[Congressional Record Volume 165, Number 61 (Tuesday, April 9, 2019)]
[Senate]
[Pages S2317-S2319]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                                 China

  Mr. PORTMAN. Madam President, I am on the Senate floor to talk about 
the importance of trade and specifically our country's economic 
relationship with China.
  As a trade lawyer, as a former U.S. Trade Representative, as a member 
of the Finance Committee now that handles trade issues, I have been 
involved in these issues over the years.
  Most importantly, I am from Ohio, which is a huge trade State. We are 
concerned about trade because we have a lot of manufacturing and a lot 
of agriculture, where jobs depend on trade back and forth. In fact, in 
Ohio, about 25 percent of our manufacturing workers make products that 
get exported, and one out of every three acres planted by Ohio farmers 
is now being exported.
  These are good jobs. These are jobs that pay, on average, about 16 
percent more than other jobs and have better benefits. We want more of 
them.
  With only 5 percent of the world's population and about 25 percent of 
the world's economy, America wants access to the 95 percent of the 
consumers living outside of our borders. It is always in our interest 
to open up overseas markets for our workers, our farmers, and our 
service providers.
  While promoting exports, we also have to be sure we protect American 
jobs from unfair trade, from imports that would unfairly undercut our 
farmers and our workers, our service providers. Simply put, we want a 
level playing field, where there is fair and reciprocal treatment. If 
it is fair, if we have a level playing field, I believe American 
workers and businesses can compete and win.
  The sweet spot for America is this balanced approach: opening up new 
markets for U.S. products, while being tougher on trade enforcement so 
American workers have the opportunity to compete.
  In that context, I want to talk a little about the inequities in our 
relationship with China. We don't have a level playing field with 
China, and it is one of the most important policy issues that faces our 
country today.
  It is certainly really important to Ohio. Ohio sells a lot of 
products--auto parts, aerospace parts, and other things--to China. We 
also sell a lot of oilseeds and grains, particularly soybeans--about 
$700 million worth every year. China is actually our third biggest 
trading partner in Ohio after Canada and Mexico.
  Yet, despite these exports, we have a trade deficit with China 
because they send a lot more to us than we send to them, and it is not 
always fair trade.
  As an example, Ohio has been ground zero for steel imports coming in 
because of government-directed overcapacity in China. Our steel mills 
have been hit hard because, to put it bluntly, China has not been 
playing by the rules.
  In 2000, China produced about 15 percent of the world's steel. Today, 
thanks to massive subsidies and other forms of state intervention, they 
now produce about 50 percent. So, again, about 19 years ago, they 
produced 15 percent of the world's steel; now they produce 50 percent 
of the world's steel, and they do it, again, through the government 
subsidizing them.
  They often sell that steel at below its cost. They don't need it in 
China so they are trying to push it out to other countries. They 
transship it to try to avoid our anti-dumping duties or our 
countervailing duties, which were put in place because China wasn't 
playing by the rules. So we find out they are selling below their cost, 
which is dumping, or we find out they are subsidizing, we win a trade 
case, but then China sends that product to a third country that then 
sends it to us, therefore, evading the tariffs we put in place to deal 
with the unfairness.
  It hits our plants hard in Ohio, but it also reduces the cost of 
steel around the world.
  When it comes to our bilateral economic relationship, there is little 
or no transparency from China when it comes to their regulations, their 
approvals for inbound foreign direct investment into China, and the 
required notification of subsidies that is required by the World Trade 
Organization.
  This lack of transparency, of course, frustrates American businesses, 
and it violates China's international obligations.
  China also exhibits a lack of reciprocity. Its market is 
substantially more closed to American companies than our market is to 
their companies. We have Chinese companies in Ohio. They don't have to 
be in a joint venture with a 51-percent Ohio partner, American partner; 
they can own the whole thing. They don't have to go through this 
process of approvals that American companies have to go through, where 
often their intellectual property is taken.

[[Page S2318]]

  China, as we all know, has relatively higher tariffs than the United 
States--on average, about a 10-percent tariff in China versus our 3.4 
percent tariff, but that is not the biggest problem.
  The biggest problem is a host of what are called nontariff barriers. 
Some keep out our ``Made in America'' products and others coerce the 
production of those products to be in China. So if you want to sell in 
China, you have to produce in China, and that is in order to transfer 
this valuable intellectual property from U.S. companies to Chinese 
companies.
  Investment is not reciprocal either. According to the U.S. Trade 
Representative in its section 301 report on China, in 2016, the OECD--
Organization for Economic Cooperation and Development--ranked China the 
fourth most restrictive investment climate in the world, despite their 
being the second largest economy in the world.
  So of all the countries in the world, OECD ranked them the fourth 
most restrictive in terms of accepting foreign investment.
  Based on this report, China's investment climate, then, is nearly 
four times more restrictive than that of the United States.
  So the confluence of these two factors--the lack of transparency and 
reciprocity--stem from China's Communist Party-led nonmarket economy. 
While China made an effort after joining the World Trade Organization 
to become more market oriented, in recent years, they have actually 
moved away from more market-based reforms and instead doubled down on 
the kind of mercantilism you would expect in the last century but 
revamped for the 21st century.
  In doing so, China has placed enormous strain on the world's trading 
system and, in turn, has undermined American jobs, American workers, 
and America's overall competitiveness.
  When I served as U.S. Trade Representative, I said that the United 
States-China trade relationship lacked equity, durability, and balance. 
Sadly, that is still the case today. We didn't have a level playing 
field then.
  Since that time, the conduct has even worsened. China has invested 
large sums of money in industrial capacity, subsidizing production that 
impacted industries in places like the United States but also Japan, 
the European Union, and many developing countries.
  China has embarked on a so-called indigenous innovation campaign 
backed by hundreds of billions of dollars and the full weight of its 
nontransparent regulatory apparatus. This intent of the indigenous 
innovation campaign seems to be directed primarily at us but also other 
countries around the world that are innovating.
  The United States has been the leader in many innovative 
technologies, and now China is attempting to be the leader. Think of 
artificial intelligence or 5G.
  China's embrace of techno-nationalism has undercut critical 
commitments it has made to open up its markets, protect intellectual 
property rights, adhere to internationally recognized labor rights, and 
meet its WTO commitments on unfair trade practices, such as illegal 
subsidies.
  Without changes to these practices, as long as the inequities and 
imbalances persist, the durability of our economic relationship remains 
in question.
  I understand China is not going to become a free market economy 
anytime soon, and while I hope we can have a more market-oriented 
economy someday and we can move toward that in China, as they were 
moving that way after joining the WTO, I think it is vital that we at 
least demand a level playing field in the meantime.
  That is why I have supported the Trump administration's efforts to 
demand structural changes as part of its ongoing negotiations with 
Beijing. This takes the form of a few different things. One is 
addressing our huge trade deficit--that is part of the negotiations--so 
China would buy more soybeans and might buy more LNG, liquefied natural 
gas. That is all good, but this agreement must also deal with these 
other issues, like forced technology transfers and dealing with 
nonmarket practices, like state-owned enterprises and other subsidies.

  Addressing the first issue by selling additional soybeans and 
liquefied natural gas to China is a positive step forward, but a short-
term reduction of our trade deficit, which is out of balance, isn't 
enough. We have to seek progress on these sustainable structural 
changes so we can count on a fair trading relationship between two now 
mature trading partners.
  Ambassador Lighthizer, who is the current U.S. Trade Representative, 
is a tough negotiator. I feel confident that he understands this, and 
he is going to ensure that we not only improve the imbalance in our 
trade deficit but also--if we get these structural changes we need--
bring home a strong and sustainable agreement.
  That leads me to my next point. Any agreement must not just address 
these important structural problems, but it also has to be enforceable. 
Without enforceability, it is going to be impossible to make any real, 
meaningful progress in our economic relationship based on the past. We 
also have to do more than merely enforce by negotiation. I support 
consultations and consistent engagement; that is also good. But there 
also has to be some enforcement mechanisms with some consequences.
  While I look forward to seeing the agreement that we come up with 
China--and I hope it happens soon--I would like to offer a few 
suggestions related to enforceability.
  First, I favor reviving a China-specific safeguard to provide both 
due process and an effective response to surges with Chinese imports 
that injure U.S. domestic industry, such as the high-tech products or 
those derived from nonmarket practices we talked about earlier.
  One model to consider is section 421 of the Trade Act of 1974. Now 
expired, section 421 was a China-specific safeguard that was created, 
pursuant to China's WTO Accession Protocol, to guard against increased 
imports from China--surges--with less demanding requirements than that 
afforded market economies. I think it would be good to get back to 
that.
  Second, strong trade laws have been successful in addressing some of 
the externalities caused by China's nonmarket practices. We have to 
continue to enforce those laws. Consider the 266-percent tariff that is 
currently in place with regard to imports of cold-rolled steel from 
China. That was because we brought a trade case, and we won the trade 
case using internationally accepted criteria as to what constitutes 
dumping and subsidies. Nonmarket economy methodologies give our trade 
remedy tools extra heft when deployed against these unfair imports from 
countries like China, which lack the market-driven system found 
everywhere else in the world.
  China knows the effectiveness of our trade laws, especially the 
nonmarket economy methodologies we use to get that 266-percent tariff 
in place, and has therefore challenged the use of these methodologies. 
China has challenged this at the World Trade Organization. I hope that 
as part of any commitments made pursuant to the current talks, China 
will drop its challenge to the use of nonmarket methodologies until 
such time as China has actually become a market economy under 
established and accepted statutory criteria set out in U.S. law.
  Third, increased transparency requirements can help make enforcement 
more effective. As long as key elements of the ways that China 
intervenes in the economy--such as the provision of illegal subsidies; 
currency manipulation, for that matter; the participation in the market 
in state-owned enterprises; and the application of laws--remain without 
transparency, it is going to be difficult to effectively monitor 
compliance with commitments that are made. We have to know. We have the 
right to know. I thus urge the administration to secure enforceable 
transparency commitments to ensure we have enough visibility on China's 
nonmarket practices to make enforcement as effective as possible.
  I hope the administration takes some of these enforcement suggestions 
into account.
  Today, pursuant to our section 301 investigation, the United States 
has levied tariffs of 25 percent on $50 billion and 10 percent on $200 
billion of exports from China to the United States. These tariffs are 
in place now, and they are affecting a lot of our companies here in the 
United States because China has,

[[Page S2319]]

in turn, retaliated against us, putting tariffs ranging from 5 to 25 
percent on $100 billion of U.S. exports to China. So there has been an 
escalation of tariffs as we have been in these negotiations.
  There has been discussion about the United States keeping our 25 
percent and 10 percent tariffs in place as a backstop even after an 
agreement is reached. I think that is unlikely because I think it is a 
recipe for no agreement or an inadequate agreement.
  Instead, I believe it is important for both countries to reduce or 
eliminate altogether the new tariffs under 301 and the retaliatory 
tariffs when the agreement is reached. Of course, the United States 
would be able to quickly reimpose tariffs if China doesn't live up to 
the commitments it makes, and that would be appropriate. But I think we 
ought to make a commitment now to China that we are willing to get rid 
of these tariffs, or substantially all of them, if a good agreement is 
reached.
  Over the next few weeks, I hope the President remains focused on 
reaching this agreement that addresses the structural inequities in our 
trade relationship. Buying more soybeans is important, but this is a 
chance to resolve deeper issues, especially when there is such 
compelling evidence of commitments not met in the past and continued 
inequities in the U.S.-China trade relationship.

  As part of reaching an enforceable structural agreement, I urge the 
administration to give China certainty about what we actually want and 
exactly what we want. From what I have heard, I believe giving Beijing 
the security of an unwavering negotiating position will help unlock 
China's last best offer. My sense is that is not yet on the table 
because perhaps they think we have shifted in terms of our objectives 
and priorities. The agreement would then allow the United States to 
take a step forward toward a more balanced, equitable, and durable 
U.S.-China relationship.
  Again, I commend the administration and President Trump and 
Ambassador Lighthizer for engaging in these negotiations. I think we 
are headed in the right direction, but let's bring it to a close.
  I want to note that the current negotiations are only part of what 
must be a holistic and long-term strategy toward China. A good 
agreement and strong enforcement is essential, but to keep the United 
States competitive over the long term, we have to invest more here at 
home.
  As an example, if you are going to be in a sports competition, it 
helps to go to the gym once in a while. Until recently, we hadn't been 
hitting the gym too much.
  Tax reform and lifting burdensome regulations recently have given our 
economy a shot in the arm. It is really important because it has 
created jobs and increased wages, but it has also made our country more 
competitive, particularly by investing in technology and investing in 
new equipment.
  Unfortunately, we still have some challenges we need to address to be 
truly competitive. We have a workforce that too often lacks the skills 
necessary for the 21st century. We have an opioid epidemic that is 
undermining our economy as well as our communities. We have a crumbling 
infrastructure that is holding back economic growth.
  Instead of people being awed at how quickly China can build a bridge, 
I want people to be awed at how effectively and how fast we can build a 
bridge here in this country. To do that, we need to build on the 
permitting reforms we have enacted in the last few years to make it 
easier to start and quicker to finish projects that keep our economy 
moving and growing. Reinvesting in America with world-class career and 
technical education, infrastructure investment, pro-growth and pro-
innovation economic policies, as we started with tax reform and 
regulatory relief--these are the things that would send signals to 
China and to the rest of the world that we are a vibrant nation, we are 
in the game, we are focused on the future, we are constantly 
innovating, and we are not a nation in decline.
  I believe the best days of our country can be before us. We need to 
show the world that America remains, in fact, the world's preeminent 
power because of our free markets, because of our innovations, and 
because of our work ethic. If we do that, we will be able to compete 
with China. If we don't, even without these trade negotiations, it will 
be difficult.
  By the way, unlike some, I don't propose to compete with China by 
adopting policies and processes that mimic their system. As an example, 
nationalizing our 5G deployment or adopting 5-year industrial plans, as 
China does, is not the path to success. It gives in to the critiques 
that we make of Beijing. Instead, we need to double down on the 
American way: big ideas and bold visions grounded in principles unique 
to our origins. After all, we believe in freedom and free markets 
because they work.
  With regard to China, we should want to have a successful and 
mutually beneficial relationship on trade and other issues. China and 
the United States must be strategic competitors going forward, not 
enemies.
  I commend the Trump administration for entering into these difficult 
and very important negotiations with China, and I encourage the 
administration to stay strong in the pursuit of long-term, meaningful 
structural changes in that relationship. I want our country to do the 
hard work here at home, to ensure that American competitiveness is 
second to none. That combination--a successful resolution of 
longstanding issues with China and staying on the cutting edge here at 
home--will ensure the continued prosperity and global leadership of the 
United States of America.
  Thank you.
  I yield back my time.
  The PRESIDING OFFICER. The Senator from Ohio.