for copyrighted works. We also
continue to engage with India to ensure that their statutory license
for broadcasts is not expanded to include interactive Internet
transmissions.
USTR also publishes an annual Review of Notorious Markets for
Counterfeiting and Piracy (Notorious Markets List) separately from the
annual Special 301 Report. The Notorious Markets List identifies
illustrative examples of online and physical markets that reportedly
engage in, facilitate, turn a blind eye to, or benefit from substantial
copyright piracy and trademark counterfeiting.
More about USTR's latest IP efforts and successes can be found in
USTR's 2024 Special 301 Report.
Question. There has been a surge in imports of certain steel
products from Mexico. For example, U.S. rebar imports from Mexico
increased by more than 1,700 percent in 2023 over the 2015-2017
historical average. This appears to be in violation of the 2019 U.S.-
Mexico agreement to suspend application of section 232 measures,
provided that import volumes do not surge in excess of historical
volumes. I remain concerned that Mexico does not seem willing or able
to take the action necessary to address U.S. concerns.
What more can be done to ensure that Mexico abides by the 2019
agreement? At what point does it become necessary to consider
reapplying section 232 measures to products where surges have occurred?
Answer. Maintaining viable steel and aluminum industries is
essential to U.S. national security. These industries fueled American
industrialization and built the American middle class.
On July 10, 2024, President Biden and President of Mexico Andres
Manuel Lopez Obrador announced actions to jointly prevent the evasion
of tariffs on steel and aluminum. Under this agreement, in order to
enter the United States free of section 232 tariffs, steel imports from
Mexico must be melted and poured in the United States, Mexico, or
Canada and aluminum imports from Mexico must not contain primary
aluminum smelt or cast in Belarus, China, Iran, or Russia.
The United States is committed to continued discussions with Mexico
on surges, including in products like rebar where we know our industry
remains deeply concerned.
Question. I understand that the U.S. and Mexico have been
negotiating a provision that would require steel imports from Mexico to
be melted and poured in Mexico in order to benefit from the tariff-free
treatment. This provision is critical to help ensure that China and
other countries don't evade the section 232 measures by shipping
product through Mexico.
What is the status of these negotiations, and what more can be done
to ensure that Mexico agrees to this critical provision?
Answer. We agree that a melt-and-pour requirement is critical to
help ensure that China and other countries do not evade the section 301
and section 232 measures. On July 10, 2024, President Biden and
President of Mexico Andres Manuel Lopez Obrador announced actions to
jointly prevent the evasion of tariffs on steel and aluminum. Under
this agreement, in order to enter the United States free of section 232
tariffs, steel imports from Mexico must be melted and poured in the
United States, Mexico, or Canada and aluminum imports from Mexico must
not contain primary aluminum smelt or cast in Belarus, China, Iran, or
Russia.
Question. A company with their headquarters and significant
manufacturing presence in North Carolina is facing unfair competition
from a Chinese company that has set up a new factory in Thailand to
circumvent the China section 301 tariffs. It is using cheap Chinese
inputs in its production in Thailand and bringing the final products
into the United States tariff-free, undercutting the local NC company.
While the company is pursuing AD/CVD relief, we know that is costly,
time-
consuming, and uncertain. I understand the Chinese are duplicating
these efforts in other industries.
What emergency authorities or policies could combat this clear
circumvention of U.S. tariffs? Could you provide any policy solutions
USTR could take to address this type of situation?
Answer. To maintain the effectiveness of the section 301 actions,
the U.S. Government must ensure that goods subject to the section 301
duties are properly assessed. That is why, in my report, Four-Year
Review of Actions Taken in the Section 301 Investigation: China's Acts,
Policies, and Practices Related to Technology Transfer, Intellectual
Property, and Innovation, I recommended additional funds be allocated
to Customs and Border Protection (CBP) for the enforcement of trade
actions. As noted in my report, despite the significant increase in
trade actions under section 301, section 201, and section 232, the
budget for CBP does not have funds specifically allocated for the
enforcement of these trade actions. Additional funds for CBP's
enforcement work would make these trade actions more effective.
Generally, as your question suggests, we must be aware of the
incentives created by the section 301 tariffs. These tariffs promote
diversification of supply chains away from China, but they may
encourage PRC-based companies to set up operations outside China,
whether in the United States or in other jurisdictions, to avoid the
tariffs. Given the openness of our market to goods from key trading
partners and to foreign investment, we will need to work closely with
Congress to evaluate and address these challenges.
______
Questions Submitted by Hon. Marsha Blackburn
Question. The theft of intellectual property (IP) by China poses
significant risks to U.S. producers, undermining their competitive
advantage and stifling innovation. When American ideas, designs, and
technologies are appropriated without authorization, businesses face
revenue losses and decreased incentives for research and development.
This is exactly the situation facing Tennessee-based Meco, which is the
last domestic producer of charcoal grills. Chinese producers have been
flooding the U.S. market with knockoffs of Meco's grills, fully
usurping Meco's IP down to stolen imagery (produced by Meco) used to
advertise the grills online.
What actions has the United States Trade Representative (USTR)
taken to address China's anticompetitive practices, specifically
concerning the intellectual property theft from American producers like
Meco?
Answer. USTR's statutory Four-Year Review of the Section 301
Investigation of China's Acts, Policies, and Practices Related to
Technology Transfer, Intellectual Property, and Innovation found that
China continues to engage in intellectual property theft and forced
technology transfer, which underpinned the initial 2018 investigation.
In light of this finding and to further encourage the elimination of
China's unfair technology transfer-related policies and practices that
continue to burden U.S. commerce, the President directed USTR to
increase tariffs on $18 billion of imports from China in strategic
sectors. We are committed to using the full range of tools we have and
developing new tools as needed to defend American economic interests
from harmful, unfair policies and practices.
We continue to press China to address a range of intellectual
property (IP) enforcement concerns, including IP theft. Under the
United States-China Economic and Trade Agreement, China committed to
take sustained and effective enforcement action to stop the manufacture
and block the distribution of counterfeit products and to combat the
prevalence of counterfeit goods on its e-commerce platforms, including
by revoking licenses for repeated failures to curb the sale of
counterfeit goods. We continue to use the consultation mechanisms
established by the agreement to address IP concerns as they arise.
Nevertheless, China continues to be the world's leading source of
counterfeit and pirated goods. China remains on the Special 301
Priority Watch List in 2024 and is subject to continued monitoring
pursuant to section 306 of the Trade Act of 1974, as amended (19 U.S.C.
Sec. 2416).
USTR also works closely with our colleagues across IP agencies,
including regional IP attaches, the Department of Justice, and Customs
and Border Protection, on these types of company-specific issues.
Question. I appreciate your March 28th response to our bipartisan
letter inquiring about USTR's engagement with its EU counterparts
regarding the implementation of the EU Deforestation-Free Regulation.
As you know, I am deeply concerned that EUDR will disrupt the U.S.-EU
trade relationship and urge the Biden administration to work with the
EU to ensure that American producers' market access is not disrupted.
Could you please provide an update on USTR's discussions with EU
regulators on EUDR's implementation?
Answer. The Biden-Harris administration remains strongly committed
to combating deforestation, but I share your concerns regarding how the
EU's Deforestation-Free Supply Chain Regulation (EUDR) will be
implemented and the impact it may have on U.S. producers that engage in
sustainable production practices. USTR has directly engaged with the EU
at all levels regarding our implementation concerns and continues to
urge the EU to delay implementation and enforcement of penalties until
U.S. concerns have been addressed. This includes adjustments to the
risk benchmarking to take into account good forest management
practices, such as those in the United States. I have engaged directly
with Executive Vice President for the European Green Deal,
Interinstitutional Relations and Foresight Maros Sefcovic to request
that implementation and enforcement issues are addressed, including by
sending a letter with USDA Secretary Vilsack and Commerce Secretary
Raimondo detailing our shared concerns. Chief Agricultural Negotiator
Doug McKalip has also raised these issues directly to the European
Commission. Additionally, we have raised EUDR implementation concerns
at the WTO, including at the Committee on Technical Barriers to Trade,
the Committee on Market Access, and the Council for Trade in Goods.
USTR will continue to engage at all levels to press the EU to ensure
that this regulation does not lead to unnecessary barriers for U.S.
exports.
Question. U.S. agriculture exports dropped by $17 billion in the
last fiscal year. China did not live up to its agricultural purchase
commitments under President Trump's Phase One Deal and USTR has failed
to take enforcement actions against China.
What are you doing to hold China accountable for failing to meet
its purchase commitments?
Answer. Since the beginning of the Biden-Harris administration,
USTR has been engaging with trading partners across the globe to
provide export opportunities for farmers and producers, including
through the reduction of both tariff and nontariff barriers. According
to USDA calculations, these actions have supported roughly $21 billion
in U.S. agricultural exports over the course of the 3 highest years of
agricultural exports ever, breaking records in 2 of the past 3 years.
USTR's statutory Four-Year Review of the Section 301 Investigation
of China's Acts, Policies, and Practices Related to Technology
Transfer, Intellectual Property, and Innovation found that China
continues to engage in intellectual property theft and forced
technology transfer, which underpinned the initial 2018 investigation.
In light of this finding and to further encourage the elimination of
China's unfair technology transfer-related policies and practices that
continue to burden U.S. commerce, the President directed USTR to
increase tariffs on $18 billion of imports from China in strategic
sectors. We are committed to using the full range of tools we have and
developing new tools as needed to defend American economic interests
from harmful, unfair policies and practices.
We remain open to meaningful improvements from China for our
agricultural products and to mitigate against retaliation. But one of
the challenges we have with China is an over reliance on China as a
customer. Our strategy therefore has expanded to include working with
allies and partners on issues of common concern and market
opportunities while also pursuing the vigorous defense of our values
and economic interests from the negative impacts of China's unfair
economic and trade policies and practices.
Question. USDA projects that exports of corn, livestock, poultry,
dairy, pork, soybeans, and wheat will all fall by hundreds of millions
of dollars in Fiscal Year 2024. You have not negotiated or signed new
trade agreements to create new markets for our farmers.
Does your office intend to do so in 2024 or will American farmers
experience more of the same and continue to lose market share to their
competitors?
Answer. Since the beginning of the Biden-Harris administration,
USTR has been engaging with trading partners across the globe to
provide export opportunities for farmers and producers, including
through the reduction of both tariff and nontariff barriers. According
to USDA calculations, these actions have supported roughly $21 billion
in U.S. agricultural exports over the course of the 3 highest years of
agricultural exports ever, breaking records in 2 of the past 3 years.
USTR has been taking a leading role to develop innovative
strategies and initiatives to integrate trade and other economic policy
measures in a way that promotes trade and bolsters resilience. We have
launched initiatives to strengthen our relationships with key partners
in the Indo-Pacific and the Americas and with Taiwan and Kenya. With
respect to existing agreements, we will continue to focus on full
implementation, monitoring, and enforcement. We will remain focused on
the work ahead to drive more inclusive, sustainable economic growth--
and to shape the global trading system for the better.
Question. I would like you to address our exchange as well as your
exchange with my colleague, Senator Grassley, during the hearing. When
questioned about USTR's withdrawal from longstanding proposals made
during international negotiations on issues related to free cross
border data flow, data localization, and source code issues, you
responded that the administration's rationale was a changed perception
of data--specifically that it should be viewed as a commodity as
opposed to a facilitator of trade. You stated this in the context of
the Kids Online Safety Act (KOSA), which is legislation that I am
coleading with Senator Blumenthal and that you acknowledged addressed
data security for children's data in the digital economy and in the
digital sphere.
In your view, how would KOSA violate U.S. commitments under the
World Trade Organization, as well as trade agreements like the U.S.-
Mexico-Canada Agreement?
Several countries have their own data privacy laws. Do the data
privacy laws of other countries violate its commitments to
international agreements?
If so, why has USTR not taken enforcement action against these
countries?
Answer. At the hearing, I did not state that there was a changed
perception of data. Rather, I stated that the very nature of the
discussion about electronic trade had changed, from using digital
technology to facilitate the flow of goods, to a circumstance in which
the data itself is the commodity.
In circumstances in which the United States commits to the free
cross-border flow of data, any measure that does not permit the free
flow of data, including children's data, is subject to challenge as a
violation of that agreement. Administrations dating back to President
George W. Bush have expressed concern over WTO dispute settlement
because it did not show adequate deference to parties' sovereign
rights. Dispute settlement panels have not consistently respected
governments' efforts to regulate in the public interest. We need to
ensure that international commitments on data permit the United States
to act domestically to protect our citizens' data, and that those
international commitments only proscribe what we agree governments
should not do.
Respecting Congress's interest in legislating, the United States
has limited its exposure to such challenges by refraining from making
further commitments until we are confident that the interests of the
American people are secure.
Question. This past December, the EU extended their tariff
suspension for products affected by the steel and aluminum trade
dispute through March 31, 2025. This includes the suspension of a 50-
percent tariff on American whiskey products.
Please provide a detailed update on USTR's ongoing discussions with
the European Union regarding its retaliatory tariffs imposed on
American products in response to section 232 tariffs on steel and
aluminum?
Answer. In December 2023, the United States extended the EU's
access to U.S. tariff rate quotas for steel and aluminum until December
31, 2025, in order to give more time for both the United States and the
European Union to negotiate a global arrangement. For its part, the EU
chose to extend the suspension of its retaliatory tariffs on U.S. goods
only until March 31, 2025. The United States has been clear to the EU
that a resumption of the EU's retaliatory tariffs at that time could
lead to a return of the section 232 tariffs for the EU. We continue to
strongly encourage the EU to extend the suspension of the retaliatory
tariffs until December 2025.
Question. Over the past 2 years, officials from USTR and the
Department of Commerce have participated in several rounds of
negotiations related to the Indo-Pacific Economic Framework for
Prosperity (IPEF). I would like to know more about the costs associated
with these international trips to U.S. taxpayers.
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the first negotiating round held in Brisbane, Australia,
from December 10-12, 2022, followed by a special negotiating round on
Pillars II-IV in New Delhi, India, from February 8-11, 2023?
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the second negotiating round held in Bali, Indonesia, from
March 13-19, 2023,
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the third negotiating round held in Singapore from May 8-
15, 2023?
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the fourth negotiating round held in Busan, South Korea,
from July 9-15, 2023?
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the fifth negotiating round held in Bangkok, Thailand from
September 10-16, 2023?
Could you please produce detailed expense reports or related
documentation accounting for costs associated with sending USTR
officials to the sixth negotiating round was held in Kuala Lumpur,
Malaysia from October 15-24, 2023.
If you cannot produce expense reports or documentation, can you
commit to providing cost estimates for each of these international
trips?
Answer. Through the IPEF trade pillar negotiations, the United
States seeks to strengthen our economic ties to the region, while
promoting inclusive growth for workers and businesses, advancing strong
labor standards, and tackling climate change. As part of this effort,
we are specifically focused on negotiating provisions that can help
American businesses and workers compete in the global economy and are
seeking to include commitments on labor, environmental sustainability,
the digital economy, agriculture, transparency and good regulatory
practices, competition policy, and trade facilitation. The
administration's focus is on developing high-
standard rules that can increase competitiveness among parties to the
agreement, which can generate increased access to foreign markets for
U.S. exporters. We are eager to make progress quickly and deliver
results for U.S. workers and businesses. We are committed to continuing
to keep Congress informed of progress on trade pillar negotiations.
As the U.S. lead for international trade and investment matters,
USTR staff across administrations have traveled to meet with trading
partners to advance America's interests. This includes traveling for
negotiating rounds, such as the IPEF negotiating rounds. Traveling to
engage in person is an essential feature of USTR's trade work. In-
person meetings help USTR build important relationships and allows
negotiations to occur in a setting that helps the United States make
more progress on behalf of American workers, farmers, businesses, and
others, as well as our national interest.
USTR reports travel expenses in its annual budget requests. As
noted in USTR's Fiscal Year 2025 Budget Request, USTR's travel expenses
totaled $7.2 million in Fiscal Year 2023.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
Today I'm going to discuss the ways in which Congress and the
administration can work together to build a trade agenda that will
supercharge America's diverse industries and create good-paying and
innovative jobs across Oregon and nationwide.
Let's start with trade enforcement: without enforcement, our trade
laws aren't worth the paper they're written on.
India's wheat subsidies are distorting prices and making it harder
for Oregon's farmers to compete in the Asian market. Mexico's illegal
fishing practices are hurting the environment, and its harmful energy
regulations are undermining American clean energy suppliers. China has
a rap sheet of unfair subsidies and trade practices so long, we'd be
here until dinner time just to get through it. But I'll spare everyone
the filibuster.
Every single one of these unfair practices by foreign countries is
directly hurting workers and companies in the United States, including
in my home State.
There's a lot more USTR can be doing with the tools it has--whether
that's raising issues directly with trading partners, starting dispute
settlement, or opening 301 investigations into unfair trade practices.
That's the only way to hold trade cheats accountable and level the
playing field for American workers and businesses.
Next up: trade barriers. Our economy thrives when our workers make
and grow stuff here, add value to it here, and ship it around the
world--but we can't do it with all these barriers in place.
In my home State, one in four jobs relies on exports. Oregon has
world-renowned exports from wheat, to potatoes, to wine, to high-tech
electronics, and everything in between. But the success of Oregon's
farmers and workers depends on the administration knocking down
barriers to help them compete in the global market and get their
products on shelves.
That's why, in addition to enforcing the rules on the books to hold
trade cheats accountable, USTR can and must be playing offense. It's
not enough to sell domestically; the United States must expand
opportunities in the global market for American exporters across every
industry.
The negotiations with Taiwan, Kenya, and Indo-Pacific countries
could net big wins for our exporters in agriculture and manufacturing--
but only if the administration pushes hard to crack down on tactics
like unfair labeling, duplicative testing requirements, and ag
regulations that aren't supported by science and are designed to put
American workers, farmers, and ranchers at a disadvantage.
Before I wrap up, I'll also note our country, particularly my home
State, has set the standard on high-tech, innovative industries. The
United States needs to be a leader in setting the rules of the road for
digital trade so our creators and innovators get a fair shake in
foreign markets.
I take a back seat to no one when it comes to privacy, security,
and antitrust enforcement. While lawmakers look to domestic tech
regulation, we must also push for digital trade rules that will protect
the free and open Internet, help small businesses, and push back on
China's model of digital surveillance and censorship.
I'm glad the White House is taking charge on this issue and working
with diverse stakeholders and agencies to develop a whole-of-government
position. I look forward to working on a digital trade position that
reflects the needs of American workers, businesses, and consumers.
I'll close with this: the American people deserve to know what the
government's priorities are with regard to trade policy. Unfortunately,
I have strong concerns that this administration has moved away from
working with Congress and, as a result, is keeping the American people
in the dark.
To that end, I'm asking USTR to be straight with Congress and the
public. When you take meetings with foreign officials, it isn't enough
to say ``a range of bilateral concerns'' were raised. Tell us what
trade barriers you're trying to break down, and how that will help
American workers and businesses.
If negotiators are meeting with the Japanese, tell us if they're
pushing to get Oregon potatoes on shelves in Japan. When officials
engage with Indonesia, tell us if you're pushing against unfair
licensing requirements that hurt Oregon's dairy farmers. In your
negotiations with Kenya, tell us how you'll push them to improve their
environmental and labor laws or bring down barriers to biotech
products.
Fishermen in Newport and ranchers in Prineville want to know
exactly how USTR is helping their businesses thrive in the global
market. So I need you to shed some light on trade policy.
In my mind, enforcing laws on the books and making our government's
trade policy priorities clear is a good place to start to level the
playing field for the American people. I look forward to today's
discussion about how Congress and the administration can work together
to make it possible.
______
Communications
----------
American Association of Exporters and Importers
1300 Pennsylvania Avenue, NW, Suite 450
Washington, DC 20004
+1 202-857-8009
https://aaei.org/
April 15, 2024
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
Senate Committee on Finance Senate Committee on Finance
Washington, DC 20510 Washington, DC 20510
The Honorable Jason Smith The Honorable Richard Neal
Chairman Ranking Member
House Ways & Means Committee House Ways & Means Committee
Washington, DC 20515 Washington, DC 20515
Re: Generalization System of Preferences (GSP) program renewal
Dear Chairman Wyden, Ranking Member Crapo, Chairman Smith, and Ranking
Member Neal,
The American Association of Exporters and Importers (AAEI) urges
Congress to complete work and report legislation to reauthorize the
Generalized System of Preferences (GSP), including provisions to ensure
that this this program is renewed on a fully retroactive basis.
On December 31, 2020, the Generalized System of Preferences (GSP)
program lapsed. GSP strengthens U.S. interests by supporting the
development of 119 emerging economies opening the U.S. market to
qualified exports. The GSP program has a long history of bipartisan
support going back to its establishment in the Trade Act of 1974. GSP
supports American workers and manufacturers by reducing the costs of
imported inputs, materials, and equipment for domestic manufacturing.
Additionally, GSP helps American families by lowering the costs of
consumer goods imported from eligible countries that are aligned with
U.S. national security and economic interests. Products imported under
GSP do not compete with U.S.-made goods in a significant way.
For over 100 years, AAEI has served as a prominent national voice for
the United States' international trade community. AAEI proudly
represents a diverse range of industry sectors within the global trade
landscape, comprising manufacturers, importers, exporters, wholesalers,
retailers, and various service providers such as customs brokers,
freight forwarders, trade advisors, insurers, security providers,
transportation interests and ports. Many of its members are small
businesses seeking opportunities to export to foreign markets, while
the larger entities help to fuel the economy through their supply
chains. As the premier U.S. international trade organization, AAEI is
recognized for its expertise in the day-to-day facilitation of trade,
including the administration and compliance with import and export laws
of the United States, making it an indispensable resource for those
directly involved in and impacted by developments in international
trade.
GSP solidifies the U.S. relationships with developing companies,
ensuring that these countries improve their approaches to the
environment, human rights, and the rule of law. To the extent that the
U.S. Government is looking for reliable partners that share U.S. values
as a viable alternative to imports from China, GSP countries are ready
to fill this role. They simply need a signal in the right direction.
GSP can send that message clearly. Since GSP expired in 2020, U.S.
companies have paid over $2 billion in extra taxes while also dealing
with the effects of the COVID-19 pandemic, high freight costs, and
supply chain disruptions in both the U.S. and beneficiary countries.
These issues have contributed to high and persistent U.S. inflation
while hindering American companies' efforts to build more diversified
and resilient supply chains.
If you have any questions or require any clarification of our
responses, please contact my staff lead Mitchell Hart at MHart@aaei-
hq.org.
Sincerely,
Eugene C. Laney
President and CEO
______
American Farm Bureau Federation
600 Maryland Avenue, SW, Suite 1000 W
Washington, DC 20024
p. 202-406-3600
f. 202-406-3606
https://www.fb.org/
The American Farm Bureau Federation, the nation's largest general farm
organization, submits this statement for the Senate Committee on
Finance hearing on the President's 2024 trade policy agenda. Trade is
critically important to the current welfare and future prosperity of
U.S. farmers and ranchers. America's farmers and ranchers depend on
growing and stable export markets for the success of their businesses.
President's Trade Agenda for 2024
The Administration's approach on trade includes the Indo-Pacific
Economic Framework; reducing trade barriers generally and with Taiwan
and Kenya specifically; supporting agriculture; promoting sustainable
environmental practices; focusing on supply chain improvements; and
promoting stability.
The Indo-Pacific Economic Framework (IPEF) was introduced as a part of
the overall Indo-Pacific Strategy. It is an approach to improve
relationships and reach agreements with the region's countries. It
should also be used to reach science-based standards that will assist
exports. The inclusion of sanitary and phytosanitary (SPS) standards
will reduce barriers and expand opportunities for our agricultural
exports. Trade initiatives should also include a strategy of expanding
market access for agriculture by working to reduce tariff barriers.
The Administration is also not proposing a reauthorization of Trade
Promotion Authority nor a commitment to pursue trade negotiations with
binding and enforceable commitments. Farm Bureau supports trade
agreements in the Indo-Pacific region as the most durable and effective
means to improve market opportunities for farmers and ranchers.
The U.S.-Taiwan Initiative on 21st Century Trade was launched in 2022.
For agriculture, this effort needs to resolve standards barriers by
Taiwan that restrict U.S. exports. In fiscal year 2023, $3.7 billion in
agricultural products were exported to Taiwan.
Indo-Pacific Region Agricultural Trade
Current agreements in the region show the importance of moving forward
with additional efforts to improve opportunities for U.S. agricultural
exports.
U.S.-China
The U.S.-China Phase 1 Agreement resulted in improved agricultural
trade and progress in the removal of barriers that impact the
competitiveness of U.S. products in this market. In the Phase 1
Agreement, China committed to increase purchases of U.S. agricultural
products.
The outlook for Chinese purchases of soybeans, corn, wheat, sorghum,
beef, pork, and other products remains strong. China bought $33.7
billion of U.S. agricultural products in 2023.
China must continue addressing the commitments they made to improve and
reform many standards in the Agreement. As these barriers go down, the
opportunity for increased U.S. commodity sales improves.
An ongoing trade relationship with China is critical for U.S. farmers
and ranchers.
U.S.-South Korea
The U.S.-South Korea Free Trade Agreement (KORUS) entered in force on
March 25, 2012. The agreement eliminated or reduced tariff and non-
tariff barriers on agricultural and other products. U.S. agricultural
exports to South Korea reached an all-time high in 2023 at $7.7
billion.
U.S.-Japan
The U.S.-Japan Trade Agreement went into effect on January 1, 2020. The
tariffs applied to U.S. products are now the same as those applied to
the products of the other countries with a trade agreement with Japan.
Tariffs are being reduced or eliminated on a variety of U.S.
agricultural exports to Japan. The U.S. and Japan should continue talks
on the remaining issues, such as SPS rules, which would help lead to a
comprehensive FTA between the U.S. and Japan. The agreement on the
operation of Japan's beef safeguard mechanism will help increase sales
of U.S. beef products.
U.S. agricultural exports to Japan were over $12.2 billion in 2023.
USMCA
The U.S.-Mexico-Canada Agreement is important for the continuation and
improvement of trade among the nations of North America. Mexico ($28.3
billion) and Canada ($28 billion) are the second- and third-largest
export markets for U.S. agriculture. The implementation and enforcement
of this agreement will yield future growth for our exports.
Issues between the U.S. and Mexico on biotech corn are currently in the
dispute settlement system. Concerns continue with the amount of U.S.
dairy product access into Canada.
U.S.-United Kingdom
We support a resumption of trade negotiations between the U.S. and the
UK to deal with non-science-based barriers to our agricultural exports.
A trade agreement that addresses both tariff and non-tariff barriers
will benefit farmers and consumers.
Trade Promotion Authority
The Bipartisan Congressional Trade Priorities and Accountability Act of
2015 (Trade Promotion Authority) ended on July 1, 2021. Farm Bureau
recognizes the crucial importance of Trade Promotion Authority and
supports its reauthorization. The negotiating objectives set by
Congress, the consultation requirements of the Administration with
Congress and the voting procedures established under TPA are important
to the successful negotiation and conclusion of trade discussions.
World Trade Organization
The Biden Administration will need to deal with various WTO reform
issues such as the operation of the Appellate Body. For agriculture, we
support working toward increased transparency through an improved
notifications process. We do not support discussion of subsidy levels
without a full discussion of market access initiatives.
Sustainability
U.S. farmers and ranchers look to be partners in addressing the
challenges of our changing climate. Not only are agriculture's
emissions low, American farmers and ranchers are making their footprint
even smaller. This is best accomplished through policies that provide
voluntary, incentive-based tools for farmers, ranchers, and forest
owners to maximize the sequestration of carbon. This approach will also
help achieve a reduction in greenhouse gas emissions, increase the
resilience of the land, advance science-based outcomes and help rural
economies adapt.
Agricultural Exports and Imports
U.S. imports of agriculture and food are growing more than our
agricultural exports, with imports of $195 billion in fiscal year 2023
and exports of $178.7 billion. This growing trend shows the need for
more aggressive efforts to expand market opportunities for U.S. farmers
and ranchers.
Part of the rise in imports is due to an increase in fruit and
vegetable imports. We are concerned that foreign competitors are
hurting domestic seasonal produce growers.
We support efforts to expand export markets and to also use our
existing trade laws to protect growers against unfairly traded imports.
When fruit and vegetable imports are increasing, producers of
perishable commodities need an import relief procedure that will
prevent their markets from being severely impacted during a short
marketing season.
Conclusion
U.S. farmers and ranchers rely on export markets for over 20% of
agricultural production. As Congress considers future discussions with
the nations that are our most important export destinations, and those
that have the potential to grow in importance, we need to consider how
trade initiatives can most effectively expand agricultural exports to
the benefit of the nation's farmers and ranchers.
As we seek to expand and diversify our markets, we will rely upon the
actions of Congress and the Administration to enact market-opening
trade agreements.
______
Americans for Free Trade
https://americansforfreetrade.com/
April 15, 2024
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
Senate Committee on Finance Senate Committee on Finance
Washington, DC 20510 Washington, DC 20510
The Honorable Jason Smith The Honorable Richard Neal
Chairman Ranking Member
House Ways and Means Committee House Ways and Means Committee
Washington, DC 20515 Washington, DC 20515
RE: Statement for the Hearing Record: The President's 2024 Trade Policy
Agenda
Dear Chairman Wyden, Ranking Member Crapo, Chairman Smith, and Ranking
Member Neal,
The Americans for Free Trade coalition, a broad alliance of American
businesses, trade organizations, and workers united against tariffs,
respectfully submits this written statement to include in the public
record of the Senate Finance Committee and House Ways and Means
Committee's (``the Committees'') 2024 Trade Policy Agenda hearings
scheduled for April 16th and 17th. We appreciate the Committees holding
hearings on this important matter.
By way of background, Americans for Free Trade represents every part of
the U.S. economy including manufacturers, farmers and agribusinesses,
powersports, retailers, technology companies, service suppliers,
natural gas and oil companies, importers, exporters, and other supply
chain stakeholders. Collectively, we employ tens of millions of
Americans through our vast supply chains.
For more than 5 years, AFT has called for an end to the China 301
tariffs which have had a disproportionate economic impact on American
companies, workers, and consumers. These tariffs have also failed to
achieve their stated objective which was to change China's use of
unfair trade practices relating to intellectual property rights, forced
technology transfers, and innovation. We have repeatedly called for the
administration to find a new path forward to address the ongoing China
trade issues, without a response. We continue to believe that it is
well past time for a strategic realignment of the tariffs to focus on
the original intent of the Section 301 investigation and seek alternate
measures to achieve the necessary changes in China's behavior.
Unfortunately, we have seen no change in the Biden-Harris
administration's position or communication regarding the tariffs since
the last time the committee held this hearing in 2023. The statement
\1\ that we submitted for those hearings remains true today. The only
difference is that importers have paid close to $40 billion more in the
Section 301 tariffs. As of today, importers have paid more than $211
billion \2\ in Section 301 tariffs on covered products imported from
China, according to U.S. Customs and Border Protection (CBP). These
taxes continue to create tremendous uncertainty, increase the cost of
doing business in the United States, and place a financial burden on
American businesses--negatively impacting their ability to invest in
their companies, hire more American workers, innovate new technologies,
and remain competitive globally. The tariffs also have an impact on
consumers. While many companies have tried to absorb the costs of the
tariffs, many have had to share the costs with final consumers.
---------------------------------------------------------------------------
\1\ https://americansforfreetrade.com/wp-content/uploads/2023/04/
AFT-Trade-Policy-2023-Statement-for-SFC-HWM-Hearing-Record-Final-
040623-1.pdf.
\2\ CBP Trade Statistics--https://www.cbp.gov/newsroom/stats/trade.
---------------------------------------------------------------------------
I. Lack of USTR Response and Timely Communications
AFT has continuously sent communications to the Office of the U.S.
Trade Representative (USTR) regarding both the release of the 4-year
necessity review as well as calls to renew expiring exclusions and to
reopen a more fulsome exclusion process. Each of those communications
has gone unanswered.
Our most recent letters sent in July 2023 \3\ and December 2023 \4\
urged USTR to quickly renew expiring exclusions, as well as call for an
immediate release of the results of the 4-year review. The lack of
urgency for USTR to renew the expiring exclusions has been concerning.
Each time USTR has renewed the exclusions, importers have been guessing
until the last minute whether they will have to pay the tariffs on
products that have already been bought and paid for under contract.
---------------------------------------------------------------------------
\3\ AFT Letter to USTR--Extension of Section 301 China Tariffs
Exclusions--https://americansforfreetrade.com/wp-content/uploads/2023/
07/AFT-Letter-to-USTR-Tariff-Exclusion-Renewal-Final-072723.pdf, July
27, 2023.
\4\ AFT Letter to USTR--Four Year Review and Exclusions--https://
americansforfreetrade.
com/wp-content/uploads/2023/12/AFT-Letter-to-USTR-Tariff-Exclusion-
Renewal-Four-Year-Review-Final-Updated-121123.pdf, December 11, 2023.
For the most recent extension of the COVID-19 and small batch
exclusions at the end of December 2023, USTR did not provide CBP enough
time to program its system (the Automated Commercial Environment or
ACE) to note that the exclusions had been extended. This resulted in
importers having to pay duties on products imported into the United
States for several days and then subsequently file for a duty refund--
creating additional administrative burdens for both the importers as
well as CBP. USTR must improve the product exclusion renewal process so
that both importers and CBP are provided with more advanced notice
---------------------------------------------------------------------------
about the status of the exclusions.
As AFT communicated with the committees in a December 2023 letter,\5\
``USTR has taken over a year and half to conduct the review, which has
exacerbated the uncertainty around the future of the tariffs.'' The
letter concluded, ``As economic uncertainty continues, it is imperative
that Congress reclaim its constitutional authority over trade and
conduct rigorous oversight over USTR to ensure it is using its tools
appropriately to create economic opportunity for all Americans and to
ensure that American businesses can compete globally.'' We continue to
renew that call upon Congress to reclaim its tariff authority.
---------------------------------------------------------------------------
\5\ AFT Letter to Congress Urging USTR to Promptly Conclude Section
301 Four-Year Review and Extend Expiring Exclusions--https://
americansforfreetrade.com/wp-content/uploads/2023/12/AFT-Section-301-
Tariff-Letter-to-Big-Four-HWM-SFC-Final-Update-122023.pdf, December 20,
2023.
---------------------------------------------------------------------------
II. 301 Tariffs' Impacts on American Businesses and Consumers
From the onset of the tariffs, AFT has stated that American companies,
not Chinese companies, bear the economic brunt of the tariffs. Those
who argue otherwise are simply ignoring reality. As a reminder, this
fact was confirmed by the non-partisan, independent U.S. International
Trade Commission (USITC) last year in its recent report entitled
``Certain Effects of Section 232 and 301 Tariffs Reduced Imports and
Increased Prices and Production in Many U.S. Industries.''\6\ The
report states: ``U.S. importers bore nearly the full cost of these
tariffs because import prices increased at the same rate as the
tariffs. The USITC estimated that prices increased by about 1 percent
for each 1 percent increase in the tariffs under sections 232 and
301.''
---------------------------------------------------------------------------
\6\ Economic Impact of Section 232 and 301 Tariffs on U.S.
Industries--https://www.usitc.gov/publications/332/pub5405.pdf, March
15, 2023.
As part of the 301 4-year review, AFT submitted comments \7\ to USTR
with feedback from our coalition partners regarding the negative
impacts that the tariffs have had on their businesses, workers and
consumers.
---------------------------------------------------------------------------
\7\ AFT Comments to USTR on Four-Year Review--https://
americansforfreetrade.com/wp-content/uploads/2024/04/AFT-USTR-301-
Review-Comments-011723-Final.pdf.
---------------------------------------------------------------------------
In general, our comments concluded that:
1) The tariffs make U.S. manufacturers less competitive. While
protecting domestic manufacturing was never the stated purpose of the
section 301 tariffs, they have been harmful to manufacturers by taxing
inputs they need to produce more products domestically. Many of these
companies are not able to find alternate markets to purchase their
inputs, even from U.S. manufacturers. The section 301 tariffs have
harmed, and continue to harm, U.S. manufacturers and make them less
competitive vis-a-vis their competitors and China. They should be
lifted immediately.
2) Tariffs increase costs for American consumers and contribute to
inflation. Despite what the proponents of the tariffs say, the tariffs
do have a very real impact on inflation when they artificially cause
prices to remain high. While there are various contributing factors to
inflation, lifting tariffs is one of the few tools that the
administration could utilize to bring down inflation. Time and again,
we have heard from businesses of all kinds that they were forced to
pass along the increased costs associated with the section 301 tariffs
directly to their customers.
3) Tariffs disproportionately harm low-income American families.
Tariffs harm American families by raising prices on consumer products,
and this is felt most acutely by low-income families. A report \8\ by
the Progressive Policy Institute found that tariffs on consumer goods
are discriminatory and regressive because low-income Americans are
disproportionately impacted by these tariffs, especially single-parent
families and people of color. Our coalition partners agree with the
report and witness the impact the tariffs have on their customers.
---------------------------------------------------------------------------
\8\ Progressive Policy Institute Report--Trade Policy, Equity, and
the Working Poor: United States MFN Tariffs are Regressive Taxes Which
Help Few Workers and Harm Many (4/19/22), https://
www.progressivepolicy.org/pressrelease/u-s-tariffs-are-regressive-
taxes-that-hurt-american-working-families-argues-new-report-from-ppi/.
---------------------------------------------------------------------------
III. China Strategy Moving Forward
As we have asked previously, members of Congress must call upon the
Biden-Harris administration to provide a clear and transparent China
trade strategy. Such a strategy has yet to be delivered. We know that
this strategy goes well beyond the China 301 tariffs, but we believe
addressing the tariff issues and China's unfair trade practices
associated with them are important for the reasons we discussed above.
As a near-term path forward, with regards to the tariffs specifically,
AFT urges the following:
1) Realign the Section 301 Tariffs--Through the strategic 4-year
review process, the administration must strategically realign the
tariffs away from consumer goods and manufacturing inputs and equipment
that are currently unavailable in sufficient quantities from sources
other than China. These tariffs harm American companies and consumers
and are not related to China's Made in 2025 program or critical
sectors. The realignment should provide the opportunity for the
administration to refocus the tariffs and create better leverage to
achieve changes in China's unfair trade practices regarding forced
technology transfer and intellectual property theft. As part of this
realignment, USTR should also include a new, fair, predictable, and
transparent exclusion process available to all products subject to the
301 tariffs to ensure that American companies are not unduly harmed.
2) Use Targeted Tools to Hold Bad Actors Accountable--There has
been ongoing discussion about what tools other than tariffs can be used
to achieve success regarding China's trade practices. USTR has
discussed other ``tools in the toolbox'' and potentially the
development of ``new tools'' but has stopped short of articulating what
those might be. We believe these discussions are incredibly important
and need to continue, with stakeholder input. We need to find the right
set of tools that address China's unfair trade practices in a targeted
way without causing disproportionate economic harm to American
businesses, workers, and consumers.
3) Support U.S. Supply Chain Resiliency and Competitiveness by
Partnering with Allies--AFT continues to call upon the administration
to work with allies to address China's unfair trade practices. This
includes work at the G20, G7, World Trade Organization, the Asia-
Pacific Economic Cooperation (APEC) forum, and other multilateral and
regional institutions. The U.S. can be much more effective in
addressing China's unfair trade practices by working in concert with
allies.
4) Support Efforts on Supply Chain Diversification--Congress and
the Biden-Harris administration should support the U.S. business
community's efforts to further diversify supply chains. This includes
developing an offensive trade agenda that supports supply chain
diversification and ensures the U.S. does not cede global economic
influence and international rulemaking to China. This should include
seeking new free trade agreements with our allies that include tariffs
and market access considerations. Congress should also quickly act to
retroactively renew expired trade preference programs including the
Generalized System of Preferences (GSP), which provide sourcing
alternatives to China, as well as the Miscellaneous Tariff Program
(MTB), which provides temporary duty benefits for U.S. manufacturers
and businesses.
IV. Conclusion
We appreciate the Committees' continued focus on ensuring that U.S.
trade policy advances American values and boosts U.S. competitiveness.
The Committees must continue to weigh in with the Biden-Harris
administration to ensure that destructive tariffs are lifted and that a
new and more effective approach to addressing China's unfair trading
practices is adopted.
We thank the Committees for holding this year's trade agenda hearings
and look forward to continuing to work with you.
Sincerely,
Accessories Council American Association of Exporters
and Importers (AAEI)
ACT | The App Association American Association of Port
Authorities
Agriculture Transportation
Coalition (AgTC) American Bakers Association
Alliance for Chemical Distribution
(ACD) American Bridal and Prom Industry
Association (ABPIA)
ALMA, International (Association of
Loudspeaker Manufacturing and
Acoustics) American Clean Power Association
American Apparel and Footwear
Association (AAFA) American Coatings Association, Inc.
(ACA)
American Down and Feather Council American Fly Fishing Trade
Association
American Home Furnishings Alliance Electronic Transactions Association
American Lighting Association Energy Workforce and Technology
Council
American Petroleum Institute Experiential Designers and
Producers Association
American Pyrotechnics Association Exhibitions and Conferences
Alliance
American Rental Association Fashion Accessories Shippers
Association (FASA)
American Seed Trade Association Fashion Jewelry and Accessories
Trade Association
American Specialty Toy Retailing
Association Flexible Packaging Association
American Trucking Association Florida Ports Council
Arizona Technology Council Florida Retail Federation
Arkansas Grocers and Retail
Merchants Association Footwear Distributors and Retailers
of America (FDRA)
Association For Creative Industries Fragrance Creators Association
Association for PRINT Technologies Game Manufacturers Association
Association of American Publishers Gemini Shippers Association
Association of Equipment
Manufacturers (AEM) Georgia Retailers
Association of Home Appliance
Manufacturers Global Business Alliance
Auto Care Association Global Chamber
Bay Area Council Global Cold Chain Alliance
Beer Institute Greeting Card Association
Building Service Contractors
Association International (BSCAI) Halloween & Costume Association
(HCA)
Business Alliance for Customs
Modernization Home Fashion Products Association
California Retailers Association Home Furnishings Association
Chemical Industry Council of
Delaware (CICD) Household and Commercial Products
Association
Coalition of New England Companies
for Trade (CONECT) Housing Affordability Coalition
Coalition of Services Industries
(CSI) Idaho Retailers Association
Colorado Retail Council Illinois Retail Merchants
Association
Columbia River Customs Brokers and
Forwarders Association Independent Office Products and
Furniture Dealers Association
(IOPFDA)
Computer and Communications
Industry Association (CCIA) Indiana Retail Council
Consumer Brands Association Information Technology Industry
Council (ITI)
Consumer Technology Association International Bottled Water
Association (IBWA)
Council of Fashion Designers of
America (CFDA) International Foodservice
Distributors Association
CropLife America International Housewares
Association
Customs Brokers and Freight
Forwarders Association of
Washington State International Warehouse and
Logistics Association
Customs Brokers & Freight
Forwarders of Northern California International Wood Products
Association
ISSA--The Worldwide Cleaning
Industry Association Licensing Industry Merchandisers'
Association
Juice Products Association (JPA) Los Angeles Customs Brokers and
Freight Forwarders Association
Juvenile Products Manufacturers
Association Louisiana Retailers Association
Leather and Hide Council of America Maine Grocers and Food Producers
Association
Maine Lobster Dealers' Association North American Association of
Uniform Manufacturers and
Distributors (NAUMD)
Maritime Exchange for the Delaware
River and Bay North Carolina Retail Merchants
Association
Maryland Retailers Association Ohio Council of Retail Merchants
MEMA, The Vehicle Suppliers
Association Outdoor Industry Association
Michigan Chemistry Council Pacific Coast Council of Customs
Brokers and Freight Forwarders
Assns. Inc.
Michigan Retailers Association Pennsylvania Retailers' Association
Minnesota Retailers Association PeopleforBikes
Missouri Retailers Association Personal Care Products Council
Motorcycle Industry Council Pet Food Institute
NAPIM (National Association of
Printing Ink Manufacturers) Pet Advocacy Network
National Association of Chain Drug
Stores (NACDS) Plumbing Manufacturers
International
National Association of Foreign-
Trade Zones (NAFTZ) Power Tool Institute (PTI)
National Association of Home
Builders PRINTING United Alliance
National Association of Music
Merchants Promotional Products Association
International
National Association of Trailer
Manufacturers (NATM) Recreational Off-Highway Vehicle
Association
National Confectioners Association Retail Association of Maine
National Council of Chain
Restaurants Retail Council of New York State
National Electrical Manufacturers
Association (NEMA) Retail Industry Leaders Association
National Fisheries Institute Retailers Association of
Massachusetts
National Foreign Trade Council RISE (Responsible Industry for a
Sound Environment)
National Grocers Association RV Industry Association
National Industrial Transportation
League (NITL) San Diego Customs Brokers and
Forwarders Association
National Lumber and Building
Material Dealers Association Semiconductor Industry Association
(SIA)
National Marine Manufacturers
Association Snowsports Industries America
National Pork Producers Council Software and Information Industry
Association (SIIA)
National Restaurant Association South Dakota Retailers Association
National Retail Federation Specialty Equipment Market
Association
National Ski and Snowboard
Retailers Association Specialty Vehicle Institute of
America
National Sporting Goods Association Sports and Fitness Industry
Association
Natural Products Association TechNet
New Jersey Retail Merchants
Association Technology Trade Regulation
Alliance (TTRA)
North American Association of Food
Equipment Manufacturers (NAFEM) Telecommunications Industry
Association (TIA)
Texas Retailers Association The Hardwood Federation
Texas Water Infrastructure Network Toy Association
The Airforwarders Association Travel Goods Association
The Fertilizer Institute Truck and Engine Manufacturers
Association (EMA)
United States Council for
International Business Virginia Retail Federation
United States Fashion Industry
Association Virginia-DC District Export Council
(VA-DC DEC)
US Global Value Chain Coalition Washington Retail Association
US-China Business Council Water Quality Association
Vinyl Institute Window and Door Manufacturers
Association
Virginia Association of Chain Drug
Stores World Pet Association, Inc. (WPA)
______
Center for Fiscal Equity
14448 Parkvale Road, #6
Rockville, MD 20853
[email protected]
Statement of Michael G. Bindner
Chairman Wyden and Ranking Member Crapo, thank you for the opportunity
to submit comments to the committee.
As Russian aggression in Ukraine continues, it must be a key component
of our trade policy, not just including the obvious connection to our
Foreign Military Sales program, which is being used to aid Ukraine
directly and to backfill contributions by our NATO allies.
Europe's energy independence is also a related issue, which means that
replacing Russian energy with other sources is a relevant issue--and a
reason to consider alternatives like increased support of nuclear power
here and abroad (development of small modular reactors) and its use to
replace gasoline with electric vehicles--either battery powered or
tethered electric cars and trucks (on separate roadways).
These changes are necessary, regardless of Ukraine, due to global
climate change--particularly regarding the warming of the Barents Sea
and its impact on the continued warming of the Northern Hemisphere. In
short, the thermostat is broken and only drastic change, like replacing
gasoline in urban areas, is required.
Replacing Ukrainian and Russian grain in the developing world is
another priority--however such replacement should not rest with the
United States, at least not in the long term. Instead, developing
nations need help in developing nations to feed themselves. For too
long, agricultural aid and trade have been predatory, designed to
destroy local agriculture for the sake of our own. We need to ship
know-how, not grain, whenever possible, although such know-how should
respect local land ownership practices rather than imposing the Anglo-
American system of ownership fee-simple arising as a grant from the
British monarchy or state government.
Our comments from last year touch on still lingering issues of trade
with China and the possible resurrection of something like the Trans-
Pacific Partnership, immigration as a trade policy issue, consumption
taxes and the issue of Tier 2 OECD corporate tax policy reforms. We
have included them as an attachment, along with our usual attachments
on taxation and trade policy, consumption taxes and an asset value-
added tax (which will include a need for a negotiated rate).
Some income taxation of the very wealthy as a way to reduce the debt is
appropriate, as are the use of an income tax system (or subtraction
value-added tax) to fund adequate tax support for families. Taxation
for other domestic government, including contributions from employers
to social insurance, should be replaced with a credit invoice value-
added tax or some sort of fair tax. To not do so runs counter to the
spirit of the constitutional provision banning export taxes.
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 One--The President's 2023 Trade Policy Agenda,
March 23, 2023
(Last year at this time) Chinese President Xi met with Vladimir Putin
to strengthen economic ties, although any direct help with the Russian
aggression in Ukraine (not a regional conflict) was not disclosed. If
such aid is found to exist, it is news to no one that this would be
very bad for our trade relationship with China.
Barring such stupidity, an agreement between Russia and China on energy
and resources is geographically inevitable, although its instigation by
authoritarian regimes is problematic for anyone outside the ruling
oligarchy on one side and the Communist Party on the other. Revolution
in both countries is inevitable and may occur sooner than later--which
would be good news for the Mongols, the Uyghurs, and the Ukrainians
(and many others).
The continuing conflict in Ukraine is not good for the Belt-Road
Initiative. If China acts in their own interests in this matter, rather
than in the interests of the strongmen, development will be good for
all.
Until sanity returns, a rapprochement between Russia and China is all
the more reason to dust off plans for the Trans-Pacific Partnership (or
whatever Ambassador Tai wishes to call it). We made our feelings about
extra-legal provisions of trade treaties in regard to local law last
year--and the years before. Global capitalism is bad enough. Global
authoritarian capitalism is worse. Using right to work laws to leave
American workers naked in the face of such power (including migrants to
the United States) is a practice that must be ended if we wish to claim
moral high ground in dealing with the Chinese.
The crisis on the border continues. The President is finding that
dealing with it is not so easy as evicting Stephen Miller from the West
Wing, which is why immigration reform must be part of the trade policy
agenda. Workers who do not have documentation problems cannot be easily
exploited--especially if they are able to unionize. This will also help
level the playing field for American workers.
An analysis of how consumption taxes can improve our trade policy is
found in our first attachment, as it was last year. We have updated our
tax reform and debt papers, which are also attached.
Congress has recently passed corporate minimum taxes to come into
compliance with the OECD's agreement on this subject. The President's
budget includes further proposals in this area. I am no fan of
corporate income taxation when value-added taxes (both GST/Invoice VAT
and Subtraction VAT) are available.
Our proposal for an Asset Value-Added Tax will require international
cooperation. Part of trade is moving money around--including financial
assets. An asset VAT as a replacement for capital gains taxes and
capital returns must go farther than the border. It is too easy to
shift to offshore stock exchanges where such taxes do not exist.
International agreements on rates and enforcement structures are vital
for such a tax to work. The model for negotiating the CMT on a multi-
national basis can be used for this effort. Again, please see the third
attachment, which has been recently updated.
Attachment Two--Taxation and Trade Policy
Consumption taxes could have a big impact on workers, industry and
consumers. Enacting an I-VAT is far superior to a tariff. The more
government costs are loaded onto an I-VAT the better.
If the employer portion of Old-Age and Survivors Insurance, as well as
all of disability and hospital insurance are decoupled from income and
credited equally and personal retirement accounts are not used, there
is no reason not to load them onto an I-VAT. This tax is zero rated at
export and fully burdens imports.
Seen another way, to not put as much taxation into VAT as possible is
to enact an unconstitutional export tax. Adopting an I-VAT is superior
to its weak sister, the Destination Based Cash Flow Tax that was
contemplated for inclusion in the TCJA. It would have run afoul of WTO
rules on taxing corporate income. I-VAT, which taxes both labor and
profit, does not.
The second tax applicable to trade is a Subtraction VAT or S-VAT. This
tax is designed to benefit the families of workers through direct
subsidies, such as an enlarged child tax credit, or indirect subsidies
used by employers to provide health insurance or tuition reimbursement,
even including direct medical care and elementary school tuition. As
such, S-VAT cannot be border adjustable. Doing so would take away
needed family benefits. As such, it is really part of compensation.
While we could run all compensation through the public sector.
The S-VAT could have a huge impact on long-term trade policy, probably
much more than trade treaties, if one of the deductions from the tax is
purchase of employer voting stock (in equal dollar amounts for each
worker). Over a fairly short period of time, much of American industry,
if not employee-owned outright (and there are other policies to
accelerate this, like ESOP conversion) will give workers enough of a
share to greatly impact wages, management hiring and compensation and
dealing with overseas subsidiaries and the supply chain--as well as
impacting certain legal provisions that limit the fiduciary impact of
management decision to improving short-term profitability (at least
that is the excuse managers give for not privileging job retention).
Employee owners will find it in their own interest to give their
overseas subsidiaries and their supply chain's employees the same deal
that they get as far as employee ownership plus an equivalent standard
of living. The same pay is not necessary, currency markets will adjust
once worker standards of living rise. Attachment Three further
discusses employee ownership.
Over time, ownership will change the economies of the nation's we trade
with, as working in employee-owned companies will become the market
preference and force other firms to adopt similar policies (in much the
same way that, even without a tax benefit for purchasing stock,
employee-owned companies that become more democratic or even more
socialistic, will force all other employers to adopt similar measures
to compete for the best workers and professionals).
In the long run, trade will no longer be an issue. Internal company
dynamics will replace the need for trade agreements as capitalists lose
the ability to pit the interest of one nation's workers against the
others. This approach is also the most effective way to deal with the
advance of robotics. If the workers own the robots, wages are swapped
for profits with the profits going where they will enhance consumption
without such devices as a guaranteed income.
Attachment Three--Consumption (Fair) Taxes, March 24, 2023
Corporate income taxes as a whole should be abolished and a two stage
Fair Tax enacted in its place. We propose channeling a Fair Tax style
subsidy through two taxes, a (credit) invoice value-added tax (turning
the deduction for sales taxes paid into a full credit--which is the
essential the difference between a VAT and income tax-based
collections) and a subtraction value-added tax to channel subsidies for
health care and the child tax credit through employers rather than the
Social Security Administration (as proposed for the Fair Tax).
Subtraction Value-Added Tax (S-VAT). Corporate income taxes and
collection of business and farm income taxes will be replaced by this
tax, which is an employer-paid Net Business Receipts Tax. S-VAT is a
vehicle for tax benefits, including:
Health insurance or direct care, including veterans' health care
for non-
battlefield injuries and long-term care.
Employer paid educational costs in lieu of taxes are provided as
either
employee-directed contributions to the public or private unionized
school of their choice or direct tuition payments for employee children
or for workers (including ESL and remedial skills). Wages will be paid
to students to meet opportunity costs.
Most importantly, a refundable child tax credit at median income
levels (with inflation adjustments) distributed with pay.
Subsistence-level benefits force the poor into servile labor. Wages and
benefits must be high enough to provide justice and human dignity. This
allows the ending of state-administered subsidy programs and
discourages abortions, and as such enactment must be scored as a must-
pass in voting rankings by pro-life organizations (and feminist
organizations as well). To assure child subsidies are distributed, S-
VAT will not be border-adjustable.
Credit Invoice Value-Added Tax (CI-VAT). Border-adjustable taxes will
appear on purchase invoices. The rate varies according to what is being
financed. If Medicare for All does not contain offsets for employers
who fund their own medical personnel or for personal retirement
accounts, both of which would otherwise be funded by an S-VAT, then
they would be funded by the I-VAT to take advantage of border
adjustability.
CI-VAT forces everyone, from the working poor to the beneficiaries of
inherited wealth, to pay taxes and share in the cost of government. As
part of enactment, gross wages will be reduced to take into account the
shift to S-VAT and CI-VAT, however net income will be increased by the
same percentage as the I-VAT. Inherited assets will be taxed under A-
VAT when sold. Any inherited cash, or funds borrowed against the value
of shares, will face the CI-VAT when sold or the A-VAT if invested.
CI-VAT will fund domestic discretionary spending, equal dollar employer
OASI contributions, and non-nuclear, non-deployed military spending,
possibly on a regional basis. Regional I-VAT would both require a
constitutional amendment to change the requirement that all excises be
national and to discourage unnecessary spending, especially when
allocated for electoral reasons rather than program needs. The latter
could also be funded by the asset VAT (decreasing the rate by from
19.25% to 13%).
Carbon Added Tax (C-AT). A Carbon tax with receipt visibility, which
allows comparison shopping based on carbon content, even if it means a
more expensive item with lower carbon is purchased. C-AT would also
replace fuel taxes. It will fund transportation costs, including mass
transit, and research into alternative fuels. This tax would not be
border adjustable unless it is in other nations, however in this case
the imposition of this tax at the border will be noted, with the U.S.
tax applied to the overseas base.
Attachment Four--Asset Value-Added Taxes, June 7, 2022
There are two debates in tax policy: how we tax salaries and how we tax
assets (returns, gains and inheritances). Shoving too much into the
Personal Income Tax mainly benefits the wealthy because it subsidizes
losses by allowing investors to not pay tax on higher salaries with
malice aforethought.
An Asset Value-Added Tax (A-VAT) is a replacement for capital gains
taxes and the estate tax. It will apply to asset sales, exercised
options, inherited and gifted assets and the profits from short sales.
Tax payments for option exercises, IPOs, inherited, gifted and donated
assets will be marked to market, with prior tax payments for that asset
eliminated so that the seller gets no benefit from them. In this
perspective, it is the owner's increase in value that is taxed.
As with any sale of liquid or real assets, sales to a qualified broad-
based Employee Stock Ownership Plan will be tax free. This change would
be counted as a tax cut, giving investors in public stock who make such
sales the same tax benefit as those who sell private stock.
The repeal of corporate profits taxes as part of the creation of a
subtraction value-added tax and repeal of capital gains taxes in the
United States will lead to their repeal worldwide. If Asset Value-Added
Taxes are adopted, the rate should be negotiated so that investors who
are able do not market shop for the lowest rate. The recent OECD
compact on minimum rates is an example of how tax cooperation on
capital can work for other types of asset taxation. This tax will end
Tax Gap issues owed by high income individuals. The base 20% capital
gains tax has been in place for decades. The current 23.8% rate
includes the ACA-SM surtax), while the Biden proposal accepted by
Senator Sinema is 28.8%. Our proposed Subtraction VAT would eliminate
the 3.8% surtax. This would leave a 25% rate in place.
Settling on a bipartisan 22.5% rate (give or take 0.5%) should be
bipartisan and carried over from the capital gains tax to the asset
VAT. A single rate also stops gaming forms of ownership. Lower rates
are not as regressive as they seem. Only the wealthy have capital gains
in any significant amount. The de facto rate for everyone else is zero.
With tax subsidies for families shifted to an employer-based
subtraction VAT, and creation of an asset VAT, taxes on salaries could
be filed by employers without most employees having to file an
individual return. It is time to TAX TRANSACTIONS, NOT PEOPLE!
The tax rate on capital gains is seen as unfair because it is lower
than the rate for labor. This is technically true, however it is only
the richest taxpayers who face a marginal rate problem. For most
households, the marginal rate for wages is less than that for capital
gains. Higher-income workers are, as the saying goes, crying all the
way to the bank.
In late 2017, tax rates for corporations and pass-through income were
reduced, generally, to capital gains and capital income levels. This is
only fair and may or may not be just. The field of battle has narrowed
between the parties. The current marginal and capital rates are seeking
a center point. It is almost as if the recent tax law was based on
negotiations, even as arguments flared publicly. Of course, that would
never happen in Washington. Never, ever.
Compromise on rates makes compromise on form possible. If the
Affordable Care Act non-wage tax provisions are repealed, a rate of 26%
is a good stopping point for pass-through, corporate, capital gains and
capital income.
A single rate also makes conversion from self-reporting to automatic
collection through an asset value-added tax levied at point of sale or
distribution possible. This would be both just and fair, although
absolute fairness is absolute unfairness to tax lawyers because there
would be little room to argue about what is due and when.
Ending the machinery of self-reporting also puts an end to the Quixotic
campaign to enact a wealth tax. To replace revenue loss due to the
ending of the personal income tax (for all but the wealthiest workers
and celebrities), enact a Goods and Services Tax. A GST is inescapable.
Those escapees who are of most concern are not waiters or those who
receive refundable tax subsidies. It is those who use tax loopholes and
borrowing against their paper wealth to avoid paying taxes.
For example, if an unnamed billionaire or billionaires borrow against
their wealth to go into space, creating such assets would be taxable
under a GST or an asset VAT. When the Masters of the Universe on Wall
Street borrow against their assets to avoid taxation, having to pay a
consumption tax on their spending ends the tax advantage of gaming the
system.
This also applies to inheritors. No ``Death Tax'' is necessary beyond
marking the sale of inherited assets to market value (with sales to
qualified ESOPs tax free). Those who inherit large cash fortunes will
pay the GST when they spend the money or Asset VAT when they invest it.
No special estate tax is required and no life insurance policy or
retirement account inheritance rules will be of any use in tax
avoidance.
Tax avoidance is a myth sold by insurance and investment brokers. In
reality, explicit and implicit value-added taxes are already in force.
Individuals and firms that collect retail sales taxes receive a rebate
for taxes paid in their federal income taxes. This is an
intergovernmental VAT. Tax withheld by employers for the income and
payroll taxes of their labor force is an implicit VAT. A goods and
services tax simply makes these taxes visible.
Should the tax reform proposed here pass, there is no need for an IRS
to exist, save to do data matching integrity. States and the Customs
Service would collect credit invoice taxes, states would collect
subtraction VAT, the SEC would collect the asset VAT and the Bureau of
the Public Debt would collect income taxes or sell tax-prepayment
bonds.
______
Coalition for Economic Partnerships in the Americas
April 10, 2024
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
United States Senate United States Senate
Committee on Finance Committee on Finance
Washington, DC 20510 Washington, DC 20510
Dear Chairman Wyden and Ranking Member Crapo:
We, the Coalition for Economic Partnerships in the Americas (CEPA),
a group of major American companies and manufacturers dedicated to
promoting regional trade and job growth, write today to underscore the
importance of expanding trade and investment throughout the Western
Hemisphere. Through this lens, we are particularly focused on expanding
apparel sourcing from partner countries in the Dominican Republic-
Central America Free Trade Agreement (CAFTA-DR).
The CAFTA-DR region offers enormous potential due to its proximity
to the U.S. market. However, some in the U.S. apparel industry have
faced challenges in meeting new investment goals and commitments in the
region, and recent allegations of transshipment of goods made with
forced labor through CAFTA-DR perpetuate these challenges by driving a
risky narrative that trade with the region is tainted.
U.S. apparel imports face regressively high tariffs, so the duty-
free benefits that free trade agreements like CAFTA-DR offer provide
additional incentives to source competitive apparel for U.S. consumers.
These duty-free benefits are key to unlocking investment in the region.
Unfortunately, CAFTA-DR is not living up to its potential as apparel
imports from the region claiming duty-free benefits have declined since
the agreement's rolling entry into force.\1\
---------------------------------------------------------------------------
\1\ Dr. Sheng Lu, U.S. Apparel Sourcing from CAFTA-DR and U.S.
Textile Exports: Myth vs. Reality, Coalition for Economic Partnership
in the Americas, (March 2023), https://img1.
wsimg.com/blobby/go/22dee558-ac80-4801-b2f6-9c5d799b644e/downloads/
CAFTA-DR%20sourc
ing%20and%20US%20textile%20exports%2003.30.pdf.
Increasing utilization of CAFTA-DR for apparel can be done without
reopening the agreement and will facilitate trade and investment in the
region. This also aligns well with initiatives such as the Vice
President's Call to Action and the Partnership for Central America,
supporting shared policy goals to strengthen and diversify supply
chains, boost economic development, empower women in the region, and
stem the flow of migration.\2\
---------------------------------------------------------------------------
\2\ FACT SHEET: Vice President Harris Launches a Call to Action to
the Private Sector to Deepen Investment in the Northern Triangle, The
White House, (May 27, 2021), https://www.
whitehouse.gov/briefing-room/statements-releases/2021/05/27/fact-sheet-
vice-president-harris-launches-a-call-to-action-to-the-private-sector-
to-deepen-investment-in-the-northern-triangle/; and Partnership for
Central America, https://www.centampartnership.org/.
We want to build on this momentum and capitalize on industry
commitments to achieve those goals, but several long-term challenges
have proven an obstacle to doing so. CAFTA-DR's built-in short supply
mechanism allows sourcing flexibilities for yarns and fabrics that are
not made in the U.S. or partner countries so that imports can still
unlock duty-free treatment. But this process has been costly,
burdensome, and inefficient over the years. Companies seeking to expand
their investments have been unable to source the inputs that would
allow them to manufacture high-demand products like technical apparel
and fashion items in the region. Without these additional materials,
companies are restricted to producing basic apparel in the region,
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which imposes a ceiling on the region's growth potential.
Compounding this long-term challenge is a growing narrative that
CAFTA-DR countries are being used to transship products connected to
forced labor. Lawmakers have amplified these allegations in a series of
recent letters to the Biden Administration. The U.S. apparel and retail
industry champions robust trade compliance and is on the front lines of
ensuring our supply chains are free of forced labor. Therefore, we have
concerns about repeated claims of non-compliance being made without
supporting evidence and data, which may harm the very growth the U.S.
government and industry are trying to promote by creating a chilling
effect on new investment and sourcing in the region.
In response to these allegations, the Department of Homeland
Security (DHS) has developed a comprehensive action plan with the aim
of expanding enforcement of these illegal customs activities that are
purportedly harming the American textiles industry.\3\ The U.S. apparel
industry, which boasts many designated as ``trusted traders'' by U.S.
Customs and Border Protection, stands ready to engage with and provide
input to DHS as it rolls out these enhanced enforcement activities. The
U.S. apparel industry benefits from a level playing field and is an
important partner in ensuring bad actors are unable to profit from
illegal customs practices. We encourage you to hold DHS to a commitment
to work with all stakeholders in support of a risk-based and data-
driven action plan that is effective in combating illicit commerce
while still facilitating legitimate trade.
---------------------------------------------------------------------------
\3\ New DHS Textile Enforcement Actions Crack Down on Illicit Trade
to Support 500,000 American Textile Jobs, U.S. Department of Homeland
Security (April 5, 2024), https://www.dhs.gov/news/2024/04/05/new-dhs-
textile-enforcement-actions-crack-down-illicit-trade-support-500000.
The textiles and apparel industries comprise unique, complex supply
chains that foster growth and support jobs both in the region and here
at home. We appreciate congressional engagement in supporting strong
trade partnerships throughout the hemisphere, and we look forward to
continuing to work with lawmakers to shape policies in a way that grows
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economic opportunities for the whole supply chain.
Sincerely,
Beth Hughes
Vice President, Trade and Customs Policy
American Apparel and Footwear Association
On behalf of CEPA
______
Computer and Communications Industry Association
25 Massachusetts Avenue, NW, Suite 300C
Washington, DC 20001
https://ccianet.org/
The Computer and Communications Industry Association (CCIA) \1\
appreciates the opportunity to respond to the Senate Finance
Committee's April 17, 2024, hearing regarding, ``The President's 2024
Trade Policy Agenda,'' featuring U.S. Trade Representative (USTR)
Ambassador Katherine Tai.
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\1\ CCIA is an international nonprofit membership organization
representing companies in the computer, internet, information
technology, and telecommunications industries. Together, CCIA's members
employ nearly half a million workers and generate approximately a
quarter of a trillion dollars in annual revenue. CCIA promotes open
markets, open systems, open networks, and full, fair, and open
competition in the computer, telecommunications, and internet
industries. A complete list of CCIA members is available at http://
www.ccianet.org/members.
Digital trade is crucial to U.S. economic and global security
interests. Exports of digitally-enabled services generated $626 billion
in 2022, which helped to achieve a $256 billion surplus in the
sector.\2\ Digitally-enabled services are a critical piece of the
overall strength of the United States in the services sector, reflected
by the fact that 70% of U.S. services exports were digitally-enabled
services in 2022.\3\ The digital economy writ large generated $2.6
trillion worth of value added--which represented 10.0% of Total U.S.
GDP--in 2022, which supported 8.9 million jobs in the United States
with $1.3 trillion provided in annual compensation.\4\ The export of
digital products and services also promote an interconnected world
through a free and open internet, support freedom of expression
globally, and strengthen U.S. competitiveness in a critical and
emerging industry.
---------------------------------------------------------------------------
\2\ Amir Nasr, ``New Data Showcase the Strength of Digital Services
Exports to Overall U.S. Economy,'' Disruptive Competition Project (July
26, 2023), https://www.project-disco.org/uncategorized/strength-of-
digital-services-exports-to-u-s-economy/ (``Disruptive Competition
Project New Data Post'').
\3\ Disruptive Competition Project New Data Post.
\4\ ``How Big is the Digital Economy,'' U.S. Department of Commerce
(last accessed April 22, 2024), Bureau of Economic Analysis (last
accessed April 22, 2024), https://www.bea.gov/sites/default/files/2023-
12/digital-economy-infographic-2022.pdf.
To ensure U.S. digital products and services exporters--and the goods
and services exporters that are reliant on digital services to reach
foreign consumers--are able to access foreign markets, commitments
struck in trade agreements and enforcement of those commitments are
critical. USTR has historically performed this function, in line with
the directives of the 1974 Trade Act and later iterations of delegated
responsibility such as the 2015 Bipartisan Congressional Trade
Priorities and Accountability Act. However, as highlighted by a
bipartisan group of lawmakers in letters and testimony at these
hearings,\5\ USTR has reversed course on this longstanding U.S. policy,
withdrawing core digital trade proposals from the World Trade
Organization (WTO) and the Indo-Pacific Economic Framework and removing
references to swaths of digital trade barriers from the
Congressionally-mandated National Trade Estimate (NTE) for which USTR
is directed to identify significant trade barriers in electronic
commerce.\6\
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\5\ ``What Lawmakers Said at the 2024 USTR Congressional
Hearings,'' Computer and Communications Industry Association (April 23,
2024), https://ccianet.org/library/what-lawmakers-said-at-the-2024-
ustr-congressional-hearings/.
\6\ 19 U.S.C. Sec. 2241(a)(1)(A)-(B).
Below, we submit a few targeted responses to remarks and claims raised
across both the House Ways and Means and Senate Finance Committees'
hearings in relation to arguments for why USTR has opted to
deprioritize digital trade by ceasing negotiations in multiple fora and
scaling back enforcement of existing rules. Attached to this submission
is a March 2023 brief \7\ that identifies the myths perpetuated by
those who argue that the United States should step back from strong
digital trade rules globally--myths that should not dictate U.S. trade
policy. The broad theme USTR uses to justify its course reversal is a
purported need for ``policy space'' to ensure that that nascent law or
regulation can evolve unhindered by binding trade rules. CCIA has
written on this false choice in detail \8\ as well as about the harms
of deprioritizing digital trade barriers in the NTE report.\9\ Below
are some of CCIA's key findings.
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\7\ ``Myths and Facts about Digital Trade Rules,'' Computer and
Communications Industry Association (Updated March 21, 2023), https://
ccianet.org/library/myths-and-facts-about-digital-trade-rules/.
\8\ Jonathan McHale, ``Friendly Fire: the Saga of Trade Policy at
an Impasse,'' Disruptive Competition Project (February 23, 2024),
https://www.project-disco.org/21st-century-trade/friendly-fire-the-
saga-of-trade-policy-at-an-impasse/.
\9\ Amir Nasr, ``Why a USTR Report Represents Another Step Back for
Digital Trade,'' Disruptive Competition Project (April 2, 2024),
https://www.project-disco.org/21st-century-trade/why-a-ustr-report-
represents-another-step-back-for-digital-trade/.
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Rules Promoting Cross-Border Data Flows Were Never Primarily About
Facilitating Goods Trade
One of the key reasons cited by Ambassador Tai to defend USTR's digital
trade withdrawal is her view that rules promoting cross-border data
flows need updating, as they were formed at a time--roughly 30 years
ago--as an adjunct to goods trade. Ambassador Tai stated at the House
Ways and Means Committee hearing that the rules the U.S. has previously
championed on data flows, data localization, and source code were
``rooted in our recognition and our understanding 20 years ago that
data is just about facilitating traditional trade transactions.'' In
the Senate Finance Committee hearing, Ambassador Tai elaborated on
this, stating that these provisions are founded on an ``understanding''
of data as ``a facilitator of traditional trade transactions, goods
transactions, data as a facilitator of e-commerce, data traveling along
with the information that has to be traded in order for goods to move
across borders.''
This is simply untrue. The roots of data flow rules extend back to 1994
to the conclusion of the General Agreement on Trade in Services (the
GATS) where both for financial services, and services generally,
disciplines were introduced to ensure that cross-border services trade
would not be impeded through restrictions on data. Thus, both the
Financial Services Understanding,\10\ and the GATS Annex on
Telecommunications,\11\ contained specific provisions designed to
ensure that governments (or telecommunications suppliers) would not use
control over data to ``nullify and impair'' a service commitment--the
ability of a bank, insurance company, travel agency, or computer
service supplier to operate globally and serve customers in distant
locations. Those concerns remain as valid now as they were then.
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\10\ ``Understanding on commitments in financial services,'' World
Trade Organization (last accessed April 22, 2024), https://www.wto.org/
english/tratop_e/serv_e/21-fin_e.htm (``WTO Understanding on
Commitments in Financial Services'').
\11\ ``Annex on telecommunications,'' World Trade Organization
(last accessed April 22, 2024), https://www.wto.org/english/res_e/
publications_e/ai17_e/gats_anntelecommunications_jur.pdf.
Additionally, 30 years ago, trade negotiators recognized the importance
of ``policy space'' by ensuring that commitments were subject to
reasonable exceptions, including specifically for privacy. Analogous
provisions addressing data flows were included in the first modern Free
Trade Agreements (FTAs) struck by the United States, the North American
Free Trade Agreement and the subsequent FTA signed by the United
States, with Jordan in 2000.\12\
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\12\ https://ustr.gov/sites/default/files/Jordan%20FTA.pdf.
It is further evident from these early FTAs that digital trade was not
focused on facilitating traditional goods trade. Consider both the
U.S.-Chile FTA and U.S.-Singapore FTAs, which have commitments to
refrain from imposing customs duties on electronic transmissions and to
not discriminate against digital products from the other Party.
Electronic transmissions and digital goods and services were seen as
necessary to protect the Parties' broader interests in an emerging new
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area--digital trade was not seen as a conduit for the trade of goods.
Charlene Barshevsky, the USTR at the end of the Clinton Administration,
described the United States digital trade policy goals succinctly in
2000 that are just as valid today:
This new initiative will create a lasting set of rules and
agreements which help to ensure that the trading system
provides for electronic business the same guarantees of
freedom, fair competition, respect for intellectual property
rights and access to markets that more conventional commerce
enjoys.\13\
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\13\ https://usinfo.org/usia/usinfo.state.gov/topical/global/ecom/
00102301.htm.
The WTO E-Commerce Moratorium Remains Crucial for U.S. Businesses and
Workers; Making it Permanent Should Be a Top
Priority for USTR
At the WTO's Ministerial Conference 13th Ministerial Conference in late
February, WTO Members renewed a crucial commitment for countries to
refrain from imposing customs duties on electronic transmissions (the
``e-commerce moratorium''). This was a critical achievement--failure to
extend a commitment which has been renewed consistently since it was
first agreed to in 1998 would have dealt a major blow to the WTO, and
the trade flows that depend on this commitment. The moratorium protects
firms from what would be onerous and pernicious customs duties,
allowing the digital economy to flourish between WTO member countries.
The importance of the moratorium could not be understated--studies
consistently show the agreement brings broad benefits to WTO Member
economies and that the commitment lapsing would lead to widespread
economic losses,\14\ and the past two renewals were far from
guaranteed. Recently, Dr. Ngozi Okonjo-Iweala, Director General of the
WTO, predicted that the e-commerce moratorium would not be renewed when
next scheduled for review--in two years when the current agreement
ends--and that companies should prepare for that event.\15\
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\14\ Andrea Andrenelli and Javier Lopez Gonzalez, ``Understanding
the scope, definition, and impact of the WTO e-commerce moratorium''
Vox EU Center for Economic Policy Research (March 26, 2024), https://
cepr.org/voxeu/columns/understanding-scope-definition-and-impact-wto-e-
commerce-moratorium.
\15\ Andy Bounds, ``Ecommerce tariffs will kick in from 2026, says
WTO chief,'' Financial Times (March 27, 2024), https://www.ft.com/
content/aea64aa4-fde2-46f3-9376-c56b8e94263b.
Despite this near-term threat, Ambassador Tai would not commit to
seeking the most obvious solution--making this moratorium permanent.
Instead, Ambassador Tai argued that the e-commerce moratorium was
``developed at a time when we talked about electronic transmissions
because the relevant transmission was about fax transmissions,'' and
the world currently is ``so far advanced,'' it renders the debate about
---------------------------------------------------------------------------
the moratorium as ``stuck in time.''
The world is indeed very different from the time the e-commerce
moratorium was struck, but it is simply not true that negotiators in
1998 were focused on tariffs on fax transmissions.\16\ Rather, they
understood perfectly well that physical goods, subject to tariffs, were
increasingly being digitized and that this burgeoning trade of e-books,
music, videos and software would be significantly impaired if subject
to tariffs.\17\ Indonesia has set up a framework to do just that,\18\
so the threat is no longer hypothetical. A firm, clear U.S. position is
a top priority.
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\16\ https://one.oecd.org/document/TAD/TC/WP(2023)6/FINAL/en/pdf
(``[a] majority of delegations agreed that a majority of electronically
transmitted products were indeed services. However, there was still a
lack of clarity with regard to the classification under GATT or GATS or
certain products which can be delivered both in electronic form and on
a physical carrier.'').
\17\ The GATT had grappled with this issue as early as 1984, when
considering the treatment of software delivered over satellite
networks. See https://www.wcoomd.org/-/media/wco/public/global/pdf/
topics/valuation/instruments-and-tools/decisions/
wto_val_decision_4_1.pdf?la=
en.
\18\ https://insightplus.bakermckenzie.com/bm/consumer-goods-
retail_1/new-regulation-on-the-import-of-consigned-goods-gives-clarity-
and-guidelines-for-e-commerce-transactions.
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Canada's Digital Services Taxes Warrant USTR Intervention
Ambassador Tai provided a strong commitment to continue pursuing U.S.
interests in pushing back on digital services taxes (DSTs) as they
spread internationally, stating that USTR is ``prepared to use the
tools that we have.'' We appreciate USTR's efforts on this front,
particularly as Canada--one of the closest trading partners of the
United States--is in the process of passing Bill C-59, a discriminatory
DST which may soon become law. USTR should commit to expeditiously
addressing the harms presented by Canada's DST, which would cost
hundreds of millions of dollars a year for U.S. companies and thousands
of jobs for U.S. full-time employees. A commitment to initiate a formal
investigation and consider action using existing tools such as Section
301 and USMCA dispute resolution is now fully warranted.
Discriminatory Streaming Policies Require USTR Engagement
In April 2023, Canada passed the Online Streaming Act, which requires
all foreign online content providers to fund arbitrarily-defined
``Canadian content'' and to ``clearly promote Canadian
programming.''\19\ The law discriminates against U.S. film, television,
and music content on streaming services, as it gives preferential
treatment to Canadian content, violating Article 19.4 of the U.S.-
Mexico-Canada free trade agreement (USMCA).\20\ Further, U.S. suppliers
are subjected to requirements to fund local competitors in a
discriminatory manner that implicates investment commitments in Article
14.10.1 (b) of USMCA.\21\
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\19\ https://www.parl.ca/legisinfo/en/bill/44-1/c-11.
\20\ Computer and Communications Industry Association, ``CCIA White
Paper on Canada's Online Streaming Act (Bill C-11)'' (January 19,
2023), https://ccianet.org/library/ccia-white-paper-on-canadas-online-
streaming-act-bill-c-11/ (``CCIA Online Streaming Act White Paper'').
\21\ Id.
CCIA appreciates Ambassador Tai's clear commitment to ensure that, as
Canada amends its definition of Canadian Content, USTR will advocate
for ``fair outcomes for U.S. stakeholders.'' USTR should also consider
addressing the underlying discriminatory nature of the law using the
tools available. For example, under USMCA's implementing legislation,
USTR is obligated to investigate any discriminatory measures sought
under Canada's Cultural Industries exception, and consider subsequent
actions to compensate for any harms. USTR should, pursuant to its
legislative mandate, proactively address the harms that could cost U.S.
businesses, content creators, and workers hundreds of millions of
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dollars annually.
Further, in line with Ambassador Tai's commitment to protect U.S.
content creators and streaming suppliers in Canada, it is important for
USTR to remain vigilant regarding similar discriminatory proposals that
are being developed in Australia despite clear rules in the U.S.-
Australia Free Trade Agreement (AUSFTA) constraining such actions. The
proposals, which the Australian Government seeks to have in force by
July, would likely violate Article 16.4 of AUSFTA's E-Commerce
Chapter--Non-Discriminatory Treatment of Digital Products--and Article
11.9 of AUSFTA's Investment Chapter.\22\ As USTR engages with Canada,
the agency must monitor, deter, and ultimately investigate and act upon
this policy if Australia passes the law to ensure the policy does not
spread to other jurisdictions.
---------------------------------------------------------------------------
\22\ Amir Nasr, ``Australia Pursues Streaming Obligations That
Would Harm U.S. Service Suppliers and Workers,'' Disruptive Competition
Project (December 19, 2023), https://www.project-disco.org/21st-
century-trade/australia-pursues-streaming-obligations-that-would-harm-
u-s-service-suppliers-and-workers/.
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Securing Strong Digital Trade Rules Ensures that U.S. Leadership and
Values not those of Adversaries, are Reflected on
Global Stage
Finally, a theme emerged from the hearings regarding the harms of the
United States withdrawing from digital trade commitments on the global
stage and how such a move would benefit the Chinese or Russian view of
digital governance. While digital trade rules are criticized as an
ineffective mechanism for advancing our values relating to democracy,
free expression, and rule of law, such criticism misses the point--no
one disputes that. However, if the United States is not leading
discussions and advocating for digital trade rules with the values of
the free flow of commerce and freedom of expression, China will fill
the vacuum and more easily advocate for third party nations to adopt
China's vision of digital authoritarianism domestically. A Digital Silk
Road, the antithesis to a free and open internet, is not in our
interest, but without robust engagement, its reach will only grow.
The spread of China's repressive model of digital oversight has already
begun. Both Cambodia and Nepal have in recent years sought to implement
``National Internet Gateways'' which filter the internet and create a
government-owned intranet.\23\ Similarly, Vietnam passed its own
version of data localization requirements in the mold of China's
approach.\24\ U.S. leadership in digital can combat the spread of
similar efforts in the Indo-Pacific region--a key piece of U.S.
diplomatic and security policy objectives--while abandoning the issue
could give time for these policies to proliferate widely.
---------------------------------------------------------------------------
\23\ Adrian Wan et al., ``Internet Impact Brief: Nepal's Proposed
National Internet Gateway,'' Internet Society (Feb. 19, 2024), https://
www.internetsociety.org/resources/2024/internet-impact-brief-nepals-
proposed-national-internet-gateway/ (``The Cambodian government claims
this will bolster national security and help crack down on tax fraud.
However, the impact on Cambodian network connections will affect anyone
who connects to these networks, which could have serious consequences
for social and economic life and endanger privacy and security.'').
\24\ Justin Sherman, ``Vietnam's Internet Control: Following in
China's Footsteps?'', The Diplomat (December 11, 2019), https://
thediplomat.com/2019/12/vietnams-internet-control-following-in-chinas-
footsteps/.
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CORRECTING THE RECORD
Myths and Facts about Digital Trade Rules
Myth: Digital Trade Rules Only Benefit ``Big Tech.''
Fact: Digital trade rules benefit firms from all sectors of the
economy, especially SMEs.
Small and medium-sized enterprises (SMEs) are prime beneficiaries of
digital trade rules, which facilitate their ability to reach foreign
markets online:
More than 80% of top grossing apps are made by small companies.
Over 300,000 companies are active in the mobile app market in
the United States, participating in an ``app economy'' estimated to be
worth $1.7 trillion.
SMEs comprised 70% of the companies using Privacy Shield, a key
mechanism allowing U.S.-EU data transfers.
All these firms need to transfer data, and few can afford to invest in
computing facilities in every market they serve--issues that trade
rules address.
By preventing a range of discriminatory barriers, digital trade rules
help small businesses ``achieve scale without mass'' and expand their
footprint with fewer resources. Foreign markets represent a key area
for growth for small businesses enabled by digital services--the U.S.
Census Bureau has estimated that 97.4% of the more than 277,000 U.S.
companies that exported goods in 2021 were SMEs, which in turn
contributed 34.6% of the country's $1.5 trillion merchandise exports.
These firms typically use digital technologies to access foreign
markets and thus distortive foreign policies can have a
disproportionate effect on their growth and job-creating potential.
Myth: Digital Trade Rules Hurt U.S. Workers.
Fact: Digital trade rules sustain broad-based, high-quality U.S. jobs.
Quality jobs supported by digital trade permeate the U.S. economy,
encompassing firms both large and small. Some of the biggest
beneficiaries of the digitalization of the economy are traditional
sectors--pharmaceutical development, health care, transportation,
travel, and agriculture--supporting technology workers whose wages are
125% higher than the median national wage in the U.S. The export
potential of digitally-intensive industries, and the employment they
support, benefit from a fair and predictable rules-based framework for
trade: government data indicates that the digital economy in 2021
generated $3.70 trillion in output, or 10.3% of total U.S. GDP,
accounting for 8 million jobs, over $1.24 trillion in total
compensation, and a persistent trade surplus (most recently of $300
billion). It is in our national interest to leverage this strength, not
constrain it.
Myth: Digital Trade Rules Undermine Countries' Right to Regulate in
the Digital Space.
Fact: Digital trade rules do not prevent governments from regulating
effectively and appropriately.
Governments' right to regulate is explicit in trade agreements, with
rules affecting not whether a country can regulate but how. Digital
trade rules developed to date in agreements like USMCA (support of data
flows, constraints on localization and discriminatory treatment) are
narrowly targeted to provide guardrails around only the most
unreasonably trade-restrictive practices, leaving most economic
activity wholly in the domain of domestic regulation. Such a targeted
approach avoids governments pursuing policies that unfairly
discriminate in favor of local suppliers, while taking into account
national policies and practices. Trade rules include flexibility based
on legitimate exceptions (privacy, security, public morals, etc.). In
the face of a country invoking such an exception, a trading partner
must demonstrate that there is a reasonably available approach that
achieves the regulatory goal--goals that a country independently sets.
Thus, the key effect of a negotiated trade rule is a level of
accountability between trading partners based on shared values and
ensures that regulation in narrowly identified areas is developed
pursuant to fair and transparent processes.
Myth: Digital Trade Rules Undermine Consumer Privacy and Consumer
Protection.
Fact: Digital trade rules can enhance consumer protection and privacy
rights.
A key innovation in recent U.S. digital trade policy is undertaking
binding obligations to protect consumers generally and privacy in
particular--putting this goal front and center as not only a legitimate
regulatory objective, but one that countries must implement. The USMCA
and the U.S.-Japan Digital Trade Agreement each included such
provisions, incorporating into trade rules a binding obligation as well
as OECD guidance on how to implement an effective privacy regime. In
USMCA, the Parties expanded on this by also referencing the U.S.-
championed APEC Privacy Framework.
At the heart of the traditional U.S. approach has been the well-
established norm that privacy protections do not depend on location,
and that protections can, with the right mechanisms, travel with data,
minimizing the need for overly restrictive constraints on cross-border
data flows. Not only are private sector entities fully capable of
instituting mechanisms that can reflect the highest levels of
protection different countries may set, but democratic governments have
also developed principles governing governmental access to data, such
as the OECD Declaration on Government Access to Personal Data Held by
Private Sector Entities. Such principles can be incorporated into trade
frameworks (e.g., ongoing IPEF negotiations) demonstrating that trade
rules can enhance, not undermine privacy.
Myth: Data Localization Rules are Needed to Protect Privacy and Ensure
Government Access.
Fact: Data localization mandates do not strengthen privacy or security
and can actively undermine these goals.
Data localization requirements do not, in and of themselves, enhance
data privacy or security. While certain sensitive data (e.g., national
security data, health data, and financial information data) merits
additional safeguards, such safeguards (e.g., encryption, multi-factor
authentication) can be applied irrespective of location and do not
require data localization. To the extent that governments need access
to data for regulatory or law enforcement purposes, and where the U.S.
cannot be ensured such access, identifying specific unacceptable
locations would be consistent with the rule. But, a general prohibition
on foreign storage is unnecessary.
Data localization requirements in specific markets often have a direct
and negative impact on U.S. suppliers: such requirements typically
result in superfluous investment, often in countries with less robust
cybersecurity practices than performed in the United States.
Accordingly, forced localization can demonstrably weaken security,
since the proliferation of redundant facilities opens an additional
``attack surface'' for bad actors.
Apart from the security, the economic impact is obvious. The United
States leads the world in data processing and storage capacity, so any
requirement to move such capacity to a foreign location to serve that
market undermines the clear competitive advantage enjoyed by U.S.
exporters of services based on secure processing and storage.
Myth: Digital Trade Rules Will Hurt U.S. Jobs.
Fact: Jobs in digitally-intensive industries are growing.
Over the past decades, digitally-intensive job growth is responsible
for a net gain of over 15 million jobs. This growth remains strong,
with unemployment rates half those of the economy generally--supported
by robust digitally-enabled exports. Even the one target of trade
critics, call-center jobs, do not support the offshoring narrative:
call center jobs have actually increased in the past decade, from 2.3
to 2.8 million. In short, trade rules that support the U.S. competitive
advantage in the digital economy will help ensure strong U.S. job
growth going forward; and a turn to localization and other
protectionist measures (as seen in the EU and China) will only diminish
it.
Myth: Digital Trade Rules that Prohibit the Disclosure of Source Code
Undermine a Regulator's Ability to Investigate Harms.
Fact: Digital trade rules strike the right balance between protecting
trade secrets and the public interest.
Regulators may need access to source code in limited cases, and these
cases can be addressed in trade rules, as was done in USMCA, balancing
such access against the harms to trade secrets and cybersecurity
protections. Rules limiting access to source code are not designed to,
and do not in practice, protect companies from regulatory oversight or
enforcement actions. Those goals generally can be addressed through
robust testing, and does not require access to source code. Regulating
against commonly identified harms (bias, inequity, and other forms of
discrimination) is fully consistent under digital trade rules. And,
where evidence of harms emerges, particularly when it is intentional
(e.g., in the motor vehicle emissions cases of a decade ago, or
financial market manipulation), the rules accommodate such need for
access--subject to requirements under the law to protect the trade
secrets and other confidential business information. Expanding the
scope of regulatory access to source code puts U.S. companies at
significant risk in many markets that do not have the robust trade
secret protections of the United States. To this end, trade agreements
should not create new access rights to governments or third parties
that are not available under existing Parties' law.
Myth: Non-Discrimination Rules Hinder Enforcement of Existing and New
Anti-
Monopoly Laws.
Fact: Prohibiting discrimination on the basis of nationality is a
worthy goal that does not implicate robust competition enforcement.
Critics of digital trade rules have asserted that a 20-year-old rule
preventing discrimination against digital products undermines efforts
to enforce or enhance competition law. The digital products rule \25\
extends a 75-year-old ``national treatment'' rule common in trade
agreements,\26\ that is applicable to physical products, to their
digital counterparts. Based on this rule, a country would be
prohibited, for example, from imposing a tax on foreign software that
was downloaded from abroad that it does not also impose on domestic
software (i.e., creating a preference for domestic software). This rule
has no more bearing on legitimate competition law than its older goods-
rule analogue. Critics are erroneously conflating how a government
treats a supplier generally with how that supplier's products are
treated in comparison to those of its competitors.
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\25\ E.g., USMCA 19.4, available here: https://ustr.gov/sites/
default/files/files/agreements/FTA/USMCA/Text/19-Digital-Trade.pdf.
\26\ I.e., Article III-4 of the General Agreement on Tariffs and
Trade, available at https://www.wto.org/english/docs_e/legal_e/
gatt47_01_e.htm.
Regardless of whether new competition-inspired regulation is justified,
measures seeking to constrain the behavior of specific suppliers (e.g.,
Europe's Digital Markets Act, Korea's App store legislation) do not
typically result in creating explicit ``preferences'' for domestic
products, the target of digital non-discrimination rules.\27\ Rather,
these regulations typically seek to constrain specific conduct of
specific firms.
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\27\ There is a separate question of whether competing domestic
firms as a whole gain preferential treatment by virtue of being
excluded from the scope of such regulations. That is a legitimate
inquiry under the analogous national treatment rules for services, but
such inquiry does not does not require analyzing treatment of those
domestic firms' products.
CCIA has raised compliance concerns with the digital product rule in
the context of efforts to impose payment obligations on U.S. digital
platforms for hosting or indexing news content in Canada and Australia.
The problematic discrimination identified in these instances is not
vis-a-vis the internet platforms but, rather, competing foreign news
products. None of this is relevant to any U.S. domestic conversation,
since trade rules do not constrain burdens that the United States may
choose to apply to its own suppliers.
Links
https://actonline.org/2016/05/05/small-businesses-make-it-big-in-the-
app-economy/
https://actonline.org/wp-content/uploads/2020-App-economy-Report.pdf
https://actonline.org/2020/07/20/what-the-end-of-the-eu-u-s-privacy-
shield-means-for-small-businesses/
https://www.kearney.com/documents/3677458/161343923/The+economic+costs+
of+restricting+the+cross-border+flow+of+data.pdf/82370205-fa6b-b135-
3f2b-b406c
4d6159e?t=1625036783000
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=980568
https://www.trade.gov/press-release/international-trade-administration-
and-amazon-launch-new-initiative-boost-export
https://timreview.ca/sites/default/files/article_PDF/
TIMReview_2020_July%20-%203.pdf
https://www.oecd.org/G20/summits/hamburg/publicationsdocuments/the-
next-production-revolution-G20-report.pdf
https://www.cyberstates.org/
https://www.bea.gov/system/files/2022-11/new-and-revised-statistics-of-
the-us-digital-economy-2005-2021.pdf
http://oecdprivacy.org/
https://cbprs.blob.core.windows.net/files/
2015%20APEC%20Privacy%20Framework.
pdf
https://www.oecd.org/newsroom/landmark-agreement-adopted-on-
safeguarding-privacy-in-law-enforcement-and-national-security-data-
access.htm
https://ecipe.org/wp-content/uploads/2014/12/OCC32014__1.pdf
https://www.mckinsey.com/featured-insights/future-of-work/what-can-
history-teach-us-about-technology-and-jobs
https://www.comptia.org/content/tech-jobs-report
https://www.bls.gov/news.release/archives/ocwage_03292013.pdf
https://www.bls.gov/oes/current/oes434051.htm
______
Consumer Technology Association
1919 S. Eads St.
Arlington, VA 22202
703-907-7600
https://www.cta.tech/
In advance of the April 16th and April 17th congressional hearings on
the 2023 U.S. Trade Policy Agenda, the Consumer Technology Association
(CTA)' respectfully submits this statement for the record on
increasing the ambition of U.S. trade policy and reducing the harm the
current path is causing to the U.S. economy.
The current trajectory set by the Office of the United States Trade
Representative (USTR) should be cause for deep bipartisan concern. The
current U.S. trade policy agenda is undercutting the collective U.S.
efforts to compete with China not just on trade, but on our foreign
policy and national defense priorities.
By not negotiating or entering into new trade agreements, not defending
U.S. companies from barriers to trade in foreign markets, and ceding
global trade leadership to other countries, including U.S. adversaries,
USTR is isolating the United States, harming the U.S. economy,
increasing inflation, and weakening the U.S. innovative and defensive
capacity. More, by taking protectionist steps in the name of its
``worker-centered trade policy'' or ``supply chain resilience,'' USTR
in fact is diminishing prospects for U.S. workers and their long-term
investments. Collectively, this helps China, not the United States.
CTA is gravely concerned that the isolationism envisioned by USTR will
lead to more expensive consumer prices. With workers already in short
supply due to generational shifts in the U.S. workforce shifts and
limitations on immigration, USTR's protectionist agenda will result in
out-of-control inflation and force interest rates higher. This lethal
combination of cutting down on trade, failure to protect U.S. companies
overseas, and higher-for-longer interest rates will hurt our national
defense as it will isolate us from our friendly trading partners,
skyrocket government interest payments and further take away from
defense spending.
With this context in mind, CTA offers the statement below.
USTR Has Thrown U.S. Companies into the Trade Jungle
Congress created the Office of the Special Trade Representative (STR)
under the Executive Office of the President in Section 141 of the Trade
Act of 1974. President Carter reorganized the STR and established it as
the Office of the U.S. Trade Representative (USTR) in 1979 under
Executive Order 12188. Since its founding, U.S. businesses of all sizes
and all sectors expected that USTR would identify foreign trade
barriers and work to address and remove them through a wide range of
negotiation, enforcement and litigation tools. They did not expect that
USTR would encourage foreign governments to impose trade barriers on
U.S. companies and ignore the harms of those barriers on the U.S.
economy.
Today, the USTR openly admits that encouraging foreign trade barriers
in the name of ``public interest'' is a fundamental aspect of its
harmful and misguided domestic competition policy. Since October 2023,
USTR under Ambassador Katherine Tai has taken the position that all
governments deserve ``policy space'' to regulate as they see fit. When
USTR released the significantly shorter National Trade Estimate report
in March 2023, Ambassador Tai reiterated that each government ``has the
sovereign right to govern in the public interest and to regulate for
legitimate public policy reasons.'' These statements are not as benign
as they first appear.
Under this world view, USTR is signaling to other governments that they
can discriminate against U.S. companies--whether by intent or impact--
and USTR will do nothing in response, especially if the government
claims the measure is in the ``public interest.'' With this policy,
USTR has opened a Pandora's box of discrimination against U.S.
companies to preserve the United States's own ability to discriminate
and violate international trade norms and U.S. law.
Where does this leave U.S. companies, particularly technology firms who
are the primary target of the Administration's ire? Once, they could
rely on the U.S. government to uphold and promote the rule of law and
to enforce the WTO and other free trade agreements. Now, they will
contend with the law of the jungle, where might makes right and the
rule of law is an inconvenient relic of the past. U.S. companies
exporting to other markets or operating abroad will be on their own in
facing trade barriers, whether digital barriers, technical barriers, or
other discriminatory measures. They will receive less favorable
treatment by foreign governments, who may choose to prioritize their
own domestic companies and retaliate against U.S. measures.
Congress must hold USTR to account, demand that USTR justify its
deviation from decades of bipartisan trade policy and explain why it
believes that other governments can do whatever they want on trade so
long as they claim their measures are in the ``public interest.'' More,
if USTR remains unable to meet its statutory obligations to defend U.S.
companies in foreign markets, Congress should consider drastic steps,
such as withholding appropriations, refusing to confirm nominees for
key roles or assigning responsibility for digital trade issues to other
agencies.
USTR's Theory of the Case on Supply Chain Resilience Is Wrong
The Biden-Harris Administration has identified supply chain resilience
for certain strategic goods as one of its top economic priorities. The
Administration has also cited the fragility of certain private sector
supply chains during the pandemic as a reason for this approach. While
some supply chains showed strains of historically high demand during
the pandemic, not all supply chains buckled and collapsed. In fact,
many, many more survived and thrived due to the agility and nimbleness
of U.S. companies and their ability to pivot in the face of challenging
circumstances associated with the pandemic (e.g., people staying at
home and purchasing more goods, including consumer technology
products). These companies, many of them startups and small businesses,
succeeded without any help from federal or state governments and often
had to overcome policy barriers hampering their ability to compete and
respond (e.g., the tariffs on imports from China under Section 301 of
the Trade Act of 1974).
President Biden issued an Executive Order (EO) on America's Supply
Chains in February 2021. Only now, more than 3 years later, is USTR
seeking public comment and testimony from stakeholders on its own set
of supply chain resiliency principles that diverge from the EO. In
doing so, it is signaling that supply chains not located in the United
States are inherently risky and that government intervention might be
necessary to address those risks. It is not making any distinction
between strategic goods identified by the EO and goods designed for and
delivered to consumers. In fact, the Federal Register notice concerning
this request for comment identifies many additional economic sectors
for scrutiny, most of which are not related to the EO. Congress should
be wary of USTR going ``off-mission'' and designing trade measures that
have protectionist intent for the sake of supply chain resilience.
In CTA's comments and testimony before USTR in that consultation, we
will encourage USTR to understand how and why companies design and
execute supply chains. USTR may benefit from viewing supply chains, and
the workers who run them, not through the lens of academics or the
federal government but through the eyes of the private sector. It may
also benefit from speaking more with U.S. trading partners,
particularly our treaty allies and FTA partners, who may take offense
at USTR efforts to force companies to make everything in the United
States. Supply chain resilience is an important concept, but it should
not be a pretext for protectionism and forced localization at the
expense of U.S. foreign policy and economic interests.
Tariffs Hurt U.S. Consumers, and Supply Chains and Are Not as Worker-
Centric as USTR Believes
CTA has long fought for tariff relief for the consumer technology
industry, including by advocating the removal of the harmful and
ineffective Section 301 tariffs on imports from China.\1\ Study after
study demonstrates that tariffs, which are taxes on imports, do not
make U.S. businesses more competitive, lead to more job creation, or
make supply chains more resilient. These studies have indicated that
the U.S. consumer bears the costs of U.S. tariffs.\2\ This is because
importers to the United States pay the tariffs,\3\ not foreign
governments. Importers can either absorb the costs or pass them on
through their supply chains. Inevitably U.S. consumers pay the costs.
CTA has included a short annex to our statement on recent studies and
tariff commentary for the benefit of the Ways and Means and Finance
Committees.
---------------------------------------------------------------------------
\1\ See, e.g., CTA's comment to USTR on its 4-year necessity review
docket, submission USTR-2022-0014-00034970, available at https://
comments.ustr.gov/s/commentdetails?rid=72BH3CQ
WG6.
\2\ Building a Resilient U.S. Consumer Technology Supply Chain,
Consumer Technology Association (July 2022), https://shop.cta.tech/
products/building-a-resilient-u-s-consumer-technology-supply-chain;
Analysis of Section 301 Tariff Impacts on Imports of Consumer
Technology Products, Consumer Technology Association (July 2022),
https://shop.cta.tech/products/analysis-of-section-301-tariff-impacts-
on-imports-of-consumer-technology-products?variant=43179752358058; PNTR
Revocation is a Recipe for Inflation, Consumer Technology Association
(January 2024), https://cdn.cta.tech/cta/media/media/pdfs/
cta_pntrreport.pdf?_ga=2.139639793.373325017.17
12953669-
1972693078.1712953669&_gl=1*8wysx5*_ga*MTk3MjY5MzA3OC4xNzEyOTUzNjY5*
_ga_5P7N8TBME7*MTcxMjk1MzY2OS4xLjAuMTcxMjk1MzY3Mi41Ny4wLjA.
\3\ E.g., U.S. International Trade Commission, Press Release,
Certain Effects of Section 232 and 301 Tariffs Reduced Imports and
Increased Prices and Production in Many U.S. Industries, available at
https://www.usitc.gov/press_room/news_release/2023/er0315_63679.htm
(``The report finds that on average from 2018 to 2021: U.S. importers
bore nearly the full cost of these tariffs because import prices
increased at the same rate as the tariffs.'').
USTR believes that tariffs make supply chains more resilient. USTR has
also demonstrated that it does not value the public comments it
receives about tariffs. This ambivalence was evident during both the
current and prior Administrations. For example, in 2019, USTR
implemented massive and unprecedented modifications to the Section 301
tariffs over 3,000+ vociferous public comments opposing the policy. And
this USTR has dallied for nearly 2 years on the statutorily-required
``necessity review'' of those tariffs, again in ignorance of thousands
---------------------------------------------------------------------------
of public comments seeking the removal of the tariff action.
The truth is that tariffs undermine the resilience of private sector-
led supply chains by imposing more costs, creating significant
uncertainty on rates and duration of duties, and forcing companies to
spend time and resources on tariff payments and bureaucracy as opposed
to hiring and innovating new products and services. Instead of
dismissing tariff analysis as ``fiction'' or conveniently ignoring
authoritative research inconsistent with its world view, USTR should
take this analysis into account as it formulates and executes U.S.
trade policy. Further, we encourage Congress to organize hearings with
trade economists to present their research in person to Committee
members and invite USTR leadership to attend these hearings.
If USTR or Congress truly believe that tariffs are a necessary tool--
for example to prevent highly subsidized imports from China from
entering the U.S. market or further decouple the U.S.-China economic
relationship by revoking permanent normal trade relations--it must
level with Americans that they will experience higher inflation, higher
costs for inputs and finished goods, and retaliation by trading
partners that could evaporate markets for their goods and services
abroad. Such candor with the American public is emblematic of rational
and compelling leadership. Ignoring inconvenient truths about economic
impacts of tariffs and other trade barriers is the hallmark of
governments lacking confidence in their actions and seeking to deflect
the political fallout.
Reducing Trade Costs Between the United States and Its Trading
Partners Will Support Supply Chain Diversification
Efforts
As companies reorient their supply chains and find new sourcing
opportunities, they will look at the costs of trade between the United
States and its allies and key trading partners. Reducing trade costs,
whether through tariff elimination, trade facilitation measures, or
regulatory alignment, will create a stronger enabling environment for
the diversification of supply chains. Reducing trade costs also allows
U.S. companies to compete more effectively against firms from foreign
adversaries.
USTR may promote the notion that more trade barriers lead to more
resilient supply chains, for example by localizing production of goods
in specific economies. However, reducing trade costs allows companies
to make their supply chains as efficient as possible, therefore
permitting them to lower their own internal costs and deliver
competitively priced products to consumers. Companies also will seek to
produce their goods with sustainability in mind as a means of
delivering more ethical products to consumers, particularly in the face
of growing consumer demand for such products. The costs of sustainable
production are decreasing, and companies will benefit from being able
to freely choose sourcing partners that can demonstrate high
commitments to sustainability. But more importantly, lowering trade
costs strengthens U.S. commercial and trade relations with its allies
and key trading partners, thereby increasing U.S. soft power over time.
USTR Must Negotiate New Agreements That Strengthen U.S. Relationships
With Its Allies and Key Trading Partners
USTR has stated that free trade agreements are a tool of the 20th
century. Nevertheless, in the 21st century, U.S. trading partners
continue to negotiate FTAs, some of which exceed the high standards of
the U.S.-Mexico-Canada Agreement (USMCA) particularly on topics like
digital trade. The Biden Administration has chosen to avoid any trade
negotiations that would result in an agreement require an affirmative
vote from Congress for enactment, thereby seeking to make an end-run
around long-standing, bipartisan Congressional priorities.
CTA strongly advocates for the negotiation of new FTAs to support
supply chain diversification, particularly with U.S. treaty allies such
as the United Kingdom and Japan and other close trading partners in
Southeast Asia, such as Vietnam, Thailand, Malaysia, and the
Philippines. The adamant refusal of USTR to even contemplate the
negotiation of comprehensive, market-opening, binding and enforceable
FTAs with these partners is a source of comfort to U.S. adversaries.
USTR could still address its labor and sustainability objectives
through FTA negotiations while advancing higher-standard rules that
curtail the harmful and predatory practices of adversaries. USTR's
current posture of doing as little as possible on trade creates a
vacuum in the global rule-making environment. Stronger U.S. trade
leadership on the global stage is necessary to fill that vacuum.
U.S. Global Trade Leadership Is Essential for Preserving and
Strengthening the Multilateral Trading System
At the 13th WTO Ministerial Conference in Abu Dhabi in February, a
final, limited package came together due to the leadership of the UAE
and the WTO Director-General, Dr. Ngozi Okonjo-Iweala. We understand
that the USTR team on the ground worked incredibly hard behind the
scenes to secure another 2-year extension of the moratorium on customs
duties on electronic transmissions. This was the most important
deliverable for MC13. However, it does not seem that USTR leadership
played a key role in securing this deliverable. The path to MC14 in
Cameroon in 2026 will be far more difficult and will require greater
and more visible leadership from USTR to renew the moratorium or make
it permanent. A permanent moratorium would benefit U.S. businesses in
all sectors and of all sizes by providing durable certainty that they
will not face tariffs on cross-border data flows as they navigate a
global digital economy made all the more challenging through USTR's
unwillingness to address barriers to trade in foreign markets.
Conclusion
CTA greatly appreciates the opportunity to submit these comments for
the record. We look forward to continuing to work with the House Ways
and Means and Senate Finance Committees to increase the ambition of the
U.S. trade policy agenda, combat inflation, strengthen U.S. trade and
economic ties with allies, open new markets to exports of U.S. consumer
technology products, negotiate high-standard, binding and enforceable
trade rules and bolster U.S. technology leadership and the innovation
economy.
Attachment 1--Studies on Economic Impact of Tariffs--2021-present
1. April 2024, Goldman Sachs Economics Research: The Effect of
Tariffs on Government Revenue, Growth, and Inflation: Lessons From the
Last Trade War (Walker); Jan Hatzius, Alec Phillips, David Mericle,
Spencer Hill, Ronnie Walker, Manuel Abecasis, Tim Krupa, Elsie Peng and
Jessica Rindels.
2. March 2024, Harvard Business School: Research Brief: The Real
Cost of Countering China; Jennifer Myers, https://www.alumni.hbs.edu/
stories/Pages/story-bulletin.aspx?num=9396.
3. February 2024, Brookings Institution: Hidden exposure:
Measuring US supply chain reliance; Richard E. Baldwin, Rebecca
Freeman, and Angelos Theodorakopoulos, https://www.brookings.edu/
articles/hidden-exposure-measuring-us-supply-chain-reliance/
?trk=article-ssr-frontend-pulse_little-text-block.
4. February 2024, Council on Foreign Relations: Why U.S. Imports
From Mexico Surpassed Those From China; Brad W. Setser, https://
www.cfr.org/in-brief/why-us-imports-mexico-surpassed-those-
china?utm_source=monthgeoecon&utm
_medium=email&utm_campaign=Feb%2022%20CGS%20Newsletter&utm_
term=GeoeconomicsMonthly.
5. February 2024, National Bureau of Economic Research: Tariff
Rate Uncertainty and the Structure of Supply Chains; Sebastian Heise,
Justin R. Pierce, Georg Schaur and Peter K. Schott, https://
www.nber.org/papers/w32138.
6. February 2024, Peterson Institute for International Economics:
Would Trump's threats of new tariffs survive legal challenge in the
Supreme Court?; Alan Wm. Wolff, https://www.piie.com/blogs/realtime-
economics/2024/would-trumps-threats-new-tariffs-survive-legal-
challenge-supreme.
7. February 2024, Competitive Enterprise Institute: Trump
proposes 60 percent China tariff; Ryan Young, https://cei.org/blog/
trump-proposes-60-percent-china-tariff/.
8. January 2024, Tax Foundation: Tariff of Abominations Redux:
Trump Proposes 60% Tariff on Chinese Goods; Erica York, https://
taxfoundation.org/blog/trump-china-trade-war-proposal/.
9. January 2024, Consumer Technology Association: Consumer
Technology Association Releases New Report Showing That Revoking PNTR
for China = Massive Inflation for American Consumers; Ed Frank, https:/
/www.cta.tech/Resources/Newsroom/Media-Releases/2024/January/Consumer-
Technology-Association-Releases-New-PTNR.
10. January 2024, National Bureau of Economic Research: Help for
the Heartland? The Employment and Electoral Effects of the Trump
Tariffs in the United States; David Autor, Anne Beck, David Dorn,
Gordon H. Hanson, https://www.nber.org/papers/w32082.
11. November 2023, The American Action Forum: Trump's Proposed 10
Percent Tariff: Considering the Impact; Tom Lee, https://
www.americanactionforum
.org/research/trumps-proposed-10-percent-tariff-considering-the-
impact/.
12. October 2023, Consumer Technology Association: Landmark Study
Shows Bringing All Tech Manufacturing Back to U.S. Not Feasible, Ed
Frank, https://www.cta.tech/press-releases/landmark-study-shows-
bringing-all-tech-manufacturing-back-to-us-not-feasible.
13. September 2023, Brookings Institution: BPEA Conference Draft:
Hidden Exposure: Measuring U.S. Supply Chain Reliance; Richard Baldwin,
Rebecca Freeman, Angelos Theodorakopoulos, https://www.brookings.edu/
wp-content/uploads/2023/09/2_Baldwin-et-al_unembargoed.pdf.
14. September 2023, The Committee for a Responsible Federal
Budget: Donald Trump's Universal Baseline Tariff; https://www.crfb.org/
blogs/donald-trumps-universal-baseline-tariff.
15. August 2023, Harvard Business School: Global Supply Chains:
The Looming ``Great Reallocation''; Laura Alfaro and Davin Chor,
https://www.hbs.edu/faculty/Pages/item.aspx?num=64652.
16. August 2023, Harvard Kennedy School: Global Supply Chains: The
Looming ``Great Reallocation'' [PowerPoint Slides]; Laura Alfaro and
Davin Chor.
17. July 2023, The Tax Foundation: Tracking the Economic Impact of
U.S. Tariffs and Retaliatory Actions; Erica York, https://
taxfoundation.org/research/all/federal/tariffs-trump-trade-war/.
18. April 2023, Council on Foreign Relations: The Cost of Trump's
Trade War with China Is Still Adding Up; Gabriel Cabanas, Natalia
Feinberg and Inu Manak, https://www.cfr.org/blog/cost-trumps-trade-war-
china-still-adding.
19. March, 2023, U.S. International Trade Commission: Economic
Impact of Section 232 and 301 Tariffs on U.S. Industries; Peter Herman,
Kelsi Van Veen, https://www.usitc.gov/publications/332/pub5405.pdf.
20. July 2022, Consumer Technology Association: Analysis of
Section 301 Tariff Impacts on Imports of Consumer Technology Products,
https://shop.cta.tech/products/analysis-of-section-301-tariff-impacts-
on-imports-of-consumer-technology-products.
21. May 2022, American Action Forum: The Total Cost of U.S.
Tariffs; Tom Lee & Jacqueline Varas.
22. April 2022, Tax Foundation: Tracking the Economic Impact of
U.S. Tariffs and Retaliatory Actions; Erica York.
23. March 2022, Peterson Institute of International Economics: For
Inflation Relief, the United States Should Look to Trade
Liberalization; Gary Clyde Hufbauer, Megan Hogan, and Yilin Wang.
24. January 2022, USDA Economic Research Service: The Economic
Impacts of Retaliatory Tariffs on U.S. Agriculture; Stephen Morgan,
Shawn Arita, Jayson Beckman, Saquib Ahsan, Dylan Russell, Philip
Jarrell, and Bart Kenner.
25. December 2021, Tax Foundation: Who Really Pays the Tariffs?
U.S. Firms and Consumers, Through Higher Prices; Alex Durante and Alex
Muresianu.
26. October 2021, National Bureau of Economic Research:
Illuminating the Effects of the US-China Tariff War on China's Economy;
Davin Chor and Bingjing Li.
27. May 2021, Moody's Investor Service Report, as reported in U.S.
companies are bearing the brunt of Trump's China tariffs, says Moody's,
CNBC, Yen Nee Lee.
28. January 2021, IHS Markit: Did the US section 301 tariffs
work?; Yacine Rouimi.
______
Distilled Spirits Council of the United States, Inc.
101 Constitution Ave., NW, Suite 350 West
Washington, DC 20001
Tel: (202) 682-8826
Fax: (202) 682-8820
Statement of Robert Maron, Vice President, International Issues and
Trade
The following statement is submitted on behalf of the Distilled
Spirits Council of the United States, Inc. (``DISCUS'') for inclusion
in the printed record of the Finance Committee hearing on the
Administration's 2024 trade policy agenda. DISCUS is a national trade
association representing U.S. producers, marketers, and exporters of
distilled spirits products. Its member companies represent
approximately 75% of total U.S. distilled spirits exports.
Introduction
DISCUS and its member companies have strongly supported commitments
by the U.S. to liberalize trade through a variety of fora and
mechanisms. International trade is essential to the U.S. distilled
spirits sector and is instrumental to its long-term viability. Our
small, medium and large companies, their employees and their suppliers
have benefitted from the successful efforts to open markets for U.S.
spirits exports. Distilled spirits are high value-added agricultural
products, which utilize a range of grains, fruits, and other
agricultural raw materials in the production process. In fact, over the
past decade, grain use in U.S. production of whiskey, brandy, rum, gin,
and vodka increased by 121% to more than 2.8 billion pounds in 2023.
2023 was a banner year for American spirits exports. Total U.S.
spirits exports reached a record $2.2 billion, up 8% compared to last
year. American Whiskeys, which accounted for 63% of all U.S. spirits
exports, increased by 9% over 2022 to reach a record $1.4 billion. U.S.
distilled spirits were exported to more than 130 countries in 2023 from
small, medium, and large distillers located in 44 states. Today, there
are more than 2,600 U.S. craft distillers, up from less than 100 in
2005. The distilled spirits sector directly and indirectly supports 1.7
million good-paying jobs in every state, from the production, import,
wholesale and retail tiers.
Over the past 2 decades, global U.S. spirits exports rose nearly
280% (from $587 million to more than $2.2 billion between 2003-2023).
Long-term growth for U.S. spirits exports is due, in large part, to the
range of trade agreements that eliminated import tariffs, opened many
foreign markets for distilled spirits, and provided tools and
mechanisms to address discriminatory tariff and non-tariff barriers.
U.S. spirits exports tumbled between 2018 and 2021, due largely to
retaliatory tariffs on American spirits imposed by the European Union
(EU) and United Kingdom (UK), which have since been suspended or
removed. In 2023, exports have rebounded over pre-tariff levels. Our
top priority is to secure the final removal of tariffs on U.S., EU, and
UK distilled spirits and a return to permanent zero-for-zero tariffs.
I. U.S. Spirits Industry Has Benefitted From
Market Opening Trade Agreements
DISCUS and its members have strongly supported comprehensive trade
agreements that eliminated tariffs and included other provisions to
protect U.S. spirits products, such as recognition for distinctive
American Whiskeys (e.g., Bourbon, Tennessee Whiskey, American Rye
Whiskey, and American Single Malt Whiskey), and best practices for the
labeling and certification of distilled spirits products. These have
been vital to opening new markets and keeping them open for U.S.
spirits exports.
a. Tariff Elimination
Exports to our trading partners, which have agreed either through
multilateral, regional, or bilateral trade agreements, to eliminate
tariffs on U.S. spirits, reached $1.8 billion in 2023, accounting for
83% of global U.S. spirits exports. In 2023, U.S. distilled spirits
exports to bilateral and regional free trade agreement (FTA) partners
totaled $726 million, accounting for nearly \1/3\ of global U.S.
spirits exports. In fact, between 2000 and 2023, exports to U.S. FTA
partners have grown faster (539% increase) than U.S. distilled spirits
exports to non-FTA partners (400% increase).
In contrast, U.S. spirits exports to high-tariff countries, such as
India (150% tariff), Vietnam (45% tariff) and Brazil (20% tariff on all
imported distilled spirits, except bulk whiskey, which is 12% tariff),
reached $69.2 million, accounting for only 3% of total U.S. spirits
exports in 2023. Clearly, the elimination of tariffs leads to an
increase in U.S. spirits exports.
In particular, the tariff elimination commitments regarding
distilled spirits products secured during the Uruguay Round, which led
to the development of the World Trade Organization (WTO) in 1994, and
subsequent negotiations under the U.S. government's ``zero-for-zero''
initiative have paved the way for a significant increase in U.S.
distilled spirits exports. At the outset, participation in the spirits
``zero-for-zero'' was limited to the U.S. and the EU. However, other
countries, including Japan, Canada, Macedonia, Taiwan and Ukraine have
since also agreed to eliminate tariffs on spirits imports on a Most
Favoured Nation (MFN) basis.
Since the ``zero-for-zero'' agreement came into effect in 1997, the
value of U.S. spirits exports to the EU (current membership) increased
by 413%, from $171 million to nearly $880 million in 2023. The ``zero-
for-zero'' agreement continues to produce benefits for U.S. spirits
exports. Specifically, as countries have joined the EU, they are
required to adopt the EU's common external tariff, which, in the case
of distilled spirits is zero for practically all spirits. For example,
exports to Latvia, which is currently the 21st largest destination for
U.S. distilled spirits, increased by almost 879%, from $1.8 million in
2004 when it joined the EU, to $17 million in 2023. Similarly, exports
to Poland, which is the 14th largest market, increased by nearly
3,887%, from $1.1 million in 2004 when it joined the European Union to
$47 million in 2023. Prior to Poland joining the EU, U.S. spirits faced
tariffs ranging from 75% to 105% ad valorem.
In the case of Japan, U.S. distilled exports grew from $68 million
in 2002, when the tariff was eliminated, to $122 million in 2023,
representing a growth rate of 79%.
b. Distinctive Product Recognition for Bourbon, Tennessee Whiskey, and
American Rye Whiskey
Bourbon and Tennessee Whiskey, the largest categories of American
spirits exports, are recognized by 45 countries as distinctive products
of the U.S. Such recognition ensures that products sold as Bourbon and
Tennessee Whiskey are produced in the U.S. in accordance with U.S. laws
and regulations. Distinctive product recognition for Bourbon and
Tennessee Whiskey has been secured in free trade agreement negotiations
with Canada, Mexico, Colombia, Peru, Chile, Australia, Panama, Korea,
Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and
Nicaragua. In addition, distinctive product recognition for Bourbon and
Tennessee Whiskey has been secured in Brazil, Japan, the EU, the UK,
and Bolivia through bilateral agreements. With regard to the EU, any
country that joins must automatically afford this protection to Bourbon
and Tennessee Whiskey.
The USMCA includes provisions to preserve recognition for Bourbon
and Tennessee Whiskey in Canada and Mexico and secures Mexico's
agreement to take steps to provide distinctive product recognition for
American Rye Whiskey, a fast-growing category of American Whiskey.
c. Best Practices for the Labeling and Certification of Distilled
Spirits Products
For the first time in a U.S. FTA, the USMCA establishes new best
practices regarding the labeling and certification of beverage alcohol
products. These important protections will facilitate trade in
distilled spirits and reduce potential barriers to trade by providing
greater certainty, transparency and efficiency for distilled spirits
producers, importers and exporters among the three countries. These
commitments ensure that the USMCA is a model 21st-century trade
agreement for the distilled spirits industry.
II. American Spirits Exports Tumbled Due to Retaliatory Tariffs
As noted above, trade agreements and the elimination of tariffs on
U.S. spirits exports have directly increased U.S. spirits exports.
However, in mid-2018, the EU, UK, Canada, Mexico, Turkey, and China
implemented retaliatory tariffs on U.S. spirits in trade disputes
unrelated to the spirits sector. The retaliatory tariffs curtailed
overall U.S. spirits export growth between 2018 and 2021.
Export contracts were canceled, and distribution negotiations were
postponed for U.S. distillers of all sizes. Many also put expansion and
investment plans on hold. The impact was felt across the U.S.
throughout the supply chain, from farmers to suppliers.
The only retaliatory tariffs on U.S. distilled spirits currently
imposed are those applied by China and Turkey. The EU's retaliatory
tariffs on U.S. distilled spirits products are suspended as part of
trade disputes over steel-aluminum and large civil aircraft subsidies.
The U.S., Canada, and Mexico reached an agreement in the steel and
aluminum dispute in connection to the USMCA negotiation that resulted
in the repeal of retaliatory tariffs on American Whiskey exports to
Canada and Mexico.
Since the EU first agreed to suspend its 25% retaliatory tariff on
American Whiskeys in 2022, exports to the EU surged by over 60%,
climbing from $439 million in 2021 to $705 million in 2023.
In December 2023, the EU announced that it would continue the
suspension of tariffs on American Whiskeys in the steel and aluminum
dispute for 15 months, until March 31, 2025. If no agreement is
reached, the EU will reimpose its tariff on American Whiskeys at 50%,
up from the previously imposed 25%. The UK permanently removed its
retaliatory tariff on American Whiskeys in the steel and aluminum
dispute in June 2022.
Tariffs on U.S., EU, and UK distilled spirits in the large civil
aircraft disputes are suspended until June 2026. If agreements are not
reached, the tariffs will be reimposed. Our top priority is to secure
the permanent removal of U.S and EU tariffs on distilled spirits and a
permanent return to zero-for-zero tariffs with the EU and UK.
III. U.S. Tariffs on Imported EU and UK Spirits Impact U.S. Jobs
While U.S. tariffs imposed on EU and UK spirits may appear only to
harm EU and UK companies, this is simply not the case. As a result of
the important market-opening agreements highlighted above, the U.S.,
EU, and UK spirits sectors are deeply integrated with companies owning
a range of U.S., EU, and UK spirits. The same is true for EU and UK
tariffs on American spirits. Many companies have made considerable
investments in the U.S., EU, and UK to successfully create
complementary product portfolios with brands from the U.S., EU, and UK
to satisfy consumer demands. Thus, tariffs on imported spirits
compounds the negative impact on companies negatively impacted by the
EU's retaliatory tariff on American spirits. Since retaliatory tariffs
on imports are, in effect, taxes, imposing tariffs on EU beverage
alcohol imports will have the unintended consequence of harming U.S.
consumers of these products.
Trade associations representing the spirits sectors in the EU and
UK are aligned with DISCUS in opposition to tariffs on distilled
spirits. They have and continue to urge their respective governments to
permanently remove tariffs on American spirits imports.
IV. DISCUS Strongly Supports New Comprehensive
Market-Opening Trade Agreements
DISCUS and its members have strongly supported comprehensive
multilateral, regional, and bilateral market-opening agreements, as
these are vital to opening new markets and keeping them open for U.S.
spirits exports. Efforts by the U.S. government to secure the
elimination of tariffs on U.S. spirits have contributed to the
significant growth in exports. As noted above, U.S. spirits exports to
our trading partners, which have agreed to eliminate tariffs through
multilateral, regional, or bilateral trade agreements, reached $1.8
billion in 2023, accounting for 83% of global U.S. spirits exports.
DISCUS supports new comprehensive bilateral/regional market-opening
agreements, which we believe will contribute significantly to the
continued growth of our sector. DISCUS supported the Congressional
passage of the U.S.-Mexico-Canada Agreement (USMCA) implementing bill
and continues to urge the administration to pursue new comprehensive
trade negotiations to secure the reduction of tariffs for U.S. spirits
exports, distinctive product recognition for Bourbon, Tennessee
Whiskey, and American Rye Whiskey, and best practices for the labeling
and certification of distilled spirits products.
DISCUS also strongly supports the WTO and its ongoing efforts to
further liberalize global trade and strengthen the rules-based
multilateral trading system. Unquestionably, the package of agreements
concluded in the Uruguay Round, which led to the establishment of the
WTO in 1994, has significantly benefitted the U.S. distilled spirits
sector by reducing or eliminating import tariffs and establishing rules
for transparency, non-discrimination, and equal access. Since the
Uruguay Round agreements entered into force in 1997, global U.S.
distilled spirits exports have increased by almost 300% through 2023.
V. Other Trade Barriers Negatively Impacting American Spirits Exports
Several priority target markets apply discriminatory spirits taxes
in favor of domestically produced spirits and maintain high tariffs
and/or an array of non-tariff barriers to U.S. spirits, which inhibit
the sector's long-term growth prospects. For example, India maintains
an excessive tariff on imports of bottled spirits of 150% ad valorem,
Brazil maintains a tariff of 12% ad valorem for bulk whiskey and 20% ad
valorem for other distilled spirit products, and Vietnam imposes a 45%
ad valorem tariff. In addition, Thailand, Peru, Brazil, and the EU
continue to apply discriminatory spirits taxes in favor of domestically
produced spirits, which distort the market in violation of the national
treatment provisions of GATT Article III, paragraph 2. Furthermore,
labeling requirements, packaging requirements, and product standards
under consideration in Thailand, Ireland, South Africa, the EU, Brazil
and elsewhere, which are inconsistent with standard international
practices, could impose unnecessary barriers to entry for U.S. spirits
exporters.
These, and many other tariff and non-tariff market access barriers
impacting U.S. spirits exports, are discussed in length in DISCUS'
October 2023 submission regarding foreign trade barriers to U.S.
exports to the Office of the United States Trade Representative, which
can be viewed at the following link: https://www.distilled
spirits.org/wp-content/uploads/2023/10/DISCUS-2024-National-Trade-
Estimate-Report-Submission-Final.pdf.
Conclusion
In summary, the U.S. distilled spirits industry has benefitted
significantly from the comprehensive multilateral, regional, and
bilateral trade agreements the U.S. has concluded. However, the
imposition of retaliatory tariffs had a significant negative impact on
the sector. For these reasons, our top priority is to request that
Congress continue to urge the Administration to engage with their EU
and UK counterparts to secure the permanent removal of U.S., EU, and UK
tariffs on distilled spirits. Our EU and UK counterparts share our
strong opposition to the application of any tariffs on distilled
spirits and are sharing similar concerns with their respective
governments.
In addition, we urge the Administration to pursue new market-
opening and comprehensive trade agreements for U.S. spirits exports to
secure the reduction of tariffs on these exports, distinctive product
recognition for Bourbon, Tennessee Whiskey, American Rye Whiskey,
American Single Malt Whiskey, and best practices for the labeling and
certification of distilled spirits products.
Thank you again for the opportunity to provide the U.S. spirits
sector's views. Please do not hesitate to contact us if we can provide
any additional information.
Thank you very much for your consideration.
______
Engine Advocacy
700 Pennsylvania Ave., SE
Washington, DC 20003
https://www.engine.is/
April 15, 2024
U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg. Rm. SD-219
Washington, DC 20510-6200
Dear Chairman Wyden, Ranking Member Crapo, and Honorable Members of the
Senate Finance Committee:
We write to urge you to use the upcoming April 17th hearing to probe
recent actions by the Office of the U.S. Trade Representative,
particularly with regard to digital trade. Engine is a non-profit
technology policy, research, and advocacy organization that bridges the
gap between policymakers and startups. Engine works with government and
a community of thousands of high-technology, growth-oriented startups
across the nation to support the development of technology
entrepreneurship. Lowering barriers to trade unlocks markets for U.S.
startups to expand, compete, and find success and is a vital part of
promoting domestic technology entrepreneurship. Recent backsliding on
longstanding digital trade priorities threatens to raise barriers to
global success for U.S. startups, and it must be corrected.
Several recent actions by USTR have been alarming for startups that
rely on smart digital trade policy to keep barriers low and help them
reach markets around the world. In multilateral talks at the World
Trade Organization last October, the U.S. Trade Representative
retreated from important and long-held negotiating positions on source
code protection, antidiscrimination, and free data flows.\1\ Shortly
thereafter, the trade pillar of the Indo-Pacific Economic Framework was
seemingly jettisoned, in part due to the emerging upheaval on digital
trade.\2\ Last month, in the National Trade Estimate, which is supposed
to be an accounting of trade barriers faced by U.S. companies, USTR
markedly dialed back the number of digital trade barriers they intend
to address, especially around data localization.\3\
---------------------------------------------------------------------------
\1\ See, e.g., David Lawder, US drops digital trade demands at WTO
to allow room for stronger tech regulation, Reuters (October 25, 2023),
https://www.reuters.com/world/us/us-drops-digital-trade-demands-wto-
allow-room-stronger-tech-regulation-2023-10-25/.
\2\ See, e.g., David Lawder, U.S. suspends Indo-Pacific talks on
key aspects of digital trade-
lawmakers, Reuters (November 8, 2023), https://www.reuters.com/
business/finance/us-suspends-indo-pacific-talks-key-aspects-digital-
trade-lawmakers-2023-11-08/.
\3\ See, e.g., Ari Hawkins and Doug Palmer, USTR defends trade
report amid industry rebuke, Politico (April 1, 2024), https://
www.politico.com/newsletters/weekly-trade/2024/04/01/ustr-defends-
trade-report-amid-industry-rebuke-00149889.
Barriers encountered by startups dictate the markets where they can
reasonably enter, create additional costs that detract from investments
in R&D and job creation, and hamper U.S. economic growth by limiting
the flow of goods and services across borders. Across administrations,
the U.S. has pursued a strong, forward-
looking digital trade agenda to address these digital trade barriers
like data localization. These measures placing limitations on how and
when data can be transferred across borders have particularly negative
impacts upon startups. Startup founders have described these
restrictions as ``very costly,'' leading them to ``lose prospects and
customers,'' and forcing them into decisions about what services they
can offer.\4\
---------------------------------------------------------------------------
\4\ See Letter from Engine to Ambassador Katherine Tai (October 30,
2023), https://static1.
squarespace.com/static/571681753c44d835a440c8b5/t/
653ab38280bab20aba47a209/169834589
4992/Startups_letter+to+USTR.pdf.
U.S. startups need strong digital trade policy implemented by
policymakers that will fight for their interests on the global stage.
To that end, a coalition of over 40 startups, investors, and support
organizations penned an open letter highlighting what U.S. trade
policymakers must do to support them. That letter is attached as an
appendix below, but in particular, the startups called for policies
---------------------------------------------------------------------------
that:
Enable cross-border data flows and oppose local storage
mandates;
Foster innovation and regulatory consistency;
Avoid technology-specific levies and prohibit duties on digital
transmissions; and
Streamline trading processes and support access to resources and
digital tools.
Many of the policies needed to support startups are those that the U.S.
Trade Representative is actively backing away from. We urge you and
your colleagues to examine the recent moves of Ambassador Tai's agency
and to implore her to change course. It is imperative that the U.S.
pursues a strong digital trade policy agenda that ensures U.S. startups
can thrive and remain global leaders in innovation.
Sincerely,
Engine
Appendix: Open Letter from Coalition of Startups
February 7, 2024
To U.S. Trade Policymakers:
We are leading members of the U.S. startup ecosystem--entrepreneurs,
startup founders, incubators, investors, accelerators, and support
organizations--that serve customers and clients across the country and
around the globe. Sound digital trade policy is critical to startups'
international competitiveness, and we write to encourage U.S. trade
policymakers to aggressively pursue policies that lower barriers to
trade and enable startup success.
U.S. startups are at the fore of global innovation and domestic job
creation, largely thanks to the Internet, digitization of world
economies, and forward-looking digital trade policies that haveenabled
startups to reach markets beyond U.S. borders. Still, U.S. startups
encounter myriad barriers as they grow and scale internationally. Those
barriers dictate the markets where startups can reasonably enter and
compete, create additional costs that could instead fuel R&D and job
creation, and hamper U.S. economic growth by limiting the flow of goods
and services across borders.
Startups need smart digital trade policies that promote an open and
global Internet to lower and keep low barriers to trade. In 2020,
Congress overwhelmingly approved the U.S.-Mexico-Canada Agreement,
revealing a broad bipartisan consensus on the forward-looking digital
trade provisions included in the deal. U.S. digital trade policy should
build on those provisions and other longstanding U.S. trade policies to
support the success of U.S. startups looking to expand into foreign
markets and engage customers abroad by embodying these principles:
Enable cross-border data flows and oppose local storage mandates.
The Internet is inherently borderless and should allow startups
to reach foreign markets with little additional investment.
Conversely, policies that restrict where data can be stored or
how and when data can be transferred across borders erect
barriers to trade and increase costs that startups with limited
resources have difficulty overcoming, especially compared to
their larger rivals.
Foster innovation and regulatory consistency.
Different rules about the same issue across jurisdictions
create costs and heighten barriers for startups. Regulations
adopted in other jurisdictions--including around data privacy,
intermediary liability, emerging technologies, and more--can
negatively impact startups, especially when they are
discriminatory, apply extraterritorially, or require startups
to significantly alter their products, undermine security
measures, or compromise proprietary technology.
Avoid technology-specific levies and prohibit duties on digital
transmissions.
Digital services taxes increase costs for startups regardless
of who the taxes are initially levied upon, putting startups at
a disadvantage in jurisdictions with them. And the moratorium
on imposing customs duties on electronic transmissions has
shaped the market, allowed digital trade to flourish, and must
be permanently extended.
Streamline trading processes and support access to resources and
digital tools.
Trade facilitation and capacity building is critical to
lowering costs and burdens while opening opportunities for
startups. Federal and state governments can play a critical
role in helping more startups reach markets abroad through
grants, workshops, access to digital services, and other
resources.
Trade policy impacts U.S. startups' ability to break into new markets,
create domestic jobs, earn investment, and scale their ventures. We
encourage you to pursue strong digital trade provisions that open
opportunities and defend the ability of U.S. startups to provide their
goods and services to customers around the globe.
Sincerely,
1Huddle ACT | The App Association
Newark, NJ Washington, DC
Allied for Startups ArchAngels
San Francisco, CA Washington, DC
Arcascope Black Women Talk Tech
Arlington, VA New York, NY
CAPTVR3D Carefully
Clark, MO Brooklyn, NY
Center for American
Entrepreneurship Colorado Startups
Great Falls, VA Boulder, CO
Connected Commerce Council Deltacard Corp
Washington, DC Orlando, FL
Engine Enployable, Inc.
Washington, DC Tysons, VA
Get Write to Business LLC Global Innovation Forum
Belton, TX Washington, DC
Hacom LLC hobbyDB
Santa Ana, CA Superior, CO
KCRise Fund Ki-Zen Power Systems
Kansas City, MO Portsmouth, VA
Libib Make Startups
Covina, CA Augusta, GA
M1PR, Inc. MetaProp
Roswell, GA New York, NY
PIE PILOT Inc.
Portland, OR New York, NY
pollen.media Productions.com
Austin, TX Atlanta, GA
Pruuvn Inc. Retail Aware
Atlanta, GA Omaha, NE
RevUp Capital Shatterbox
Providence, RI Tulsa, OK
Small Business and Entrepreneurship
Council SmarTwin AI
Washington, DC New York, NY
TechUnited:NJ Themis Strategic Partners, LLC
Jersey City, NJ Chicago, IL
TheraTec, Inc. TMSOFT
Horace, ND Tavernier, FL
Tostie Productions LLC Venntive
San Diego, CA New York, NY
Voatz Warmilu
Boston, MA Ann Arbor, MI
______
Public Citizen
215 Pennsylvania Ave., SE
Washington, DC 20003
(202) 588-1000
https://www.citizen.org/
Statement of Melinda St. Louis, Director,
Public Citizen's Global Trade Watch
Dear Chairman Wyden, Ranking Member Crapo, Chairman Smith, and Ranking
Member Neal:
Public Citizen, a nonprofit consumer advocacy organization with more
than 500,000 members, welcomes the opportunity to submit a statement
for the record in regard to the 2024 United States Trade Agenda. A
mission of Public Citizen is to ensure that in this era of
globalization, a majority can enjoy economic security; a clean
environment; safe food, medicines and products; access to quality
affordable services; and the exercise of democratic decision-making
about the matters that affect their lives.
At the core of the discussions of both hearings was a rehashing of a
long-settled debate over the direction of U.S. trade policy. Since the
early 1990s, corporate-rigged free trade agreements (FTAs) have
undermined domestic safeguards and perpetuated a global race to the
bottom for the cheapest labor and lowest environmental standards,
contributing to the hollowing out of U.S. manufacturing and increasing
income inequality. Americans who have lived with the consequences of
the North American Free Trade Agreement (NAFTA) and its clones have
thus demanded that their representatives in government pursue a new
path. As a result, a new FTA hasn't successfully passed through
Congress for over a decade, since 2012.
Biden administration officials have repeatedly stated that the
President's vision for trade will not repeat the past mistakes of
prioritizing efficiency above all else, but will serve workers,
consumers, and the environment. It is the right but difficult task to
create a new model of trade policy that excludes problematic
investment, intellectual property, market access, and procurement
provisions in order to put people and the planet first.
The neoliberal model had decades to run its course. It is unreasonable
to expect a wholly new model to be completed within only three years--
and still, important improvements have already materialized.
Worker-Centered Trade
U.S. trade agreements since the George W. Bush administration have
included labor and environmental standards in their core texts as part
of the ``May 10th'' standard. The ostensible goal of these terms was to
raise standards in trade partner countries. But these terms have proven
ineffective. The absence of effective labor and environmental standards
created race-to-the-bottom incentives for U.S. firms to offshore
production and slammed U.S. firms and workers with a flood of imports
subsidized by environmental and social dumping.
The U.S.-Mexico-Canada Agreement (USMCA) however, thanks to the
determination of congressional Democrats and labor unions late in the
negotiations, included innovative labor provisions. The office of the
U.S. Trade Representative under Katherine Tai has used the USMCA's
Rapid Response Mechanism (RRM) to ensure that companies cannot secure
unfair advantages by shipping jobs out of the U.S. to exploit workers
in Mexico. Public Citizen recognizes the efforts of Ambassador Tai to
enforce these terms, as well as her role in the crafting of those
provisions in Congress. As of April 2024, these labor provisions have
directly benefited nearly 30,000 workers in Mexico by providing
millions of dollars in backpay and benefits to workers, ensured wrongly
terminated workers were reinstated, and helped secure free and fair
elections in which workers selected independent unions to represent
them. The labor provisions and RRM enforcement process in the USMCA are
the new minimum standard that must be met for trade agreements going
forward.
One of the top priorities in President Biden's trade policy agenda is
working toward an Indo-Pacific Economic Framework (IPEF). It appears
this administration recognizes that it would be disastrous in terms of
policy and politics to return to the failed ``free trade agreement''
model that made the Trans-Pacific Partnership (TPP) so widely
unpopular. From the start of negotiations, USTR has been clear that
IPEF is not an FTA, and that it excludes all of the most controversial
aspects of the TPP.
The Biden administration did the right thing by not concluding the IPEF
Trade Pillar last fall, as the standards in the labor chapter were
lacking, and there is no ``worker-centered trade'' without enforceable
standards. It's better to miss an arbitrary deadline than to ink a deal
that fails to live up to the administration's promise of ``worker-
centered'' trade, especially when rules governing 40% of the global
economy are on the line. This move by the Biden administration and USTR
broadcasts the message to the world that if a trade deal doesn't meet
standards to protect workers and the environment, it's not worth
concluding. We applaud the righteous decision to slow negotiations,
prioritizing workers over scoring political points.
Similarly, Public Citizen calls on members of Congress and the
administration to work together to ensure that strong and enforceable
labor and environmental standards are at the center of ongoing and
future trade talks, including Critical Minerals Agreement (CMA)
negotiations. The U.S.-Japan CMA must not be the model, as the lip
service around labor rights and environmental protections are
unenforceable. The only binding language in the text concerns a vague
commitment to share information on labor protections. All labor
standards must be subject to swift and certain enforcement that include
facility-specific enforcement mechanisms and meaningful penalties for
violations. Public Citizen is encouraged that the U.S. Trade
Representative appears to be responsive to the critiques from labor and
Congress regarding the lack of transparency in negotiations and
enforceable standards in the U.S.-Japan CMA, as negotiations with other
partners have reportedly slowed. These new and foundational texts will
play a major determining role in the green transition, and we look
forward to improved processes with meaningful stakeholder engagement in
future negotiations.
Reflecting on the lessons learned from the IPEF process, we call on the
administration to center labor rights and environmental protections in
negotiations for a U.S.-Kenya Strategic Trade and Investment
Partnership (STIP). And we note that all of the negotiations over the
past 3 years would have benefited from greater transparency and civil
society participation.
Redefining Digital Trade Rules
Several representatives at the hearings disingenuously criticized
USTR's rethink of digital trade rules as if it shuts down all online
sales and the internet itself. In reality, all that USTR did was remove
U.S. support for four extreme ``digital trade'' provisions that the
previous administration proposed at e-commerce talks on the sidelines
of the World Trade Organization (WTO). These rules--on data flows, data
localization, source code/algorithm non-disclosure, and anti-
competitive nondiscrimination--came straight from the tech industry,
which has picked up the pharma industry playbook to insert rules in
trade agreements that would restrict governments' ability to regulate
them.
We commend Ambassador Tai for leading the update of digital trade rules
to provide the policy space necessary for our nation to enact urgently
needed policies that Congress and regulators are currently crafting: on
Big Tech competition, gig worker rights, online consumer privacy and
data security protections, and AI accountability measures. We are eager
to work with the Biden-Harris administration to create new digital
trade rules that promote worker rights, consumer privacy, civil rights,
and data security goals.
The 2024 National Trade Estimate (NTE) Report on Foreign Trade Barriers
shows continued progress on this front. This year's NTE is not simply a
hit list of other countries' laws and regulations that large U.S.
corporations dislike. Now, for the first time in memory, USTR is
recognizing that it is not in the U.S. national interest to attack and
threaten other nations' consumer and worker protection measures. This
is particularly apparent in the context of ``digital trade'' barriers,
many of which are actually privacy, anti-discrimination, and anti-
monopoly safeguards. As governments around the world, including our
own, work to regulate the rapidly changing tech space, it does not make
sense to list these new regulations as ``barriers to trade.'' Still,
there are 22 jurisdictions with sections on ``digital barriers to
trade'' (compared to 28 in Trump's 2020 NTE)--revealing the lie behind
Big Tech's claim that USTR has dropped their interests entirely.
There is still more work to be done to ensure that the NTE does not
inappropriately target other countries' public health and development
laws. This would be consistent with the Biden-Harris administration's
stated ``worker-centered'' approach to trade, that does not simply
privilege large corporate interests over all else, but recognizes that
trade policy should complement, rather than undermine, public interest
goals.
Checking Corporations' Power to Challenge Laws
Senator Sheldon Whitehouse and Ambassador Tai acknowledged at the
Senate Finance hearing that for decades the United States was the
driving force expanding the Investor-State Dispute Settlement (ISDS)
mechanism. Yet at the end of 2019, the U.S. Congress, in a welcome act
of bipartisanship, agreed to eliminate ISDS provisions with Canada and
significantly reduce them with Mexico as part of the USMCA. This shift
in U.S. policy sent a signal worldwide to the many countries also eager
to exit the ISDS regime, especially after nations that terminated ISDS
agreements saw no fall-off in foreign investment.\1\
---------------------------------------------------------------------------
\1\ https://www.citizen.org/article/termination-of-bilateral-
investment-treaties-has-not-negatively-affected-countries-foreign-
direct-investment-inflows/.
President Biden and USTR have thus far followed through on the promise
to exclude ISDS provisions in new trade negotiations. The next step is
to dismantle ISDS in the dozens of active U.S. agreements in which it
still exists. Public Citizen is encouraged that, in response to Sen.
Whitehouse's impassioned plea to remove the mechanism in existing
agreements, Ambassador Tai noted that USTR is actively looking into
options to address ISDS in existing agreements. We look forward to
working with the administration to make concrete progress on this as
soon as possible, and would like to note for the record the growing
---------------------------------------------------------------------------
support for this endeavor:
300+ Professors of Law and Economics Urge Elimination of ISDS in
U.S. Trade and Investment Agreements, https://www.citizen.org/wp-
content/uploads/2024
-Professors-Letter.pdf.
Sanchez, Doggit call for Biden Administration to Reform CAFTA-DR
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releases/sanchez-doggett-call-biden-administration-reform-cafta-dr-
trade.
Warren, Whitehouse, Cohen, Lawmakers Urge Biden Administration
to Eliminate Investor-State Dispute Settlement from Existing U.S. Trade
and Investment Agreements, https://www.warren.senate.gov/newsroom/
press-releases/warren-whitehouse-cohen-lawmakers-urge-biden-
administration-to-eliminate-investor-state-dispute-settlement-from-
existing-us-trade-and-investment-agreements.
Public Citizen, AFL-CIO, Sierra Club, and 200+ Organizations
Urge Biden to Terminate ISDS Provisions in Existing U.S. Trade and
Investment Agreements, https://www.citizen.org/wp-content/uploads/exit-
ISDS-organizational-letter.
pdf.
UN Report: Paying polluters: the catastrophic consequences of
investor-state dispute settlement for climate and environment action
and human rights, https://www.ohchr.org/en/documents/thematic-reports/
a78168-paying-polluters-catastrophic-consequences-investor-state-
dispute?s=03.
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Tide: How to Harness the Americas Partnership for Economic Prosperity
to Deliver an ISDS-Free Americas, https://rethinktrade.org/wp-content/
uploads/2024/03/ISDS_
Report_Tides_03.12.2024.pdf.
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International Investment Agreements as a Barrier to Climate Action: A
Toolkit to Safeguard Fossil Fuel Measures from Investment Treaty
Claims, https://www.ciel.org/wp-content/uploads/2024/01/Overcoming-
International-Investment-Agreements-as-a-Barrier-to-Climate-Action.pdf.
Access to Medicines
Too often, the U.S. government has sided with Big Pharma at the expense
of access to medicines and vaccines in developing countries,
contributing to suffering and preventable death during the early global
AIDS crisis and accepting access delays at the height of the COVID
emergency. In years past, the U.S. government sought to deter even
consideration of pro-health patent policies in many other countries,
under potential penalty of trade sanctions, and provided cover for far
more aggressive opposition tactics by powerful prescription drug
corporations.
But as with investment rules, USTR has changed course and excluded
intellectual property (IP) rules from ongoing trade negotiations.
Ambassador Tai has frequently spoken about the need to balance IP
protections with access to affordable medicines and technologies.
Public Citizen applauds USTR for realizing that this balance has leaned
heavily in favor of pharmaceutical company profits for far too long.
For example, in the recent Special 301 Report, USTR states its ``policy
of declining to call out countries for exercising [WTO Trade-Related
Aspects of Intellectual Property Rights] TRIPS flexibilities, including
with respect to compulsory licenses, in a manner consistent with TRIPS
obligations.''
This statement gives reason for hope. Countries struggling under the
burden of high-priced medicine monopolies should know that the United
States will not interfere with their efforts to make medicine
affordable for their people, consonant with WTO rules.
However this progress is constrained by the still-onerous and pharma-
authored rules of the WTO. And U.S. negotiators of a WHO pandemic
accord have yet to accept forward-looking proposals from developing
countries on medical patents. And the Special 301 report still supports
harmful rules favored by drug corporations, including challenges to
practices safeguarding India's provision of generics to the world. This
must change.
In 2021, the initial announcement from the Biden administration of
support for a temporary waiver of IP barriers to facilitate more
production of COVID-19 vaccines was a welcome change from the previous
administration. The final outcome of the negotiations was ultimately
inadequate to meet the scope of the tragedy facing the world, but
shining a light on the deadly prioritization of intellectual property
over public health in our global trade systems was an important first
step.
Helpfully, the Biden-Harris administration acknowledged countries'
health interest in compulsory licensing to support production and
access, and stepped down trade pressures against their use. The October
2023 USITC report found compulsory licenses are ``associated with
increased generics and lower prices, and increased access to
pharmaceuticals.'' The report cites evidence that patent protection
``has little to no positive effect for innovation in developing
countries and negative effects for access and affordability.
The world will never forget the critical time the WTO wasted or the
untold lives lost because rich countries refused to share the doses and
knowledge that scientists around the world and public funds helped
produce. We sincerely urge the U.S. Trade Representative to learn from
these missteps and act quickly and effectively in the next crisis, and
look forward to the U.S. continuing the work to shift the balance
towards access.
______
Society of Chemical Manufacturers & Affiliates
1400 Crystal Drive, Suite 630
Arlington, VA 22202
T: (571) 348-5100
https://www.socma.org/
April 15, 2024
The Honorable Ron Wyden The Honorable Mike Crapo
Chairman Ranking Member
U.S. Senate U.S. Senate
Committee on Finance Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
The Honorable Jason Smith The Honorable Richard Neal
Chairman Ranking Member
U.S. House U.S. House
Committee on Ways and Means Committee on Ways and Means
1139 Longworth House Office
Building 1139 Longworth House Office
Building
Washington, DC 20515 Washington, DC 20515
RE: Statement for the Record--Hearing on the Biden Administration's
2024 Trade Policy Agenda
Dear Chairman Wyden, Ranking Member Crapo, Chairman Smith, and Ranking
Member Neal,
The Society of Chemical Manufacturers & Affiliates (SOCMA) appreciates
the opportunity to submit comments regarding the hearings on the Biden
Administration's 2024 Trade Policy Agenda with United States Trade
Representative Katherine Tai.
SOCMA is part of a $300 billion industry that's fueling the U.S.
economy. Our members play an indispensable role in the global chemical
supply chain, providing specialty chemicals to companies in markets
ranging from aerospace and electronics to pharmaceuticals and
agriculture. As the only U.S.-based trade association solely dedicated
to the specialty and fine chemical industry, our industry network
extends to more than 20,000 influencers and decision makers in the
specialty chemicals supply chain.
Section 301 Tariffs
SOCMA is not seeking the elimination of the Section 301 Tariffs.
China's unfair policies and practices towards intellectual property
have had a range of negative effects on the American economy and have
significantly undermined American manufacturing. Many SOCMA members
have been victimized by IP theft in China--theft that is particularly
hurtful to an industry that thrives on innovation. We respect the
administration's need for a full range of options to deal with China's
unfair practices and understand that tariffs are an impactful tool that
should remain at the Administration's disposal.
Nevertheless, the Section 301 tariffs have placed burdens on domestic
specialty chemical manufacturers that have placed them at a competitive
disadvantage. In many cases, China is the only or predominant source of
inputs and raw materials for the specialty chemical industry and there
is a need to alleviate the tariffs on those products.
Reinstatement of Section 301 Exclusion Process
SOCMA encourages a three-step approach to 301 tariff exclusions:
1. Reopen the exclusion process for previously extended exclusions
(already completed by USTR).
2. Open the exclusion process for all previously granted, now
expired exclusions.
3. Reopen the exclusion process to all 301 tariffs.
SOCMA strongly believes any exclusion process must be transparent and
inclusive for all stakeholders, apply consistent procedures and
processes for all tariff exclusion applications, and base decisions on
clear evidence and consistent criteria.
There are a number of reasons to re-open the exclusion process, not the
least of which is that tariffs on products that are not competitively
available outside of China have a compounding effect on the US economy
of which the chemical industry is a net exporter. The tariffs that are
being paid by US companies hinder their production and growth
opportunities, and because it increases the cost of US products it
makes them less competitive in the global market, which in turn inhibit
reductions in the US trade deficit.
Support for Legislation to Amend USMCA Implementation
SOCMA also requests the support in amending USMCA implementing
legislation to allow duty drawback for 301 surtaxes. The collection of
these levies places SOCMA members at a severe disadvantage for exports
to Mexico and Canada since international competitors do not have the
25% surcharge included in the cost of raw materials. The implementing
legislation of USCMA will need to be amended to resolve this trade
imbalance. SOCMA's hope is that this is a unilateral change and does
not require the participation, nor negotiation with, Mexico or Canada.
Conclusion
SOCMA has appreciated the opportunity to provide input and looks
forward to continued engagement with the Committees. If you have any
questions about these comments, please feel free to contact me at
[email protected] or 571-348-5123.
Respectfully submitted,
Genevieve Strand
Director, Government Relations
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